I think that most of us would agree that we are affected by our environment, that our upbringing and parents, peer groups and culture have an effect on who we are and dictate a lot of our outcomes. If we didn't believe this, it would make our position on blaming these things on our outcomes quite ridiculous -
"It's because my parents didn't..."
If we are products of our environment and behaviorally reflect back a lot of the conditions we experience, this raises some uncomfortable questions in regards to those who have lived their lives in adverse conditions, corruption and economic unavailability. We like to think we are better than the worst and on average we are, but that doesn't mean the average is good.
Then there is the way we frame the conditions we have and I was thinking about this in the morning in regards to risk-taking and investment strategy. Why is it they call extra money "disposable income" and not something like "investable income"? While this doesn't change the amounts in question, the vocabulary we use affects our visualization of concepts and by extension, how we behave.
Disposable means it can be thrown away, that it doesn't have a great deal of value, that it can be wasted. When we apply this to the money, it means that it can be used to consume goods and services that will depreciate in value, televisions, holidays, cars. These things have next to no chance of generating additional value once purchased.
However, investable income gives a different impression, as it sees the same money as a resource that can be used to attract or generate additional wealth. It isn't something that can be wasted, it is something that has to be used with thought and attention.
I wonder how much of our outcome is driven by the way we hold and apply concepts, where while everyone has the same concept, the variation in understanding dictates activities. When we look at this applied across average income groups and societal norms, we would likely see that those who have been raised in environments of plenty will have a different understanding of money than those who have been raised in an environment of scarcity.
Pushing this a little further into the activities of each group in regard to investment strategy, it is likely that those in abundance are going to see money as a resource to generate more money, but not a resource that should be wasted, over the other group, who may be more likely to see money as something to be used when it is available.
I think this is the same for kids when it comes to something like eating treat foods, where those who have a healthy relationship with it, are those who weren't denied it, they had it available, but were taught that it is something that needs to be used in moderation. The kids who had it denied, often build some kind of taboo around it, creating an imbalanced understanding, often making it more special than it deserves. Push this into adulthood and apply it to consumption of all things and we can see how this imbalance could present itself and affect outcomes.
Impulse control affects more than the food we eat, it also affects every "buying decision" we make and the meteoric rise of Buy Now Pay Later (BNPL) services, as well as increasing debt exposure and defaults on loans, suggest that we are losing the battle, on average.
A lot of people want to know what investment to make to become wealthy, which stock or coin to buy. They want to get a payrise so that they can buy a better life or win the lottery to change their life forever. However, the most important aspect of our future is our behavior and it is driven by our mindset and the understanding of the concepts that affect our world. Without developing a psychology that encourages us to invest ourselves and resources into building that better world, even when the opportunities arise, we will find ourselves lacking with scant availability on what is required to take advantage.
Having disposable income is not enough to invest, unless it is coupled with a mindset that converts what is disposable, into what is investable. If instant gratification is the habitual position, the ability to build long-term is greatly diminished as the inability to control impulses will continually erode any gains made.
While we feel that we act from the head, we are built from the ground up and a lot of the lessons we have learned make us who we are today, even though we never chose to learn them at all. Home-life, culture and the things we consume go into making us who we identify with as us, but we do have the opportunity to consume differently, to unlearn and relearn actively to build a mind and body of action that works toward where we want to be, rather than building walls between.
Perhaps a good place to start is reversing our concept of income from the lessons taught through society, where anything extra is able to be disposed of to satisfy our desires and if we want to invest, we have to make a conversion. Instead, anything extra is first investable income and is seen as a generative resource and if we want to buy something, we have to actively make the decision to "waste" it.
Words matter, but none more so than the ones we tell ourselves.
Taraz
[ Gen1: Hive ]
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This is actually really relevant right now given everything that is happening in my country. It is more specifically focused right now, but it actually applies to a wide range of things. I am fully aware that I probably drew one of the long straws when it comes to the cards being dealt out. I try to be more thoughtful of that these days.
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I think I might write a post about this later :)
You are right though - we have so little control over the conditions, especially in early life. I didn't choose my parents, country or most anything else - it was the luck of the draw. I have been very unlucky in some respects, but also lucky enough to have some abilities that allow me to counteract some of the bad luck too.
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I am like typical middle American white, you can't get around that. Parents still married and living, etc. My ability to live the way I do is very clear to me.
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My Money is 50/50
Or I try to make it like that
Of Course we have to consume foods and service and what remains I try to invest it but for me I do not know anything but crypto
As It is hard to invest in real world
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Are you trying to learn about it?
Yes it is. The biggest challenge is making the decision to go without something else.
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Where I'm from, we refer to disposable or inevitable resources as 'flexable'. That's an amount of money you get to spend on beer and partying.
We're more of a YOLO kind of people. Temporary Joy over possible permanent luxury.
It takes a lot of mental reconditioning to outgrow this mentality.
Do you think the YOLO life is working well on average, or is it the kind of thing that has led to the position of the country now?
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It's definitely what's got us to this terrible point. A lot of people just don't care anymore. And as much as I would like to judge them, the state of the country most times makes me understand why they don't care.
Dear @tarazkp , I have a hard time understanding your article, but I guess the current economic situation in Europe is bad.
Depends what industry you look at it. In general, it is doing okay I guess.
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Such an apt reflection of what my father taught me as a child. He always asked me to question my spending. "Is it nice to have or is it necessary to have?", he asked me to reflect. I think he was essentially asking me to develop an idea of disposable income and investable income, actively making the decision to 'waste it' if it just nice to have. It's something that's stayed with me well into my twenties. I'm constantly trying to manage my finances better and this post really rang with those lessons my father tried to ingrain in me :)
Nice or necessary is a good way to look at it. I think a lot of parents don't make an active attempt to teach kids about finance, but still expect them to learn and manage it well. It becomes generational bad habits in some cases and very hard to break.
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Yeah, and also children look at how their parents spend/consume/ save and imbibe those habits. I’m no expert and have SO much of a road ahead when it comes to being financially literate but I think we should also be taught about borrowing money - from banks, from friends, from family- and the consequences of it.
I don't really know about the disposable stuff,can get a clear understanding of it??
disposable means it can be thrown away. When it comes to money, it is considered the extra money yo have after living costs that can be spent on extras. Use it well consistently and you might end up with a comfortable life - use it poorly consistently and it is likely you will suffer economically forever.
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"The rich get richer and the poor get poorer." Everyone has their own idea of what makes them happy but do agree my time/money is important not to waste. I want the option of not having to work because I didn't look at my money as "disposable income."
Definitely, but one has to own their experience. A lot of people say "money doesn't buy happiness" yet in the next breath, complain about not having enough money.
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"However, investable income gives a different impression, as it sees the same money as a resource that can be used to attract or generate additional wealth."
If more people thought this of income, there would be less wealth inequality in the world. Great post @tarazkp.
One of the best articles of Leofinance, so inspiring and true🤗🤑
Thanks.
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