Building Meaningful Relationship With Money As A Modern Investor
I remember reading Robert Kiyosaki’s Rich Dad Poor Dad for the first time. In short, I was struck, enthralled, and I have considered it to be one of my favorite books ever since. It’s about a story of a kid who worked under a rich dad and how he shaped his thoughts about money and investing. When I reread the book a few years ago, I was astounded at how little I had retained the book’s context. There are concepts that I’d completely forgotten. I’m reminded of the “The Cashflow Quadrants,” a chart that shows which wealth class you belong to. You have an opportunity to select one of four quadrants. One quadrant with the biggest potential for passive income is being an investor when you let your money work for you.
“The poor and the middle-class work for money. The rich have money work for them.”
– Robert Kiyosaki
Over the past 20 years, I have gradually accumulated knowledge of money and investing and the principles taught by his rich dad in my mind. In many ways, the messages of Rich Dad Poor Dad challenged me to become a savvy investor.
Today, I’ve come to see my long-term relationship with money as particularly significant. We are living through capitalism — there is no end to asset accumulation. Technology has made it more accessible and abundant, from investing to managing assets at our fingertips. But how do we increase our ability to build long-term relationships with money in a meaningful way?
You Should Learn About Investing.
Today, we face a landscape of uncertainty where we’re incentivized to invest our money in the stock market; otherwise, we may feel FOMO (fear of missing out). Take Tesla. It had grown more than 1,400% in the past two years when the stock was worth just over $60 a share (before the split). A stock price has nothing to do with the quality of the product, as long as there are enough people to stick around and buy at higher prices. That’s not to say Tesla doesn’t produce some outstanding vehicles, but it does mean that we’re encouraged to invest with a boundless “price” rather than making a sound, reasonable decision based on fundamental analysis and its value. None of this is inherently bad, of course, if the price keeps going up and as long as we make money. However, currently PE Ratio for Tesla today is 131, and PS Ratio is 21.54. In other words, the stock is way too overvalued compared to its sales and earnings. The market average PE Ratio ranges from 20 to 25, and Ken Fisher recommends buying companies with PS Ratio below 0.75 or below.
“The most contrarian thing of all is not to oppose the crowd but to think for yourself.” — Peter Thiel.
After reading hundreds of books on investing and money, I’ve learned that financial education is a lifetime commitment with continuing effort. Along with reading books, I also recommend watching documentaries and movies on money.
I’ve watched movies on money and entrepreneurship, such as:
- The Big Short (2015)
- The Wolf of the Wall Street (2013)
- Inside Job (2010)
- Moneyball (2011)
- Joy (2015)
- Margin Call (2011)
Due to COVID-19, we’ve experienced another recession, making an increasingly turbulent market. I believe the risk is something we should build into our investing life.
You Should Be In Charge With Money.
I discovered an email subscription service in college that promised to deliver a daily dosage of stock investing news. I subscribed but quickly got disappointed. Sure, it was good information, but I felt the first email was very salesy. Even though the content marketing had been initially unique and sincere, I was looking for the email with daily insights and growth potential, not random content. They weren’t sequenced. Eventually, one email arrived that wasn’t even an entire stock market — it was just a sales letter.
I began to recognize the actual problem. I felt scammed. Each day, the email curator sent bits of information with a bunch of sales pitches throughout the email. I didn’t want that. I wanted pure information to help me become a better investor and steward of money. Nevertheless, finding good, trustable information online is difficult, especially on investing.
The bottom line is that you should build the knowledge, not depend on someone else to tell you what to do. The investing world can be cold and harsh, sometimes without accurate guidance. There are many financial subscription services that I got hooked on earlier — the service recommends some stocks that have a probability of raising their price. They do the marketing and sales, just like any other for-profit company. Any of these services guarantee a profit in return, as they put a disclaimer on their newsletter that the risk is solely up to you.
You Should Know Where Your Money Goes.
In 2011, I married my husband, and I realized that I needed to budget our money on the books to see our spending monthly. For the last ten years, I have kept our family budget on YNAB, an app that tracks all of your money (it was software back then). The budgeting helps me remember the details of the spending. Ten years after marriage, what tends to remain is not anything specific about the budget itself but the way it made me feel. I can see all of the histories of our family budget, wealth growth, and current balance in different accounts. Budgeting has been my first step to wealth-building strategy since I started my path to learning financial literacy.
In Conclusion
Years ago, technology simply didn’t exist. On the plus side, access to investing has never been easy now. And while financial technology companies simplify our money management, these tools afford investors new ways to invest. Building a long-term relationship with money in a digital age is no different. Like building a romantic relationship, you should know about money, take charge of the relationship, and know how much you have. Then, the money will follow.
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