Here’s Why the Slow But Steady Will Always Win the Money Race
Make money quickly. Get rich fast. There is an overwhelmingly large number of people who live by those words. Some of them have a goat set for retirement, and by retirement, they mean putting a complete stop to their 9 to 5 life. For some, it is Time- a certain age- by which they want to make a certain amount of money and then end up buying a beach house in Bali to relax for the rest of their life. For some, it is only money- a certain figure on the spreadsheet – and then, voila! Off to a lifelong vacation. And to turn these dreams into reality, they must earn fat and earn fast. But is it the right way?
There is no right way in the realm of financial freedom, no one size fit all method. Whatever works just perfectly for Joe might bring horrific results for Jane. But our experiences with extremely volatile financial mechanisms over a century do shade one guiding light, that there might be a method in this madness.
And being fast has nothing to do with that.
In 1926, George Samuel Clason published a book that caught the financial pundits by storm. The title – ‘The Richest Man in Babylon’- had its own skeptics, but what mattered the most was the knowledge within the covers. George Clason established 7 pillars of getting rich in the book, and those tips weathered so well that the book is in print even after 95 years of its first edition. These tips are easy to understand and follow. Here’s a quick excerpt of the ‘the seven cures’ of financial problems-
1) Save your money
2) Invest your money
3) Don’t risk your money
4) Avoid debts
5) Avoid Splurges
6) Invest in yourself
7) Protect your money
But does it really hold its relevance even after all these years? Author Morgan Housel says it does. In his book ‘The psychology of Money’, he presented 20 short notes on money and emotions that drive the mobility of wealth. Surprisingly (or not so), those points are pregnant with messages strikingly similar to the teachings of the 1926 classic.
To these grandmasters of money, Time is the currency of wealth. Time and money in a sentence would inevitably remind us of Warren Buffet and Charlie Munger, but the examples themselves are not so impressive compared to the fact that Warren Buffet earned 96% of his money after the tender age of 60. You might think this is nothing new. We all trade our Time with cash- that’s how our jobs work. But the theory applies a bit differently for building wealth. Here we aren’t trading Time with money; we are employing Time to make money.
Now imagine a situation. You are running late for office. As soon as you set foot on your door, you see the bus that takes you to the office every day is about to leave the stoppage. You bolted towards the vehicle, frantically waving your hand to catch the driver’s attention, and boom- your face slammed on the floor. There goes your 1 week of work (if you’re lucky not to have a fracture). If you work for a private company, chances are you are not going to get enough paid medical leaves. So, for the days you receive treatment, your earnings will cease to exist.
Now equate this situation with your finances. The event of you running for the bus dangerously and falling on the sidewalk is what the gurus call a risk event. Just like employees lose their money when they fall for risk events, your money similarly loses its employability in case of a risk event. For the money, the risk events are bad investments, market volatility, and poor decisions. But not all hopes are lost. As doctors and medicines take care of you when you are unfit, Time will play the same role for your money. But you will learn some valuable lessons- never to put your money in bad places, never to withdraw your money in bad situations, and never to handle your money with bad emotions (think- cardinal sins).
We will discuss the other tips more elaborately in the future (trust me, the books are much, much better at this). But all of these lessons cumulatively point towards one important idea- Building money takes Time and patience. With a light (okay, heavy-ish light) favorable touch from luck, we can achieve our monetary goals if we trust Time.
But is there any reversal to this law? Hardly any fact goes without having an outlier, an exception that appears on the other side of the coin. Author M. J. DeMarco has tried to show an alternative to these century-old stalwart pieces of advice. Caution: the path he recommends involves some Innovative but highly practical ideas.
More on this later. And for the impatient, pick up his book- ‘The Millionaire Fastlane.’