Photo: William Warby

What Is Your Money Story?

Today is a momentous day for me as I have just completed my first week of full-time work on a full-time contract in my “big-girl” job. Considering I celebrated my 21st birthday last week (and the conclusion of my final undergraduate exams) it feels fitting to now be working in a real job. However, this past week has also sucked the life out of me for several reasons:

  • I am a road rager. I have many people who will testify to this: friends, family, even ex-boyfriends. I believe my road raging tendencies, coupled with the fact that I have found myself in peak hour traffic on 10 occasions in 5 days, will ultimately lead to my demise. It is not that I am verbally abusive, offer rude hand gestures to other drivers or tailgate others. I am a silent road rager. My car cabin is my own personal bubble. It is where I practice singing along to Lana Del Rey, rapping to Ja Rule, and expelling the frustrations and anger of the day through shouting at nobody in particular.

  • I have been unable to get to the gym during this Monday-Friday work week. This is problematic for me because I generally turn to weight lifting in an effort to expel anger. I also enjoy the sense of achievement one gets when they can add an extra plate to their barbell. That said, I recognise that taking a few days off can actually be good for your muscle recovery. Hopefully tomorrow’s 9am legs session will amount to a new squat or deadlift PB.

  • I am constantly hungry. This is another fact that my friends, family and ex-boyfriends will testify to. If someone had to guess what I was thinking, the answer would likely be “food”. My work lunches this week have been a boring combination of muesli bars, yoghurts, kiwifruits, nectarines, savoury crackers, European cream cheese and carrot sticks. No, this does not keep me full all day. Yes, I get hangry (hungry-angry, for those of you who do not spend time on UrbanDictionary.com).

Despite all these misfortunes, the one thing I am looking forward to is my next pay check, and the one after that, and the one after that, for all of eternity. It feels incredibly satisfying to be working in a professional capacity where your efforts are directly linked to the revenue of the business. As I said to my boss this week, being back at work makes me feel like I am contributing to society. It also carries extra perks for me - earning a salary means I can save more, invest more and consume more (and we all know how good that is for aggregate demand!). Admittedly, the exact combination of my consumption, savings and investment would look more like minimal consumption, maximum savings and eventually maximum investment. This is because I am a compulsive saver.

I suspect this mentality is something I inherited from my migrant parents and grandparents. There is nothing that spooks you more than knowing that your father was born on a clay floor (no hospitals in the village!), or that your grandfather literally came to this country with one bag and the clothes on his back. Their sacrifices, fiscal responsibility and entrepreneurial spirit is what has lead me to be able to lead the life I live. I am eternally grateful for this, although it can feel like a burden sometimes.

I believe there is no better analogy for my financial habits than my behaviour during Monopoly as a child. As a family, we would occasionally play the board game - indeed, we had two sets of it at home. If you do not recall, in the beginning of Monopoly you are allocated a starting amount of cash. From thereon, every time you pass Go!, you collect $200. It is your own responsibility to purchase property and build houses or hotels in an effort to generate further revenue. My secret tactic was to hoard the initial fund allocation. The money I used during the game to acquire properties was from the balance of the $200 amounts I received every time I passed Go!. At the end of the game I would reveal my giant pile of cash with a smug grin. If we loosely convert this into more serious financial terms, the investment strategy I exhibited in Monopoly could be described as me not spending my principal investment, but generating further revenue off the interest it earned.

Theoretically, this sounds okay. In reality, this is not a great strategy. It can be likened to financial advice I received from a relative recently - “don’t invest in shares, too risky. If you must, invest a small amount. Once your principal investment grows to the point where you have broken even, take out your principal investment amount and let the portfolio continue to grow off the investment earnings alone”. The issue with this is that you are losing all the progress you have made. For example, a 5% return on $10,000 is an additional $500. But if your principal investment is $9,000 and you remove that from your portfolio, a 5% return on $1,000 is only $50. Over the long term, the phenomenon of compounding returns can further delegitimise this argument - ultimately, the removal of the principal investment reduces your potential to earn large sums of returns.

My financial strategy has matured since my Monopoly days, but I am still an astute saver in an effort to fund further investments. It is important to understand your spending habits and attitude towards finances and investing. Interestingly, it can also be a reflection on other parts of your personality.

Sincerely,

Siomi

Categorized under: Market musings