'Money does not buy you happiness, but lack of money certainly buys you misery.' - Daniel Kahneman
Welcome to blog 85, which will be the first of the investment decisions series. Given I have worked in investments all of my 20yr+ working life, I might have been expected to get to this topic sooner, but this has been intentional.
The investment industry is so rife with every single decision error out there, that it was worth investing the time to have a firm command of the ideas before applying them to investments. Today's blog is focused on personal decision-making and the series will progress to investment decision-making in general.
Why are investment decisions important?
This might seem like a silly and obvious question, but there are so many myths out there with regards to money, savings and wealth that often this very simple question might get confusing.
I try and boil it down to this: we invest when we have income that exceeds our costs. These savings should be put away so that we can defer that spending to the future. Prices generally go up a bit each year, so ideally we would like to invest such that our money meets or beats inflation. After that individual circumstances dominate how you take it forward.
Investing in your financial health
Marketers try and have us associate savings with luxury. Buying expensive things that give us status and prestige is generally accepted to have fleeting pleasure and people tend to return to baseline happiness within a scarily short timeframe.
But a less romantic and more practical thing to think about is having savings is as "misery avoidance". I have been thinking about four pillars of avoiding misery and it always seems to boil down to these four pillars: Relationships, Health, Finances and Purpose.
Those with less financial health are more likely to feel financially insecure and get into debt through unexpected costs which is a common source of misery. Sadly, relationship breakdown, depression and suicide can sometimes have roots in financial ill-health.
My misery avoidance framework
If it is so important why aren't people focusing on it?
What language is the finance industry speaking? The conversation between investors and providers of investment products is awful. Whether it is getting a mortgage or options for ISAs, there is very little plain English spoken. A lot of the discussion is about fees and rates and very little is about whether this product is suitable for you or not depending on your circumstances.
Smart people who are outside the finance industry, genuinely have no idea how to even begin to decide how to save and there are few genuinely independent (and therefore unbiased) people out there to help you.
Next week we will be going through why investing is an approachable game for the absolute beginner.
Topics we will be discussing this series
Why beginner investors are lucky.
The sources of investment error.
What is something worth and what the market does and does not tell you.
What is risk?
What is a superior investor?
Thank you for joining. "Why beginner investors are lucky" next week. Sign up to the subscription list on Blog | Deciders (hartejsingh.com). Follow me on twitter: @Decidersblog