You Are Not a Spreadsheet
“Things that have never happened before happen all the time.” – Scott Sagan
Most investors invest with one goal in mind: maximize their return. How will I invest money today so that I have more of it tomorrow? While this sounds good on paper, and can be supported by math, there is so much more that goes into investing.
Human behavior will always come into play when it comes to investing. That’s what makes a market. We all have different timelines, objectives, and risk tolerances. But one thing we all have in common is we are looking to live the best life possible. To ultimately gain the freedom to do whatever we want, whenever we want.
Investing truly comes down to your behavior rather than your knowledge. Rather than focusing entirely on investment returns, focus on optimizing your enjoyment for life.
So why do some investors think like a spreadsheet?
If investing was entirely driven by financial aspects than we would all have cheap clothes, cars we don’t love, and we would have Ramen Noodles for dinner every night.
Yes, that will help our cash flow and in turn we will have extra capital to put to work. But at what cost? What’s the point of accumulating millions if I never get to enjoy it?
You will hear Ray Dalio say, “cash is trash” and advise people to not stay on the sidelines and find investments that will generate them greater returns.
While I agree with Dalio, and a spreadsheet would back this claim as you are technically “losing” money as inflation increases, that does not mean this strategy works for everyone?
Some people find comfort with having a fair amount of cash in the bank. That helps them sleep at night. And more importantly, a spreadsheet doesn’t factor in surprises. A spreadsheet can’t predict a roof leak, your car breaking down, or unexpected medical emergencies.
But those are the real-life issues that keep us up at night.
So rather than focusing entirely on investment returns, focus more on lifestyle decisions. How is my cash flow? Is this the life I want to live?
Remind yourself that investment returns aren’t the true way to accumulate wealth. That typically comes down to your savings rate. Morgan Housel said it best in his book Psychology of Money, “…since you can build wealth without a high income, but have no chance of building wealth without a high savings rate, its clear which one matters more.”
So do you truly want to build wealth? Find ways to save your money but not at the expense of your enjoyment for everyday life.
So please, stop thinking like a spreadsheet. We are human after all.
- Kyle
Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual.