Sep 14 2010

The Creation of Facebook Was Exciting, Great Money Management Is Not

Boredom is Your FaultPersonal finances, if handled properly and responsibly, can be one of the most boring aspects of our lives.

With invested diligence, it becomes quite uneventful and dull. How “interesting” our financial lives are is determined by one prominent factor – risk.

Which is the more intriguing introduction to a story you could possibly tell a group of friends?

- “I founded a social networking site in my dorm room. I dropped out of Harvard University to grow my company. I am in my mid 20′s and the youngest billionaire in the United States.”

- “I got my college degree with good grades. I got a job after graduation. I’m saving money in my 401K, IRA and savings accounts while paying down my student loans.”

I trust that you picked the former.

Risk Gets the Juices Flowing
To the majority of people, dropping out of college (especially Harvard) would seem to be a big risk as society has instilled that the way to succeed in life is to take the traditional path of graduating college. Mark Zuckerberg took this risk and founded a revolutionary company that has allowed him to amass substantial wealth – and a ton of press.

Any venture that escapes predictability makes it exciting. Some go on to start their own business and some take on risky investments. We subconsciously calculate risk with every move we make. Just like how it is more risky and exciting to go skydiving than to go hiking, it is more exciting to put money in penny stocks than in a savings account.

Risky and interesting:
- “I bought a penny stock. I could lose everything or make a 6,000% return!”
- “I made a late credit card payment. I have to call customer service and hope they’ll forgive me!”

Safe and boring:
- “I’m on track on my budget….”
- “I paid my bill on time this money, like every other month….”

Without a doubt, we like money. And depending on each of our risk tolerances, we decide how protective we are of our money. Excitement comes from high risk while boredom comes with high security. I guess that’s why high risk individuals usually have better stories and conversations as cautious ones do nothing and therefore have nothing to say.

Three of My Money Moves
My personal experiences in the arena of vary risk levels are great examples of why great money management is quite boring.

  • Moderate Risk – investing in a small cap company. It was an up and coming brand that seemed to have great potential. I was frantically watching the ticker symbol. I talked about it with many people. I couldn’t sleep or spend 10 minutes away from Yahoo! Finance. This company filed for bankruptcy eventually.
  • Low Risk – investing in an index ETF. It was long-term, low-risk investment that could produce nice returns in the distant future. Sound move in the books. People ask me if and what I’m investing in. I answer, “Index funds.” They change the subject.
  • No Risk – transferring money to my ING Direct savings account. Big whoop. No one cares but me…

I can tell how exciting each situation was by how fast my heart was beating at the time and how inclined I was to tell someone. If I had to brains to create Facebook, I’d tell everyone.

It’s Boring But It Works
For someone who works hard and with little financial difficulties, it becomes mundane to go on every day by following a proper budget and paying the bills on time. Simply, everything that is supposed to be done gets done.

However boring it may be though, it is the reason that many self-made millionaires accumulated their wealth. They do the right thing and make sound decisions that many neglect to do. Then, out of nowhere like a stealthy ninja, they come out accomplishing their financial goals.

But, if you can make the boring parts fun, it’ll make for a great story – something that we personal finance bloggers try to do!

(Photo credit: AliceNWondrlnd)

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4 Comments on this post

Trackbacks

  1. Weekend Reading – 09/17/2010 | Provident Planning wrote:

    [...] I promise you'll learn something from this one. Great tips!!!] Realm of Prosperity – The Creation of Facebook Was Exciting, Great Money Management Is Not – [Simon shares the truth that personal finances are really boring when you're handling them [...]

    September 17th, 2010 at 6:02 am
  2. » Personal Finance Round-Up: You Don’t Need To Dread Your Job wrote:

    [...] The Creation of Facebook Was Exciting, Great Money Management Is Not One thing stopping many people from getting out there and making the ideas they have a reality is risk. While risk is a scary thing, it is also one of the exceptionally exciting attributes of personal finance. Here are some things risk and a billion dollar idea can teach us. [Realm of Prosperity] [...]

    October 17th, 2010 at 2:01 am
  1. Financial Samurai said:

    The great thing about boring, is that you WILL get there, it will just take a lot of time and patience.

    This is something I struggle with on occasion.. patience.

    September 14th, 2010 at 11:09 pm
  2. Kevin Cimring said:

    Hi Simon, this is so true. If you have set your asset allocation according to your goals, then the discipline is rebalancing once per year to make sure you are on track – not worrying about daily fluctuations. It can be pretty boring and uneventful, but – as you have said – is the right way to go if you want a better chane of achieving your goals.

    September 16th, 2010 at 2:29 pm

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