Fear, greed & ignorance

By Randell Tiongson on May 3rd, 2014

When dealing with financial issues, one must always be aware of the 3 deadly behaviors that will cause financial havoc and I call them the 3 dangerous money attitudes: Greed, Fear & Ignorance.

greed-is-good-dennis-duganGreed has been man’s downfall since time immemorial. When it comes to our finances, greed clouds our judgment and in many cases it can even make us compromise our values. In investing, greed makes one too optimistic on possible returns based on some experience or even the potential of remarkable growth. While the principle of risk & return always dictate the performance of one’s investment, greed will make one go beyond his risk tolerance in anticipation of fantastic yields. In business, greed makes one engage in cut-throat enterprise and often times have collateral damages like ruined business relationships and even legal issues. After all, it is the love of money which is the root of all evil (1 Timothy 6:10). In the movie Wall Street, Gordon Gecko made a famous line that seems to have been the mantra of many… “Greed is good” (‘That greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit’). Well, it is because of greed that there was the recent financial tsunami which almost put the whole world economy into chaos. In fact, the US has yet to recover from their financial crisis which was really a result of greed. Greed is often times the reason for our economic woes. Regardless of how we romanticize it, and despite Holywood’s dangerous seductions, greed is not good.

Fear is not necessarily a bad behavior. In fact, fear allows one to act in prudence and makes us check if we are already becoming greedy. The issue here is too much fear, or crippling fear. Many a times, people would not take any risk at all when it comes to money and they will find themselves with hardly any financial growth because of it. It is a common notion that Filipinos are ultra conservative when it comes to money and to prove a point, one only needs to look at where our money is actually invested – locked in 30 to 90 day short term deposits that give you almost negligible returns. While keeping your capital safe is important, we must also be reminded that inflation is constant and it will erode our wealth. To illustrate, let’s assume that you place your savings in short term placements like time deposits earning 2% p.a. and you don’t mind the low return because safety of capital is your paramount concern and  you will probably keep the money there for maybe 3 to 5 years . Let us assume that during those years, the inflation rate will be at an average of 5%, you are actually losing real value in your money with the erosion of its purchasing power by as much as 3% per year. In the end, you will actually experience a real loss despite having no capital loss. In risk management, risk avoidance is not always a good choice because avoiding risk also means one can’t gain. I really like the Parable of the Talents (Matthew 25:13-40) – it is as a very good illustration of fear.

Just like greed, ignorance is a very dangerous attitude. While people lose money because of greed or too much fear (in purchasing ignorancewordmarkpower), people do so knowing what they are getting into. Losing money because of ignorance makes one well, ignorant. It is said that you should never ever, ever, ever, ever put your money into something you don’t understand. It is ironic that despite Filipinos being risk averse (ultra conservative), we are also prone to a lot of scams. Many researches reveals that our FQ or financial quotient is very low as compared to other countries. Financial education, though immensely important, is not on the top mind of our citizens. Schools look at financial education from a text book approach rather than on a personal finance perspective and many homes will not discuss money issues until the family is in severe financial situation. I counseled so many individuals that are in dire financial conditions and most of the time, the core of their problem is ignorance – financial ignorance.

So what is the solution to all these? Financial education and checking one’s heart. We need to live a life of purpose which will keep our greed in check. It is not hard to realize that our purpose goes beyond ourselves, isn’t it (Matthew 6:33)? Overpowering fear is an issue of faith – we need to believe that we are not given a spirit of timidity, but a spirit of power (2 Timothy 1:7). The only fear we should have is a godly fear (Psalms 111:10). As to ignorance, we only need to open our hearts and minds and embrace learning and seek godly wisdom (Proverbs 8:12).

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Fear, greed & ignorance