Every financial guru would tell us to exercise delayed gratification. In brief, it meant we should NOT be materialistic until we really could afford to buy things without a need to ask for the price first. Well, for some of us, that may take like, forever? Haha. Anyway, I personally think delayed gratification is to be an investor first and consumer later. An investor is always on the lookout for investment diversification. He could not be a consumer at the same time because he knows that whatever spent will not go into his investment and well, the wealth multiplication becomes much slower. So, who do we think will be happier? Actually, it may not be the investor! Haha. The reason is because the investor may take it way too seriously until he turns into a scrooge. Meaning: A scrooge is a person who is stingy with money: scrooges would rather do anything than part with their money.
So, is the consumer happier? I think they are. A real example? Before they bought that latest smartphone, they will feel happy to read about its superior features compared to other older models. When they bought the model, they feel happy because they own a phone which majority could not afford. When they start to use the smartphone, they feel happy every time people exclaimed, ‘Wow, that’s the latest model!’ Anyway, soon they will get used to the phone and another new model comes out. That’s when a consumer starts thinking again how to make himself happier. An older model certainly does not help them in their happiness anymore. So, a consumer is happier for a short period of time. What’s the cost for their happiness? RM4,000? Actually, it depends on how long are we talking about yeah. Just a RM4,000 in the FD account would become RM4,883 after 5 years at 4 percent interest per annum. That’s not a lot but the consumer is also not someone who would change a smartphone only ONCE every 5 years…
The following questions help us to determine for sure if we are an investor or a consumer.
#1 – How do we deal with any extra cash? Say, a 2 months bonus payout from the company? I would not recommend saving every sen lah. However, it’s great to be able to save it so that we build on a stock pile of fund which we could utilise for potential investment deals. OR do we think of all the stuffs that we have been eyeing for a long time? It’s great to spend some of the money to make us happy, to make our loved ones happy. This will certainly motivate us to work harder. Spending all of it and more is another matter. Depending on whether the stuffs we do are FULLY on getting returns or FULLY on just happiness would already give us the answer.
#2 – Do we focus on the return on investment (ROI)? Do we even know what are our potential returns? If we like to think of us an investor, then it’s important to understand the types of investments available. The risks associated with each one of them and the potential returns from what we put in. When we buy stocks for example, it does not mean that we simply buy the famous bluechips. This is because they are usually fully priced. How do we then identify the unknown stocks which could potentially give ‘bluechip’ kind of returns? An investor would seek answers to all these. A consumer may just simply buy into some investments which their friends tell them about.
The purpose of this article is not to determine who will be happier though. It is meant as a guide for us to know that over a period of many years, an investor would have accumulated far more returns to buy far more stuffs compared to if we have bought them earlier. Of course, for a property, the price is usually up OR the size goes down if the price is to stay affordable. For many other types of goods, the prices usually stays almost the same but the features and the specs may be getting better (especially technology goods). Assuming we still have a working phone today and we are in the market for a new phone. RM2,800 would buy us the latest phone today. Next year, a phone with the same specs would be half the price while RM2,800 would get us a much better phone. Yes, this is the reason why consumers will always be poor. They want to stay AHEAD of everyone else. An investor may not feel that much happier but in the longer term, they will be AHEAD, financially. No prizes for guessing if there are more investors or consumers today. Happy investing or buying. Both can be a source of happiness.
written on 30 July 2018
Next suggested article: No transactions, no changes in prices lah