Photo by Samantha Villagran

I followed a conversation last month. There was this person, a lady, who told us that her elder brother recommended her to invest in mutual fund. But don’t get it wrong, her brother is not a mutual fund agent. It was a sincere, brotherly suggestion. What he said to her was something like this, “You could be a millionaire, err … after 25 years, if you invest constantly in mutual fund for example two hundred a month.”

This lady rejected her brother’s suggestion saying that she can’t wait that long. I didn’t comment anything at that table (typical Asian like me avoids direct conflict). In my thought, “Cannot wait for what?” Perhaps what she was trying to say is that she better spend that two hundred than waiting that long. To me (and perhaps to you) that was childish, that was short-sighted. OK, maybe she is not dreaming of becoming a millionaire, not her type, but she could still have tens thousand after 5 years or hundreds thousand after 10 years. Which one is better – spending hundreds now or spending thousands later? Few hundreds cannot bring me visiting interesting places abroad. Few hundreds cannot buy me car or house. But thousands can. Millions even better. (Delay gratification helps! – We get better deals.)

A penny here, and a dollar there, placed at interest, goes on accumulating, and in this way the desired result is attained. It requires some training, perhaps, to accomplish this economy, but when once used to it, you will find there is more satisfaction in rational saving than in irrational spending.
- The Art of Money Getting, by P. T. Barnum

Her decision measures her financial IQ. But she is not the only one who has low financial IQ. Look around us and look at ourselves. We could have made the same mistake in the past. How much, how many opportunities did we lost? Our life could have been much better now. Did we repeat the same mistake recently? And most importantly, are we going to repeat the same mistake again?

Please use this story (a case study) as a good example of bad example of view on money to improve yourself.

Disclaimer: The figures used here are oversimplified. Don’t take my words for them.