Once Upon a Dime
AS A RELATIVE newcomer to the wonderful world of personal finance and investing, I���m quickly learning that there���s more to money than numbers. I���m discovering from my own experiences, as well as that of others, that psychology plays a huge role in how we handle our finances.
We���re human beings, not machines. We aren���t completely logical. Yes, logic helps the process, but logic isn���t how we regularly process and digest information. Instead, we���re driven primarily by our emotions. That���s why stories are often the best way to share information.
Our brains are wired to create stories. It's how we understand the world around us. But it isn���t always a good, positive, Disney-esque story that our minds create. Some stories are destructive and inhibiting.
Recently, I realized I���d been telling myself a story���and it wasn't a good one.
The realization came when I watched a YouTube video. The speaker in the video told a story about trying to lose weight. No matter how much he worked out, he didn't make any progress. One day, someone mentioned his obsession with chocolate���which, of course, he denied.
But then he tracked his spending. He was shocked to find out just how much chocolate he was buying each month. He went on to explain that this revelation changed everything for him. He was able to determine what caused his chocolate buying sprees and then make adjustments.
I was struck by how the way he used money told a story about him���and by how his brain somehow chose to ignore reality. I wanted to know what stories my money told about me. I already tracked my expenses, so it wasn't hard to see if anything was out of whack. I was sure there wouldn't be anything unusual in my spending.
And I was right. Everything was as it was supposed to be. Except for one section: transfers and investments. The number of transfers I���d been making seemed excessive. I dug deeper and found that I had made several transfers to invest in Fundrise and DiversyFund, two sites designed to help folks make real estate investments.
But I couldn't remember my rationale for making those transfers, so I used a strategy I learned while working at a lumbermill. It's called the ���five whys.��� The notion: You keep asking why until you find the root cause of a decision.
Why did I originally choose to invest in Fundrise and DiversyFund? My sister had asked me about DiversyFund. Meanwhile, I���d heard of Fundrise from various sources.
Why did I want to invest? They seemed like a good way to get into real estate. I had cash for a house down payment, and I was getting frustrated waiting to find an affordable house.
Why was I frustrated? It felt like I���d missed my opportunity to buy a house. It was frustrating to see the real estate market go up and up and up.
Why do I want to buy a house? I���m tired of living under someone else's rules. I want ���my own kingdom.���
Why do I want a kingdom? After moving around for much of my 20s, I want a place I can finally call home. I���m ready to be part of a community. I want a place where my younger siblings can come when they need to get away from everyday life. I want a place where I can house friends and family who are going through a rough patch���something I saw my parents do. Most important, I want a place where I can raise a family with my future bride.
I realized I���d been telling myself a negative story. I began believing that homeownership was unobtainable. I didn���t think through all the possibilities, including the possibility that property prices might stop skyrocketing. All I could see were the challenges. With this mindset, the only option became platforms like Fundrise and DiversyFund, which allowed me to tell myself, "Well, at least I have some real estate investment exposure."
Yet, when I think about owning a house, I���ve never cared about the investment potential. That was never my goal. But my mind had decided that these investable assets were somehow a substitute for what I really wanted���a place I could call home. I realized my investments were ways to pacify myself, to make me feel a little bit better in the short term. But in the long term, they didn't achieve what I truly want.
Money isn't just dollars and cents. It can be a way to look at ourselves from the outside. What story does your money say about you? Try taking a closer look. You might be surprised at what you learn.
Kelechi Iwuaba is an engineer, a Nigerian-American and a self-taught finance nerd who lives in Atlanta. He loves talking about all things finance to anyone willing to listen. In his free time, Kelechi creates finance videos, records the ���Rambling Mind��� podcast and writes a blog. He loves volunteering at his local church and playing soccer at every opportunity. Follow him on Twitter @KelechIwuaba.
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