Decisions Based on Greed
We work to make a living. We have to pay bills, but also we do want vacations, a nicer car, a comfortable retirement. For these reasons we get up out of bed even when we don't feel like it. We want a better life for our children.
This is a good thing.
Entrenpreneurs start companies to make a profit. Workers invest in a 401(k) to get a return on the investment. We put off today's pleasures in hopes that the sacrifice will pay off in higher returns decades in the future. This is how capitalism runs.
So what is greed? It can be defined several ways, but for our purposes, greed is an inordinate desire to have more. It may be even be insatiable. For a greedy person, the return on investment is never good enough. It's the opposite of contentment.
All financial decision making is based on a profit. We go to night school to get a better paying job. We take on a side hustle to invest more or pay off debt so we can invest more. Some small business take out loans backed by personal assets in order to have a solid income. But greed wants more.
Why does greed hurt us when it affects our financial decision making?
1. Desire for a quick profit outside the range of the normal margin or the normal time frame.
2. Susceptibility to scams. Fraudsters know the desire for a "quick buck" is a strong emotional appeal.
3. Something for nothing. Buying a lottery ticket may be harmless (I think it's not), but most lottery tickets are bought by those who can least afford them in vain hopes of "striking it rich" without work.
4. Overleveraging. Buying stocks on margin (borrowing money to make a higher return) is risky and should be used only by sophisticated investors. But greed can push us to leverage more than we should in order to make more money than we normally could.
Living a life of contentment is the answer. The formula is work plus savings plus time.
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