As a lover of books and all things textual, I have been keeping a record of quotes and inspirational snippets throughout my life. Over the past decade as my interest in personal finance has increased, I’ve taken to compiling financial proverbs as well; I find these can be some of the most poignant pieces given that money is so pervasive in our lives.
For this article I have again selected three proverbs for your reading pleasure.
“A fool and his money are soon parted.”
– Common Proverb
Given the multitude of sources I was able to find for this proverb and the ambiguous nature of it, it is likely that it has been around for millennia and spanned cultures which never would have interconnected at any time.
This one can genuinely be taken at face value; since money is difficult for the vast majority of people to acquire, many of whom are quite intelligent, it is unlikely that a fool who falls into some money will be able to keep it. The humorous rebuttal to this is to wonder how to fool and the money became acquainted in the first place!
Still, I believe it is worth considering what is meant here by a fool. Often, one can be a fool in many regards and yet industrious enough to learn to generate an income. The problem, however, is in retaining a fortune. Such a huge component of wealth management is the ongoing side of the equation. While basically anyone can win the state lottery or gene-pool lottery (inheritance), it is far more difficult to then go about day to day life over the course of decades as a prudent steward of a huge sum of money. Temptations tend to grow by exponents the greater one’s means.
Someone may be regarded as a fool simply for being ignorant of a given subject. To those actively following politics, anyone not up-to-date on the current bevy of political candidates and their platforms may be regarded a fool. Likewise, in personal finance one may be a fool who does not understand the impact of rising interest rates on the bond market. To this point, someone who is ignorant of the financial arena is in dire need of getting informed lest they lose what they have or never achieve what they desire.
“Don’t count your chickens before they hatch.”
– Common Proverb
While in Financial Proverbs 1.0 I encouraged you not to put all of your eggs into one basket, here I offer a similar warning on the note of prudent behaviour.
I take this proverb as an omen not to spend money before it has been earned. For instance, many people take on long-term debt loads on the basis that their income will remain stable or rise over time. They fail to take into account the fact that their projections may fall short. If we were discussing small stakes, this sort of behaviour might not be a huge problem. However, for those signing on for outsized homes and luxury vehicles, the pinch might be enough to crush them if they go counting too heavily on their income to never take a dip.
Only once income has been earned and expenses such as taxes have been paid can it truly be counted has yours. Life has an interesting way of throwing curve balls at people who rush impudently forward without covering themselves on the downside first. While fortune certainly favours the bold, taking risks is best done from a solid footing.
Beyond the above, this proverb can be taken as a warning not to take one’s eye off of the prize. Namely, as with a garden that requires regular weeding and watering, it is important to tend to your assets routinely to make sure they continue growing as anticipated. Counting your chickens before they hatch would be like counting the tomatoes you expect to grow from the plant you anticipate will flourish once you plant its seed. It is akin to spending your dividends before they are paid. Rather, one should put together a portfolio of high quality assets, then tend to it over time by staying abreast of company and industry developments to be sure the investment is still on course.
“A bird in the hand is better than two in the bush.”
– English Proverb
The future is uncertain. When an opportunity presents itself to take a small known gain instead of a potentially large future gain, this proverb urges us to take the money and run with it.
There are a few reasons why it may be best to just take what you can while you can:
- The future gain you hope for may never actually materialize. This is the most obvious and represents the largest downside to the one who foregoes a sure thing.
- The person you made the deal for the future gain with may change their mind entirely or ask to change the terms. You may be forced into a worse deal without being able to fall back on the first offer.
- If you take the bird in the hand right now, you can then go ahead and begin investing that on the spot and benefiting from the time value of money; having a dollar today earning 10% interest is better than being given two dollars in eight years since your money will have compounded beyond that amount by then.
The Canadian Pension Plan currently reduces the amount pensioners will receive if they choose to begin receiving their pension at 60 rather than waiting. This is meant to discourage people from tapping into funds now on the promise that they will receive more down the road.
While it may sound nice to get more money at 65 or 70, I am a proponent of collecting funds as soon as possible and putting them to work in your account. Having seen enough of life and what can go wrong, it is important to remember that time is fleeting. Every moment is precious and in a world where you can’t count even on next week, waiting years simply makes little sense to me. For my part, I would certainly take the money on the front end and, if I didn’t need it, simply invest it for when I do.
Conclusion
By educating yourself about personal finance, you protect yourself from being the financial fool who either winds up destitute or has to work endlessly for a paycheque simply for lack of know-how. By carefully tending your portfolio, you will be sure not to get too far ahead of yourself. Finally, remember that a sure profit today is often preferable to promised riches tomorrow; also recognize that this is a balancing act between risk and reward.
Thank you for reading.
– Ryan
How do you understand these proverbs?
If you enjoy this post, be sure to check out Financial Proverbs 1.0 here!
Pictures courtesy of pixabay.com
