The Nature Of Money

Finished reading 2023. 2. 14

This time I recommended to Saeyeodok a book I had wanted to read—a book that made the Korea Economic Daily's bestseller list in 2022 and was a bestseller for three years in a row. The book "The Nature of Money" shares with readers the things the author, who was born poor, came to learn after becoming wealthy.

When you read books by people who have built wealth or done financial planning, you learn that they all have their own philosophy and principles about money. There is no need to become exactly like them, but I feel it is worth thinking deeply about the philosophy they hold, and that I too need to establish a philosophy about money.

The author is Kim Seung-ho, the owner of Snowfox, which you can see in many places such as Gangnam Station, and a manager running a worldwide chain. He begins the book by saying that true wealthy people do not easily share their methods, but that he wants to give motivation through his own story. He gives money a personality, saying that you must earn good money, save it well, and spend it well.

The regular education curriculum does not teach how to earn well and spend well, and I will have to give my daughter and son an economic education too, so as not to leave them with the regret of "if only I had received such an education from a young age." I read it borrowed from the library, but I also came to think I should own a copy.

All investment begins with small money. The experience of investing that starts with a small investment makes large investments possible too. Once assets accumulate, you must invest. Money that is not invested is dead money, and money sitting idle in a drawer, doing nothing, eats the poison of inflation and slowly dies.

If you do not know how to use a smartphone, you can only live as a lower-class person in today's information world; the economy is the same. If you do not know the flow of money, you cannot protect your property even when others try to take it, and you do not even realize it has been taken.

Even if you try to manage your property, because you do not know your own value and the other party's value, you often pay absurd prices or hand things over for a pittance. No country, no school anywhere gives practical economic education. The reason is simple: there is no particular reason to teach it. It is just like the reason slaves and serfs were not taught to read in the past. --> Study "700 Economic and Financial Terms" published by the Bank of Korea. It might seem good for me to be rich and others to be poor, but in such a country the political and social safety nets collapse, and in the end the upper group bears that risk.

The importance of stocks... The characteristics of people who lose money in stocks are as follows: 1. They just followed others in. 2. They have no plan for what to buy. 3. The power of their money is weak. Even when eating at a restaurant or buying goods online, people compare prices and carefully examine product reviews, but the reality is that when buying stocks they get swept up emotionally by those around them and make the purchase. The author tells you to avoid this.

The reason companies issue stocks is that a single person cannot raise the funds to build a company, so many people gather investment money by dividing it among themselves, and a stock is a certificate of the promise to distribute according to that investment amount. People who succeed in stocks: 1. Think of themselves as managers. 2. The quality of the money they hold—money is money. 3. Wait until they can buy cheaply.

In the end, the stock market is one where those who believe in themselves with their own complete capital take the fruits. Looking at asset composition, it is made up of 53.7% real estate and 39.9% financial assets. Comparing this ratio with ordinary people's asset composition of 76.6% real estate and 18.9% financial assets, you can see that the wealthy's share of financial assets is about twice as high.

In the end, creating a situation where you no longer have to work is the first step to becoming wealthy. Most wealthy Koreans became wealthy through business income (47%) and real estate investment (21.5%). They earned money in business and invested surplus capital in real estate, living while saving about 5 million won a month. The means by which they grow their wealth is saving. Through saving they amass investment funds of about 500 million won in seed money over an average of about 12 years. The average age at which they make this amount of money is 44. This money is invested mainly in real estate (61.6%) and financial assets (35.1%), but the core purpose of asset management is mostly maintaining the status quo. Protecting what you have is not easy.

The general standard for a wealthy person

1. It is a home you own with no loan, and

2. Non-labor income exceeding a monthly average of 5,411,583 won. Even someone who lives in a multi-billion-won apartment in Gangnam and earns a salary in the hundreds of millions cannot be called wealthy if they have a loan and their income is entirely what they earn through their own work. To have non-labor income of 5 million won or more, assets exceeding 2 billion won must be invested in real estate or financial assets.

3. A possessor of the desire-restraining ability such that they no longer need to earn money. A human being must become the autonomous master of their own life.

P.105 His daily routine is as follows. Check email -> newspapers. 〈The New York Times〉, 〈The Washington Post〉, 〈The Wall Street Journal〉, 〈CNN〉, 〈FOX NEWS〉, the UK's 〈Financial Times〉, 〈The Times〉, 〈Reuters〉, Russia's 〈EIN WORLD NEWS REPORT〉, Japan's 〈Asahi Shimbun〉, 〈Yomiuri〉, 〈Nihon Keizai Shimbun〉, the homepage of YAHOO Japan, China's 〈Global Times〉, 〈People's Daily〉, the Middle East's 〈Jordan Times〉, France's 〈Le Monde〉, 〈Le Figaro〉, Germany's 〈Spiegel〉, 〈Die Welt〉, 〈Frankfurter Allgemeine〉, the Houston local newspaper 〈Houston Chronicle〉, a few Korean newspapers. Economic sites: Yahoo Finance. With lots of general investment information, the most popular part of Yahoo; stops by CNBC, Bloomberg, Market Screener, and checks the Fear & Greed Index hidden in CNN Business; the US dollar index chart, London Brent oil prices, investing.com, dividend.com, finviz.com, new news on the US Federal Reserve Board site, financial statements he is curious about: marketbeat.com, institutional investors' trends, stock trends: whalewisdom.com, tipranks.com, seekingalpha.com, stops by oaktreecapital.com run by Howard Marks to read Howard's memos, barrons.com, Korea: Hankyung Consensus, Paxnet, Naver Finance ..................................up to here, about 2 hours.................................................

loopnet.com, the largest commercial real estate listing site in the US—he remembers, tracks, and checks all the listings in Houston, LA, and New York. He buys real estate once or twice a year, and only by looking at it ceaselessly like this can he know the trend of price changes. Unlike stocks, real estate has an unclear price-formation process, so you can develop a feel only by comparing and tracking it ceaselessly like this.

He turns everything into data. He prints it out and puts it in folders. He makes properly printed stickers—holding-stock information, real estate listing information, annual reports, general stock information, and so on—and attaches them to folders. He spends a lot of time gathering, sorting, and understanding information. He cannot neglect study and information gathering. Through YouTube he listens to lectures by young teachers and lends an ear to the opinions of seasoned experts. When it comes to earning, gathering, and managing assets, I trust no one. I trust only myself.

It is impossible to become wealthy through saving. After deducting a 2% inflation rate and a 15.4% interest tax, in fact the principal shrinks. Until you amass seed money, use the bank. If you want to amass 1 billion won, you steadily compound your first seed money of 100 million won at a 10% return for 25 years.

One thing you can do right now to become wealthy: to an item that does not spark joy, say "thank you for everything" or "I'm sorry for leaving you unused and discarded," and send it off with a goodbye. If I have not yet become independent, all income must be used to build assets. People who use most of their income on consumer goods rather than assets never achieve independence in their lifetime.

The ability to earn money, the ability to save it, the ability to maintain it, the ability to spend it. When people do a sloppy job of tax reporting or run into complex investment-expenditure problems, they take the attitude of a generous person who entrusts it all in good faith, but in fact it is because they find it bothersome and do not understand it.

Also, many people ask how one should earn money, but often even the person being asked does not realize that they themselves are earning a lot. Because there always seems to be nothing left after paying for this and that, even while earning a lot of money they do not feel like they are earning.

The ability to save money is yet another ability, different from the ability to earn money. Earning money well does not mean saving money well. Because to save money you must balance your assets and have detailed expenditure-management ability. In addition, it is possible only when you have knowledge and understanding of things from the trivial—handling receipts, managing goods—to tax rates, interest, investment, and exchange rates, and are not negligent in financial separation and expenditure management. Beyond that, the very attitude toward money must be upright.

Kim Seung-ho's investment principles and standards

1. Stay away from all things that make money quickly.

2. Do not invest in anything that harms life.

3. Do not do work that does not involve investing.

4. Earn money with time, and earn money to buy time.

5. Do not chase.

6. Invest in risk, follow value, and run away from greed.

7. Stocks for 5 years, real estate for 10 years.

8. First place or second place, but discard third place.

There is a great deal in this book that must be internalized. A book to read once more. ★ 5/5