Is Pride Keeping You Poor?

I have a terrible habit of blogging about topics long after they go out of fashion. If I were a journalist, I’d probably get fired because I’d always be reporting news 3 weeks too late.

So in true cheerfulegg style, we’re gonna talk about football this week (because the World Cup just ended. Whoops). First of all, I’m not a huge football fan. In an attempt to make conversation, many people ask me, “Which team do you support?” And I go, “I don’t really watch football.” And then they’ll give me weird looks and back away re-e-e-a-ll-y slowly. I can only imagine that they must be marvelling at my admirable independence from mainstream media.

So let’s talk about football. The first chapter of Think Like a Freak by Steven Levitt and Stephen Dubner (the authors of Freakonomics) has a fascinating analysis of penalty kicks.

Let’s say you’re about to take the penalty kick that will decide whether your team will win the World Cup. You approach the penalty line, and the crowd roars in anticipation. Where should you direct the ball? You could kick to the left, which is your stronger, more accurate side, but the goalkeeper will be expecting that – Goalies jump towards the kicker’s left corner roughly 57 percent of the time, compared to just 41 percent of the time for the right corner.

You know that at this level of professional football, it’s almost entirely down to chance. The ball will rocket off your foot at 128 km/h, and the goalie simply can’t afford to wait and see what happens. He must take a guess and dive in that direction.

But hold up – If the goalie dives to your left 57 percent of the time and dives to your right 41 percent of the time, that means that he remains in the middle 2 percent of the time. Which means that you can give yourself the best odds of winning by simply shooting directly at the middle, where the goalie is standing.

With such great odds, you’d think such a strategy would be way more popular. Yet, only 17 percent of penalty kicks are aimed at the middle. Why?

The answer, of course, is pride. If you went the traditional route and kicked to either the left or right corner, people will still forgive you even if the goalie eventually thwarts your valiant effort. But if you lob the ball to the middle and the goalie doesn’t dive, you’d look extremely foolish. “What a dumbass”, your fans will say, “He practically GAVE away the World Cup championship!” And then not only do you lose all dignity among your fellow citizens, you probably also have to worry about whether some crazy fans will try to kill you.

So you sigh, and take the traditional route even though you know it ain’t the best strategy.

Sometimes, pride stops us from doing what’s best for us. Most of us (especially me) will never be professional footballers, but here are three other areas where pride could potentially stop us from getting richer.

When It Comes to Learning Personal Finance

Isn’t it interesting how money is such a taboo topic in Singapore? Try this out: Start talking about managing your money, and see how your friends will either a) roll their eyes, b) change the subject, or c) stare at you suspiciously and ask whether you’ve been reading “that weird cheerfulegg blog” they’ve been hearing about.

Why? Because most of us feel that money is something that we “should” know. (But probably don’t).

So what do we do? We hold off on learning more. We feel embarrassed to ask questions. We glance around furtively because we’d rather die than let our friends catch us in the “Investing” section of Kinokuniya.

Yet, if we think about it, it’s not as if we were born with the ability to make good financial decisions. No one pops out from the womb and says “YES! I am SO going to open a savings account with a 0.8 percent interest rate!” Since schools don’t teach us good money management skills, all of us have to start somewhere!

Let me emphasise this: NOBODY should feel awkward about wanting to learn more about personal finance. Nobody should feel like it’s “weird” to start asking more questions. At the very least, you should read one good money book. You owe it to yourself.

(To start off, check out my Reads section and join my VIP List to download a free ebook on how to save an extra $300 every month)

When It Comes to Weddings

We all know the typical wedding template in Singapore: Book a grand ballroom, invite 500 guests (most of whom you have never met in your life), march in, eat a little, change clothes, march in again, YUMMMMMM-SENG!!!, take pictures with 50 tables, shake hands, collapse into bed exhausted.

I totally get the fact that most young couples want their wedding day to be a little more lavish. What I DON’T get is spending way more than you can afford and GOING INTO DEBT for it. The next time I hear someone tell me that he’s going to Taiwan for a pre-wedding shoot because his bridal shop offers an instalment plan, I’m going to pour curry over myself and jump into a pool of of chilli padi.

Why do so many people do this? Because they don’t want to “lose face”. And so they do dumb things like order a huge arch made of rare flowers from Argentina and keep tabs on how much in ang pao collections they get from each relative.

(By the way, other personal finance bloggers will wag their fingers and say “Singaporeans should just spend less on weddings!” I disagree. When it comes to YOUR wedding, it’s pretty likely that you’ll want to splurge on yours too. It’s human nature. Telling a wedding couple that they should spend less on their wedding is like telling a person on fire that he has a great complexion. That may be technically true, but no one really cares at that point.)

Instead of being a dumbass and going into debt, plan ahead and save up for your wedding early.

When It Comes to Investing

I know a dude who’s been losing money trading ALL HIS LIFE. Yeah, he gets a couple of good days once in awhile to keep him motivated, but a quick look at his dwindling account shows that he’s running a losing strategy. It’s like a slot machine – you get payouts once in awhile, but over the long-term, it’s ultimately a loser’s game.

Yet, no amount of convincing will ever change him. Some people will always believe that they can beat the market, no matter how poor the odds are. We all believe we’re special. And it’s interesting, because we dudes are especially susceptible to this “Everyone else is dumb but I’M smart enough to beat the market” belief. Girls have a much easier time accepting a strategy like index investing, setting it up, and moving on.

I don’t really have a solution to this pride thing, except perhaps a simple mental framework to think about whenever you’re about to make any decision, financial or otherwise. Always ask yourself, “Am I doing this because it’s truly the best strategy for me, or because I don’t want to lose face?”

That’s why we focus so much on psychology here at cheerfulegg. With the right psychological mindsets, we can make better decisions, live richer lives, and maybe even win the World Cup.

Now, I’d love to hear from you. Can you think of any stories where someone you know made a less-than-ideal decision because of their pride? Make it anonymous if you have to, but share it here. Your story could help someone else reading this.

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