Personal finance: How to save, spend, and think rationally about money | Big Think

by Panzer
VICKI ROBIN: I was leading a session on a relationship with money.
I just was curious about where people were with this at this point.
This was in 2016.
We had 50 people in the room.
We circled up and we went around the room, just say something about your relationship
with money.
And I realized every person in that room was in fear about money.
From the 80 year old who I know has millions of dollars to the 20 year old who's like already
$20,000 in debt.
And it just, honestly it infuriated me like what kind of society requires that everybody
participate in something that terrifies them.
This feels so amiss to me.
DANIEL KAHNEMAN: People are not fully rational and they make many choices that if they reflected
upon them they would do differently.
There's no question about that.
The major tendency is people tend to frame things very narrowly.
They take a narrow view of decision making.
They look at the problem at hand and they deal with it as if it were the only problem.
Very frequently it's a better idea to look at problems as they will recur throughout
your life and then you look at the policy that you're to adopt for a class of problems.
Difficult to do would be a better thing.
People frame things narrowly in the sense, for example, that they will save and borrow
at the same time instead of somehow treating their whole portfolio of assets as one thing.
If people were able to take a broader view they would in general make better decisions.
So that is certainly one of the weaknesses of human decision making.
We call it narrow framing.
Four layers of financial independence
ROBIN: First of all, I'd like to distinguish between independence and freedom.
So, financial freedom is like freeing your mind.
Financial freedom is understanding that I'm me and there's an economy out there and I
have a relationship with it but it doesn't run my life.
It's freeing my mind from the messages of the consumer culture, the messages of the
economy.
The messages that a house is a starter house.
No, that's my house.
I could die in my house.
It's like there's so many presumptions that drive us into waste slavery, debt, and it
doesn't matter whether you are at the low end or the high end.
If you are engaged in that sort of anxious process of more, more, more, you are not free.