October 12, 2022

Downed by pessimism or a serious possibilist?

Why do we love to read and share doom and gloom stories? Why do we believe we are powerless to change aspects of our lives?

Morgan Housel, author of The Psychology of Money, says pessimism makes us sound smarter since optimists are often accused of being oblivious to the risks.

He says there are a few reasons we are prone to being financially pessimistic.

One is because bad economic times affect us all financially.

Another is because financial setbacks happen too quickly to ignore, but financial successes often take time.

The third reason Housel cites that is relevant to financial markets is that we expect the present conditions to continue without taking into account how markets adapt.

Being optimistic about everything can lead to complacency Housel says. But rather than succumbing to pessimism, we should, in the words of Hans Rosling, a Swedish public health expert, statistician and author who wrote about human progress, be “serious possibilists”.

We should see that the odds of a favourable outcome are in our favour over time, but there may be setbacks along the way, Housel says.

While Housel considers optimism and pessimism among investors in financial markets, his insights are valuable to other aspects of our financial lives.

South Africans are prone to pessimism as there is much bad news.

However, among them are many serious possibilists who are side-hustling – despite economic setbacks they believe they can improve their income.

Pessimism about the government’s misuse of taxpayers’ money makes it tempting to evade tax due on side-hustle income. But serious possibilists believe their businesses will thrive in future and they don't want a tax compliance problem when they do. See our article below explaining the risks of non-compliance.

It is easy to be pessimistic about climate change, poverty and inequality.

Serious possibilists, however, look for investments that can make a difference to the world we live in. Despite a much-needed spotlight on those who spin a green story without real intent to do the right thing, possibilists recognise that it is necessary to take steps collectively despite some imperfections. Smart About Money’s new section on sustainability - see the first article below - explains why.

It is also easy to take to social media and spread bad news stories about financial advisers and asset managers and especially the fees you pay to invest.

Serious possibilists take the time to look for good professionals who are worth their fees and can make a difference in their lives. They consider whether messages they receive are useful, check facts and consider their relevance before taking anything on board. Social media addicts please don’t scroll past our story below.

Getting real about your possibilities, also means knowing what you can spend. Credit cards introduce an unreal world in which it is way too easy to give in to temptation and live beyond your means. Being granted credit can create a false sense of optimism, when you should be much more serious about the possibilities. Another contribution to our section on managing credit explains.

It is easy to feel defeated if you are struggling financially, fighting a financial battle or been dealt a blow by financial markets. But there are ways take a fresh look at the situation and identify what is possible – we hope the articles highlighted below give you some ideas.

Laura du Preez
Editor Smart About Money

Open up a world of possibilities

Staying compliant

Side hustling provides income possibilities - tax evasion is not one of them

Many South Africans are hustling for additional income on the side. This opens you to the possibility of not only improving your financial situation but also your skills.

The possibility of hiding your side hustle income from the taxman is, however, narrowing and it really isn’t worth the risk. Read more: Does the taxman need to know about your side-hustle?

Doing it right

Is it possible to fix the world before it breaks?

The world’s problems may seem insurmountable. It is easy to be pessimistic about your ability to make a difference. But as more and more investors ask that their money be used to support a more sustainable way of life, the greater the impact. In this first article in our series on sustainable investing, we take a high-level look at how investors can make a difference.

Good to know

Whose advice should you trust?

Twitter and TikTok may provide edutainment, but scroll with care. Information can be empowering if it is accurate, but if you really want to be sure your finances are on track, you need to work out if you are doing what is financially right for you.

If you know where to find good, reliable info you can do your own research. If not, there is a lot of value in paying a fee to a professional who can work out a plan that suits you and your unique circumstances. Read more: Why social media is not the place for solid financial advice.

Money management

So easy to be too complacent

Credit cards offer a convenient way to pay for things, but they can also lead you into temptation. There’s a right and wrong way to use them. Knowing the difference can make many things possible and avoid a lot of financial stress. Read more: What is a good way to manage my credit card?

Opening up the possibilities for others

Do you have friends, family or colleagues who could do with a dose of realism? Please share this newsletter with them by clicking the Forward button in the footer.

If there are topics you would like to see covered, drop us an email on editor@smartaboutmoney.co.za and watch out for new topics by subscribing to this newsletter on www.smartaboutmoney.co.za or following us on social media.