How an Average Person Can Turn Their Financial Life Around
Understanding the Big Picture of Wealth
Economics is the foundation of society's operations. As the old saying goes: "People hustle for profit." There was once a legendary post on a forum that stated: "The tragedy of adulthood is that by the time you understand the rules of the game around 40, you're already too exhausted to fight back."
So, What Exactly Is Money?
Imagine you're stranded on a deserted island with a bank card worth a million dollars. You'll quickly realize that a fishing net or a lighter is more useful than that card. So, it's not the money itself we seek but what money represents: resources, products, services, and status.
That's why some high-ranking officials might not have a lot of cash, but they enjoy vast resources and services behind the scenes. For us ordinary folks, we don't need to worry about survival skills on a deserted island or fantasize about accessing top-tier social resources. Instead, we need to understand how money is created.
Where Is All This Wealth Stored?
The oldest and most classic asset class is real estate, which holds about two-thirds of global wealth. The total market value of global stocks is around $70-90 trillion, making it the second-largest asset class. Cash and currencies account for about $30 trillion, while gold's total market value is about $7-9 trillion. Lastly, cryptocurrencies like Bitcoin are valued at around $3.9 trillion.
The Past Decade: The Era of Consensus Economy
After understanding these macro concepts, let's delve into two crucial practical ideas: the consensus economy and the consumer economy. I’ll illustrate these with my own experiences.
Society is dynamically competing for various resources. Understanding how societal interests are distributed is crucial. Real estate investment is one of the most important strategies for a family, as the land is controlled by the government and is where most public funds are tied up. Next is the stock market, reflecting the value of the most efficiently run companies. Investing in good companies can yield capital gains, a valuable skill for making money.
Real Estate and Stock Investments
Real estate represents future certainty in value, helping your funds retain their value. Identifying good companies allows you to continuously buy stocks and gain capital returns. Achieving an 80% success rate in real estate and stock investments requires minimal effort but provides long-lasting benefits. However, reaching a 90% success rate is extremely difficult and often results in diminished returns due to overexertion.
The Nature of Business
Business involves a proportional input-output relationship, generating profit through the supply-demand dynamic. In market economies, businesses thrive on transactions. Increased transaction efficiency, especially through online platforms, has enriched business channels but hasn't changed the essence of business: buying and selling.
Whether on social platforms or online platforms, the goal is always to maximize the platform's interests, leading to a competitive environment focused on transaction efficiency rather than user value. This results in declining food quality, prevalence of additives in products, and low-quality goods on platforms like TikTok and Pinduoduo.
Consumer-Oriented Economy
For sustainable growth, society must transition from a market economy to a consumer-oriented economy, focusing on producing better products and services to meet user needs. This requires long-term thinking and prioritizing user value over immediate profits. Companies like Apple and Fat Donglai excel in this regard, offering superior products and services without relying on discounts.
Wealth Redistribution
In a consensus economy, wealth is rapidly accumulated, benefiting participants much like the fast economic growth of the past. However, this concentration of capital and talent in high-paying sectors limits opportunities for small businesses and ordinary people, leading to issues like declining birth rates and rising unemployment.
Young people are increasingly moving away from big cities, finding that smaller cities offer all the material and spiritual needs for survival. This shift highlights the true nature of wealth: it's not just about money but access to resources.
Practical Steps for Ordinary People
For most people, the problem isn't the ceiling being too high but the floor being too low. Economic opportunities arise every few years, but the challenge is maintaining a livelihood in changing environments.
Key Principles for Achieving Financial Success
- Figure out what works and do it: When you have nothing, this is crucial. Identify what you understand and pursue it.
- Don't act without understanding: With some capital, resist the temptation to act on everything. Do nothing if you're unsure.
- Stop if it's not working: Even if you've invested heavily, stop if it's not working. Dynamic observation and timely intervention are essential.
In a thriving economy, everyone pursues maximum wealth, driven by market forces. However, if we shift our focus to doing the right thing and improving society, we can transition to a spiritually fulfilling society where material needs are met, and trust and quality are paramount.
Conclusion
Ultimately, in the face of societal shifts, we are all small players. Yet, we always have the choice to decide what kind of person we want to be and what values we want to uphold.
