MAKING MONEY IS AN ART FORM

I believe that the right mindset is essential for a person to prosper financially. Again, it’s impossible to get out of poverty without models that reconcile us with money. That’s why it would be of great help to have an educational system that reconciled money with willpower and constant dedication.

I say this knowing that we live on a continent marked by profound inequalities. Coming from the most privileged segments of society offers advantages in loan acquisitions, educational systems, and family independence. Nevertheless, for all social sectors, having an efficient, accessible, and adequate education is essential for future challenges, allowing us to pave the way for those who follow us. In this case we come back to the issue of what we learn and practice. For example, it’s very common to hear that Latinos have lower savings rates than other regions, but we don’t know how to properly define savings. We continue to believe that it means having our assets in a bank or under a mattress.

I’VE NEVER SEEN ANYONE MAKE A LOT BY RISKING LITTLE.

Most countries in North America and Latin America have experienced hyperinflation, and savings have lost their conventional meaning, yet we still haven’t been able to redefine that term. In The Psychology of Money (2020), Morgan Housel describes some of the keys that shape our understanding of money. One is that our experiences shape our particular perspectives on how finance works.

The same author argues that even education can’t help us fully re-create the experiences of other societies—maybe that’s why we’re so willing to make the same mistakes—yet, undoubtedly, as we become aware of the existence of resources, we increase our capacity to act. Unfortunately, our high school graduates leave school without even having heard the words investment, dividend, and profitability.

All these elements end up digging a ditch that makes it more complicated to reconcile ourselves with the images of prosperity. And when you roar, and your efforts begin to bear fruit, there will also be those who criticize you for what you have. The bloodthirsty attacks of those who do not accept your progress will come from every direction. I stopped paying attention to them when I realized how interested they were in how much I have and how little they cared about how hard I had worked to get it. I’ve been working for thirty years, twenty years of that before social media exploded onto the scene.

Let’s get one thing straight: working is one thing, but there is a world of difference between that and knowing how to work. Making money is an art form, because it requires the use of creativity in an effective and productive way, being orderly and disciplined, being punctual and forever passionate, building a life in which work and family merge and coexist in synergy, knowing how to communicate and express oneself, knowing how to spend and invest, knowing how to hire and lead. To produce something, all of these art forms must merge and become one line.

Working shouldn’t be a merit but a joy. And making money should be considered an art form when done ethically. Never be ashamed of having money. We’ve been raised to feel bad about our accomplishments, about the grace and blessing we have achieved by being diligent, skillful, and tenacious.

When you reach your peak, many will say that it was handed to you or that it was sheer luck, that you were born with a silver spoon in your mouth, that you had more opportunities than others, that you stole, or that you cheated. They’ll make public claims because they don’t know how hard you worked in private, how much you’ve given for everything you have. Many will play the victim and that’s why they’ll never be leaders, because a leader who acts like a victim can’t lead themselves or anyone else. So while others cry and point fingers at you, keep on harvesting and shattering those wine presses. Being held accountable by God will be enough.

I LOOK MORE LIKE WHAT YOU DON’T SEE THAN WHAT YOU IMAGINE.

Earn all the money you want honestly and enjoy it. Relish it in the fragility of life, but above all, share it with others. Be prudent, devoid of greed. Invest a little, save a little, but never save yourself from experiencing moments. Spend without wasting your life. Save what you have in your pocket, but not what is in your heart. Never spare kisses, hugs, or good deeds. Never spare words of love.

Our relationship with money is not restricted to the amounts we deposit or withdraw from the bank. Money is much more complex than an exchange rate. If we were guided solely by the monetary denomination of money, we’d lose the sense of its value. This was already explained by the Spanish poet Antonio Machado when he wrote: “Only a fool thinks price and value are the same.”

The latter is crucial when we add up how much we invest in the different steps that lead us to our goals. In human thinking, it’s natural to be dominated by numbers. We unconsciously open a mental account for each type of expense, and in that account, we accumulate what we’ve invested. I will explain this mental accounting with the help of one of the most interesting behavioral studies I have ever read.

To put it in context: Money is supposed to be a “universal” exchange mechanism, which is why we value two products of the same price equally. According to this principle, with fifty dollars I can buy an earring or a good imported steak; I can also use that money to go to a soccer game or to the opera. So we could be led to think that the currency’s value is preserved if things cost the same. In other words, losing a twenty-dollar bill should hurt just as much as ruining a tie of the same price.

On the other hand, the brain keeps a different record from our accounting books. It defines in advance what the money has been spent on and adds up all the amounts we have allocated for that purpose.

MENTAL ACCOUNTING

What we just discussed isn’t only a theory. The marvelous duo of human research, the brilliant Daniel Kahneman and Amos Tversky, put this idea into practice by coming up with a brilliant experiment. They asked a group of students to imagine themselves in the following scenario: They had bought a ten-dollar ticket to a play. The researchers asked them to pretend that when they arrived at the theater door, they realized they had lost the ticket. The researchers then asked if they’d be willing to buy another ticket to see the play. Most participants said no.

The members of a second group were asked a different question: They were presented with the situation of going to a play where the ticket cost ten dollars, but in this case, they hadn’t bought the ticket yet. But they had money in their pocket to do so. This group was asked to imagine that when they arrived at the box office, they noticed that they’d lost ten dollars of the total they had in their pocket, just like the previous group had lost the ticket. They were then asked the same question: Would they buy the ticket, even though they had lost the amount of money equal to the value of the ticket? The vast majority answered yes.

YOUR LIGHT IS IN YOU, NOT IN SOMEONE ELSE’S SHADOW.

In this hypothetical reality, the first group lost a ticket valued at ten dollars, and when they realized this, they chose to go home. The second group lost ten dollars that they had kept in their pocket, and still chose to see the play.

What explains these contradictory results? In the first case, they didn’t enter the theater because their brain had already put ten dollars in the mental account for that event. In other words, they’d already paid for the play, and it would cost them twice as much if they bought another ticket. In the case of the second group, who lost plain old money, the brain lost the same amount in monetary terms, but the money hadn’t been recorded in their mental accounts. So the play still cost ten dollars, but the lost money was not part of any personal calculation.

This illustrated how human beings mentally assign numerical criteria to certain activities.

Although, from a financial perspective, we should value two products of the same price equally, our brains register them differently. We anticipate what we’re going to spend the money on and establish a range of what we’re willing to deposit into that account.

We can use this human thinking trait to our advantage and turn it into an opportunity to focus on future benefits. How? First, identify those future benefits you want to access, such as taking a trip with your family, taking a specific class, or buying something worth a lot of money. Once you determine the goal you’re going to save for, you should begin to set aside a certain amount of money for this goal on a monthly basis. Many bank accounts today have a savings fund option where you can set aside money for a specific goal. For example, if you automate this and deposit twenty-five dollars into that fund each month, after four months you’ll have saved one hundred dollars almost without even realizing it, because that amount is already mentally associated with a specific purpose.

Our brain registers and assigns different values in each case. This has great importance in how we make decisions, because by mentally allocating where resources go, we end up giving weight to what we contribute. The lost ticket was in an established mental account, the lost money was not related to any specific expense, but in theory both had the same value.

Why is this information important to roaring? Defining the right mental line items helps us create a more appropriate destination for our money. Additionally, if you manage to link it to your purpose, you’ll have better results because you’ll strengthen that connection. From a purely financial perspective, this approach has gained traction with the successful Profit First method popularized by entrepreneur Mike Michalowicz.³ The idea behind that model is to allocate part of a business’s return as profit and to separate other relevant expenses as structurally as possible.