Frank Bruno vs. Mike Tyson I and II were defining boxing fights in my youth.
The first was in 1989 for the WBA, WBC, IBF and lineal heavyweight championships.
The second in 1996.
What if anything can we learn from ‘Iron Mike’?
When it came to knocking out his competitors in rapid succession, not many could match the legendary heavyweight boxer Mike Tyson.
When it came to knocking out cheques, he was just as prolific.
Despite having received over $30 million for several of his fights and $300 million during his career, he blew it all in a spectacular fashion, and declared bankruptcy in 2003.
He spent with the type of aggressiveness that once characterised his knockout games.
According to court documents, Tyson spent $400,000 a month just to maintain his lifestyle.
Morgan Housel, in his book The Psychology of Money, wrote:
“Spending money to show people how much money you have is the surest way to have less money.”
He then shared the example of singer Rihanna, who earned millions of dollars, but found herself bankrupt in 2009.
She sued her financial adviser.
He offered a legendary response:
“Was it really necessary to tell her that if you spend money on things you will end up with the things and not the money?”
Charles Dickens wrote in his 1850 novel David Copperfield:
“Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
170+ years later, it's still the most basic and important advice on personal finance.
- Spend less than you earn.
- Live within your means.
- Pay yourself first.
- Save something for a rainy day.
But sadly, most of our lives are highlighted by tremendous amounts of wastefulness.
And since we don't pause to think about it, we're not able to start on the path to freedom from our financial worries.
Of course, money isn't everything in life.
But it certainly helps to consistently work towards reducing such wastefulness, to spend less than you earn and invest the difference well.
Over time, compounding will do the rest for you.
“By sowing frugality, we reap liberty, a golden harvest”
Said the Greek King Agesilaus.
Most people have it all wrong about ‘wealth'.
It is not the same as income.
If you make a good income each year and spend it all, you are not getting wealthier.
You are just living high.
Wealth is what you accumulate, not what you spend.
So how do you become wealthy?
Here, too, most people have it wrong.
It is not pure luck or inheritance, an advanced degree or even intelligence that enables people to create enough wealth.
Wealth is more often the result of three key factors – frugality, compounding, and time.
Of course, life is not just about money and compounding.
You must not aim to live a lonely and miserly life and stretch the idea of delayed gratification too far.
But here I am talking purely about ‘financial wealth’ which when adequate, enables us to create the freedom we all want to enjoy some day.
Morgan wrote in his book,
“Being able to wake up one morning and change what you are doing on your own terms, whenever you are ready, seems like the grandmother of all financial goals. Independence…does not mean you will stop working. It means you only do the work you like with people you like at the times you want for as long as you want. And achieving some level of independence does not rely on earning a doctor’s income. It’s mostly a matter of keeping your expectations in check and living below your means.”
What a liberating idea it is.
A question for you
Is your future self going to thank you for your spending habits now?
“One of the most powerful ways to increase your savings isn’t to raise your income it’s raise your humility” - Morgan Housel