It is easier to understand
something complicated with a simple story and a so what. That helps us figure out
our role in the bigger thing without having to make complete sense of it. This
can be both positive (if the story is helpful) and negative (if the story is
unhelpful). The trick is figuring out a way to find out how to let go of the
story if it is unhelpful, but is deep soaked into who we are.
Asset Liability Matching is when
you try find investments that match the risk characteristics of the expenses
that need to be met. Complicated, but there are easy to follow so whats people use.
The simplest example is if you lend someone money with the date for repayment exactly
matching when you need the money. This makes the story very clear. What happens
when everyone does this? You get the crazy situation we are in now where big
pools of money *have* to be lent. You get negative interest rates where Countries
(like Switzerland) are being paid rather than paying to borrow. The Swiss National
Bank pays (charges) -0.75% interest to Commercial Banks. The Savers who put
their money with these banks end up being paid close to nothing.
Ignoring the complicated example,
bring it back to normal people. If we live hand to mouth, the work we do ends
up being because we have to. Expenses become a habit, and that habit needs to
be met. We become defined by our jobs. Snapping the connection between hand and
mouth by building a Buffer, and then an Engine, with Capital changes the story.
It allows you to build the life you want to live, without being too closely
dictated to by the rules of how money is made.
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