TL;DR - All of us have a “defining moment” in our lives that has shaped our view of money and finances. We all need to recognize what that moment is and understand the impact that it has on us today. Only then will we be able to manage our finances effectively.

Let me take you back to a six-month period from the end of 2008 to the beginning of 2009. For many of us, we see “2008” in the context of a discussion about finances and our brains immediately transport us to "THE GREAT FINANCIAL CRISIS”. At this point, there has been a lot said about that period of time, Steve Carell and Ryan Gosling starred in a movie about it (not Crazy Stupid Love, the other one), and anything I could say about it has probably already been written by Michael Lewis.

I promise you it is not another case study on the financial crisis, what a subprime mortgage is, or an analysis on the havoc that the collateralized debt obligation wreaked on the financial system. OK I CAN FEEL THAT I’M LOSING YOU, SORRY, WAKE UP I’M MOVING ON.

The reason I bring up 2008 is not because I have anything interesting to say about what caused the crisis and its aftermath; rather I wanted to share with you the impact that this six-month period had on my relationship with money.

I think that all of us have a past trauma or experience that shapes our relationship with money. Understanding our past and the impact it has on us is important to being able to manage our finances effectively.

A little bit of background

My father (or Pop, because that’s what I normally call him, and “my father” sounds like he belongs in an Agatha Christie novel) managed our family’s personal finances during my childhood; not because he enjoyed it but out of necessity. There was nobody else to do it.

Mom is one of the shrewdest business people I have ever met, but by her own admission she has little to no interest in managing money. It all just kind of goes over her head. So Pop had to fend for himself on the issue of how to manage the family’s finances.

Pop’s own trauma in his life has shaped his relationship with money. He lost his dad when he was 19, and the death threw the family’s finances into chaos.

The lesson Pop learned from this experience?

Money can disappear in an instant, so plan accordingly. Plan for the worst possible outcome, and if the worst outcome happens, then you will have protected your family from the worst outcome.

Sounds a bit apocalyptic, but it is an understandable takeaway if your earliest memory is of your family trying to make ends meet after the sudden death of your father.

My defining moment

Fast forward a few decades.

Having no formal training in finance, Pop educated himself about the various financial instruments that were available to protect our family if he were to pass suddenly. His focus was on preservation and protection. He just wanted to protect his family from the experience that so scarred him when he was 19.

When the financial crisis hit, Pop had been receiving help from a few advisors at a bank (so as not to disparage anyone, we’ll just call them The Bank). I remember sitting at our dinner table after Pop had just gotten off the phone with The Bank.

He looked scared.

Only now do I recognize what caused the fear in his eyes. He had spent his entire adult life trying to protect his family from the worst possible outcome, and now through no fault of his own, he felt that all of his hard work was unraveling before his eyes.

The Bank had not been helpful. In fact, they had been patently unhelpful.

Instead of talking Pop through a plan of action on how to manage the family’s finances, The Bank gave a lot of noncommittal answers when he asked what he should do.

The Bank had no clear explanation for what caused the good returns during the years leading up to 2008, other than “everyone was making money during this time period.”

The Bank had no clear explanation for what might cause the good times to return.

The Bank had no clear plan for what someone in Pop’s position should do. The Bank had no advice at the moment Pop needed advice and help the most.

To be fair to The Bank, at that time nobody knew what the hell was going on. Nobody could explain to you what you should do to protect the fruits of your labor.

But for me, The Bank will always be the people who let Pop down when he needed them the most.

Takeaways

1. I would rather make money investing in something I understand than give money to someone else to manage it for me - Staring at Pop across the dinner table, I was mad. I was mad that I couldn’t help him more. I was mad that he felt alone, and that I couldn’t be there as a sounding board for him. I could never shake the feeling that our advisors didn’t know as much as we assumed they did. My lasting impression was that I needed to make sure that I knew what our money was invested in and why it was invested in it, because only then could I make a determination about what to do when shit hit the fan.

2. Fear of the stock market - I know it sounds crazy to hear from someone who has made a career on investing and working in the crypto industry, but for the longest time I had a real fear of the stock market. At any time, the market could tank inexplicably. This was not a unique fear for those who lived through the financial crisis. I know a few friends who lived and worked through both the dot-com bubble and the financial crisis, and they spent the last decade sitting on a stockpile of cash waiting for the market to dip so that they could get back in. For those who have lived through market turmoil, it takes a lot of work on yourself to get back in the game at all.

3. Determination that we would never feel that fear again - I promised myself that we as a family would never feel that fear again. I was determined to not let this experience negatively define my relationship with money and finances. I would do whatever I needed to do to educate myself so that I could help myself and my family manage the inevitability of things like the 2008 financial crisis. Together we would navigate the next crisis.

4. Admiration for Pop (and every other adult who manages their family’s finances) - Shoutout to everyone who manages his or her family’s finances. I give Pop a lot of credit for how he handled the entire situation. It’s hard out there for an adult. You are expected to know about things that you have no business knowing. He had no formal training on how to manage money, but he shouldered the burden willingly for his family and performed admirably. You can’t go to a money doctor and fix your problems. So hats off to anyone who fills this role for their family.

Final Thoughts

One of my favorite movies is Tin Cup, a movie about a down-on-his-luck golfer, Roy McAvoy played by Kevin Costner. Roy has a great golf game but he never does the smart thing. He is always mired in mediocrity because of his inability to lose the battle to win the war. He always goes for glory instead of playing it safe when the odds are against him.

With a US Open qualification almost guaranteed, Roy decides to try an impossible shot instead of playing it safe and just qualifying for the US Open.

The result?

The impossible shot proves to be impossible, but Roy refuses to give up. He hits the same shot multiple times until he is successful which costs him a chance at qualifying for the US Open.

When his caddie tries to reason with him after this epic meltdown, Roy shoots back at his caddy with an iconic line:

“I would hit it again, because that shot was a defining moment, and when a defining moment comes along, you define the moment or the moment defines you.”

I love this scene, because it is the exact type of romanticized hero’s journey that captures your imagination in high school.

Of course you are supposed to attempt the impossible!

When you get a chance at immortality you have to take it!

What I now realize is that Roy is right, but for the wrong reasons. There are defining moments in all of our lives, and we do have the opportunity to define the moment or let the moment define us.

However, defining the moment is all about the lessons learned and the work done on ourselves after experiencing a defining moment. Roy never learned that sometimes playing it safe and shooting par is good enough (a lesson his caddie reminds him of in this video clip). He let the moment define him because he was incapable of learning that lesson.

Similarly, we all have past experiences with money and finances that have shaped our own views on how to handle our finances. There is no right or wrong way to do things; it’s just important to understand where we are coming from. If we don’t, then we run the risk of being like Roy McAvoy and letting the moment define us.

Have you had a defining moment in your financial life? What was that like for you? If you are willing to share, please send me a message. I would love to hear your story.

For the rest of you, see you next week!

^{Disclaimer: Nothing contained in this website and newsletter should be understood as investment or financial advice. All investment strategies and investments involve the risk of loss. Past performance does not guarantee future results. Everything written and expressed in this newsletter is only the writer's opinion and should not be considered investment advice. Before investing in anything, know your risk profile and if needed, consult a professional. Nothing on this site should ever be considered advice, research, or an invitation to buy or sell any securities. Rohan Muralidhar is not a licensed securities dealer, broker or US Investment adviser or investment bank. This newsletter is not an offer to buy or sell, nor is it a solicitation of an offer to buy or sell or to participate in any advisory services or trading strategy.}