Thread by @soicfinance

After the wild success of Squid Games. Let’s understand how this show connects to Financial Planning and our 4 Key Takeaways related to it :)

Time for a thread🧵🧵🧵🧵🧵🧵🧵

RT For MAX Reach

First Lesson: Debt isn’t just a 4 letter word, it is slavery

-A small debt makes a man your debtor, A large one your enemy. All the participants in the game had borrowed debt and thus had to risk their lives to play. A large debt does make you an enemy for the other man.

Eg: Seong Gi Hun the lead protagonist had borrowed nearly 160 million won (1.01cr) from Loan sharks and 255million won (1.61 crore) from the Banks. Loan sharks chased him down, and made him sign a waiver of Physical Rights.

Basically they could sell his kidneys to recover the loan if he didn’t pay them back within a month. It isn’t only Gi Hun who borrowed money, all the other participants of the game had massive debts as compared to their incomes. All were living on the brink of financial ruin.

Lesson: Shun debt. Assess the debt to equity of your own balance sheet. Make sure you live within your means, it doesn’t lead to such a situation ever in your life. Follow the words of Thomas Jefferson-

Never spend your money until you have earned or better save first and spend later+Shun Debt.

Second Lesson: “Our advice: Beware of geeks bearing formulas.” - Warren Buffett

Cho Sang Woo (friend of Seong Hi Wun) graduated from SNU Business (one of the top universities in the world) and topped his class. After graduation he worked as an investment banker. He was extremely smart and intelligent (glimpses visible throughout the show).

He probably didn’t listen to what Mr Buffett had to say in his 2002 annual report that “Derivatives are weapons of mass destruction.” One of the smartest groups of people (some of them won the nobel prize too) came together and formed a hedge fund known as LTCM.

They used derivatives and were leveraged to an astonishing 30 to 1. (Rs 1 of equity supporting Rs of assets). With macro events like Asian crisis and the crisis in Russia the entire networth was wiped off within days.

The fund had to be bailed out and they ended up tainting their successful careers.

Key Lesson: No matter how smart you are, there are somethings that are just not worth doing. F&O, leveraged trading etc.

Seong Hi Wun embezzled money from his clients account and ended up losing it all in derivatives (37.93 crore/6billion won). It hurts to see many young retail investors trying their hands in F&O, where your odds of succeeding are extremely miniscule.

Key takeaway- don’t do dumb things, no matter how smart you are.

Third Lesson: Importance of having insurance and an emergency fund

When Seong Gi Hun comes back from the Squid Games (First time), he is told that his mother is in hospital and suffering from an infection to her feet that could be life threatening.

Yet she discharges herself when she comes back to consciousness due to two reasons:

First, they didn’t have any emergency fund. Her active income (working) was used to pay all the rent. She asks her son, tell me if I don’t work,who will pay our rent?

Second, the treatment costs in the hospital. Her son stopped paying the premiums for health insurance and when the emergency struck they neither had an emergency fund nor an insurance to cover for it. This eventually led her to death as she left the infection untreated :(

Key Lesson: have health and term insurance, probably the two most important aspects in good financial plans. Mr Yashish Dahiya (Policybazaar) in one of his interviews pointed out how most people end up spending 80% of their savings in the last 20% of their lives due to

healthcare costs and inadequate cover. Another key lesson here is to always have an emergency fund ready that covers at least (9months of your monthly expenses, I have done this for myself, in case it is ever needed).

You can’t just depend on your active income to cover your expenditure. What if it gets taken away temporarily?

Fourth Key Lesson: Do what is simple and not what is expedient

Follow the SOIC Golden Ratio to be financially free. Financial freedom is not about sitting on the couch watching TV all the time, financial freedom is about doing what gives meaning to your life.

Manage the income and the expectations curve, don’t let your expectations grow faster than your income (Credits Morgan Housel). Set aside a given % of amount from your monthly income.

Then spend what is left. Final piece of golden ratio is to take the money saved and invest in different asset classes and most importantly invest in yourself (will lead to increasing passive and active income over a period of time).

Lets keep learning together :) Register for the upcoming webinar on the Real Estate Sector on the 30th October:

pages.razorpay.com/pl_I1xzAq7QioN…

@morganhousel 🙏🙏