Introduction to how our minds work.
The unity of the human mind is a myth. All of us make cognitive errors all day long, every day. Most of these errors are mundane and inconsequential; you made a grocery list yet blanked out one of the items and didn’t notice until you began cooking at home. Or you try to get in to a car just like your but it’s not yours. Then there are serious and life changing errors. You fall in love and get married at a time of heightened excitement or insecurity. You come into a large sum of money and you seek help from what seemed like financial domain experts but turned out to be salespeople. Or, worse, you are manipulated by someone with all the right sounding credentials that convince you to invest in a hedge fund or financial product that promises high returns with low risk.
To avoid such errors we must learn to live in a way that suits our particular background, experience and understanding. We must learn to observe ourselves with a degree of detachment, and we must obtain adequate background knowledge of the areas of life that we are attempting to master.
To become financially independent we must first master our minds to a degree.
To become psychologically autonomous we must become aware of how our minds work and blind us to much of reality.
Links to articles, books and resources that can help you understand yourself and your money stories
Every functional structure excludes some things and includes others to achieve an optimal balance. But in modern societies it's almost entirely about how much can be included; people are conditioned from birth to be good consumers. As a result, many Westerners’ money stories are out of balance. In many cases, it is so unbalanced that eventually people fall apart mentally, physically, financially and spiritually. I grew up on the Northwest Coast of Sweden. There I was told very different stories about money and resources in general.
Understanding the deeper purpose behind your actions and decisions give you a strong foundation that helps you stay focused on what truly matters.
I was taught to conserve resources, and seek to minimize consumption, and maximize relationship quality. Our way is based on relationships. Relationships between individuals, groups, and things. Everything is understood as existing only as in relationship with everything else.
For Westernized individuals seeking psychological and financial independence, several challenges often arise, as the broader societal norms can work against these goals. Here are some of the main challenges:
Consumerism and Materialism: In many Western societies, the cultural emphasis is on consuming more, upgrading lifestyle, and keeping up with societal expectations. The constant barrage of marketing creates pressure to spend, which can make it difficult to prioritize saving, investing, and living within one’s means.
Debt Culture: Credit cards, loans, and the idea of “buy now, pay later” are ingrained in the economic system. Many people accumulate significant debt early in life, often starting with student loans, which becomes a long-term barrier to financial independence. Breaking free from this requires conscious financial planning and discipline.
Status and Identity Tied to Wealth: Success is often measured by material wealth, career achievements, and possessions. Those who seek independence might struggle to redefine success on their own terms, separate from societal expectations. This can create internal conflicts, as pursuing minimalism or frugality may feel at odds with the perceived path to social respect.
Psychological Pressure of Success: The competitive culture in the West often ties self-worth to external accomplishments, such as job title, income level, or social status. This can lead to burnout, stress, and mental health challenges, as people constantly chase elusive markers of success. Those who aim for psychological independence may face resistance or misunderstanding from those still entrenched in these norms.
Work-Life Balance: The drive for productivity and career advancement often leads to an imbalance between work and personal life. People who want more psychological independence may struggle to break free from the "hustle culture," which glorifies long hours and constant achievement, often at the cost of mental well-being and relationships.
Social Expectations and Conformity: The desire to fit in can deter people from pursuing financial independence, especially if it means living more frugally or taking an unconventional path. Those who reject consumerism or choose a simpler lifestyle may face social pressure or judgment, which can make it harder to stick to their goals.
Lack of Education and Resources: Financial literacy is often not prioritized in Western education systems. Without a solid understanding of budgeting, investing, and saving, people may find it difficult to achieve financial independence. Similarly, mental health education is lacking, making psychological independence more challenging without proper support or tools.
Fear of Missing Out (FOMO): With social media showcasing lifestyles of wealth, luxury, and constant excitement, people often experience FOMO, which can lead them to spend money unnecessarily or chase a lifestyle that isn’t aligned with their values or long-term goals.
For Westernized individuals, becoming independent in these areas requires overcoming these societal norms and pressures, often by redefining success and building good daily habits that prioritize values over external validation.
Introduction to the markets
Financial markets emerged to manage uncertainty. Along with markets, investment risk has evolved over time. In earlier periods, the primary risk was rising interest rates due to external factors like wars. In modern economies, the significant risk is a decline in economic growth. Investors are typically rewarded more for taking risks during difficult economic periods when risk premiums are higher. These premiums are a key driver of investment returns. Success in investing is less about predicting market behaviors and more about staying prepared, adaptable, and ready to take advantage of changing conditions.
The investment world is upside down. How often do we hear that the economy is doing great and, therefore, we should load up on risk assets such as Stocks, Real Estate, and Junk Bonds? Such thinking is upside down because we get paid to take risks!
How much we get paid for taking risks depends on the Risk Premium of the asset we buy. The risk premium is relatively larger during "bad times" than at "good times." In other words, we get paid much more for buying in bad environments than in good environments. Risk premiums vary over time. Risk premiums, like the Bond and Equity premiums, are the largest sources of investment returns.
