Iceberg Theory of Personal Finance

The Iceberg Theory is the writing style of American writer Ernest Hemingway. He conceived of the idea of a new theory of writing after finishing his short story ‘Out of Season’.

Do you know about the Iceberg Theory? This is the theory about money management :-

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I have seen smart people make stupid money mistakes.
I see smart marketers of our financial institutions hiding more than they reveal. Ofcourse they have all the financial jargons to their support.
I have also seen seemingly dumb guys making a pot of gold for themselves.

 

There’s some knowledge about money management. There’s some tips to know :-

The Visible: We can see our knowledge level as well as our skills level. It’s about reading up blogs, dailies, magazines and upgrading your knowledge. Also about keeping your records tidily, operating the accounts like the demat, broking accounts, etc.

The bad news is that the visible part is only 10-15% of what it takes to manage your money.

The Hidden: My take is that 85-90% of your money management depends on your attitude and other characteristics. Like there’s laziness, greed for extraordinary returns, fear of numbers, fearing the markets, etc.

Some of us are benefitted with the values we have learnt from our parents/influencers. For some, the parent/influencer effect is a handicap.

Conclusion: Money management expertise has four components.

1. Knowledge

2. Skills

3. Attitude

4. Characteristics like confidence, values.

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