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Money: ideas and frameworks explained

A collection of ideas, frameworks and techniques related to Money, explained clearly so they are easy to understand and share.

Pyrrhic saving concept showing shoppers leaving a megastore with an overloaded trolley under deal signs, captioned “If we save any more money, we’ll be ruined” – spending more to save money examplePyrrhic Saving: "Saving" money by spending moreWhen there’s a gold rush, sell shovels and picks, a classic business and entrepreneurship quote with prospectors chasing gold and suppliers lining the roadWhen there's a gold rush, sell shovelsWhat is contentment? Happiness, wellbeing and contentment is what you have relative to what you want, from Morgan Housel’s The Art of Spending Money.Contentment: What you Have Relative to What you WantWhat is the subscription trap? A picture example showing how canceling subscriptions is made difficult with delays, friction, and sludge.The Subscription TrapIllustration of Adam Smith’s quote about trade: “It is not from the benevolence of the butcher, the brewer, or the baker…” showing how self-interest leads to mutual benefit in trade and a tipsy baker.The Butcher, the Brewer, the Baker — Adam Smith quoteWhat is the meaning of fungible and non-fungible goods with examplesFungible - non-fungibleDon't ask the barber if you need a haircut - quote from Warren Buffet and othersDon't ask the barber if you need a haircutGini Coefficient illustration: a scale of wealth distribution is depicted where green squares represent the wealth of an individual within a population. On the left, every individual has a green square - equal wealth distribution. In the middle, the wealth sits with only half the population. On the right, all the wealth sits with only one person - they have a shiny crown and gold chain to display that wealth! The Gini coefficientWhat is Human Risk example: an enormous line of Mongol soldiers easily march through an open gate in the Great Wall of China as the two bribed guards take a nap. Human riskWhat is the Diderot Effect example explained: showing two people discussing their new sofa and deciding they have to change the room, or even moveThe Diderot EffectVolunteer your own booking feeAsymmetry of returnsApproaches to asset valuation: the castles in the air approach and the firm foundations approachApproaches to asset valuation: Castles in the air and firm foundationsBenefits to you from getting started chart — put it off and stress about it = no benefit, start now with something = some benefitBenefits to you from getting startedRebalancing your portfolioSales aren’t always the bargain they seemPrices written smaller seem more affordable examplePrices written smaller seem more affordableBull market, bear marketMental accountingEuphemisms for losing moneyCore components of riskSurvivorship Bias illustration: two onlookers enjoy the long-lasting, successful design of the fun, iconic Volkswagen Beetle car. One says to the other "They don't make them like they used to" - ignoring the fact that the product they see is undoubtedly the result of many failed prototype designs. Survivorship biasDebt's vicious cycle illustration: A flow diagram of a vicious cycle starting with needing cash, to taking a loan and then hitting a cycle of paying interest, lower cashflow, needing cash, increasing loan and so on.Debt’s vicious cycleSneaky cognitive biases: hindsight bias, loss aversion, recency biasZone of Possible AgreementThe cost of doing nothingISAs are like bucketsIf money doesn't make you happy then you probably aren't spending it right. Tips to spend better from Dunn, Gilbert, Wilson, 2011Spend betterA portfolio can reduce your overall riskInvestments are like building blocksYour ISA allowance is one-wayISAs are like wrappersPound cost averaging

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