A Bit of a Bad Thing

The most toxic substance known to man is a fascinating poison called botulinum toxin.

It’s a 100 million times more toxic than cobra venom, and you’ve probably heard about it before in one way or another.

First, botulinum toxin causes a terrifying disease called botulism. It can be found in contaminated canned food. Be unfortunate enough to eat it, and soon you might have trouble keeping your eyes open, speaking and swallowing. It paralyses your muscles — starting from your head, moving to your toes.

5-10% of people who get botulism die.

On the other hand, millions of people pay billions of dollars every year to get injected with botulinum toxin. They don’t die. They become more beautiful.

You probably know the trade name for this highly-purified, heavily-diluted botulinum injection: Botox.

Regardless of how you feel about human vanity, you’ve gotta admit there’s genius in taking a poison that can paralyze your breathing muscles and kill you, then purifying and delivering it in such a way it only paralyzes minor facial muscles — to reduce wrinkles.

Used wisely, carefully: A bit of a bad thing can be good.

Crossing to the Dark Side

My last article was about good things that become bad if taken too far.

As I was writing it, I couldn’t help feeling the more interesting angle is actually the opposite: What things are “bad” — many people get burned by them — but a limited amount can be good?

I can think of a few:

1. Credit Cards

I once watched a sermon where Dave Ramsey pulled out a pair of scissors and cut up several credit cards on stage.

Dramatic, I know. I used to think he was just being a boomer, but I’ve realized many people probably don’t have the discipline to handle credit cards. That’s why you see personal finance personalities preaching “credit cards are EVIL.”

Tell someone you’ve got a home loan and they’ll congratulate you. Tell someone you’ve got credit card debt, and you’ll get a look of pity.

Of course, coming from the perspective of someone who used to love “credit card hacking,” and paid off his education loan using credit cards, I can tell you they’ve been a net positive in my life.

As long as you understand the charges. And are disciplined enough to make full payments every month.

If credit cards had never been invented… If someone told you about a magical piece of plastic which allows you to buy stuff everywhere across the world, and gives you sign-up bonuses, rewards, status, insurance, fraud protection, an instant ability to block suspicious transactions, and 24-hour customer service — wouldn’t you say it’s a genius invention?

Credit cards are arguably still the best way to pay for most things. But are you disciplined enough to use them without getting burned?

2. Man vs Debt

Debt is fascinating because of how wide the range of emotions gets when people discuss it.

Some people love debt. Using other people’s money to grow their business. Of course, they typically don’t call it debt. They call it margin, leverage, financing.

Other people hate debt. I’m sure you’ve heard horror stories of people who’re forced to take new loans to pay off old ones — an endless downward spiral. I’m sure you know at least one person who dreams to be debt free.

When is a little debt good?

This isn’t scientific, but a wise, risk-averse uncle once told me that only property loans make sense. How else would you ever afford a house?

Nothing wrong with renting, but the feeling I got the day I moved into my own apartment was priceless.

Besides, for most people, a home loan is the lowest-interest loan you’ll ever get. Put it in an asset that usually appreciates like a home for decades, and you can understand why so many people get wealthy from property.

Another angle: If we’re being specific, financial advisers will give you guidelines like:

  • Home loans <30% of gross salary
  • All loans (including home) <40% of gross salary

In my 20s, this would have allowed me one home loan. Maybe one car loan. The percentages seem way too high to me now, but it’s because I learned from Uncle and followed his advice — even as my earnings grew.

A final one, also useful for other money questions: “Does it allow you to sleep well at night?”

Quite a few people I respect dream to be debt-free. I respect that — there’s a priceless feeling from complete independence. Freedom.

But if you can sleep soundly with a bit of low-interest debt, also nothing wrong with using it to make your life better.

3. Insecurity and Competitiveness

Ron Daniel, a former managing director, once revealed McKinsey’s secret for hiring:

“We look to hire people who are, first, very smart; second, insecure and thus driven by their insecurity; and third, competitive.”

No surprise McKinsey consultants are smart and competitive. What’s interesting is insecurity.

If you feel you have something to prove, something that you’re lacking — you work harder. Longer.

It’s a great recipe to climb the corporate ladder and earn big money. Though not a good recipe for mental health. You can’t be happy if you’re constantly worried about: “Am I good enough?”

See the conflict here? Feeling insecure is what drives you to achieve success. But if you define success as being happy — which most people eventually figure out — you can end up fighting with what got you career/money success in the first place.

Not an easy thing to balance.

Maybe a bit of wanting to prove yourself is good. A bit of a competitive streak. The desire to have a better life is powerful.

Just remember not to take it too far.

4. “High-Risk” Investing

The easiest way to manage risk is to NOT invest in high-risk assets. Keep everything in fixed deposits at the bank — my mom’s favorite.

On the other hand, financial advisers will ask you to take on a little more risk, to beat inflation and secure your retirement. 60% stocks, 40% bonds and so on.

At the far end of the spectrum, I know millennials who keep most of their investments in crypto.

What’s an appropriate level of risk? Everyone defines “high-risk” differently — our family got burned in the 1997 Asian Financial Crisis so Mom doesn’t even like blue chip stocks. Some financial advisers say it’s okay to consider 3% in Bitcoin, but I know others who still think crypto is rat poison.

Would adding a little more risk add value to your portfolio? Potentially, if the potential reward is high enough (and you can still sleep well at night).

The difficult part is drawing the line. At some point it crosses over from acceptable risk to irresponsible gambling. If you’re unsure of where that line is, better to play it safe. Speak to a financial adviser for pro advice.

And if you must dabble in higher-risk investing — I like the concept of “sinning a little.” Just like how a glass of wine won’t kill you, buying $100 of Ethereum — even if it crashes — won’t bankrupt you. At the very least, it could be a great learning experience.

As long as you don’t drink the entire bottle and get addicted.

5. Blowing Money on FUN Stuff

“What’s one money thing that’s generally ‘bad,’ but a little bit of it can be good?”

I asked my followers on Facebook, and the most popular theme was spending: Travel. Shopping. Impulse buys. Vacations. Date night.

First of all, I don’t think any of the above are bad. But maybe because much personal finance content today is about reducing expenses, spending money for fun has become seen as bad.

Well if you can’t spend on some things that make you happy, then what’s the money actually for?

You won’t go broke if you blow a little money on fun stuff. But if you can afford to, yet don’t do it, I’m sure you’ll be miserable.

The best diets have a cheat day. The best budgets have some money you can splurge on whatever you want.

As professor Michael Norton once said: “If you think money can’t buy happiness, you’re not spending it right.”

Knowledge of Good and Evil

As I was writing this, a few questions repeatedly came up:

  • Where do you draw the line?
  • How much before it gets bad?
  • What if someone young reads this and hurts themselves?

It’s tough to give nuance on today’s Internet. Much easier to appeal to the largest number of people possible with a clickbait headline: “DEBT IS EVIL.”

But I long for a deeper conversation. One that can understand multiple perspectives, and consider different positions on the spectrum of good vs bad.

And I get it, not everyone will have the discipline, knowledge or ability to handle the “bad” stuff we’ve talked about today. There’s a practical reason why governments have restrictive laws around risky stuff.

A little bit of wine makes your life better. But many people can’t stop at one glass. One argument says they should learn self control. The opposite argument says they shouldn’t drink at all, and the government should ban alcohol.

Of course, if you’ve made it this far, you’re probably not “most people.”

I think you’ll be able to figure it out.

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Pic from Pexels: Daniel Kux

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