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Assumptions and why they’re not helpful

Everyone knows the old saying, “Assumptions make an ass out of you and me.” It’s kind of cheesy, but it’s definitely true in almost all areas of life, and especially with regard to personal finance.

Just because someone doesn’t own a nice house and a fancy new car, doesn’t mean that they don’t have 200 000 or 500 000 or a million dollars in the bank. Maybe it’s that they choose to live a different kind of life and that they’re more interested in a nomadic kind of existence rather than being tied down in a physical location (which a house and car tend to make you). Maybe they’re not decided yet about which city they want to spend a big portion of their life so they’re just saving until they figure that out.

Conversely, just because someone does have a fancy new car and nice house, it doesn’t mean that they’re doing well financially. Appearances are deceptive. Maybe that person is slowly sinking underwater due to all the debt they’ve taken on. Maybe their expensive lifestyle is financed with credit cards. It’s just impossible to tell actually, until you sit down and talk to that person, and assuming they’re willing to honestly share.

Let’s take the example of Warren Buffet, perhaps the greatest investor who ever lived and one of the richest guys in the world. He’s also very frugal, living in Nebraska in a modest home, eating regular food and he disdains technology, toys and luxury cars. If you went to his house, you’d probably think he had some money but you’d have no idea that he was one of the richest guys in the world. I like his style.

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