Millionaire’s Guide: Win at Personal Finance like a Grandmaster | 5 financial lessons from Chess |
Want to know the difference between you and a self-made millionaire? Strategy. In this article, we’ll use the chess strategy to make high-quality financial decision-making interesting and simple. At the end of this game, the pieces all go back into the box, but you’ll be a millionaire!
The world’s oldest strategy game holds a special place in Indian hearts, originating here as Chaturang and then making its way via the Silk Route to the West where it was developed into its modern form. But whether it’s the Guptas, Emperor Wu, Anand, Kasparov or AlphaZero, the ability of this game’s ideas to shine a light on our thinking has remained timeless. So here are the top 5 strategies from Chess that millionaires apply every day to their personal finances!
Forward March! And sideways. Sometimes back! : Pawns can only move forwards. But the power of a piece lies in its flexibility and speed. Millionaires never strategize like pawns. They see their personal finance in two dimensions and modify their plans flexibly according to the situation. When the board position calls for it, they will move backwards, perhaps closing a business or divesting a stock position at a loss, not worrying about sunk cost the way the chess grandmaster doesn’t worry about territory gained before having to move backwards. At other times, when the board position calls for it, millionaires move sideways, diversifying into new opportunities, changing the look of their portfolio, the way a grandmaster will overload one side of the board and then shift it to the other. The important thing to learn before doing this is our next lesson.
Not all pieces are created equal: Millionaires understand the unique strengths of each piece of their portfolio. He doesn’t see them as stronger, weaker, better or worse. They all have a unique role to play in his strategy. A knight’s L shaped move does what a Bishop’s diagonal cannot, and vice-versa. A rook can castle, and a Queen can fly across the board. A millionaire’s portfolio will similarly get the best out of the growth potential of early-stage investments and equity, the cash potential of fixed income securities, the tax potential of instruments like mutual funds, the wealth potential of real estate, and the Queen’s multiplicative potential of leverage through responsible loans. Um, are the Pawns created equal too?
The journey of 1000 miles: Millionaires and grandmasters understand the game-changing nature of pawns. When pawns quietly, unceremoniously and steadily get to the other side, they are elevated to a Queen, which usually tips the scales of the game entirely. The most underrated financial decisions of millionaires are ones that involve small, consistent action. Invest an insignificant amount like just 5% of your monthly salary, without a moment’s thought, every single month for 10 years, and see what the compounding power of time does to it. Build small powerful habits like checking your credit score, and making all credit payments on time, and see how that can pay off later, saving you lakhs of interest on any loans you want to take out. Respect the Pawn! And most of all, respect time.
Short term sacrifices serve long term ends: This isn’t the article on how to become a millionaire overnight. The millionaires know those articles don’t exist. They believe in daily intelligent finance. This involves short term sacrifices. Chess teaches us not to count every lost pawn, every unfavourable board position. It teaches us to stay focused on the long game, and willingly sacrifice pieces in service of that. A home loan can be a 20-year game, involving monthly sacrifices where you forego consumption in favour of EMIs. Millionaires make these sacrifices easy, by small acts of intelligent finance like automating your EMI payments or credit card payments. The pawns go by unnoticed, as they keep their eyes on the prize. That prize is, of course, the King.
Long live the King: In the interest of diversification, most amateur investors fragment their portfolios and lose a lot of money. In the worst case, they never build any lasting wealth. However many diverse pieces there are on the chessboard, they are all in service of protecting the King. That one asset in your possession losing which the game is lost. For most of us, when we eventually become millionaires, the bulk of our wealth will be our home. But early in our careers, we don’t see this clearly, and therefore don’t take action soon enough, or regularly enough. Whatever the King of your portfolio is, all your resources, plans and effort needs to have a bearing on building and securing that King. Start now, with mymoneykarma’s strategic home loans. We give you a personalized loan strategy, the lowest interest rates, and the most efficient and fast processing. Your move!