Why Millennials Think Financial Grit Is Important
The journey to financial freedom is not an easy one. Most find it a hard path to find, and by no means an easy path to walk. It becomes more like flailing around in the ocean, drowning in a sea of information and options that you find hard to stay on top of. Remember the story of The Tortoise and the Hare? The tortoise e won the race, despite the fact that the odds were stacked against him. However, his resilience, patience, and tenacity won him the prize.
He had grit. Grit is defined as the firmness and indomitable spirit that you find in people whose perseverance, passion, and pursuit of excellence lead them to success.
I was prompted to write this post when I read an article about a young boy who committed suicide after losing money from his investments.
Kearns ended his life thinking that he is $730,000 in debt from his Robinhood app.
This is a tragedy, I was deeply saddened by this news.
It is definitely not the first time that I had read stories about people ending their lives due to money issues or from losing a huge sum of money due to gambling.
It must be said though, that there are still plenty of so-called investors who behave far more like gamblers, especially when it comes to the expectation of profit with associated risk. But I digress...
It turns out that the 20-year-old with no income was able to get assigned almost a million dollars worth of leverage under the Robinhood platform. He invested in options without having real money of his own. This is what his account looked like.
How did this happen?
Let me explain. Kearns was trading with what’s known as a "bull put spread” strategy.
A bull put spread is an options strategy that is used when the investor expects a moderate rise in the price of the underlying asset. The strategy uses two put options to form a range consisting of a high strike price and a low strike price. The investor receives a net credit from the difference between the two premiums from the options.
However, negative cash balance displaying on the trading home screen was only temporary and would be corrected once the underlying stock gets credited to the account. It is not unusual for cash and buying power to display negative after the first half of the options are processed, but before the second options are exercised—even if the portfolio remains positive. You can now see what an innocent blunder Kearns made.
It is a tragic tale of greed, ignorance, and immaturity. We can even blame it on the loopholes of the trading platform. But as it has been made evident, this can happen to anyone.There is no shortcut to financial success.
In her famous Ted Talk, the University of Pennsylvania Professor and Psychologist Angela Lee Duckworth defines “Grit” as “passion and perseverance for very long-term goals.” She continues to explain that “grit is stamina, and sticking with your future – not just for the day, not just for the month, but for years.”
Check out her best-selling book if you haven't! If you want an electronic version of the book, do DM me on Instagram!
In her book, “Grit: The Power of Passion and Perseverance,” she explains how through her research on high-performance achievers, she discovered that more than talent or IQ, the most notable determining factor of success was if they had that proper “combination of passion and perseverance.
To put it plainly, they had grit. Grit is the ability to pursue something with the consistency of interest and effort.
Quote from the book by Angela Duckworth, Grit
What is worth doing is worth doing well and sticking to it. That goal that you have been aiming for? It is going to require some grit.
Achieving these goals is not about your IQ level, it is about how strong-minded you are to reach them, stick with the plan, and how quickly you can get back on your feet when life gives you lemons.
Stay committed to your goals no matter what and remember why you even started in the first place. Do not try fixing the problems with the same set of solutions thinking that you will get a different set of results.
The great news is that developing grit is like building muscles - the more you train, the stronger it gets! Alternatively, seek the advice of someone who has been in the situation or has a broader range of experience, i.e. look for mentors. It’s just as the proverb says, “Fall seven times, stand up eight.” When it comes to your finances, it can help to start with smaller, attainable goals that will get you to that big vision that you have. For example:
Create a budget (pay yourself first every time you get your paycheck).
Pay off your debts, such as credit card loans or student loans (by sacrificing discretionary spending).
Set up an emergency fund of 3-6 months of your income.
Achieving your long term financial goals will require many ordinary acts over many years. Do not give up thinking that they are far-fetched from your reality. The key is to be committed, believe in yourself, and have grit!
Times are guaranteed to get tough, but tough times don't last! You will reach the finish line eventually as long as you persist. It can also be beneficial in building the right support team. Know you tend to get off track? Find someone that you can check in with and rely on to hold you accountable to your goals. You can get there, just add grit!
"Success is stumbling from failure to failure with no loss of enthusiasm.”
– Winston Churchill
Want to see how you rate on the grit scale?
Check out UPenn’s official Positive Psychology Center website.
Try the Grit survey and also the series of other questionnaires and learn more about positive psychology.
I hope to hear from you, what is financial grit to you?
Be Blessed!
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