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Why you need to differentiate investments capital from your budget

If you ever lose money in the market, don't bother to think about how you could have used the money to spend on something else.

I know a lot of people who lost a few thousand in the market and regretted investing their money, whining that they could have used the money to buy a branded bag, shoes, gadgets, or dine in a Michelin-star restaurant.

And some of them were actually foolish enough to really go ahead and spend another few thousand on the stuff mentioned earlier to make them feel better about the loss. Honestly, I'm still trying to figure out how does that works for them.

Just like how we differentiate investment from insurance, we must also separate investment capital and budget for spending.

When we are saving aggressively in our 20s, we are usually saving up money to invest for wealth accumulation or to spend for enjoyment. 

Investment capital is money that we are going to put in the market in the hope of appreciation and be willing to bear the risk of losing everything.

Spending budget is the money we are prepared to trade for a service or product that we can consume, and be fully prepared to not recover any of the money spent. 

If you spend the money that you are supposed to invest, you may regret missing the boat when the investment you eyed on skyrocket.

If you invest the money that you have budgeted to spend, you will beat yourself for not spending the money to make you happy.

It is very easy to mix these two together but fundamentally they have different objectives.

Remember not to mistaken one for another.

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