In today’s world of automation, AI, and blockchain, it is easy to look past the relevance of ancient wisdom. After all, what could philosophers from thousands of years ago teach us about navigating modern financial challenges?
The truth is that the wisdom of the ancients—particularly Stoicism—is timeless. Its principles not only stand the test of time but also carry an unexpected depth of insight for modern times: maintaining financial stability, resilience, and even true abundance within a volatile world.
In this blog, find out how the Stoic school of thought originating in ancient Greece- can prepare you for a change in mindset, master your finances, and create lifetime wealth.
Read on for some very practical strategies inspired by Stoicism that will help in improving your financial outcomes and your life.
A Short Introduction to Stoicism
Stoicism is a philosophy founded by Zeno of Citium in around 300 BC.
The most well-known stoic philosophers include Marcus Aurelius, Seneca, and Epictetus.
In modern times, it is easy to be drawn into negative thinking. We are more connected than ever via social and mainstream media. Exposed to conflict and pain the whole world over.
Stoicism has become more popular recently as there seems to be a general acknowledgement that mental strength and resilience are in decline. Whether this is true or not is beside the point – stoicism has gained traction on social media and in the media world.
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The Financial Application of Key Stoic Principles
In this section, I will explain how each of these principles can help you in your financial life.
These 5 principles are simple to understand but not easy to master.
1. How can being more rational lead to better financial decisions?
Rationality is a crucial aspect of investment and decision-making.
Warren Buffett famously stated, “Investment must be rational; if you can’t understand it, don’t do it.”
He has also commented on how managers who work in institutions often end up making sub-par irrational decisions because of certain corporate pressures, which he calls the institutional imperative.
In huge market sell-offs, where stocks are cheap, it is easy to be swept up in the emotions.
Rather than calmly assessing the situation and making intelligent investments in companies on sale, the majority of investors are scared off. The people who can keep a cool head and take a long-term approach can benefit.
If you had bought at the peak of the market in 2008, you would have had to ensure your portfolio fell by around 50%.
However, if you had stayed in the market and invested in an S&P 500 fund, you would have achieved a 9.5% return until now – not bad.
If you had invested at the trough it would be around 15% growth per year with dividends reinvested by my calculations.
2. How can acting with authenticity and kindness boost your earnings?
In one of my other blogs, Why Money Attracts Money, I revealed how our net worth tends to explode when a portfolio value reaches 100,000 pounds or dollars – as a result of the effects of compounding interest. Up to that point, you must do what you can to increase your earning potential.
Part of this involves fostering strong relationships with other strategic connections – your network is your net worth as the saying goes.
How do you build connections in the first place? Curate an attractive personality. Authenticity and kindness are important qualities in friendship and business.
Authenticity is the idea of your inner being and “real self” being reflected outwards in your actions and behaviour. If you sit down and think about the qualities of the person you want to have and embody, this is the person you can be and who you wish to be deep down.
“Don’t explain your philosophy. Embody it.” – Epictetus
This is your authentic self. It sparkles, doesn’t it? It is far more challenging to be yourself than you might think. It takes strength, courage and confidence to stand for what you believe in and live it out.
Kindness is treating others with care and respect. If you struggle with kindness, it may make sense to spend time reflecting on your words and actions. Your idea of kindness might differ from someone else’s, but respecting other people’s autonomy is a large part of it.
As a man, it can be easy to think of kindness in terms of acts of service carrying out a duty, or solving a problem, but sometimes, it can be a simple case of lending an ear. This is because men typically engage in problem-focused coping rather than emotional-focused coping – which is more common in women.
3. How can exercising control in your life improve your finances?
Stoics understand that certain aspects of life where control can be exercised or relinquished.
It would be best if you established your domain of influence. You cannot solve every problem, control peoples’ hearts and minds, or stop natural disasters. Our expanding circle—brought about by the reach of the media—makes us think that because we know of unfortunate events in other parts of the world, we can solve them.
“Make the best use of what is in your power, and take the rest as it happens.” – Epictetus
Learning how to accept the uncontrollable and controllable will give you peace of mind, and ensure that you do not waste resources or energy on anything that is not important. Note that does not mean do not give to charities – it means that you should not get caught up emotionally in events that are out of your control.
If you try to exercise control in areas where you have no influence, you are wasting energies that could be directed more productively. These productive activities, in some cases, may result in better economic outcomes.
4. How can walking in harmony with nature and not according to others can improve your financial life?
The stoics emphasise walking hand-in-hand with nature and not working against it.
If you live in harmony with nature you will never be poor; if you live according what others think, you will never be rich. – Seneca
There are two inferences that we can make from the quotation above:
- We should aim to live simply. Simple living is living in harmony with nature. Naturally, this will lead us not to spend frivolously, and retain more of our income as savings and investments.
- Seneca also cautions against chasing a life that others expect. For instance, your family and friends may expect you to spend your money on a nice car, fancy clothes and an opulent lifestyle. Are you led by their feelings and society’s values more than your own?
Both of these are simple to understand, but not easy to follow. In this consumerist age, and with all the pressures that family and peer groups can place on you, it can be challenging to reject the lure of materialism: ” A striking 78% of millennials state that they base their financial habits on those of their social group” source. To achieve extraordinary results, you need to do what the minority do, and not the majority.
There may be a lot of personal work and reflection that is required to bring you to a state where the lure of materialism does not weigh upon you, but the power is within you. It’s taken me many years to develop the discipline and courage to say no. A big part of this process is practising gratitude, and part of this process can involve reconnecting with the natural world.
Have you ever felt a profound sense of peace stepping into the wilderness, immersing yourself in the raw, untamed beauty of nature?
5. In what ways can recognising the impermanence of things strengthen your financial resilience?
Recognising the impermanence of things can profoundly impact your financial approach.
“You could leave life right now. Let that determine what you do and say and think.”
– Marcus Aurelius, Meditations 2.11
Here are three key ways it helps build resilience:
- You know not to have your eggs in one basket.
- You do not live squandering opportunities
- You build a thicker skin for failure and reclaim the hope to start anew when you fall flat on your face
On the first point, it is important to practise some form of diversification.
Even though Warren Buffett, Munger and other investors have expressed that diversification is not advisable if you know what you are doing, I believe that you should look at what these investors do and not just at what they say. Also, delve into the implications of what they say and question your prima facie assumptions – they are probably implying something far deeper.
For instance, although Buffett has always stated that he invests in one stock, consider the diversification present within Berkshire’s portfolio. Even if one of the companies in the portfolio were to go under, there is a great deal of diversification present within the portfolio.
What Munger and Buffett generally seem to criticise is the portfolio management practised on Wall Street and Markovitz’s Portfolio Theory. Both Munger and Buffett seem to understand the concept of risk as “permanent capital loss” rather than as a volatility metric.
In your own investments, strive for thoughtful diversification. Even if your portfolio begins as concentrated, it will likely evolve and diversify over time, providing greater stability and resilience against uncertainty.
On the second point, living every day like it’s your last allows you to take opportunities as they come. Although it may be possible to lose money investing, it is usually something that will pay off over a long period.
Many people are paralysed in fear of taking the first step of investing or taking a business risk. You must take some rational risks in life to get the most out of it.
Third, and perhaps most importantly, understanding that failure is inevitable and life is impermanent can help you develop that thick skin that is needed when life does not go your way.
The Story of Soichiro Honda
When one thinks of resilience in financial life, there are few stories that are better than that of Soichiro Honda, the founder of Honda Motor Co., who went from repeated failures to building one of the world’s most recognisable automotive brands. In fact, his journey very well testifies to embracing impermanence and adapting to change.
Honda’s career started very ambitiously, with failures at the start. The initial business, producing piston rings, couldn’t compete and failed on quality ground. Instead of giving up, Honda went back to school and refined his skills, subsequently winning a contract with Toyota. By that time, the war came on, with its relentless bombardments; finally, even an earthquake devastated the rest of his factory. To those who would have otherwise given up on life, he perceived another opportunity right there in defeat.
After the war, when Japan was suffering from fuel shortages, Honda began to attach small motors to bicycles, creating a new form of transportation that was both inexpensive and functional. That small pivot eventually led to the founding of Honda Motor Co. in 1948. Though his first motorcycle was not very successful, Honda’s perseverance paid off, and his company went on to dominate the industry and later move into automobiles.
Honda’s story reminds us that failure isn’t the end but mostly a beginning toward another direction. By embracing impermanence and using each setback as a lesson, he created a legacy that lives on and on.
Conclusion
Stoicism gives timeless wisdom on how to handle the modern-day financial challenge.
The principles of embracing impermanence, acting with authenticity, and focusing on what you can control give a framework for resilience and intentional decision-making.
You can develop financial stability, seize opportunities, and turn setbacks into growth. True abundance is mastering your mind, not just your wealth.
