The Snowball Effect In Finance
Money is more than a tool and this is because it taps into every fabric of our lives, which creates a different form of fulfillment and brings a positive vibe of accomplishment in almost every endeavor in our lives.
how is this?
In the age we're currently living in, we tend to psychologically perceive a series of negative events happening to us when we feel we do not have money and on the other hand, our plans, goals, and ambitions tend to go very smoothly when we feel we have money.
However, I'm focusing on the latter. The negative snowball effect on our finances. Take a look at crypto at the moment. A lot of people now hold mistrust of centralized exchanges and this was created as a series of events led to this.
From Luna to FTX and now to binance. This means that these events have created a negative snowball effect which has ultimately affected crypto, a lot of people still believe that there might be more and this is justifiable because there's a tendency for one crack to lead to further cracks which now creates an almost irredeemable situation.
Look at the situation with the bear market for example, apart from the fact that it creates a lifeless essence to some crypto projects, it's a phase in the crypto market cycle with which a lot of people can associate so many terrible financial occurrences to. For example, the beginning of a bear market can turn a maximalist, into a skeptic, and from that to an unbeliever and to a full-grown FUDster.
The sequence of bear cycles and fall in price, creates a negative snowball effect which we can blame on a gradual loss of money in a sequential order. This changes for the better when the bull market comes, but the point here is that the loss of money can gradually create a negative sequence because of how deep-rooted it is in every fabric of our lives.
In a real-world situation, we're more susceptible to terrible situations immediately after one terrible situation begins. For example, the loss of one's emergency funds exposes them to even riskier situations that they cannot handle and which can also in turn create a possible situation that can attract further damage.
A man losing his job for example can make his wife file for divorce if he cannot provide for the family again, now this wouldn't end, because there's a possibility the man starts drinking, and there's also another possibility he might display an erratic behavior from this drinking which might land him in jail. From owning everything to having nothing.
This proves that Causality exists in some of the economic and financial behavior we mostly exhibit, but some people understand this and try as much as possible to not be victims of this phenomenon. Have you ever wondered why people leave their mansions, wealth, enablement, opportunity, and comfort and go to live minimalists live in the mountainsides?
The reason might vary,
but sometimes it's generally because they want to build different lives where money does not determine how happy they are. They want to feel what it's like to lose everything but still stay accomplished and happy, some of them get to accomplish this, and some of them don't. It's safe to say we cannot control the negative effects of the occurrences of loss. This is mostly why some people try to get ahead of it.
Good things happen when the right money comes, it's the same too for when we experience loss, however in the opposite direction with cancerous effects what we can majorly do is to have several solid plans, because it's the failure of the only plans we built that creates this snowball effect.
Having solid plans and preparing for the things we deem inevitable can make it easier for one bad occurrence to happen and our other plans stop the crack from creating irredeemable ripple effects. There's no need to fight loss with loss, depriving ourselves to prove that loss Cannot affect us is a terrible way to prevent a negative snowball effect in finance.
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