It's not such a big grammar, is it? Of course, it's not. You have heard of "empirical" even though you have been in science class for one minute or you had friends taking up such courses. But today, you will discover that it's not something related to your science friends alone. It has everything to do with your finances too.
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When you make financial decisions, what's your motivation? Is it because your neighbor is doing it? Is it because your friend said it's okay if you do it? Is it because you have done your research and are well assured you are making the right decision?
These few days, if you have walked with me through my writings, you should have learned how all of us might want to pretend we made financial decisions based on spreadsheets, but it's mostly out of our emotions, and how we think the world actually works.
The way you think the world works is different from how I think it does. And that applies to the human beside us too. We all think of money differently depending on our experiences especially in the past, with our parents, with the way the economy moved during our youthful age, etc.
This is why when you are dealing with your finances, and you are intending to build wealth, you must understand the role that empirical evidence plays. This is an important factor because those things you learned through your experience or that of others have a way of helping you achieve great results.
As much as the world is quite uncertain and you may never know what the next human will do to influence the market, you must use empirical evidence to your advantage.
You will always find a lot of information about the portfolio you are planning to invest in. But what you should also be looking out for in the waves of various information is the path of less or more resistance that was taken based on observation, practical experiment, and overall financial experience instead of relying on conventional wisdom or untested ideas.
And the only way you can achieve this is probably by putting yourself through those experiences or learning from someone who has gone through it. If you remember the South Pole story and the leaders of the two teams, it will be clear how and why Roald Amundsen allowed himself to pass through the different scenarios that could show up while on the trip with his teammates.
He experimented with different events and trained like a manic to withstand whatever the surrounding environment will throw at him and his teammates. And it worked for him.
When we are young, we are advised to take more risks, and when I read the contrasting story of Roald Amundsen and Robert Falcon Scott, I understood why. When you allow yourself to take certain risks, you allow yourself to experience how the different turns in events can affect you and if you'll be able to survive harder blows or the same blows in the future.
It is on this note, that you will base your financial decisions around. If you understand your risk tolerance level as they keep preaching, you will know how much further you can take when it comes to risking your money. You will know how much you can risk that allows you to sleep well at night. You will understand how much you can risk that won't wipe you completely if the market doesn't go your way. You will know how much you can risk which will allow you to continue to stay in the game until you win.
This can only be possible if you learn to use empirical evidence to your advantage. Wealth can become possible when you learn to build empirical foundations for all your financial decisions and actions. This will give you more confidence to act at the right time and take the right form of risk.
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