My Worst Financial Decision (And Why I'd Do It Again)

Welcome to Financial Fluency - your weekly guide to mastering financial English, learning how money works, and making confident financial choices.

In this issue:

• A Look at the Markets: Bitcoin

• My Worst Financial Decision (And Why I'd Do It Again)

• Quote of the Day: Warren Buffett

• We value your feedback

• Word of the Day: Differential

• Test Your Knowledge: Interactive quiz

• Whenever you are ready, here is how I can help you

A Look at the Markets: Bitcoin

Bitcoin Market Update

It has been all eyes on Bitcoin this week, and for good reason. Long-term newsletter readers will know that I have been waiting for a break and hold above $108,000. After two false starts earlier this summer, we finally achieved this milestone, and I view this as a significant bullish confirmation.

Bitcoin breached $120,000 for the first time, marking a historic moment in cryptocurrency markets.

I believe that the bullish sentiment is easier to see on the weekly chart, which shows the sustained breakout pattern that validates our long-term thesis.

After such a rapid ascent to over $120,000, some profit-taking and consolidation is not only expected but healthy for the market's long-term trajectory.

However, my belief is that after this period of consolidation, Bitcoin can continue to rise. This doesn't mean we can't see a retest of $108,000 or even a temporary breach below it.

I do not believe we have reached the cycle peak yet, but I remain cautious as always. With cryptocurrencies, you should always be prepared for drawdowns of 30% (particularly in a bull market) or even 80% at the end of a cycle.

My Worst Financial Decision (And Why I'd Do It Again)

3 Key takeaways from our buy vs rent analysis

Over the past two weeks, we've examined two very different property scenarios: a €75,000 Italian apartment where buying won by €16,660 over 10 years, and a €750,000 Rome apartment where renting + investing won by €142,000. The complete reversal in outcomes reveals something crucial about personal finance decisions.

They're more nuanced than conventional wisdom suggests.

The Mathematical Framework

The key insight isn't that buying is always better than renting, or vice versa. The crucial factor is the monthly cost differential.

When ownership costs exceed rental costs, investing the difference can be extraordinarily powerful. When rental costs exceed ownership costs, buying often wins financially.

In our examples:

• €75,000 apartment: Buying cost €412/month vs €500 rent → buying wins

• €750,000 apartment: Buying cost €4,120/month vs €2,500 rent → renting wins

The framework gives you a systematic way to think about the decision rather than relying on emotional arguments or general principles.

Beyond the Numbers

But here's what the spreadsheets don't capture: personal finance is personal.

Your decision shouldn't be purely mathematical. Consider:

• Property inflation expectations over your intended timeframe

• Life stage and flexibility needs

• Personal security and stability preferences

• Risk tolerance and cash flow requirements

Most importantly, your circumstances change over time. What makes sense today may not make sense in five years.

Personal Finance is Personal: My Journey

I've made different property decisions at different life stages, and each was right for its time:

1. Business Building Phase (Renting) When I was starting my business, I rented. Every pound mattered, and I wanted maximum capital allocation to the business rather than tied up in property. The opportunity cost of investing in property at the time would have been too great. Flexibility was crucial—I didn't know where the business would take me.

2. Wealth Building Phase (Buying) As my business became established, I bought both personal and business properties. The timing was fortunate—this coincided with high property price inflation in the UK. The financial returns were excellent, but more importantly, my business was self-sufficient and did not need extra capital.

3. Retirement Preparation Phase (Building) When I moved to Italy, I built a new house. This was the worst financial decision of my life due to low property price inflation here. However, I wanted security and lower living costs as I head towards retirement. The peace of mind was worth the opportunity cost.

The Key Lesson

Notice how the "right" decision changed based on:

• Life stage: Starting out vs established vs pre-retirement

• Risk capacity: How much capital I could afford to tie up

• Personal priorities: Growth vs security vs lifestyle

• Market context: UK boom vs Italian stagnation

The framework helps you make an informed decision, but the "right" choice depends on your unique situation, timeline, and what you value beyond pure financial returns.

Your Decision

Most people make property decisions based on emotion or conventional wisdom. Instead, run your own numbers using the framework we've outlined. But remember:

• Property inflation expectations matter enormously—adjust your assumptions based on local market conditions

• Your personal circumstances are unique—what works for others may not work for you

• Non-financial factors have real value—security, stability, and peace of mind aren't just numbers on a spreadsheet

The goal isn't to make the "perfect" financial decision. It's to make an informed decision that aligns with your circumstances, values, and life stage.

As always, none of this is financial advice. Everyone should invest according to their personal circumstances, risk tolerance and financial goals.

Quote of the Day: Warren Buffett

This quote from Warren Buffett (no apologies for regularly quoting him) sums up how I feel about long-term financial planning and the decisions that I have made over the different stages of my life.

We Value Your Feedback!

Your opinion helps us improve and lets you suggest topics or ask Business English questions for future issues.

Word of the Day: Differential

Differential - noun - the difference between two or more quantities, rates, or values; the gap that determines which option is more favourable.

Context and Usage: Differential is crucial in comparative financial analysis. It's not the absolute numbers that matter, but the difference between options. The differential often determines which choice creates more wealth over time.

Note: Differential can be positive or negative, and the direction often determines the optimal strategy. A small differential might favour one choice while a large differential completely reverses the decision.

Common Collocations:

Monthly differential - the difference in monthly costs
The monthly differential of €88 between renting and buying seemed small, but compounded to €16,660 over 10 years.

Cost differential - the gap between different expense options
The cost differential between ownership and renting determines whether you should invest the savings or build equity.

Price differential - the difference between market prices
The price differential between similar properties in Rome and smaller Italian towns can be 10x or more.

Interest rate differential - the gap between different borrowing rates
The interest rate differential between mortgage rates and investment returns drives the rent vs. buy calculation.

Business Example: 

Property Context: In buy vs. rent decisions, the differential in monthly costs is the key variable—when ownership costs exceed rental costs, investing the difference can generate substantial wealth over time.

Test your knowledge: Interactive quiz

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Disclaimer:

This newsletter is for informational and educational purposes only and should not be construed as financial advice. The information contained herein is generic and does not take into account your individual financial circumstances. You should always consult with a qualified financial professional before making any investment or financial decisions.

Additionally, the authors and/or publishers of this newsletter may hold investments in securities or other financial instruments mentioned herein. These are included for illustrative purposes only and should not be taken as a recommendation to buy or sell such securities or financial instruments.