Advertising
Advertising

10 Unforgettable Financial Lessons From The Most Entertaining Wall-Street Movies

10 Unforgettable Financial Lessons From The Most Entertaining Wall-Street Movies

Stories of America’s financial hub never fail to captivate audiences. The New York Stock Exchange is crammed into four rooms, and Wall Street itself is less than a mile long. However, this hive is the center of the world’s financial activity, resulting in an average of 5.7 billion shares traded each day, according to recent numbers published by the Wall Street Journal. Margin Call, Arbitrage, and the recent Wolf of Wall Street thoroughly examine the fast paced decisions, complexities, and even savagery of life in this iconic financial hub. Business leaders have to consider how they’ll react under immense pressure to keep their organizations afloat and customers happy. The protagonists in the following movies must face high-risk decisions and ethical issues on a constant basis. Decisions that can significantly impact their personal and professional lives. Here are 10 takeaway lessons we can gain from these films.

1

    Lesson #1: Be Prepared to Face Significant Risks

    The film Margin Call highlights some of the extremely sobering potential risks faced by traders working for Wall Street firms. In this sink or swim drama, the decision makers at the firm discover that they have to sell off extremely toxic securities, or their organization will sink. However, offloading these securities will only push the crisis onto their partners and clients, severing trusting relationships that the firm has been developing for years. It is a harrowing study of what traders will do when faced with situations of immense risk. Employees watch as their peers are laid off left and right, as the surviving firm representatives accumulate mass amounts of wealth, as the crisis affects everyone around them. Margin Call serves as a strong reminder that large gains are often made at the severe expense of others.

    “I want you to hit every bit you can find. Dealers, brokers, clients, your mother, if she’s buying….The ground is shifting below our feet, and apparently, there’s no other way out.” – Sam Rogers, Margin Call

    2

      Lesson #2: Don’t Cook the Books

      Arbitrage attracted critical attention and acclaim in 2012 with its list of stars, including Richard Gere, Susan Sarandon, and Tim Roth. Gere’s character, Robert Miller, is an unsavory magnate whose history of fraud remains unknown to his family. He’s altered his company’s financial data to keep his criminal acts concealed. Miller is involved in a car accident that results in a fatality, and tries to minimize his involvement. The ensuing investigation brings several questions to the surface for his family members, who catch onto the fraudulent activity. While Miller never has to legally answer for his crimes, his relationships with his family members have been irrevocably damaged. Arbitrage serves as a stark reminder that unethical business practices can come back to bite you. They can negatively impact your personal life and relationships as well.

      “Nothing is beyond money for you, Robert. We both know that.” – Jimmy Grant, Arbitrage

      3

        Lesson #3: Don’t Let Success Get To Your Head

        The Wolf of Wall Street is the epitome of a financial cautionary tale, demonstrating the new lows people can sink to when they amass their own fortunes quickly on Wall Street. Stockbroker Jordan Belfort can’t handle the quick success, and he spirals out of control with drug use, sex, insane purchases, and scams. This film teaches us that the fast accumulation of wealth doesn’t work out for everyone – in fact, it can lead people down paths of destruction. This adaptation is based on the real life experiences of Jordan Belfort, detailed in his 2007 memoir.

        “On a daily basis I consume enough drugs to sedate Manhattan.” – Jordan Belfort, The Wolf of Wall Street

        4

          Lesson #4: Those Who Rise the Highest Might Fall the Furthest

          The 1993 TV movie, Barbarians at The Gate, tells the story of F. Ross Johnson, a prestigious CEO who has risen to wealth and fame after working as a paperboy. This rags to riches tale initially seems like the perfect capitalist success story. However, things become sour as Johnson strives to save a company from doom by purchasing it. The ensuing drama demonstrates that millions of dollars are at stake. Quite often, CEOs betting on Wall Street are putting their fortunes on the line.

          “It’s not the company. It’s the credibility. My credibility. I can’t just sit on the bench and let other people play the game. Not my game. Not with their rules.” – Henry Kravis, Barbarians at the Gate

          If you’re looking for a completely different type of film that emphasizes this point, check out Assault on Wall Street. This over-the-top Hollywood action shootout shows what one murderous and vengeful broker will do during an economic recession.

          Advertising

          “They should all know that I am out there, a soldier of the people.” – Jim Baxford, Assault on Wall Street

          5

            Lesson #5: Don’t Let Brokers Gamble with Institutional Funds

            Rogue Trader is a fictional adaptation of a real-life story, which illustrates one of the most catastrophic cautionary tales for banking institutions. Nick Leeson, portrayed by Ewan McGregor, gambles with illegal trades as a bank employee. His employers never think to monitor these trades, and the situation quickly derails.

            “I, Nick Leeson, have lost 50 million quid in one day!” – Nick Leeson, Rogue Trader

            6

              Lesson #6: Stop Trying to Impress Others

              Seth Davis (played by Giovanni Ribisi) is the hapless protagonist of Boiler Room, which also stars Vin Diesel. Seth drops out of college and seeks to regain the approval of his father, who is a really strict federal judge. To impress his dad, he begins to explore the world of stock brokerage. However, his quest to win over his father unwinds when Seth is confronted with extremely unethical business dilemmas.

              “I have a very strong work ethic. The problem was my ethics in work.” – Seth Davis, Boiler Room

              7

                Lesson #7: The Press Will Dig Up Your Dirt

                Investor Sherman McCoy, played by Tom Hanks, learned this the hard way in The Bonfire of the Vanities. He becomes the center of a media scandal as journalists and politicians warp a criminal investigation to suit their needs. McCoy’s life is completely picked apart by lawyers and journalists, who publicly reveal his infidelity, along with other dirty secrets.

                “You see, Sherman, who started with so much, lost everything. But he gained his soul. Whereas I, you see, who started with so little, gained everything.” – Peter Fallow, The Bonfire of the Vanities

                8

                  Lesson #8: It’s All a Big Gamble

                  Michael Moore’s eye-opening Capitalism: A Love Story documentary shows just how ill-informed Wall Street influencers are when it comes to where American funds are going. When Moore grills Elizabeth Warren about the location and status of federal bailout money, he was met with an “I don’t know” response. Moore spends the remainder of the film being met with red tape and closed doors as he tries to chase down answers on Wall Street.

                  “Don’t make any more movies.” – A Wall Street Businessman, Capitalism: A Love Story

                  Advertising

                  9

                    Lesson #9: Put Your Eggs in More than One Basket

                    The HBO film, Too Big To Fail, illustrates the false confidence and extremely risky deals made by American financial institutions in 2008, which lead to the financial crisis and recession. Unfortunately, a pattern of mergers led to a very small group of institutions accountable for massive amounts of U.S. wealth. With few accountability measures in place, these banking giants were slid downhill along with the country’s funds.

                    “AIG can’t pay. AIG goes under. Every bank they insure books massive losses on the same day. And then they all go under. It all comes down.” – Neel Kashkari, Too Big to Fail

                    10

                      Lesson #10: The Stress Can Be Really Bad for Your Health

                      American Psycho is an extremely memorable film adaptation of the Bret Easton Ellis novel. Institutions aren’t just at risk of meltdowns – the human psyche can suffer a breakdown due to the immense stress of life on Wall Street. Christian Bale horrifies us with his portrayal of serial killer Patrick Bateman, who has become completely warped by the kill-or-be-killed mentality of the New York investment world.

                      “I think my mask of sanity is about to slip.” – Patrick Bateman, American Psycho

                      Institutions rise and fall because of the decisions made on Wall Street. This very crucial location is the setting for countless real life and fictional drama that unfold as quickly as stock prices fluctuate. It’s no surprise that there have been dozens of films capturing the culture and figure of influence on Wall Street. Check out a few of these cinematic gems and see what financial lessons you walk away with.

                      Featured photo credit: Hernan Seoane via flickr.com

                      Advertising

                      More by this author

                      Larry Alton

                      Business Consultant

                      We’ve Been Dreaming of These 10 Inventions, and They’re Almost Here How to Make Someone Who’s Angry at You Suddenly Become Nice (Even If He’s a Stranger!) You Have to Read This Before Going into Your 10 Day Juice Cleanse! boston 5 Historic U.S. Cities You Have to Visit in 2017 How to Teach Your Non-Tech Savvy Parent Some Useful Skills How to Teach Your Non-Tech Savvy Parents Some Useful Skills

                      Trending in Money

                      1 How to Set Financial Goals and Actually Meet Them 2 25 Killer Sites For Free Online Education 3 How to Develop a Millionaire Mindset in 6 Simple Steps 4 5 Books You Must Read if You Want to Be a Millionaire in Your 20’s 5 20 Better Money Habits to Help You Increase Your Savings

                      Read Next

                      Advertising
                      Advertising
                      Advertising

                      Last Updated on August 20, 2019

                      How to Set Financial Goals and Actually Meet Them

                      How to Set Financial Goals and Actually Meet Them

                      Finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. And that’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

                      In this article, we will explore ways on how to set financial goals and then actually meet them with ease.

                      5 Steps to Set Financial Goals

                      Though setting financial goals might seem to be a daunting task but if one has the will and clarity of thought, it is rather easy. Try using these steps:

                      1. Be Clear About the Objectives

                      Any goal (let alone financial) without a clear objective is nothing more than a pipe dream. And this couldn’t be more true for financial matters.

                      It is often said that savings is nothing but deferred consumption. Therefore if you are saving today, then you should be crystal clear about what it is for. It could be anything like kid’s education, retirement, marriage, that dream vacation, fancy car etc.

                      Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives, however small they may be, that you foresee in the future and put a value to it.

                      2. Keep Them Realistic

                      It’s good to be an optimistic person but being a pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going out of the line will definitely hurt your chances of achieving them.

                      It’s important that you keep your goals realistic in nature for it will help you stay the course and keep you motivated throughout the journey.

                      3. Account for Inflation

                      Ronald Reagan once said – “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman”. And this quote sums up the best what inflation could do your financial goals.

                      Therefore account for inflation whenever you are putting a monetary value to a financial objective that is far away in the future.

                      For example, if one of your financial goal is your son’s college education, which is 15 years hence, then inflation would increase the monetary burden by more than 50% if inflation is mere 3%. So always account for inflation.

                      4. Short Term vs Long Term

                      Just like every calorie is not the same, the approach towards achieving every financial goal will not be the same. It is important to bifurcate goals in short term and long term.

                      As a rule of thumb, any financial goal, which is due in next 3 years should be termed as short term goal. Any longer duration goals are to be classified as long term goals. This bifurcation of goals into short term vs long term will help in choosing the right investment instrument to achieve them.

                      More on this later when we talk about how to achieve financial goals.

                      Advertising

                      5. To Each to His Own

                      The journey of setting financial goals is an individualistic affair i.e. your goals are your own goals and are determined by your want to achieve them. A lot of times we get on the bandwagon of goal setting only to realize later on that it was not meant for us.

                      It is important that your goals are actually your goals and not inspired by someone else. Take a hard look at this step at all the goals you’ve set for after this step, you will be on the way to achieve them.

                      By now, you would be ready with your financial goals, now it’s time to go all out and achieve them.

                      11 Ways to Achieve Your Financial Goals

                      Whenever we talk about chasing any financial goal, it is usually a 2 step process –

                      • Ensuring healthy savings
                      • Making smart investments

                      You will need to save enough; and invest those savings wisely so that they grow over a period of time to help you achieve goals. So let’s get down to ensuring healthy savings.

                      Ensuring Healthy Savings

                      Self realization is the best form of realisation and unless you decide what your current financial position is, you aren’t heading anywhere.

                      This is the focal point from where you start your journey of achieving financial goals.

                      1. Track Expenses

                      The first and the foremost thing to be done is to track your monthly expenses. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you would be surprised to see how small expenses add up to a sizeable amount.

                      Also categorize those expenses into different bucket so that you know which bucket is eating the most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pump up your savings rate.

                      2. Pay Yourself First

                      Generally, savings come after all the expenses have been taken care of. This is a classical mistake which almost everyone of us do. We pay ourselves last!

                      Ideally, this should be planned upside down. We should be paying ourselves first and then to the world i.e. we should be taking out the planned saving amount first and then manage all the expenses from the rest.

                      The best way to actually implement is to put the savings on automatic mode i.e. money flowing automatically into different financial instruments (for example – mutual funds, retirement corpus etc) every month.

                      Taking the automatic route will make us lose control of our money and hence will compel us to manage in what’s left with us thereby increasing the savings rate.

                      3. Make a Plan and Vow to Stick with It

                      Budgeting is the best to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be made.

                      Advertising

                      Nowadays, several money management apps and wallets can help you do this automatically. It’s easy and who knows, you may just end up doing what people fail to do.

                      At first, you may not be able to stick to your plans completely but don’t let that become a reason why you stop budgeting entirely.

                      Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

                      You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

                      4. Rise Again Even If You Fall

                      Let’s be realistic. It’s not like the world will come to an end if you made one mistake. This isn’t called leniency but discipline.

                      If you fail to meet your budget for a month, don’t give up the entire effort just like that. Instead, start again.

                      Remember that flexible plans are the most realistic plans. So go forward and try to follow your financial goals as planned but if for some reason, the plan gets out of hand for you, do not give up on it just yet. This has a lot to do with your psychology rather than any material commitment.

                      All you have to do is to stay on the road and vow to stay on it, no matter how much you fall down.

                      5. Make Savings a Habit and Not a Goal

                      In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

                      Make Savings a habit rather than a goal. While it might seem to be counter intuitive to many but there are some deft ways of doing it. For example:

                      Always eat out (if at all) during weekdays rather than weekends. Usually weekends are expensive. Make it a habit and you would in turn be saving a great deal.

                      If you are travelling buff, try to travel during off season. Your outlay will be much less.

                      If you go out for shopping, always look out for coupons and see where can you get the best deal.

                      So the key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice which will be harder to sustain over a period of time.

                      Advertising

                      6. Talk About It

                      Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission. And it would be rather easy to lose the grip over your discipline.

                      Therefore in order to stay the course, it is advisable that you keep yourself surrounded with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

                      7. Maintain a Journal

                      For some people, writing helps a great deal in making sure that they achieve what they plan.

                      So if you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

                      Use this journal to write down all essential points such as your short term, mid term and long term goals, your current sources of income, your regular expenses which you are aware of and any committed expenses which are of recurring nature.

                      When you have a written commitment on paper, you are going to feel more energised to follow the plan and stick to it. Moreover, it is going to be a lot more easier for you to follow you and track your progress.

                      At this point, you should be ready with your financial goals and would be doing brilliantly with savings; now it’s time to talk about the big daddy – Investments.

                      Making Smart Investments

                      Savings by themselves don’t take anyone too far. However savings when invested wisely can do wonders and we are at that stage where we will talk about making smart investments.

                      8. Consult a Financial Advisor

                      Investments doesn’t come naturally to most of us therefore rather than dabbling with it ourselves, it is wise to consult a financial advisor.

                      Talk to him/her about your financial goals and savings and then seek advice for the best investment instruments to achieve your goals.

                      9. Choose Your Investment Instrument Wisely

                      Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about them.

                      Just like “no one is born a criminal”, no investment instrument is bad or good. It is the application of that instrument that makes all the difference.

                      Do you remember we talked about bifurcating financial goals in short term and long term?

                      It is here where that classification will help.

                      Advertising

                      So as a general rule, for all your short term financial goals, choose an investment instrument that has debt nature for example fixed deposits, debt mutual funds etc. The reason for going for debt instruments is that chances of capital loss is less as compared to equity instruments.

                      10. Compounding Is the Eighth Wonder

                      Einstein once remarked about compounding,

                      Compound Interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.

                      So make friends with this wonder kid. And sooner you become friends with it, quicker you will reach closer to your financial goals.

                      Start investing early so that time is on your side to help you bear the fruits of compounding.

                      11. Measure, Measure, Measure

                      All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments; taking stock of how our investments are doing.

                      If there is one single step where everything (so far) can go wrong, it is at this step – Measuring the Progress.

                      If we don’t measure the progress timely, then we would be shooting in the dark. We wouldn’t know if our saving rate is appropriate or not; whether financial advisor is doing a decent job; whether we are moving closer to our target or not.

                      Do measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

                      The Bottom Line

                      This completes the list of tips for you to set financial goals and actually achieve them with not so great difficulty.

                      As you can see, all it requires is discipline. But guess that’s the most difficult part!

                      More About Personal Finance Management

                      Featured photo credit: rawpixel via unsplash.com

                      Read Next