Personal finance lessons from

Pop culture relating to real life

Yes, I am a fan of the PBS hit show Downton Abbey, a British drama series that follows the lives of the Crawley family and its servants in the early 20th century.  But truth be told, I never imagined in addition to plots and characters, the shows also gives some valuable personal finance lessons.

In episode 5 of season 5, which aired recently, Mrs. Patmore, the head cook from downstairs, just inherited 300 pounds from her deceased aunt. That might not sound like much today, but it was worth a lot more in 1924. Mrs Patmore is a prudent person so she chose not to squander the money. But she didn’t know what to do with it, so she asked the head butler, Mr. Carson, for financial advice.  Why did she consult with Mr. Carson? She explained that Mr. Carson is a male and an authority figure to her.

It turned out Mr. Carson didn’t know much about personal finance himself. But he was determined to maintain his authoritative status, so he suggested Mrs. Patmore purchase shares of a construction company with her inheritance.  Mrs. Patmore was uncomfortable with this recommendation because she knew nothing about construction. In the end, she purchased a cottage with her inheritance and started collecting rent.

What personal finance lesson did this incident teach us? First, be careful who you consult for investment advice. Many people who exude a presence of authority and probably are brilliant in their own professional fields don’t necessarily know much about investing. Since most people are not comfortable with managing investments on their own, it is important to consult with the right expert for advice.

Second, men and women have very different investment styles and therefore, make very different decisions. Men, generally, are more willing to make risky bets with their money. They are more likely to be thrill-seeking investors who tend to focus on short-term track record of portfolio performance.  Women, on the other hand, generally associate money with security. Therefore, women are typically very cautious and take their time to make investment decisions. Women often choose investments they feel they know something about and also can offer downside protection. This tendency often leads women to choose safe but lower return investments.

Therefore, to counter these behavior biases, a male investor may want to establish a systematic approach to make investment decisions and be very disciplined about only taking actions when a decision parameter is breached. This approach will help minimize the impulse to move in and out of an investment. 

A female investor, on the other hand, may want to take on additional but appropriate amounts of risk that fit her investment goals and time horizon.

Pop culture is often a generalization, but it can reflect real life back to us.  Our favorite programs and characters provide us an opportunity to emulate their good decisions and criticize their bad ones.  Like Mrs. Patmore, we should examine our biases and try to make the best decisions possible.

Categories: Finance