Benjamin Felix

Could buying a house be a mistake? I have been trying to better comprehend how to make smarter decisions with my money. Not just how to earn more, but how to actually use it properly over time because the truth is that most of us were never really taught this stuff. So to help me understand it, Finance Guru Ben Felix joins me on The Diary Of A CEO today. Ben is a portfolio manager for PWL Capital (wealth management firm and multi-family office) who focuses on ‘evidence-based investing’ that debunks financial traps and explains the relationship between money and well-being. We spoke about how most people approach money with assumptions that they have never really questioned. Things like buying a house, chasing higher returns, or believing that more money will automatically improve their lives. I have always found money confusing. Not because the information is not out there, but because there is too much of it and most of it says something different. This episode strips it back and should help you understand what actually matters…

A man deposits $10,000 in a bank. The bank thanks him and records the deposit on its balance sheet. But not where you might expect. For the bank, that $10,000 is actually a liability – because technically it belongs to the customer and might have to be returned. So the bank does what banks do. It lends $9,000 of that money to someone buying a car. Now something interesting happens. The $9,000 loan appears on the bank’s books as an asset – because someone now owes the bank money. So the same $10,000 is doing two jobs at once. The depositor believes he has $10,000 safely in the bank. The borrower now has $9,000 to spend. That $9,000 gets deposited somewhere else. The next bank lends $8,100. That gets deposited again. Then $7,290 gets lent out. Soon the original $10,000 has quietly turned into tens of thousands of dollars of loans scattered across the economy. Everyone believes they have money. Depositors see balances in their accounts. Borrowers have the money they spent. Banks show healthy assets on their balance sheets because people owe them money. And here’s the best part. Banks charge interest on all those loans – maybe 7%. But the depositor who supplied the original money might earn only 0.5% on their savings account. So banks collect interest on money that mostly wasn’t theirs to begin with – and keep the difference. The system works beautifully. As long as nobody asks for the money back at the same time.