Quick snippets from our morning read on Wednesday, 27th January 2021
In Today’s morning read, Morgan Housel share some Finance wisdom.
Personal Finance Philosophies
It can happen to you. Job loss, divorce, a string of disastrous investments, succumbing to your emotional flaws, being a victim of fraud, getting hit by a risk you didn’t see coming – to people in good financial shape these tend to be viewed as things that happen “to other people.” But they can happen to you. And given enough time, at least one likely will. Some are more susceptible than others, but no one is exempt from being humbled.
Save like a pessimist and invest like an optimist. They’re different skills that can contradict each other. But you need both to build wealth over time. Survive the short run to enjoy the fruits of the long run.
No one is as impressed with your possessions as much as you are. It’s easy to overestimate the social signaling benefits of having nice stuff. The quirk is that people who see your nice stuff spend more time imagining themselves with your stuff than they do admiring you for having that nice stuff. I like nice stuff. But I try to only want it when it’s comfortable, convenient, efficient, or delicious, rather than fooling myself into imagining it’ll bring some higher level of importance.
Managing lifestyle can have the same impact on your net worth as increasing returns. And it’s easier more in your control. Wealth is just the gap between what you have and what you spend/want. It’s a two-sided equation, but the “MORE” side gets 99% of the attention. There are investors who work 80 hours a week to add 10 basis points to their returns when there are two or three full percentage points of dumb lifestyle bloat in their finances that can be exploited with way less effort. A Taleb quote I love: “He did not depend on the bull market, and, accordingly, does not have to worry about a bear market at all.”
Extreme adherence to an investment strategy is dangerous in a world that changes all the time, so an important question to ask when things aren’t working whether you’re being patient or stubborn.
I value independence more than anything else in finance. Doing what you want, when you want, with whom you want, for as long as you want, is the most incredible thing money offers that too often goes overlooked. Viewing every additional dollar of wealth as “Haha, there’s a little bit more independence and a part of my future I now own” is a fun way to think about it.
Most financial mistakes come when you try to force things to happen faster than is required. Compounding doesn’t like when you try to use a cheat code.
Read more Personal finance philosophies here.
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