People are weird about money.
There are lots of examples of this; we all have countless anecdotes to muster.
But its more than mere anecdote: the entire field of Behavioral Finance backs it up. (More on this later)
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There are lots of examples of this; we all have countless anecdotes to muster.
But its more than mere anecdote: the entire field of Behavioral Finance backs it up. (More on this later)
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Money makes you do weird things. It's how we are wired.
But more than that, my theory is there are so many myths and misunderstandings about money.
It is important to understand what it is and what it does for you. Sounds simple, but it's more complicated than many realize.
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But more than that, my theory is there are so many myths and misunderstandings about money.
It is important to understand what it is and what it does for you. Sounds simple, but it's more complicated than many realize.
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The most annoying weirdness to me are the spending scolds - those annoying puritans who seemingly believe every decision to spend money is bad.
They find it easier to "just say no" then consider someone's circumstances + goals in order to make a good decision.
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They find it easier to "just say no" then consider someone's circumstances + goals in order to make a good decision.
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I believe managing your financial life requires following 3 simple rules:
No. 1. Spend less than you earn;
No. 2. Prioritize investing for your future;
No. 3. Figure out what matters, and spend accordingly.
ritholtz.com/2020/01/kawhi-…
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No. 1. Spend less than you earn;
No. 2. Prioritize investing for your future;
No. 3. Figure out what matters, and spend accordingly.
ritholtz.com/2020/01/kawhi-…
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If you follow those 3 rules you never have to read another annoying personal finance column again.
And you can ignore those annoying Calvinists + their silly ideology.
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And you can ignore those annoying Calvinists + their silly ideology.
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Rule #1 is obvious, but it needs to be said:
"Spend less than you earn"
You can spend money, but within the framework of your salary + family budget.
Don't go deeply into debt (a mortgage is OK); be reasonable and balanced.
But goddammit, go live your life.
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"Spend less than you earn"
You can spend money, but within the framework of your salary + family budget.
Don't go deeply into debt (a mortgage is OK); be reasonable and balanced.
But goddammit, go live your life.
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Rule #2
"Prioritize investing for your future"
Obvious: Invest regularly via Dollar Cost Avg, max out your 401k + match, have an emergency savings, etc.
You cannot do that if you are in debt. But it does not mean you cannot have a cup of coffee or drive a new safe car.
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"Prioritize investing for your future"
Obvious: Invest regularly via Dollar Cost Avg, max out your 401k + match, have an emergency savings, etc.
You cannot do that if you are in debt. But it does not mean you cannot have a cup of coffee or drive a new safe car.
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Don't stress over pennies, and instead focus on the big picture. (This is why the Latte crap is so FN dumb).
Your professional growth, your spouse, your overall lifestyle matters. Stay healthy. Keep adding to your skill sets.
ritholtz.com/2019/04/buy-yo…
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Your professional growth, your spouse, your overall lifestyle matters. Stay healthy. Keep adding to your skill sets.
ritholtz.com/2019/04/buy-yo…
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Rule No. 3.
"Figure out what matters, and spend accordingly"
WHAT MATTERS
You don't have to "Keep up with the Jones" or live on the Hedonic treadmill. Recognize instead that money is a tool that buys security and satisfaction.
SPEND ACCORDINGLY
ritholtz.com/2019/07/a-mode…
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"Figure out what matters, and spend accordingly"
WHAT MATTERS
You don't have to "Keep up with the Jones" or live on the Hedonic treadmill. Recognize instead that money is a tool that buys security and satisfaction.
SPEND ACCORDINGLY
ritholtz.com/2019/07/a-mode…
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Example of all 3 rules:
My advice to Kawhi Leonard, whose $103 million NBA contract is dependent upon his body being healthy, is to go buy a new, safe car.
With that sort of money at stake, driving around in a 20 year old SUV is simply reckless.
ritholtz.com/2020/01/bbrg-s…
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My advice to Kawhi Leonard, whose $103 million NBA contract is dependent upon his body being healthy, is to go buy a new, safe car.
With that sort of money at stake, driving around in a 20 year old SUV is simply reckless.
ritholtz.com/2020/01/bbrg-s…
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In terms of happiness, the benefits of more money tails off at about $75,000.
Once you get past basic security & needs it is much less important.
pnas.org/content/107/38…
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Once you get past basic security & needs it is much less important.
pnas.org/content/107/38…
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Danny Kahnemann explains that "satisfaction is a long-term feeling, built over time and based on achieving goals and building the kind of life you admire.”
That's a good way to spend your money.
qz.com/1503207/a-nobe…
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That's a good way to spend your money.
qz.com/1503207/a-nobe…
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A good summation of life strategies and the balance between money and happiness comes via NYU Stern wizard @profgalloway.
He explains why work and stress in your 30s + 40s is normal, and Happiness is something you work towards.
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He explains why work and stress in your 30s + 40s is normal, and Happiness is something you work towards.
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Prof Tom Gilovich of Cornell studies on happiness and life satisfaction discovered that experiences generate greater lasting joy then do consumption of goods.
Adaptability is why the "big new TV" eventually becomes just "the TV."
ritholtz.com/2018/01/mib-to…
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Adaptability is why the "big new TV" eventually becomes just "the TV."
ritholtz.com/2018/01/mib-to…
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Gilovich observes people adapt to both positive AND negative situations; pleasure from increases in goods eventually attenuates as one gets used to them.
Imagine if this was not the case: we would carry every setback with us for the lest of lives. It would be debilitating
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Imagine if this was not the case: we would carry every setback with us for the lest of lives. It would be debilitating
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Hence, the rise of the recognition of "Experiences over stuff."
We adapt to Larger TVs, houses, automobiles etc.
Experiences, on the other hand, changes who you are as person, connects you to other people, and provides more enduring satisfaction and enjoyment.
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We adapt to Larger TVs, houses, automobiles etc.
Experiences, on the other hand, changes who you are as person, connects you to other people, and provides more enduring satisfaction and enjoyment.
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Its another reason why you should follow rule #3
"Figure out what matters, and spend accordingly."
ritholtz.com/2020/01/forget…
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"Figure out what matters, and spend accordingly."
ritholtz.com/2020/01/forget…
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I was bemused when @R_Thaler explained what he was going to do with his $1.1M Nobel Prize winnings:
“I will try to spend it as irrationally as possible.” (He won for his studies of how irrational people are with money, making it especially ironic - because its true)
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“I will try to spend it as irrationally as possible.” (He won for his studies of how irrational people are with money, making it especially ironic - because its true)
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Its the weekend and we all have better things to do than read me complain about spending scolds.
Go enjoy your weekend, and spend your money on whatever will bring you happiness and life satisfaction.
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Go enjoy your weekend, and spend your money on whatever will bring you happiness and life satisfaction.
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