The Wisdom Of Others
Morgan Housel had a post about realistic personal finance hacks that could make life a little easier. I don't necessarily agree word for word but this snippet resonated;
...living below your means requires suppressing your ego to below your income.
To the extent life is a series of decisions, some of which we get right and some of which we get wrong, understanding how important it is to live below your means is one of the most important things you can figure out for yourself which is why I write about it so much. Once you overcome the ego baggage that Morgan mentions, every other aspect of your life becomes easier.
The sooner this gets figured out the sooner life can be easier. That's not to say that all problems and issues are solved but removing concerns over money by virtue of having a little money in the bank (or brokerage firm) and less fear of an adverse work situation makes life easier.
Where overcoming ego comes into play is genuinely not caring that someone else has a bigger house or a new car. Decisions driven by ego often become bad decisions. @GuruAnaerobic (one of my gotos for diet and exercise) had a Tweet about mistakes people can make overdoing it with deadlifting which can lead to injury. If you lift weights (good for you!) and are using a weight that sufficiently challenges you via slow and controlled movements to a point of fatigue and being winded then you are making yourself healthier and more fit. It doesn't matter whether the weight that accomplishes that outcome is 100 pounds or 300 pounds, you're making yourself healthier. If the weight you're using today doesn't matter (compared to doing the exercise) then the weight someone else is using for the same exercise matters even less.
It can be similar with a house. If you enjoy your house, that is all that matters. Arguably, a house that you have sweat equity into is more emotionally rewarding than a custom built McMansion. This mindset is something that people need to come to on their own to be effective.
Guru (real name Mark Baker) also Tweeted a quote from Naval Ravikant;
The ultimate purpose of money is, "you don't have to be in any specific place at any specific time, doing anything you don't want to do"
This is about the psychic wealth of owning your time. As far as I am concerned, time equals wealth. We all have our own objectives and motivations of course but I would much rather be the self-employed guy working at home determining my own schedule even if that means making less money than the guy working for someone else, spending an hour (or more?) commuting everyday even if that means making more money.
If that doesn't resonate with you what does? If you know what resonates with you and you are either living it or on a path toward living it you are on your way to avoiding poor, ego-driven decisions. And that will make every other aspect of your life easier.
The investing implication of all of this is that you are not relying on an retirement plan that is build on unrealistic expectations. Suze Orman took a lot of heat recently (rightly so) for saying that you shouldn't buy a latte in the morning because if you invested that money at an average return of 12%, you'd have $1 million. An 8% return assumption is too much, let alone 12%. I don't doubt there are plans out there built on 8% but I would not want my financial success to hinder on 8%. The more you live below your means the lower of an expected return you need which then means you can getaway with taking on less risk or less volatility depending on how your portfolio is built. And you've just made your financial life much easier.
The picture in the header of this post is from this morning. It snowed overnight and is still snowing but not sticking.