No Such Thing as Enough Money

How much money is enough? 

It’s a philosophical money question that often arises out of discontent. We see someone of substantial means, like a celebrity, live a troubled life. Or, we ourselves experience great fortune yet feel unhappy.

It makes us wonder where the finish line is, the point when you can stop striving for more and settle into a life of satisfaction.

There are some great financial blogs that provide good answers, such as here and here. And then there are a variety of books that tackle this question in their own ways: Ego Is the Enemy, The Last Lecture, the Bible, to name a few.

Another book that resonates with me, perhaps because of its instructive format, is How Will You Measure Your Life? by the late Clayton Christensen.

He comes to the startling realization:

“I had thought the destination was what was important, but it turned out it was the journey.”

That to me is the answer to the question. Though it is, in a way, a non-answer. As with many of life’s mysteries, there is no definitive conclusion. 

There is never enough money. 

Don’t get me wrong. I don’t mean that you can always use more money to achieve a perfect life. Rather, I mean the exact opposite.

No amount of money will insulate you from suffering. 

This week Elon Musk’s wealth jumped by $36 billion in a single day, bringing his net worth close to $300 billion. Yet, even he has experienced some very public setbacks, including the tragedy of losing his first child. 

“The race is not to the swift or the battle to the strong, nor does food come to the wise or wealth to the brilliant or favor to the learned; but time and chance happen to them all.” (Eccles. 9:11)

There is no such thing as enough money, as there is no destination of absolute happiness. It’s all about simply having the capacity to notice the truly joyful things along the journey. 

Pay attention to the wrong things, and life starts to feel empty. As Christensen writes:

“In your life, there are going to be constant demands for your time and attention. How are you going to decide which of those demands gets resources? The trap many people fall into is to allocate their time to whoever screams loudest, and their talent to whatever offers them the fastest reward.”

His solution is to focus on what provides lasting happiness:

“Intimate, loving, and enduring relationships with our family and close friends will be among the sources of the deepest joy in our lives.”

I am writing this because yesterday we had to say good-bye to a special member of our family. Our dog Sunny, who I referenced in this previous blog, developed a severe case of intervertebral disc disease. We woke one morning to find her acting strange, and within 48 hours she was paralyzed. With a heavy sigh, the neurologist gave us the bad news that her chances of any type of recovery were minimal. At best, she would need consistent pain management. That was no way for her to live. 

I am extremely grateful for the gift of having her in my life. 

In the afternoon, my wife took Sunny for her last walk. We gently set her in the kids’ red wagon. Then she pulled her around the neighborhood, taking her one last time around her favorite trees and brightly colored fire hydrants. The late October sky was unseasonably warm and clear. The white sun brightened Sunny’s golden fur. 

When my wife and Sunny came back around the corner, I felt as rich as possible — to have known Sunny, to have such a caring and loving partner, to have a tragic day made picture perfect in so many ways. 

That’s enough.

There is never enough money, if you can’t see the riches in front of you now. 

The question shouldn’t be: how much money is enough? It should be: how much more clarity do you need to see the rich, joyful things happening all around you? 

The Relationship Between Money and Marriage

I love scotch; she hates it.

There are many things my wife and I don’t agree on, but money isn’t one of them. We are intentional spenders, buying only what mutually aligns with our needs or values. For instance, disinterested in paying for the trappings of an ostentatious wedding, we tied the knot at New York’s City Hall; our reception was watching our first son play at a public playground in the East Village on a warm fall afternoon.

We’ve been happily together for 16 years, which makes me wonder: Does love make the financial side of marriage work, or is it the other way around?

The most important decision you’ll ever make

Warren Buffett’s financial wealth is only rivaled by his wealth of wisdom. Rarely does a day pass without someone in the finance industry quoting the Oracle of Omaha on social media. Heck, Warren Buffett’s influence is so great, people have essentially made careers out of quoting him.

Yet, with all of his knowledge on investing and business, he says the most important decision a person can make has nothing to do with investing and business. At the 2009 Berkshire Hathaway annual meeting, he said:

“Marry the right person. I’m serious about that. It will make more difference in your life. It will change your aspirations, all kinds of things.”

You don’t make it to Buffett’s level of stature with a track record of being wrong often, and researchers seem to agree with him on this point. Studies show that marrying the right person can significantly improve our health, career success and wealth.

Marriage will change you in many ways. By definition, marriage — joining two into one — is disruptive. Often, for the better. It is about pursuing new things while sacrificing others. A major contributor to that disruption though is money.

Although we’ve long moved on from the ancient practice of marrying for the sake of status, money is an irrevocable part of marriage, at times, for better, and at times, for worse. Here is what research has uncovered about the relationship between money and marriage.

The relationship between money and marriage

Married people are wealthier than single people.

A 2005 study tracking people in their 20s, 30s and 40s found that married people experienced a 77% increase in wealth over single people. In fact, married individuals in the study saw their wealth rise 16% for each year of marriage. This makes sense considering married couples can combine incomes and share expenses.

However, it may not tell the whole story. You can’t expect to tie the knot and just start watching the money roll right in. More affluent people are more likelier to get married in the first place. A report by the American Enterprise Institute details the wide gap in marriage rates by income. About a quarter of “poor” adults aged 18 to 55 are currently married, compared to 56% of middle- and upper-class adults.

Wealthier couples are happier.

A study published in the Journal of Happiness Studies suggests that married individuals are generally happier than the unmarried.

What about happiness among married couples?

Turns out, money is one of the biggest contributors to marital happiness. That’s what University of Maryland sociology professor Philip Cohen found after analyzing data from the General Social Survey, a long-running study of Americans’ views and behaviors.

The survey shows a class divide when it comes to marital happiness. Of upper-class married couples, 70% said they are “very happy” while only 53% of lower-income couples could say the same.

Although interesting, this is far from remarkable considering richer couples don’t have to stress over paying bills and have the economic means to splurge on things known to boost happiness, such as take vacations and attend entertainment events.

How married couples spend money matters.

It has become personal finance gospel that spending money on experiences makes us happier than spending money on material things. The same is true of married couples. As this Marketwatch article exploring happiness among married couples states: “Partners spending money on a shared experiences like vacations or going out to dinner, are more likely to be very satisfied with life than those splurging more on less exciting things like groceries, insurance and cell phones.”

Money issues ruin relationships.

For many couples, the vow to stay together “for richer, for poorer” is a fairy tale. Money is the leading cause of stress in relationships, says one SunTrust survey.

According to the Institute for Divorce Financial Analysis, money issues are responsible for 22% of all divorces, making it the third leading cause. Unfortunately, divorce isn’t even the worst of it. Financial stress has also been linked to domestic violence.

Some people would even rather have their partner sneak around with another person than sneak around with a hidden credit card. In a survey from CreditCards.com, about 31% of people said keeping credit cards and other accounts from a partner is worse than physical infidelity.

Getting married can make you more successful.

To Buffett’s point, research suggests that marrying the right spouse can positively impact your odds of personal and occupational success.

A Carnegie Mellon University study of 163 married couples indicates that people with supportive spouses were more likely to pursue greater opportunities in life, and from that, experience more personal growth.

In another study, from Washington University in St. Louis, researchers show people with a conscientious spouse saw their salaries rise by $4,000 per year and were more likely to get a promotion.

While this research is a testament to the potential advantages of marriage, for us married folks, it should also serve as a call to action to be a more supportive partner. Just take a minute to think of the difference you can make in the life of the person you love.

Divorce is very costly.

Now that we know what can happen when you choose the right one, what about when you choose the wrong one? Well, on top of the emotional trauma, you could experience an equal level of financial stress.

In the same 2005 study referenced above, divorcees saw their wealth decline by an average of 77%! And, according to a survey by Bankrate, the average cost of a divorce in the U.S. was about $15,000 per person.

With those costs, “death do us part” may be a better deal.

Kidding aside, two people who are extremely unhappy in a marriage have little to gain by staying together. The high consequences of a failed marriage though can help explain why so many people today wait to marry or choose not to marry at all.

What’s love — or money — got to do with it?

She loves working on the house; I hate it.

I don’t know if we have a perfect marriage. But I do know that we have a marriage that is good enough to keep trying to perfect it. I think that’s the secret to a happy marriage. Yet, considering the strong relationship between money and marriage, perhaps the secret to a happy marriage is money.

Let’s consult some people with more experience.

John and Charlotte Henderson, at one time the world’s oldest living couple, said the secret to a happy marriage of more than 80 years was to “live life in moderation.” Ralph and Dorothy Kohler, meanwhile, said the secret to reaching 86 years of marriage was by doing everything — including compromise — together.

Maybe marrying the right person, as Buffett suggests, is really just a matter of luck. It could be the same kind of luck Buffett attributed to his own success by saying he and Charlie Munger won the “ovarian lottery.”

After all, trying to find “the one” may be highly unrealistic, if not impossible. As Lauren Groff writes in Fates and Furies:

“Paradox of marriage: you can never know someone entirely; you do know someone entirely.”

A perfect marriage could mean accepting your partner’s perceived imperfections while recognizing your own. Taking a clinical approach in finding a mate — that is, judging each suitor based on a set of predefined qualifications — will likely set yourself up for failure.

In his book, The All-or-Nothing Marriage, psychologist Eli Finkel says that modern marriage, with the high expectation that it should provide everything from physiological fulfillment to love to financial security to self-actualization, runs the risk of “suffocation.” Most people cannot be all things, all the time, to someone else.

Couples who can meet all those expectations for each other indeed have very happy marriages. But it takes work.

One technique Finkel suggests is to frame the actions of your spouse in a more positive light. For example, instead thinking your spouse is always late (like my spouse!), assume that it isn’t on purpose and consider the unexpected events that prevented him or her from arriving on time. Another option is to adopt a growth mindset. That is, view compatibility as something that is nurtured rather than is a fixed entity. This helps couples navigate and grow from marital conflicts.

Finkel also takes a page from Investing 101 by recommending married individuals to diversify their social networks, much like diversifying your portfolio. Look to other people and outlets to meet your needs rather than place sole responsibility on your spouse. In other words, don’t put all your eggs in one basket.

Choosing someone based on their ability to maximize certain qualities like financial security or status will not guarantee a happy marriage. In that sense, money, though big, is just one of many things that can influence the quality of a marriage.

Money is an extension of what you love and value. It’s a means to an end. If you focus only on money, you won’t receive lasting gratification from anything. Not your career or your reputation — and certainly not your marriage.

After all, a bank account won’t be there to hold your hand on your death bed.

More Data ≠ Better Performance

Data, data, everywhere data. Blockin’ out the imagination. Breakin’ my mind. Do this, don’t do that. Can’t you read the data? 

Here’s one childhood dream of mine that hasn’t died: to dunk a basketball. Just one glorious flush on a rim at regulation height. To realize this dream, I would have to vastly improve my vertical performance. 

With each attempt, I could analyze my speed, foot placement, distance, angles, etc. All reasonable data points. But, alas, none of them provide the most pertinent information: I am just too short to reasonably expect to dunk a basketball. 

When it comes to performance, data matters but information matters most. 

Even the least humble of us want to perform better at something. I want to write faster. You may want to earn more money. Nassim Taleb wants to deadlift heavier weights. 

How do we improve performance?

Performance is an amalgamation of things. An athlete can’t simply choose to play better just as an investor can’t simply choose to generate higher returns. We need to tinker with the individual inputs, the data. 

Except we live in a time when our thirst for improved performance is drowning us in data. With the watch on my wrist, I can tell you how much I slept, last night’s scores, the weather and the current price of wheat in Australia. 

Data and information are not the same. It is information and insights that help us make better decisions and improve performance. Living in a time of abundant data holds the promise of extracting a wealth of information and valuable insights. But, being mesmerized by the loads of data can obscure the fact we are not getting what we need most. 

If you go on a trip, knowing how long each traffic light stays red, or how many green sports cars are on the road, or even the route’s total elevation will not help you reach your destination faster. 

That is the big data fallacy: more data does not mean an equal measure of useful information. It can produce the opposite effect, as we confuse data for information. The forest for the trees. Even when we can ascertain interesting information from a wide range of inputs, it doesn’t guarantee any of it is valuable in relation to our personal goals. 

Unfortunately, we have a tendency to want to emulate the elite. We try to think like professional athletes and hedge funds, not as ourselves. 

Chasing Performance

If we want to understand the behaviors associated with our obsession with performance, a good place to start is in the world of finance, which has a way of exposing our faults writ large.  

A few weeks ago, Morningstar released the results of its annual “Mind the Gap”study. It found that investors earned 1.7% less than the total returns of their fund investments over a 10-year period ending on Dec. 31, 2020. 

Morningstar attributes this gap to “inopportunely timed purchases and sales of fund shares, which cost investors nearly one sixth the return they would have earned if they had simply bought and held.” 

In other words, the average investor tends to chase performance. That is, to let recent price changes guide their investment decisions, which leads to buying AFTER an investment rises (thus missing the gains) and selling AFTER the investment drops (thus locking in the loss). They focus on short-term price data even when it provides no financial benefit. It is an example of focusing on data that is difficult to understand and offers very little meaning, especially as they relate to your personal financial goals. 

What makes the most difference in financial performance is how much you earn, how much you spend and how much you save. Take what’s left over and invest it knowing that the stock market tends to rise more than it falls. That’s it. All the other numbers, measures, figures, statistics and trends, which are generally out of your control, hardly matter. 

As the late Jack Bogle said, “Investing is not nearly as difficult as it looks. Successful investing involves doing a few things right and avoiding serious mistakes.” 

The Douwalter Method

Another good place to study the concept of performance is the high-stakes world of sports, where every small competitive edge seems to matter. 

Perhaps, there is no sport more obsessed with data than track and field, where a fraction of a second is the difference between the podium and a fourth place obscurity. That sliver of a difference pushes athletes to mine everything from heart rate and sleep performance to lung capacity and power output, all in hopes of cracking the code of training.

A hot performance trend among some runners and coaches is to monitor glucose, which your body turns into energy. As reported by Alex Hutchinson in Outside magazine, the hope is to use glucose levels to help determine when and how a runner needs to refuel to maintain optimal performance and avoid “hitting a wall.” But glucose levels vary widely from runner to runner. So far, studies are inconclusive on whether glucose monitoring can help improve a runner’s performance. 

It begs the question: where is the line between acting on useful data and being mired in data that does more harm than good?

Tom Hughes, a medical doctor and sports science lecturer at Leeds Beckett University in Britain, worries that obsessively tracking glucose numbers is to “stress about another number we don’t understand.” 

That seems to perfectly sum up the reaction of many people to every new study or hack published in the news. 

Compare the big data approach to that of Courtney Douwalter, who is widely considered the best female long-distance runner on the planet. Maybe the best runner period, as she consistently dominates ultramarathons, beating both women and men. 

Unlike most professional runners, however, Douwalter does not have a coach and does not follow a detailed training plan. Instead, she primarily relies on how she feels physically and mentally to determine her training load.

As she explained on the Rich Roll Podcast, “Without a plan, I do much better listening to my body.” Her aversion to coaching or following a detailed training plan, she explains, is that she wants to avoid becoming reliant on superfluous metrics and miss the more important insights of her body.

Information over data.

Whatever principles or rules or razors support the same idea, I will consider it Douwalter’s Method: listen to your most important source of relevant information and don’t sweat the superfluous details. 

As the Morningstar study revealed, becoming too focused on data instead of information and insights tends to accentuate our faults rather than improve them.

Three Brief Performance Rules

Considering the fallacy that more data equals more information, here are a few guidelines for improving performance:

The biggest difference makers will always be what you most directly control. We can control what we put in our bodies. We can control how much we rest. We can control how much we save and spend. These will pay higher dividends than external forces like dietary supplements, high-tech shoes and the stock market. To obsess over measurements that are beyond your control is like trying to move an inch when what you already have can take you a mile. 

No amount of data will help you, if you don’t know what to do with it. The most important aspect of information is relevance. A piece of information is only useful and valuable if it is relevant to your needs. What is relevant to me may be completely irrelevant to you, and vice versa. It is the relationship between signal and noise. As the mathematician Edward Ng put it: “One man’s signal is another man’s noise.” 

Of course, there is a whole cottage industry that will try to sell you on noise. It is why people are suckered into paying hundreds of dollars for carbon-plated running shoes or putting their retirement savings in financial products they don’t need. 

The boring stuff is typically the effective stuff, which makes it boring. Get plenty of rest. Eat a balanced diet. Move around a lot. Those are the keys to becoming an athlete. Spend less than you earn. Save regularly. Invest in a diversified portfolio. Those are the keys to becoming wealthy. None of which are sexy, but they work. 

Take it from the greatest dunker of all time:

Get the fundamentals down and the level of everything you do will rise.

MICHAEL JORDAN

Cost vs. Sentimentality

One thing I love about my neighborhood is all the dogs. As anyone with a heart and soul knows, good “boys” and “girls” can make a good neighborhood. Sometimes in the evening, when I and many of my neighbors walk our dogs for the last time of the day, I feel pangs of envy. Each dog performs a similar dance, ambling from one smell to the next wagging its tail like windshield wipers in a downpour. How happy they are. It makes me think how easier life would be to live like dogs with a one-track mind — to simply act out of love or hunger or basic bodily needs. 

But, alas, humans are left to juggle many considerations, both in the present and the future, especially as they relate to money.

I apologize, this piece is not about dogs, but rather the choices we make. 

Three years ago, my wife and I made a decision that would only be a good decision if things in the future worked out just right. We chose to buy a home that would take a substantial bite out of our budget. Now that I work from home, I have had a lot of time to sit, literally, with that decision. 

What I’ve come to realize is that there are rarely perfect choices. At least, there is no right way to decide if the future that has come to pass is any better or worse than any other possible future. Although we want to make optimal decisions, optimal in most instances is a mirage. 

That can be a comforting feeling. As Salvador Dali said,

“Have no fear of perfection, you’ll never reach it.” 

This is true of financial decisions, as we try to balance what we can afford and what we want most. It is the friction between cost and sentimentality. 

From a purely financial perspective, all that matters are the numbers. But, of course, we don’t always do what the numbers say. The reason isn’t only because we’re not hardwired to think in probabilities or absolute logical terms. Numbers, even those with dollar signs, just aren’t the only thing that matters. What provides joy in life is not always financially rational. 

Essentially, our financial decisions fall on a spectrum with numbers on one end and emotions on the other. For example, a stock is an intangible thing. I will never hold it or look at it or admire it. I invest my money and then one day take it back out. I will never stand inside a stock or watch my family grow alongside it. So, when deciding what stocks to buy, I care mainly about the price of those stocks and not my emotional attachment to them.

A house is a whole different matter, which brings us back to my neighborhood and my four-legged neighbors. To better express this relationship between cost and sentimentality, let me use my house as an example.

We wanted a house with more space in a better neighborhood with a better school system. We found that home, but with the catch that it was beyond our preferred budget.  To move into this home would be financially risky as we waited for our children to graduate nursery school, freeing up some extra dollars, and we worked to increase our income. It would have made much more financial sense to stay in our old house or move to another house somewhere else.

But the home met so many of our desires. When we first viewed the house, our imaginations filled instantly with the memories that could be created there. In the end, we made the decision primarily out of sentimentality rather than cost. 

Was it the right decision? 

Cost

Since we moved into a home that is not only larger, but also located in a more affluent city with much higher property taxes, we saw our mortgage payment jump around 50%. Plus, as a larger home, our utility costs rose, too. 

Then there is the pool, an in-ground 40,000-gallon money sucker. After skimming the surface, buying gallon after gallon of chlorine and running the filter 9 hours a night, I can sympathize with those homeowners who choose to say screw it and fill their pools in. 

Making a choice to increase one’s expenses is certainly not considered ideal. 

But wait, there’s more. Let’s talk about the condition of the home.

The Japanese military was pummeling American forces in the Pacific, causing General Dougals MacArthur to flee, while thousands of miles to the east our home was being built. That makes our home nearly 80 years old. Although the bones are in good shape, it has needed some major improvements. We updated the kitchen, remodeled the living room and improved the landscaping. (To my dying day I vow to never remove shrubs by hand ever again.)

Our cost savings have come from doing  95% of the work ourselves. Still, we’ve paid for the supplies and spent our time and energy.

As any homeowner knows, there is no rest for the weary. A home is never finished. Homeowners commiserate in the phrase, “there’s always something!” Time takes its toll. Part of choosing to buy a home is not only what you can reasonably afford, but also how much home you want to handle. Again, cost vs. sentimentality. 

All told, I can play endless mind games with all these costs. That money could have been invested instead to build wealth. It could have been put toward travel or a new car.

So, is this home worth that missed opportunity cost? 

Sentimentality

On the last day of school in June, the sun had just rubbed sleep out of its own eyes when my oldest son hit me with a deep question while we waited for a car to pass: “Who’d win in a foot race, The Flash or Superman?”

We live in what is called a walkable school district. That means children can reasonably reach their respective schools on their own two feet or by bike. There are no school buses. One of the greatest joys of my day is to walk my kids to and from school — the irreverent banter, the hello and goodbye from the crossing guard, the chance to meet my sons’ friends, the quality time spent together starting and ending our days.

I would argue a choice that lets you grow closer to those you love and build relationships with the people around you is beyond pricing. 

But space is also important. Space is good for getting people together to create memories, such as holiday dinners in a spacious dining room with bottles of wine (so much wine!). 

And, after living in a ranch home, with the bedrooms on the same level as the kitchen, I’ve come to feel a great sense of gratitude for the space to grind some beans and make a cup of fresh coffee without waking the whole house. I can sit at my desk and watch people outside running and biking by. This is an active community, which can be infectious in a way that improves our own quality of life. 

In the spring and summer, our home blooms like a flower. We open the doors and windows and uncover the pool. A pool with young children is a source of constant entertainment. It is a place to make lasting memories — the things I can actually take with me to my death bed. I won’t forget the day I watched nervously as my boys removed their floaties and plunged into the pool, sinking like rocks until they popped back up and started to swim–swim without help for the first time–like drunken walruses. 

Actually, that’s not just a memory, it is an imprint of what this home means to me. I don’t know what the value of all of this is, if it indeed can ever be valued. But I do know that it is worth something. Some of the greatest joys you just cannot assign a number.

Sure, there are limits. The heartbreak would be that it all slips away. You cannot ignore the financial possibilities of what you could have done differently. That is the friction between cost and sentimentality. 

Our house could be on the precipice of one of the worst financial decisions we’ve made and one of the best experiences we will ever share as a family. 

Sentimentality can’t make you rich, but it can make you feel happy in ways money never will. 

One is not necessarily better than the other. You are fortunate if you even have the ability to make a financial decision between the two.

What matters most is that you make the decision for all the right reasons. Ask yourself, am I making a choice for only cost or sentimentality reasons? What is more important to me? Rarely, the choice is perfectly balanced. Perfection is subjective anyway. Personal finance is an art, not because it is hard or tricky, but because it is subjective.  

Some may call it a foolish financial decision. We call it home. 

Sunny in the garden.

You Contain Multitudes, Diversify Accordingly

Do I contradict myself?

Very well then I contradict myself,

(I am large. I contain multitudes.)

– Walt Whitman, “Song of Myself

The world asks us to be quickly readable, but the thing about human beings is that we are more than one thing. We are multiple selves. We are massively contradictory. 

– Ali Smith

A group of economists analyzed trades made by 783 elite investors over a period of around 16 years. These were investors who managed the assets of billionaires and large institutions, with an average portfolio size of $600 million. The performance of these big league investors was compared to the performance of what amounts to someone or some creature like, say, a dart-throwing monkey, randomly choosing from a list of stocks to buy or sell. 

Here’s what they found: when buying stocks, these kings of finance (the elite investors) far outperformed that dart-throwing monkey. But a curious thing happened when selling stocks. The king of the treetops (the dart-throwing monkey) outperformed, as the stocks the elite investors chose to sell did better than those they chose to keep.

How could elite investors succeed on one side of a trade but fail on the other?

The economists concluded these elite investors took their time and were highly deliberate when deciding what stocks to buy. Meanwhile, they tended to make reflexive, instinctual decisions when choosing what stocks to sell. It is a real-life example of Daniel Kahneman and Amos Tversky’s dual modes of thought — System 1 (quick, automatic, emotional) and System 2 (slow, deliberate, logical) — popularized by the book, Thinking Fast and Slow. The elite investors used their galaxy brains (System 2) on one side of trade and their lizard brains on the other (System 1). 

Research has proven the poet Walt Whitman right: we contain multitudes. We are vessels of contradictory desires, perspectives and emotions. We are subject to a variety of cognitive biases. In a sense, we are made up of different self states. And this consortium of selves can trip us up when making decisions, from what we order at a restaurant, to what career we pursue, to how we invest money. 

Every individual investment decision, each time you buy or sell, is subject to a multitude of mental forces.

This is why it’s better for most of us, who are saving and investing to achieve financial independence, to take the don’t-put-all-your-eggs-in-one-basket approach known as diversification.

Portfolio diversification — owning a broad mix of asset classes — can help lower overall investment risk without dramatically sacrificing return. At least, that’s what people generally know about diversification. But that’s not what I want to concentrate on here. What I find just as remarkable, and often overlooked, is how diversification works as a mental tool. 

As the study of elite investors shows, human psychology is not easily separated from money, even when you’re paid to do just that. 

Diversifying your portfolio not only helps you manage investment risk, but also manage yourself/selves. You reduce the chances of making bad decisions. Essentially, you can dilute the influence of conflicting modes of thinking by owning a variety of different assets. Put simply: We contain multitudes, so we should invest in multitudes. 

Here are three psychological reasons why:

When diversified, you are detached from the powers of greed and fear

If financial markets are driven by greed and fear, which wins today or tomorrow? Will markets rise or fall? Is it better to guess, or to simply not care?

Greed and fear are most acute among individual stocks, as evidenced by higher volatility. There are near daily events that impact specific companies or industries, to which investors emotionally react. Diversifying your portfolio is a way to sidestep those emotions. 

Think of it this way: If you’re going to own a bit of everything, you can expect your winners to effectively make up for your losers. You are not seeking to buy more of what is rising, nor hurrying to sell what is falling. Instead, you trust the growth of the world financial markets and the law of averages will continue their gradual upward trajectory. 

Therefore, the short-term market changes don’t matter much. Remember, throughout history, the stock market has drawn straight with crooked lines. 

S&P 500 Index – 90 Year Historical Chart

SOURCE: MacroTrends

Diversification helps blunt the impact of cognitive biases

As the Novel Investor’s quilt of asset class returns show, last year’s best performing assets can often become next year’s worst, and vice versa. 

From that 30,000-foot perspective, it’s easy to see betting on a specific asset class is basically a crapshoot. But in the moment, we may experience something different. For one, when deciding where to invest, we may rely on past performance. We may think recent investment trends will influence future performance, a belief known as the gambler’s fallacy. Or, we may fall prey to confirmation bias and look only for evidence that supports the investment decisions we’ve already made. 

Or, at the behest of every financial news story and our Uber driver, we may succumb to herd mentality. When markets consistently hit all-time highs and you read about people becoming millionaires on meme stocks or digital coins with canine mascots, it’s understandable to come away with irrational expectations. 

As Nir Kaissar wrote in a Bloomberg column, a survey found that “U.S. investors expect their portfolios to generate a long-term return of 17.5% a year after inflation”. That far surpasses the expectations of professionals:

That is unrealistic over the long term. His suggestion, of course, is to dispel any notions of anything going to the moon and to temper those outsized expectations by diversifying your portfolio. 

The way I see diversification is that it is a cognitive bias silencer and the ultimate form of investor humility. It is not the path to the highest returns, which is the point. The greater the heights, the greater the fall. You don’t know what’s going to happen anymore than the next person. 

Diversify, and you’ll never fall in love with the status quo

A famous though dubious quote from Henry Ford goes, “If I had asked the people what they wanted, they would have said faster horses.”

By our nature, we are resistant to change. We prefer the safety of the familiar. Which is not necessarily an ideal mindset for an investor, because the fortunes of companies and countries change all the time. If you stick with the rivers and the lakes you’re used to (high five to those who got the song reference!), you may get stuck. 

You could argue that Warren Buffett and Charlie Munger made a colossal mistake waiting to invest in technology. They shied away from investing in technology for a long time because it was something they didn’t understand, as it was outside their “circle of competence.”

But, who can really say what is today’s Kmart and tomorrow’s Tesla? Just look at how the top 10 companies in the S&P 500 changed from 1980 to 2020: 

Rather than sticking with what you know, diversification practically forces you to own — and reap the benefits of — the disruptors that evolve and grow, overtaking the old guard. 

Our contradictions don’t have to rule over our money. Diversification is one way to help become unhindered by our mental flaws. And there’s nothing wrong with admitting our judgments can be flawed. It’s what allows us to find ways to make better decisions. 

If you believe you are not susceptible to cognitive imperfections, let Walt Whitman ask: 

“Have you no thought, O dreamer, that it may be all maya, illusion?”

“Are you the new person drawn toward me?”

The Cost of Friendship

An oak tree can grow to 100 feet tall and live for more than 100 years.

In a mast year, an oak tree can shed as many as 10,000 acorns, hard little squirrel delicacies raining down dozens of feet on your lawn (or head) like tiny missiles.

These are things I learned only after shipping a young oak tree to a best friend and his wife to plant in their yard as a gift to celebrate the announcement of their first baby. I didn’t consider whether they had room for such a large tree or even had the desire to deal with the maintenance. Instead, I only thought about the cost.

How much should you spend on celebrating a friend’s big life events?

The tree came with a copy of the classic children’s book, The Giving Tree, by Shel Silverstein. I sent it as a special way for them to mark the occasion. But truthfully, just like the boy in the book who repeatedly takes from the loving tree for selfish reasons, I also did it for myself. The root of our friendships is just as much about sustaining ourselves as it is about sustaining others.

Which is why I’ve been wondering lately: What is the cost of friendship anyway?

I took an unplanned month-long break from this blog. It was partly due to the demands of my day job and some other projects I’m building. But more so, because I was having so much fun spending time in the company of others again. Nights socializing replaced nights writing.

After not seeing most of my friends in over year because of COVID, there is a sweet sense of carelessness. No one cares if we meet at that overpriced restaurant. Sitting around a backyard fire is good enough reason to drink the expensive stuff.

After all, what are friends for?

A lot.

Why You Should Spend Money on Your Friends

While it is important to identify what expenses you can cut from your budget, it is equally important to identify what you like to joyfully spend money on.

We should never get too hung up on spending time and money on friends. It sounds trite, but it seems necessary to write because fewer and fewer people have them.

Amidst my time rekindling friendships, the most depressing thing I read about is the growing loss of close friendships. Even with all the communication tools literally in our pockets, we are as lonely as ever, according to a study from the Survey Center on American Life.

Back in the day of pay phones, beepers and Zubaz pants (1990), only 3% of Americans said they had no close friends. That figure spiked fourfold over the past 30 years, with 12% of Americans awash in cellphones, social media and Crocs saying they are essentially friendless.

Meanwhile, the number of Americans who said they had 10 or more friends plummeted from 33% to an alarming 13%.

Call it a loneliness pandemic, a pandemic that could also harm people in many ways.

You can see the value of friendship most among older adults. Over the past year, Edward Jones and New Wave conducted a study investigating how retirement attitudes and behaviors were shaped by the pandemic.

After a year of living through lockdowns and the threat of illness or death, 77% of retirees say “having family and friends that care about me” is one of the most essential elements to well-being in retirement, ranking higher than “being financially secure” (59%).

The report also shows how attitudes regarding “success” change with age. Older adults place a higher value on relationships and self-acceptance than wealth or job achievements.

Of course, priorities shift throughout life. But there is something important to take away from those who generally have wealth and the freedom of time but the fewest years left to live. That is: We should be concerned about accumulating friends as much as financial assets.

The report states:

“Social isolation is linked to an increased risk of heart disease, dementia and death; it can be as deadly to one’s health as smoking 15 cigarettes per day.” (Italics mine… just let that sink in for a minute.)

Friendship has been shown to improve our mental, physical and emotional states.

A big study at Harvard spanning 80 years found that the single best predictor of health and happiness was not your wealth or your professional success, it was your close relationships.

Data from the Survey Center on American Life also reveals this basic happiness principle: more friends equals more life satisfaction.

It aligns with what longevity researcher Dan Buettner said to the New York Times:

“I argue that the most powerful thing you can do to add healthy years is to curate your immediate social network… Your group of friends are better than any drug or anti-aging supplement, and will do more for you than just about anything.”

Wealth is a number, but it’s also a feeling. Friendships can make anyone feel like the wealithiest person in the world. Friends make the whole damn mess of life so much more worth it.

As C.S. Lewis writes in The Four Loves:

“Friendship is unnecessary, like philosophy, like art, like the universe itself (for God did not need to create). It has no survival value; rather it is one of those things which give value to survival.”

Every dollar spent should be made with some consideration. But when it comes to spending money on friends or experiences with friends, consider giving yourself more freedom than you would with anything else.

A hard lesson no one wants to learn: all the money you need to become financially independent means nothing, absolutely nothing, if you have no one to spend it with.

In her bestselling memoir, The Top Five Regrets of the Dying, hospice nurse Bronnie Ware says one of those top regrets is, “I wish I had stayed in touch with my friends.”

This is why an important part of any retirement plan isn’t just what you want to do, but also who you want to do it with.

My lucky friend who is now a soon-to-be proud father and involuntary oak tree arborist married his wife in her home country of South Africa. I didn’t go, because I was concerned about the cost while saving for a new home. Fortunately, our friendship remains strong. To this day though I regret not throwing caution to the wind and being a part of that special moment.

Money can come and go. Special moments with friends last forever. Don’t miss them.

You can save and invest for a big house, a fast car, kid’s college fund, whatever. It’s all personal and who am I to tell someone one way or another. Except with this: spend all the money and time on your friends that you can*. This is investment advice, planning advice, saving advice, money advice, life advice (come at me SEC!).

(*Within reason, of course. If someone expects you to spend more than you can reasonably afford, then they’re not really a friend anyway.)

The cost of friendship is whatever it costs to maintain your friendship — and it’s worth it.

Pick up the tab.

Take the trip.

Send an oak tree.

Even if you’re just doing it for your own well-being.

“Follow Your Passion” Is Good Financial Advice

Here’s an interesting financial paradox: the less you obsess over wealth, the wealthier you will likely become.

For example, Michael Batnick, Director of Research at Ritholtz Wealth Management, notes this wild investment fact: “Since 1916, the Dow has made new all-time highs less than 5% of all days, but it’s up 25,568% over that time. 95% of the time, you’re underwater. The less you look, the better off you’ll be.

Spend less time tinkering with your investments — go for a walk, build a birdhouse, knit a sweater — the higher the likelihood you’ll be rewarded. The same is true of most things in life; at times you need to direct your focus elsewhere.

I mean…

The Nazi death machine extended its blood-drenched claws across the English Channel to terrorize Britain with deadly air attacks and drive the free world to the precipice of defeat. And Winston Churchill, the man upon which so much hope rested, transplanted himself in front of a blank, bleach-white canvas while wielding a thin brush and palate splotched with a rainbow array of oils. Then, he began to paint, crafting many of his more than 500 paintings during World War II.

Thankfully, for all our sake’s.

That’s because research shows a hobby, such as painting, can improve, among many things, a person’s state of mind and decision-making abilities. Two qualities that are important in winning a war, or building wealth.

The primary purpose of accumulating wealth is to gain full ownership of your time for the things you’re passionate about. That is, the ability to do what you want, when you want, for however long you want. Wealth procures time to do what you want and helps grow happiness.

But the formula seems to work the other way too, in a way that is often underappreciated. Dedicating time to your passions (i.e., hobbies) can positively influence your finances and life satisfaction. Time spent doing what you want procures happiness and helps grow wealth.

The valuable benefits of a hobby

Running is one of my passions. I run every day for at least an hour, seven to nine miles depending on my pace. If I live another 38 years, which is the life expectancy of a 40-year-old American male, I can expect to spend 13,870 of my remaining hours on Earth just running. Well, actually not just running, but also conditioning my cardiovascular system, strengthening neurons in my brain, lowering my levels of stress, generating creative ideas and solving problems, and not doing something that would otherwise harm me.

There’s been a kind of revolt against advice to “follow your passion.” Tech entrepreneur Scott Galloway, for instance, calls it “bullshit.” In today’s hustle culture, there is often an attitude of resentment toward leisure, as if time spent on hobbies is time that could be better spent earning money. You know, being productive. But that’s bullshit, too.

While it may be a bad idea to limit yourself to only jobs that align with your passions, science strongly suggests that indulging your passions is important to your health and happiness — and, subsequently, success and wealth.

Let’s look at the various physical, mental and trait-developing benefits of a hobby, and what they can mean for our finances.

Hobbies can make you more productive at work

Speaking about productivity, that all-powerful noun associated with accumulating money, turns out that hobbies are associated with increased productivity in the workplace.

A San Francisco State University study found creative activities outside work can make you more productive at work. Lead researcher Kevin Eschleman said, “Creative pursuits away from work seem to have a direct effect on factors such as creative problem solving and helping others while on the job.”

According to researchers, hobbies provide a sense of recovery and self-fulfillment as well as new skills that are transferrable to your role.

For the average person, wealth is not derived from stock picking, a family inheritance or a winning lotto ticket. It’s built from work income. Generally, the more productive you are, the higher your earning potential and greater your means for saving and investing. Putting effort into something else other than work can essentially help boost your career and financial success.

Hobbies hone your ability to solve problems and generate ideas

If you’re wondering what Jeff Bezos has that you don’t have, then you should read this article covering two psychological studies on the personality traits of wealthy individuals.

Among a variety of personality traits, the rich are psychologically very stable, particularly open to new experiences, more conscientious and more frequently nonconformists, and they exhibit a stronger internal locus of control. The article states: “Rich people become rich because they act differently from others. And they act differently because they think, make decisions and react differently than most people.”

Now, if you’re wondering, how can I start acting different, there’s a simple solution. First, grab a pen and some paper. Now, start doodling. Draw whatever comes to mind — a battleship, a stick figure family, the Mona Lisa.

Researchers in a 2017 study determined that simply coloring, doodling and free drawing 15-20 minutes improved “self-perceptions of problem solving and having good ideas.” In other words, study participants, like the rich, confidently thought of themselves as having good ideas and being able to solve problems.

Hobbies can improve your physical and mental health

Okay, let’s raise the corpse of that old, over-abused adage: health equals wealth. Because a hobby supports this dynamic.

Engaging in leisure activities, such as reading or playing music, can significantly lower a person’s blood pressure, according to a American Journal of Hypertension study. Further, hobbies provide additional long-term health benefits. A meta-analysis published in the Journal of the American Geriatrics Society, found playing music could improve brain function and help fight off dementia.

Of course, the healthier you are, the more active you will be throughout life and, most importantly, the lower your expected healthcare costs. According to a 2015 study, the average cost of dementia care over a five-year period was $287,038, compared to heart disease ($175,136) and cancer ($173,383).

So, pick up that guitar collecting dust in the basement and start plucking that terrible rendition of “Stairway to Heaven” you learned in college. Your brain will thank you.

Hobbies can reduce stress and boost psychological well-being

Stress negatively impacts our ability to make informed and rational financial decisions. That is the conclusion of behavioral researchers in a study by Capital One.

When we’re stressed we feel less in control, are less likely to save and budget, and become more impulsive with how we spend our money. Instead of motivating us to find a solution, stress can put us on the dreaded hedonic treadmill.

From meditation to exercise, there are plenty of ways to combat stress. In fact, researchers have proven that hobbies such as these serve as effective stress busters.

In a study published in the Journal of the American Art Therapy Association, researchers found that 45 minutes of art making significantly lowered cortisol levels in participants. Cortisol is the hormone that jump starts our “fight or flight” mechanism in times of danger. When left unchecked, high levels of cortisol cause extreme stress.

A 2009 study showed that more time spent on leisure activities was correlated with lower blood pressure, lower levels of depression and stress, and overall better psychological and physical functioning. Meanwhile, a 2019 study found simply drawing for just 10 minutes boosted the moods of participants over a month.

Further, results from this study in Annals of Behavioral Medicine indicate leisure fosters “more positive and less negative mood, more interest, less stress, and lower heart rate when engaging in leisure than when not.”

Art, in particular, doubles as a form of therapy, leading to lower stress, improved memory and better overall mental health

Essentially, a hobby can help establish a state of mind that is conducive to building wealth. When preoccupied with activities you are passionate about, you are not comparing yourself to others or spending money to assuage your ego.

As Morgan Housel writes in The Psychology of Money: “Less ego, more wealth.”

In that sense, a hobby can keep you from doing things that make you less rich.

If money is all about buying time, I think it’s just as important to figure out the time side as much as the money side. Money itself won’t make you the person you want to be. Rather, your passions make you that person, and in doing so can help make you more intentional with your money so that you can fully be that person whenever you want.

Anyway, who cares what the science says. Some of the greatest minds ever on this planet indulged several hobbies. Here are some examples:

Confucius: archery.

Albert Einstein: biking.

Warren Buffett: playing the ukulele.

Cleopatra: cosmetics.

John Rockefeller: gardening.

Martin Luther King, Jr.: walking.

Abraham Lincoln: reading.

Oprah Winfrey: photography.

Mahatma Gandhi: spinning yarn.

Steve Jobs: listening to music.

Andrew Carnegie: traveling.

Jack Kerouac: drinking, drinking, drinking.

Julia Child: sports, including small-game hunting.

Michael Jordan: gambling (don’t be like Mike).

Leonardo da Vinci: EVERYTHING.

How to Find a Hobby

Hobbies are not necessarily innate things. It can take some searching and experimenting to find the right one. If you are in need of a new hobby or skill, here are a handful of guides to help get you started:

How to start hiking

How to start running

How to start painting

How to start baking

How to start fly fishing

How to start gardening

How to start woodworking

How to start playing guitar

How to start programming video games

So, will one of these hobbies make you rich? Probably not in themselves, but they can help. And if you have been counting every penny and hustling for years but don’t feel happy, it’s a good sign you need to allocate some time and energy elsewhere.

It’s time to follow your passion.

Why We ____ : I.M.S. 1-Year Anniversary

One year ago, I promised myself that I wouldn’t write this post. One year ago Incognito Money Scribe launched, and I vowed then not to write one of those posts about the “lessons learned after X years of blogging.” Not that there is anything wrong with them. I just never wanted this blog to focus on me that much.

But, here we are.

Why the change of heart? I don’t want to take for granted what a gift it has been to have carried this project forward. Most importantly, the gift of someone like you — yes, you, you reading these words right now — reading my work.

In a recent episode of the fantastic 70 Over 70 podcast, the screenwriter Norman Lear tells host Max Linsky that everything in their lives have led them to the moment of their interview:

Norman: No, is that-that not amazing? I’ve been on this planet for 99 years and I’m meeting you for the very first time. It’s taken me all those years to get to you. 

Max: Right. You’ve been walking around doing all of these incredible things and every moment has led to this. 

Norman: To this! Yes! So what of that moment? How about that? 

Max: Yeah, that’s some shit. 

It is some shit, good shit, that every second of our lives have led to this: me writing this post and you reading it. That is a gift, and for that I am grateful to you. Such is the wonderfully unpredictable nature of life, which aptly describes my experience this past year — wonderfully unpredictable.

As a writer in the financial services industry for many years, I knew what to expect from managing a blog, as well as the drudgery and fear and doubt that comes when faced with a blank page.

What I didn’t expect was that it would be so transformational. What started as a blog about life as an anonymous financial writer targeted to all other unnamed writers tucked away in the communications and marketing departments of financial firms became my own personal finance blog. A place to express my own thoughts about money in my own way. A place to explore the meaning and mysteries of money by probing questions like: how can money make us happy?, how can we develop a healthy relationship with money?, what can people who are financially independent tell us about living a good life?

And with that came personal transformation. This blog is not a money-making machine. I would not recommend someone start a blog in hopes of getting rich. But blogging has been profitable in other personal ways.

To name a few: Adding to the public conversation of money has led to meeting many great people in finance — writers, investors, advisers, etc. — most of them people who I’ve admired for years. Publishing each post knowing that I have no control over whether it will be read and/or shared has boosted my sense of humility immensely. Most of all, it has been a exercise in endurance, to keep a consistent writing pace but also trying to write each post better than the last one.

So, my one big lesson from blogging: Dedicate yourself to a long-term project or skill or challenge, and it will provide greater benefits in your life than just the accomplishment of the thing itself.

In other words, the sum is greater than the parts. You must undertake a challenge that is commensurate with the happiness, success, well-being, etc., that you seek. It is those activities that give life fullness.

My favorite description of the purpose of running, writing and living comes from Haruki Murakami in What I Talk About When I Talk About Running:

Most runners run not because they want to live longer, but because they want to live life to the fullest. If you’re going to while away the years, it’s far better to live them with clear goals and fully alive than in a fog, and I believe running helps you do that. Exerting yourself to the fullest within your individual limits: that’s the essence of running, and a metaphor for life—and for me, for writing as well. I believe many runners would agree.

To live fully is why we write/run/paint/read/travel/work/cook/love/explore/invest/YOUR THING HERE.

With that said, I’ve enjoyed writing every article, but these are the ones that have made me feel most alive. Call them my greatest hits (in no particular order). Here’s to hit-making for another year:

1. How to Live Like You’re Already Retired

If you want to lead a more fulfilling life, then do the things retirees are told to do to make the most of their remaining years.

2. Sell Your Hot Dogs at a Loss

To live a happywell-balanced and rich life, an equal measure of focus should be directed toward spending. What looks best on a balance sheet doesn’t always translate to long-term value.

3. Supercharging Your Financial Bullshit Detector

Sturgeon’s Law saves a lot of time and effort. It helps you say “no” to all the wrong things, which is an effective financial habit. Listen to Warren Buffett: “The difference between successful people and really successful people is that really successful people say no to almost everything.”

4. Hitting Pause on the Hedonic Treadmill

Though we are hardwired to seek forms of gratification, we are not condemned to this forever unsatisfying cycle. With a simple pause, it’s possible to step off the hedonic treadmill and pursue happiness without digging yourself into an unsatisfied grave.

5. 7 Habits of Successful Financial Writers That Will Improve Your Writing

“If you want to become a better writer, the two biggest things you can do are to write more and read more. –Jason Zweig

6. Four Things That Make Money Meaningful

How we use money can be considered an expression of what we consider meaningful. Although it is easy to succumb to societal pressures and spend it on status symbols that provide no meaning at all.

7. The Relationship Between Money and Happiness

As people earn more money, their sense of well-being increases. That’s the conclusion of a study from the University of Pennsylvania’s Wharton School published in Proceedings of the National Academy of Sciences.

8. The Best Finance Books Might Be Fiction

Reading fiction may provide a useful resolution to our difficulty reconciling our current selves with our future selves. We can better empathize with the future selves that we treat as an “other”.

9. What You Appreciate, Appreciates

What you appreciate, appreciates. For you and for others. It is an important principle that applies to every pursuit in life, from investing to relationships.

10. Managing Your Personality in Your Portfolio

Some self-awareness can help you strike a balance between high and low, risk and safety, for smooth, steady progress toward your financial goals. It can help you avoid taking unnecessary risk and following the herd mentality of the market.

Thank you for reading!

Prioritizing Goals with Death

Before his death from esophageal cancer, the hard-drinking polemicist Christopher Hitchens wrote that living with a mortal illness was to live in a “double frame of mind.” You are at once preparing for the end while taking every step you can to survive. Or, as he quipped: “Lawyers in the morning and doctors in the afternoon.”

Such dualistic thinking is not reserved for those who are terminally sick. We are all tasked with trying to balance present and future desires. How can we enjoy life to the fullest today without jeopardizing our future goals, and vice versa?

The binary choice between short-term and long-term and what our hearts say versus what society expects, surrounds everything in life — our relationships, our careers, our health, our money. Do I want to get married or not? Should I take the job I love or the one that pays more? Should I eat this box of donuts or go for a run? Should I spend money now or save it for later? And all of those decisions compete with each other.

We are left to prioritize our goals, which is hard. It’s hard to choose what goals to aspire to as the human brain is not always rational, the future is always uncertain and our lives frequently change.

When the balancing act becomes overwhelming — that is, you’re faced with difficult choices — you may want to take a walk, preferably past a cemetery.

Why? Because research suggests an awareness of death can help people identify and nurture the things that will lead to a more meaningful and healthier life.

What’s So Good About Thinking About Death?

If there is one silver lining of the pandemic, it may be the heightened awareness of death. The risk of infection and time under quarantine prompted people to reevaluate their lives. As a result, many people changed jobs, moved to new cities and adopted new habits.

Stoic philosophers encouraged people to think about death every day. Epictetus advised parents to indulge their fear of death as they put their children to bed: “What harm is it, just when you are kissing your little child, to say: Tomorrow you will die?” Marcus Aurelius, in Meditations, reminds himself: “You could leave life right now. Let that determine what you do and say and think.

They believed habitually recognizing your mortality would help lead you to living a good life. It would increase your sense of gratitude and direct you toward virtuous behaviors.

Studies indicate the Stoics were on to something.

For years, a predominate theory stated that thinking about death filled us with fear. To cope, people turn to violence, greed and other destructive behaviors, such as chasing after material goods and/or frivolous experiences — what is often referred to as the hedonic treadmill.

However, recent research has uncovered findings that argue the opposite. A report from the Society for Personality and Social Psychology analyzed various scientific studies that show potential benefits from thinking about death. It concluded that “an awareness of mortality can help us re-prioritize our goals and values.

In one field experiment, researchers observed people who were either walking through a cemetery or along a street a block away. Actors near the chosen participants held scripted conversations about helping others or another control topic. One actor would then purposely drop a notebook. What they found is that a significantly greater number of participants in the cemetery would help pick up the notebook than those walking outside of view of the cemetery.

The report notes that other experiments have replicated the study’s findings, showing that “the awareness of death can motivate increased expressions of tolerance, egalitarianism, compassion, empathy, and pacifism.”

The benefits are not only psychological. Thinking about death can also promote better health. Further studies found that a reminder of death can motivate people to make better health choices, such as using more sunscreen, smoking less or increasing levels of exercise.

Instead of developing a bacchanalian YOLO attitude, people who have an acute perspective of their limited time on earth seem to become more conscious of the virtue in their decisions.

Don’t Just Take My Word for It

Perhaps, death acts as a fulcrum between the present and future, helping us to prioritize that which we will value at all times.

That seems to be the message of people, like Hitchens, who openly discussed their lives after given only a short time to live. Based on their words, we can gather that an enhanced awareness of death will essentially do two things:

  1. Help you to love the right things; and
  2. Motivate you to love them the right way

In When Breath Becomes Air, the neurosurgeon Paul Kalanithi, who was diagnosed with terminal cancer, writes:

“Everyone succumbs to finitude. I suspect I am not the only one who reaches this pluperfect state. Most ambitions are either achieved or abandoned; either way, they belong to the past. The future, instead of the ladder toward the goals of life, flattens out into a perpetual present. Money, status, all the vanities the preacher of Ecclesiastes described hold so little interest: a chasing after wind, indeed.”

According to Kalanithi, life should not be about jumping from one goal to the next. Instead, when aware of your own finitude, you cherish what matters most to you and stop wasting time worrying about all things that won’t matter in the end. Not your reputation, not your car, not your wealth compared to others. Consider another Bible verse, this one from Jesus, who asks: “Which of you by worrying can add a single hour to his life’s span?” (Luke 12:25).

Accompanying this clearer view of what matters most is an eagerness to nurture those things with whatever resources are available to you — time, money, energy, etc. Shortly after also being diagnosed with terminal cancer, the celebrated neurologist Oliver Sacks penned an essay in which he declared, with the time he had left:

I have to live in the richest, deepest, most productive way I can.

The Russian novelist Fyodor Dostoevsky shared both Kalanthini’s and Sacks’s sentiments about death. He didn’t have a terminal illness, but knew what it felt like to know you are certain to die soon. Sentenced to death for circulating literature that was prohibited by the tsar, he paraded out into a public square in St. Petersburg with other inmates to be executed. Then in a twist of fate, the tsar pardoned their lives as a callous way to build adulation among the people.

Still, after staring death in the face, Dostoevsky underwent a life-altering transformation that he describes in a letter to his brother:

“Life in the casemate has already sufficiently killed off in me the needs of the flesh that were not completely pure; before that I took little care of myself. Now deprivations no longer bother me in the slightest, and therefore don’t be afraid that material hardship will kill me.”

His near-death experience in a sense killed off his desire for trivial things and gave him a newfound confidence to live without the fear of not having those things.

Another man told that he would soon die echoed Dostoevsky. He even came to regard an awareness of death as a valuable decision-making tool. His name was Steve Jobs, and he told a group of college graduates and the world this:

“Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Almost everything — all external expectations, all pride, all fear of embarrassment or failure — these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.”

What death seems to teach us about living a good life isn’t necessarily to prioritize the achievement of goals and all the accolades and rewards that come with them. But rather to honor your values, follow your passions, dedicate yourself to only things that give your life the most meaning — today, tomorrow, always.

Time is a limited commodity, which means every day is valuable. There is nothing to lose, nothing to fail at, when it all feels like borrowed time.

5 Real Reasons You Won’t Reach Financial Independence

We are not perfect, and those imperfections often manifest themselves in our finances. But never fall for the illusion that wealth is wholly dependent on your character and behavior.

To explain what I mean, let me ask: Have you met the Welfare Queen?

She is irresponsible and shameless, engaging in behavior counter-productive to financial self-reliance. She is a fraudster, gaming the system any way she can to receive tax-payer money and never work a day in her life. She is everything wrong about government largesse.

You’ve never met her and never will. She is not real. She is the fictionalized version of an exaggerated incident. The Welfare Queen is a subversive trope, famously used by Ronald Reagan during his presidential campaign to criticize welfare programs. Do some people take advantage of federal programs? Absolutely. But it is disingenuous to portray some infractions as the norm.

Caricatures, like the Welfare Queen, are a way to tell a simple, clear story. They are also a way to charge the emotions of a desired group of people.

At their best, caricatures can help people easily understand complex topics. At their worst, they can advance harmful, racist ideologies. At their not worst but not good either, they can purposefully exclude important variables and create false impressions. As it is in personal finance.

Self-anointed financial gurus like to rail against their own trope: the hapless saver who will never achieve financial independence because of unaddressed character flaws and financially irresponsible behavior. It’s almost a form of wealth shaming. The reason, they say, so many people don’t save enough for retirement is personal choices. Coincidentally, the solution for improving your behavior and growing rich is to buy their books, sign up for their courses and dish out loads of money to attend their conferences.

But that’s not the real story any more than the Welfare Queen is. Maybe this caricature needs a royal name, too. How about the Wealth Jester? The person who is susceptible to foolish financial gestures that puts their future in jeopardy.

The truth is there are a variety of factors at play when it comes to building wealth. Certainly, personal decisions and habits make a difference. We, however, are also faced with forces that are far beyond our control. To think otherwise is to wrongfully fall for the Wealth Jester narrative.

Here are five bigger reasons people are unable to achieve financial independence.

1. Don’t earn enough money

How is it all your fault if wages are set so low you can’t save?

The ugly reality is that many people simply do not earn enough to become financially independent. Once the bare necessities are covered, there is little left over.

Less than 40% of American households have the means to cover an unexpected $1,000 expense — much less build a nest egg.

This is a structural issue, not just a result of being unambitious or unqualified.

The gravest example is the financial lives of people of color. Workers of color are paid significantly less than white workers, which contributes to a wide wealth disparity among race demographics. Data from the Federal Reserve’s 2019 Survey of Consumer Finances show the median wealth gap between white and Black households is $164,100!

Further, younger generations are the most educated in history. Yet only half of millennials earn more their parents did at the same age.

Line chart showing far fewer millennials earn more than their parents at the same age

The reason is not avocado toast and daily coffeeshop purchases. No wonder the predominant advice today is to hustle, hustle, hustle. For a lot of people, it’s the only way to make enough.

2. Lack of access to a retirement plan

How is it all your fault if employers don’t provide a retirement plan to save and invest?

Once upon a time, some workers could expect to tough out the 9-to-5 for a few decades before riding off into the sunset with a pension. Today, the private pension is on its deathbed with only 17% of workplaces offering one, according to the U.S. Bureau of Labor Statistics (BLS).

Unfortunately, the much heralded 401(k) hasn’t filled the gap entirely, as 46% of workers lack access to a defined-contribution plan and 32% of workers lack access to any type of retirement plan.

A paper from the Center for Retirement Research at Boston College identifies the lack of access to retirement plans as one of the primary reasons retirement account balances fall far short of their potential.

Given the opportunity and incentives to invest, more people likely would. As the New York Times reported, a study of Oklahoma’s program that provided college savings accounts to newborns found that “families that had been given accounts were more college-focused and contributed more of their own money than those that hadn’t been. And the effects are strongest among low-income families.”

3. Medical reasons

How is it all your fault if you suffer from an accident, illness or the inevitable effects of old age?

Severe medical issues present a multi-faceted threat to your financial life. One study attributed more than 66% of bankruptcies to medical reasons, as people struggle to pay high medical costs and/or lose time working.

A debilitating health event, such as cancer or a car accident, can lead to exorbitant medical costs and the eventual need to drain bank accounts and retirement accounts and/or sell your assets.

Further, JP Morgan’s Guide to Retirement shows health problems are one of the primary reasons people leave the workforce earlier than planned, which means missing out on years of additional income and savings, plus the early draw down of retirement accounts. In other words, technically retirement, but perhaps not truly financially independent or even comfortable.

4. Job loss

How is it all your fault that many companies see workers as expendable as single-use plastic?

Speaking of older adults leaving the workforce early, the top reason is job loss.

A survey from Allianz Life found that more than 50% of Americans are forced out of the workforce earlier than they planned. Unanticipated job loss was the leading reason, followed by health issues.

For older adults, job loss can derail their retirement plans. At this point, they are most likely in their peak earning years, which can greatly pad their savings, and leaving a company early often means receiving reduced retirement benefits.

Should anyone at any age lose a job without a sizeable emergency fund, it can be a devastating setback. And should you struggle to find gainful employment for a long period of time, it is difficult to recover. Especially if you need to resort to making withdrawals from a retirement account, which results in potential tax penalties and lost time compounding.

5. Educational challenges

How is it all your fault if you are raised in a poor school district or struggle to pay for the inflated costs of higher education?

Education can be a major determinant in your financial success. Generally, the more education you receive, the more you earn and less likely you’ll suffer from unemployment.

Based on BLS data, bachelor’s degree holders earn an average annual salary of $64,896. That is $26,104 more than the average worker with only a high school diploma ($38, 792). Over the course of a 40-year career, this equates to more than $1,000,000 in additional income. Further, their unemployment rate is 2.2%, which is nearly half the unemployment rate of high school graduates.

If you are raised in a poverty-stricken city with a terrible school district, the chances of attending an institution of higher education and receiving all its financial advantages are slim.

Even if you are fortunate to attend university, it often comes with a hefty bill for that framed piece of paper. The average student loan debt is more than $30,000, an amount that will take some people 10-20 years to pay off. A 2019 survey from New York Life found the average participant reported taking 18.5 years to pay off their student loans.

Wealth takes time. So, financially speaking, many young adults start two, three, 30,000 steps back from the starting line to financial independence.

What does this all mean on a personal level?

Some people struggle financially because of personal mistakes. Some people struggle financially because of real systemic issues that are not within their power to transform. I’d say most people are challenged with a mix of both.

Many of the reasons we accomplish something are because of forces beyond control — the luck of being born in the right place, meeting the right people, avoiding untimely hardships. It follows that those forces also contribute to when we fail.

This isn’t an argument for discounting personal responsibility. In fact, it’s the opposite. The reasons listed above are ever more reason to take responsibility for the things you can control, such as building an emergency fund, avoiding debt, saving and investing as soon as your financial circumstances allow.

Just ignore the false caricatures drawn by those who benefit from people believing every financial setback is their own fault. Recognize challenges exist beyond simple money steps like budgeting. And, finally, feel grateful for every break — large and small — in life.

When it comes to the large external forces of wealth: Some of us are lucky to start on top of the mountain, or even stand on the flatland of a plateau, while many find themselves looking up from the base of a tall hill or from the depths of a canyon, and others are tasked with running up against the strong pull of a downward escalator.

That’s for real.