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.

How Early Is Too Early to Think About Long-Term Care?

In the discussion of the single most important financial asset — investments, pension, real estate, cash, etc. — I nominate the body. Your body is how you make a living. And in a flash or rising crest, your body can come to dictate your entire financial life.

This is evidenced by the more than 80% of older adults who say maintaining health and wellness is the most important goal throughout retirement, while a common retirement dream like traveling became significantly less important (Employee Benefit Research Institute’s Spending in Retirement Survey).

Who wants to think about that though?

I’m a couple years shy of 40 and fortunate to have good health with a relatively clean family medical history. I should be concentrating on hitting my peak earning years and living life to the fullest. So, why do I want to think about aging and the inevitable decline of one’s health?

Because sometimes the world has a way of reorienting your focus. Observation is an underrated practice for growth — in work, relationships and money. Look at the things and people around you and ask: Is this related to my situation today? Could that be me some day?

Life is a game with many rules but no referee. One learns how to play it more by watching it than by consulting any book.

JOSEPH BRODSKY

That’s what happened to me.

I live in a sleepy neighborhood where many older adults choose to retire in place. Surrounded by neighbors in their 60’s, 70’s and 80’s, the visages of old age are highly visible. One day someone starts walking with a cane. Sometimes someone disappears for days and suddenly a “for sale” sign appears in their front yard. And the alternating red-and-white glow of ambulance lights streaking by at night is not a rare occurrence.

My next door neighbor, Rick, is a retired firefighter. His wife suffered a stroke several years ago and rarely ventures outdoors. They have no children and no close relatives that I know of. This past week, I happened to be outside while Rick mowed his front lawn. Half way through, he cut the engine and shuffled to his front porch to sit down. I could tell something was wrong, so I walked over to check on him. He was slumped over with hands on his knees, breathing heavily. He tied to brush it off. But finally, with much objection, he agreed to let me help finish cutting the grass then and throughout the summer.

It was a simple neighborly gesture, yet with a terrible weight of significance. Someone who once charged through burning buildings was now essentially beaten by the tension of a push lawn mower. This was the day when a mundane house chore had exceeded his physical abilities. A day that is likely in all our futures. He now had to accept what we never want to accept, or even think about.

So, I wonder what Rick, with an ill spouse and no children, will do if he needs long-term care?

If you don’t know or never cared to know, long-term care is the range of health care services for someone suffering from a chronic illness or disability over an extended period of time. It is a growing challenge in America. As we live longer, growth in the number of older adults is unprecedented. In 2016, Census data shows 15% (49.2 million) of the U.S. population was aged 65 or older and is projected to reach 23% (95 million) by 2060.

This being America, there is no simple, obvious solution. On top the potential indignity of diminishing physical and mental capacities, in America, you are given the task of navigating a complex labyrinth of funding options to pay for the care you need without having to place the burden on the shoulders of a loved one.

And so, after the experience with my neighbor, I can’t help but also wonder: How early is too early to think about long-term care?

The impact of long-term care

If you want to understand what this all may mean for you, there is no better resource than Christine Benz’s insightful Morningstar article “100 Must-Know Statistics About Long-Term Care.”

Here are some of the eye-opening highlights:

Who needs it

  • 70% of people turning age 65 who will need some type of long-term-care services in their lifetimes.
  • 48% of people turning age 65 who will need some type of paid long-term-care services in their lifetimes.
  • 3.7 years is the average duration of long-term-care need for women.
  • 2.2 years is the average duration of long-term-care need for men.

Cost of care

  • 63% of individuals age 65 today will have no out-of-pocket long-term-care costs during their lifetimes… but if you do:
  • $321,780 is the estimated lifetime cost of care for someone with dementia.
  • $51,600 is the median annual cost for assisted-living facility (2020).
  • $54,912 is the median annual cost for a home health aide (44 hours/week; 52 weeks/year, 2020).
  • $105,850 is the median annual nursing-home cost for a private room (2020).
  • $142,254 is the expected median annual nursing-home cost for a private room in 2030 (assuming 3% inflation rate).
  • $256,926 is the expected median annual nursing-home cost for a private room in 2050 (assuming 3% inflation rate).

How long-term care can impact your wealth

  • 20% is the median increase in household wealth over a nine-year period for married people ages 70 and over who did not require long-term care.
  • -21% is the median decrease in household wealth over a nine-year period for married people ages 70 who had a long-term-care need.

Who provides care

  • 41 million people provide unpaid care for family members in the U.S. (2015).
  • $470 billion is the estimated dollar value of long-term care provided by unpaid caregivers (2013).
  • 69.4 is the average age of care recipients.
  • 62.3 is the average age of spousal caregivers.
  • 34% of caregivers are age 65 or older.

As with many American household challenges, a greater burden is placed on the shoulders of women:

  • More than 75% of caregivers are female.

The potentially steep cost and heavy burden of long-term care emphasizes the importance of early planning. Especially, for those with family histories of severe cognitive impairment, a condition that requires high levels of service for long periods of time.

Long-term care funding options

The difficulty is determining how to cover long-term care when you’re only working with probabilities of how much care you need, if you ever need it.

Depending on the severity, there are not a lot of great options.

People generally choose from a handful of ways to pay for long-term care expenses. One of which is not Medicare — at least not as a reliable long-term option. Medicare primarily pays for “medical services,” whereas long-term care primarily consists of “custodial services.”

(Note: This is a simple overview. The various strategies within each option are far too complex to cover in detail here.)

Source: Congressional Research Service

Self-funding

“Self-funding” involves using income, retirement savings, investments or other assets, such as home equity, to pay for care. You can either draw from the wealth you’ve amassed or build a reserve specifically for long-term care expenses.

This option allows people to avoid having to pay insurance premiums or arrange care through a government program. Mainly, those who have substantial income or wealth and clean family medical histories are best suited to pay out of pocket.

Long-term care insurance

Insurance is one way to hedge against the high cost of care. When long-term care is needed, a person’s assets are better protected when more of the costs are covered through the benefits provided by insurance.

Basically, long-term care insurance pays a daily amount, up to a predetermined limit and length of time, for qualified services. Those factors, along with any optional benefits, generally determine the cost of premiums.

Age is another major factor. The average long-term care insurance buyer is around 57. The older a person is, the more expensive the policy will be. Insurers can also reject or place care limitations on those who are in poor health or have pre-existing conditions.

Insurance can provide piece of mind, but could become a financial strain as rates rise with age and should you never use it. The average annual long-term-care premium for a 55-year-old male (initial pool of benefits worth $164,000) is $1,870. For a 55-year-old female, the average annual long-term-care premium (initial pool of benefits worth $164,000) is $2,965.

Buyers must pay for premiums consistently for many years or let it lapse, meaning that money was wasted. That sums up the experience of a third of people with long-term care insurance who at age 65 let their policies lapse.

Those with moderate financial means may consider insurance as a way to reduce the risk that long-term care expenses will deplete their financial assets.

Hybrid life insurance with long-term care benefits

Under a life insurance policy with long-term care benefits, policyholders are guaranteed to be paid one benefit. Premiums paid go toward a policy that can be used for long-term care.

The policy then pays a tax-free death benefit to beneficiaries, depending on how much of the long-term care benefit is used. That means the more of the benefit that is used for long-term care, the less that is available for beneficiaries. As with long-term care insurance, the features of these combination products can vary widely.

People in good health and with good family medical histories who want the assurance insurance can provide yet hope to leave an inheritance may find incorporating life insurance into their long-term care strategy an attractive option.

Medicaid

Medicaid, the government program designed to provide medical care for those with limited resources, is the primary payer for formal long-term care, covering about 42% of all long-term care spending.

Unlike Medicare, Medicaid does provide for custodial care, including long-term care services in nursing homes and services provided at home, such as visiting nurses and assistance with personal care. Medicaid programs and the services provided vary state by state.

But here’s the thing: you may have to use up most of your assets paying for your long-term care before Medicaid is able to help. Many people start paying for care out of pocket and “spend down” their income and assets until they are eligible for Medicaid.

Generally, Medicaid is for those who have limited savings and cannot afford long-term care insurance or were denied coverage. Typically, to qualify for Medicaid, an individual is only allowed to have $2,000 in countable assets. Hence, Medicaid is commonly considered the option of last resort.

The best option varies from person to person, depending on personal factors including: income and assets, current health, family medical history, and whether family or friends can provide support.

Everyone though should have a discussion with loved ones about how they want to be cared for if long-term care is necessary. And, considering the complexity and costs of long-term care, it’s beneficial to work with a professional, such as a financial adviser or elder law attorney, who can help determine what option is most appropriate for your situation.

One way to improve your chances of making the right decision is to plan as early as possible. That starts with your most important financial asset.

One long-term care solution for today

So, how early is too early to think about long-term care? It’s never too early.

Because it’s never too early to think about making choices to live a long, meaningful, healthy life. Today’s decisions become tomorrow’s realities.

Therefore, one important financial step to take now is to protect that number one asset: your body. Without it, nothing else really matters.

As with most financial advice — live within your means, pay yourself first, etc. — there is no secret to living a healthier life: eat a balanced diet and regularly exercise. Those two things alone have been linked to lower risks of many physical and mental ailments.

But don’t forget about sleep. A recent report found that middle-age adults who sleep six hours or less a night may be more likely to develop dementia in their late 70’s.

There is a strong relationship between health and wealth, as detailed in a paper from Rutgers University.

Some of its findings:

  • The Centers for Disease Control estimates that a 10% weight loss could reduce an overweight person’s lifetime medical costs by $2,200 to $5,300.
  • Inactivity has been estimated to cost between $670 to $1,125 per person per year.
  • Healthy people (non-smokers and those in normal weight ranges) pay lower premiums (preferred rates) for life insurance, compared to smokers and those who are overweight.
  • One-quarter (26%) of respondents to the 2005 Health Confidence Survey, sponsored by the Employee Benefit Research Institute, reported that they decreased their contributions to a retirement savings plan as a result of the increased cost of health care and 45% reported decreasing other savings.
  • According to a study by The Rand Corporation, obese individuals also spend about 36% more than average-sized people on health services and 77% more on medications.

Further, a 2019 study published in the American Journal of Public Health estimates around 66% of Americans declared bankruptcy because of medical issues. For example, being unable to pay their medical bills or losing time from work.

The financial benefits of improved health behaviors are unquestionable. Lower health care costs mean more income available to save and invest for your financial goals. A healthier, longer life means more time to work and take advantage of the power of compound interest.

Of course, none of these unsentimental numbers may convince anyone to change their lifestyle. We all know the benefits of a healthy lifestyle. It is so easy, yet we often fail. (As I type this with a pint of beer, I know I do!)

What will change is that one day it will become personal, either to you or someone you know. As the simplest tasks become too great, we are assigned the hardest task of all — to ask for help.

The Best Finance Books Might Be Fiction

To make better choices and build wealth, have you tried investing time with the works of Shakespeare?

Our relationship with money is forged by experience. Why wouldn’t we then want the broadest experience possible to help us make important financial decisions? Experience by proxy is one of the values literary fiction offers.

Reading can be more than just a way to accumulate knowledge. Some of the most useful money skills you won’t acquire from traditional personal finance and investing books. Qualities such as self-discipline, self-awareness, creative problem-solving, empathy, adaptiveness, among others. All of which science suggests can be honed by losing yourself in a novel.

It is why, when people ask the timeless question, What are the best finance books to read?, I’m likely to recommend the names of Tolstoy, Hemingway and Morrison, alongside those of Bogle, Graham and Hill.

Many notable business and finance personalities are voracious readers. Famously, Bill Gates releases an annual reading list and Warren Buffett often name-drops books in his Berkshire Hathaway shareholder letter. But rarely do high-profile people in these industries recommend literary fiction. The attitude is seemingly reminiscent of a character in the movie Sideways who disparages fiction by saying: “There is so much to know about the world that I think reading a story someone just invented is kind of a waste of time.”

Research, however, shows that reading fiction is very much a worthwhile activity. It can help us develop the abilities to manage our emotions and behaviors and plan for the future. Two necessary traits for good financial decision-making.

Here’s the story of how.

Conflict: We don’t recognize our future selves

In a study published in Social Cognitive and Affective Neuroscience, psychologists wanted to understand why Americans were not saving enough for retirement.

After conducting a series of brain scans, they determined that people’s brains were most active when thinking about their present selves and least active when thinking about some other present person (a co-worker, the UPS driver, etc.). No surprise, there. What was revealing is that when study participants thought of their own future selves, their brain activity closely mirrored the times during which they thought about other people.

This suggests that we tend to consider our future selves as another person. From a financial perspective, we mentally treat saving money for our future selves as if we were giving money to our boss or a Starbucks barista. No wonder we struggle with saving for retirement.

Successfully balancing immediate desires with long-term financial goals that feel far out of reach — like retirement, funding higher education or purchasing a home — requires forward thinking and a deep sense of self-control.

These are the kinds of thought processes necessary for making good financial decisions — and that can be exercised by reading fiction.

Resolution: Reading fiction can improve your decision-making

Reading fiction essentially gives us practice in working out what characters are thinking and feeling in sometimes familiar but more often foreign situations. When we’re fully immersed in a good story, it can feel as if we’re actually experiencing that fictional world.

In the words of Fran Lebowitz:

“A book is not supposed to be a mirror. It’s supposed to be a door.”

That immersive quality is why reading fiction is shown to make people more empathetic. You gain a higher capacity for understanding and feeling what other people feel. But also a better understanding for how you would feel under certain circumstances, be it tragic, horrific, embarrassing, humorous or surreal.

Additional research has found that reading fiction can improve a person’s theory of mind. This is an important social-cognitive skill that involves the ability to attribute mental states, including emotions, desires, beliefs and knowledge. It helps us predict and interpret the behaviors of people, including ourselves.

Fiction isn’t all about feelings and imagination. It is the process of connecting new and old ideas, forming questions and seeking answers, and reevaluating our prior beliefs. Which explains why close reading is linked to sharper critical-thinking skills.

Put simply, reading fiction is an effective way to develop a deeper sense of self and the ability to see things from different viewpoints. This is what non-fiction, which typically feeds us black-and-white answers, often fails to do.

So, what’s all this got to do with money?

On a personal level, 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”.

Thinking about the future, or a “future orientation,” is incredibly important when it comes to managing money. A stronger tendency to consider future consequences leads to a willingness to delay gratification in favor of our long-term goals.

We become better at self-regulating, the process by which we control our thoughts, feelings and behaviors. After all, being aware of our financial motivations and having the ability to critically analyze our decisions is also important.

For example, when determining how much risk you’re comfortable investing with, it is hard to imagine a stock market crash if you’ve never experienced one. But with a higher sense of self-awareness, you may have a better sense on how you would react and can properly invest your savings accordingly.

Or consider retirement planning. How well can you imagine retirement that becomes boring? What would life feel like if your spouse dies before you? Will you regret not spending money on lifelong dreams out of caution? These questions are better answered when you can truly imagine yourself in those situations.

On a larger level, fiction helps us make sense of the world around us. We become adept at processing disparate information. With a higher sensitivity to motivations of others, we can see beyond the simplistic narrative of events and avoid costly mistakes.

You could make a case for parallels between the Wallstreetbets/Robinhood saga and a book like Game of Thrones, in which all players have dubious motivations and everything is more complex than it first appears.

Ralph Waldo Emerson sums it up best:

“Fiction reveals truth that reality obscures.”

As research continues to reveal what reading does to our thinking processes and as the financial planning industry becomes more of a “life-planning” industry, I think we’ll likely see more fiction on those best-of personal finance and investing lists.

Will reading The Remains of the Day by Nobel laureate Kazuo Ishiguro help you pick the right investments, or pay down debt, or set up sustainable retirement account withdrawals? Of course not. What it can do, however, is help you think deeply on the shortness of life and how you may feel in old age, which then inspires you to waste less money on the things that don’t matter while staying patient and committed to building a life where you no longer have to serve your precious, finite time to someone else. It is an indelible sense empathy for your current and future life.

Sometimes it is in watching another person make the journey that we appreciate our journey more and more.

Sell Your Hot Dogs at a Loss

How we spend money is as important as how we save it. Because we don’t express our truest selves with a 401(k) statement the way we can with a debit card.

What is the meaning of money if you never happily spend it?

In Kitchen Confidential, Anthony Bourdain famously wrote,

“Your body is not a temple, it’s an amusement park. Enjoy the ride.”

His point is that life is too short to unnecessarily restrict ourselves to some sacred ideal. Life should be enjoyed. It’s okay to eat a hot dog once in a while.

For those of us fortunate to have disposable income, we have the choice to save or spend it. A purely financial perspective favors saving. But to live a happy, well-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.

Speaking of hot dogs, what perfectly illustrates this idea is a business story about hot dogs. Not just any hot dogs. Costco hot dogs.

This is the Costco hot dog story.

Since 1985, the big-box retailer has charged $1.50 for a hot dog and pop (or soda for you Ivy League elitists) combo. One day, then Costco president Craig Jelinek protested to co-founder and former CEO Jim Sinegal that the cheap meal combo was costing the company money. The sensible thing to do was to raise the price. Sinegal considered Jelinek’s pragmatic position, and then delivered a curt, passionate, don’t-want-to-be-misunderstood response.

“If you raise [the price of] the effing [fucking] hot dog, I will kill you,” Sinegal said. “Figure it out.”

Jelinek ultimately did. Costco created its own hot-dog making factories to lower production costs. But why was it so important to retain the low price even if it meant losing money? As Jelinek said in an interview: “It’s the mindset that when you think of Costco, you think of the $1.50 hot dog.”

In other words, the $1.50 hot dog is synonymous with the Costco brand. The money-losing frankfurter is a part of the company’s identity. It is a staple for customers to recharge after buying five pounds of Cinnamon Toast Crunch, 50 rolls of toilet paper and a coffin.

There is a unique identity to all of us, too. And how we spend money on expressing that identity has been shown to enrich our lives.

Researchers at the University of Cambridge analyzed 76,000 transactions of 625 customers at a U.K. bank. Each purchase was grouped into 59 separate categories and matched to one of the Big Five personality traits.

Big Five Personality Traits

  1. Openness to experience
  2. Conscientiousness
  3. Extraversion
  4. Agreeableness
  5. Neuroticism

For example, money spent on traveling might be identified as openness to experience.

Participants in the study were also asked to rate their feelings of life satisfaction. What the study found was that participants who made purchases that most closely matched their personalities were more satisfied with life. What’s more, that personality spending-life satisfaction relationship materialized regardless of income, age and gender. It had a greater impact on life satisfaction than total income or total spending.

As the study’s authors explain:

“Money enables us to lead a life we want… psychological fit helps individuals to act in line with their most fundamental needs and preferences as well as to express themselves in a way that maintains and enhances their self-concepts.”

Put simply, spending money on things (experiences and material items) that align with our personalities make us happier.

Therefore, one way to boost life satisfaction is to think of what you spend money on that is synonymous with your personality. Consider these expenses your “hot dogs.” Shamelessly sell them at a loss. That is, spend money freely on the things that matter most to you. At the same, slash costs unrelentingly on all the things that don’t.

To be clear: I am not advocating for a green light to spend money mindlessly. Saving is the foundation of financial security upon which happiness is built through spending. I am only saying that we should be as mindful of spending as of saving to live the life we want.

Sadly, the author Larry McMurty died last week. An interesting note from his obituary was that he had amassed a library of 30,000 books stored in three houses. Surely, that makes little sense from a cost perspective alone. But he had the resources, and books were his life.

“I doubt it matters where you die, but it matters where you live.”

Larry McMurty, Lonesome Dove

Life is too short to agonize over every dollar spent, especially on things that make life satisfying, or to stress over every financial decision when completely unnecessary to the bigger picture.

These are what Ramit Sethi, author of I Will Teach You To Be Rich, calls $30,000 questions. Instead of exploring how to save $3 on a good cup of coffee, explore ways to increase your salary by $30,000.

So, sell your hot dogs at a loss — and enjoy all the ways in which it helps you profit.

How to Stop Carrying Too Much Financial Anxiety

Your heart starts racing when a credit card rep calls about a payment you accidently missed, and then you turn on the news to see the stock market plummeting 10%, so you log into your 401(k) account in a panic as you berate yourself for not saving more and then wonder whether to sell your stocks to stop the bleeding, which reminds you of John from accounting who told you weeks ago to buy bitcoin, which is, of course, up 5,000%, and you just know he’s going to gleefully boast about it at work tomorrow, and since his son plays with your son on the same soccer team, you suddenly remember that you need to spend another freaking $100 on new cleats, along with league registration fees, but you’re tired of buying all this sports equipment because you don’t even know where to store it, which is one of the reasons why your partner wants to move into a larger home in that one neighborhood everyone wants to live in, except you worry it’s too expensive, but now you realize, after several tense arguments, you may have to surrender, though what you really would rather do is just run away and live in an apartment by yourself curled up under a warm, safe weighted blanket.

Any of it sound familiar?

There are certain financial situations when feeling anxious is a rational response: loss of a job, stock market crash, high unexpected expense.

This article is not about those. In a time of elevated financial FOMO (fear of missing out), many people may suffer from self-induced financial anxiety.

We are anxious creatures. Some psychologists suggest anxiety is a by-product of our transition from hunter-gatherers to sedentary citizens. After the agricultural revolution, we started to spend much more time thinking and worrying about the future. The problem is that we often worry more than necessary, our thoughts high-jacked by innumerable possibilities that never come to pass or undesirable situations that are never as bad as we feared.

Seemingly, nothing makes us more anxious than money.

Money-related issues are the death knell of love. Heck, some of us fear running out of money more than death itself. And it doesn’t matter if you’re rich. According to a Northwestern Mutual study, 85% of Americans reported feeling financial anxiety, spanning all levels of income, race and gender — and that’s before the pandemic.

Financial anxiety is unavoidable. We suffer because we want. Anything you want to achieve in the future is going to cause some friction in the present. But that doesn’t mean you should carry more than necessary.

“The heaviest burdens we carry are often the thoughts in our own head.”

When I’m feeling overwhelmed, I like to meditate on an old Buddhist Zen story.

A Heavy Load

Two traveling monks enter a town and encounter a young noble woman who is waiting to step off from her sedan chair. The rains had turned the street into a giant mud puddle. She stands there with arms on her hips and scolds her servants. They also hold packages for her, so they cannot help her down and across the puddle to keep her dress from getting dirty.

The younger monk notices the woman but dismissively passes by. The older monk, however, lifts her onto his back and carries her through the muddy water. After he sets her down, she shoves him aside and walks away without acknowledging his help.

The monks proceed on their journey, though the younger monk has become noticeably sullen and irritable. No longer able to conceal his contempt, he says: “The woman in town was selfish and rude. Yet you carried her on your back. Then, she didn’t even thank you!”

“I set the woman down hours ago,” the older monk replies. “Why are you still carrying her?”

What are you still carrying?

The story encourages you to focus your energy on the present rather than the emotions of the past or future, to put down what is not there.

It is worth asking yourself, what financial anxiety are you carrying? Is it regret from past mistakes? Is it the heavy weight of worry about your long-term financial goals? Are you worrying too much about the market or the latest financial media hype?

One way I try to stay emotionally grounded about money is to do a little thought experiment based on this story. It may sound silly, but I focus on the cause of my anxiety and then imagine it as a physical object resting on my back. I try to fully visualize its shape and weight in proportion to the anxiety it induces. I ask myself, can I stand with this weight on my back? Can I walk? Do I have a choice in carrying it? If I do, is it worth carrying?

Some of the things I’ve come to tell myself is to:

Put down the weight of the notion that it’s all about you. If you get lost in your own desires (wealth, retirement, success), life around you becomes undesirable. Better to appreciate what you have now, which you once desired.

Put down the weight of guilt from enjoying your money. Extreme financial chastity in spending and saving can mean the loss of your identity. It is not worth beating yourself up over every misspent dollar. Like a bodybuilder, to stress over every calorie consumed and every single rep is its own mental workout.

Put down the weight of permanence. Nothing is permanent. What good times and bad times have in common is that they end. Work hard to create opportunities for success, but don’t worry too much about the outcome. The ride is much more fun that way.

As a Zen master once said, “It is not the wind nor the flag that moves, it is the mind that moves.”

Minding Your Blind Spots

Your greatest financial ally could be the person you share your bed with.

One reason people make costly mistakes is blindness. I am blind; you are, too. We’re all blind, in some way. And we don’t know it. Except for the self-aware, humble ones.

Horror legend Stephen King has written around 50-60 bestselling novels and won dozens of literary awards. Yet, he doesn’t fully trust his judgment when crafting a new book. In the modern classic, On Writing, he explains his writing process. After completing the first draft, he sets the manuscript aside long enough to create the illusion of reading it for the first time as he begins editing. Once he finishes making revisions, he gives it to his wife, and sometimes a few close friends, to read first.

King’s first reader, his wife or others, can identify any weaknesses he did not see, from plot holes and underdeveloped characters to grammatical mistakes and factual errors, like the wrong manufacturer of a gun that will inexorably kill someone or many someones. Essentially, she helps improve the integrity of his work by revealing his blind spots.

Blind-Spot Bias… I See It Everywhere!

What about you? Who calls out your blind spots?

I have a strong feeling many of the investment mistakes being made today are primarily a result of one pernicious bias.

Blind-spot bias is the tendency to think we don’t suffer from bias, all while we see it in others more than ourselves. It’s a growing problem. Social media has made us more polarized, which is another way of saying more blind. Especially, at it pertains to financial information.

Platforms like Twitter and Reddit often turn into verbal turf wars over cryptocurrency, Tesla, interest rates, modern monetary theory and so on. They become places to argue about everyone’s blind spots but our own. There are those so set in their ways they reject anything new. Then there are those so convinced they are changing the world they ignore history.

It is tribalism writ large. And I think this is dangerous as more people “consult” the internet for help making investment decisions.

The number of families who rely on the internet for investment advice has risen rapidly over the past 20 years, trailing only financial professionals, according to the U.S. Federal Reserve Survey of Consumer Finances.

The trend is both encouraging and troubling. On the plus side, it’s an indication that more people are interested in investing, which is good. More people learn about the market, and more people invest for their futures. Yea!

The down side is that there is a lot of misinformation online. Those with the loudest voices and deepest convictions take up the most space. It is easy to become polarized about money and less aware of your blind spots.

Another published author who actively seeks feedback from others is organizational psychologist Adam Grant. Blind-spot bias is a major theme of his latest book, Think Again.

He writes:

As we sit with our beliefs, they tend to become more extreme and more entrenched… We’re swift to recognize when other people need to think again…. Unfortunately, when it comes to our own knowledge and opinions, we often favor feeling right over being right. In everyday life, we make many diagnoses of our own, ranging from whom we hire to whom we marry. We need to develop the habit of forming our own second opinions.

What’s so harmful about trusting your own opinion?

Ask Stephen Greenspan.

One example Grant uses in his book is the story of Mr. Greenspan, who decided to invest a third of his retirement savings in a promising investment fund. A close friend advised him to avoid the fund, as it seemed too risky. But the fund came highly recommended by a family friend, who was a financial adviser. Plus, the performance numbers were sensational. Mr. Greenspan was thrilled as his money steadily grew. Then the fund was wiped out and the fund’s manager, a man named Bernie Madoff, went to jail.

Grant’s proposed solution is to think more like a scientist — to doubt what we think we know and update our views based on new information. He admits though that mindset isn’t flawless. Because no one is immune to blind spot bias, even people we think are acutely concerned about being right. People like doctors.

A study on blind-spot bias revealed that physicians who receive gifts from pharmaceutical companies say such gifts do not influence their decisions on what medication to prescribe. That is the ethical thing to say, except the majority of those same physicians also say the decisions of other physicians are likely unconsciously biased by the gifts. So, what they really believe is that those gifts do influence those kind of important medical decisions, but just not for themselves, of course.

I think one contributing factor in this study is the gifts, the reward. Rewards, like money or social media attention, seem to reinforce blind-spot bias. Consider media organizations, news personalities, podcasters, etc., that start to lean toward certain ideologies as more entrenched viewpoints lead to higher engagement, which means more ad revenue or supplement sales.

We can find financially induced blind-spot bias in our own lives: justifying time away from family to work grueling hours for a bigger salary; committing to a company that does things that are contrary to our personal morals; spending $1,000 in lotto scratch off tickets for the excitement of winning $100; making terrible investment decisions for the up votes on an online forum.

As Morgan Housel says:

Investing is not the study of finance. It’s the study of how people behave with money.

The Beauty in Our Faults

Whether as a writer or investor, successful people rarely do it all alone. We can’t see everything. Successful people know the value of another pair of eyes.

There is something wonderful about understanding our own faults. And that is the remarkable opportunity in figuring out how to overcome them. With blind-spot bias, the solution is its own reward: forming a deeper relationship with someone who gracefully gives you an honest second opinion, something that is invaluable when it comes to financial decisions.

Such a relationship can be with a spouse or a friend or a colleague or financial adviser. Whomever you choose, the relationship is liable to change more than just your finances but your life in general.

So, share your art, no matter how bad you think it is. Share your financial life with someone, no matter how embarrassed you may feel.

The beauty of our individual flaws is that in them exists the opportunity to connect with others.

As King writes:

“You can’t let the whole world into your story, but you can let in the ones that matter most. And you should.”