Managing Your Personality in Your Portfolio

Whether we can admit it or not, the way we invest is heavily influenced by our personalities.

As I struggle with the hardest Dry January in history, I’ve thought a lot about people I’ve known who could freely indulge in alcohol or drugs yet still meet all life’s obligations. They always made it to the party, always confidently got behind the wheel, always woke up the next morning in their own bed, always kissed their spouses and children goodbye and made it to work on time…  

…until the time they failed to see the on-coming headlights.

How does someone remain oblivious to risk and live under the presumption of good outcomes? I suppose it’s easy when that’s all you know.

I can’t say the stock market, cryptocurrency or anything else is a bubble right now. But I can say a lot investors seem oblivious to the potentially adverse consequences that lie in wait. New brokerage accounts are at an all-time high and TikTok investing videos made by teens attract millions of views.

Insurrection. Pandemic. Millions unemployed. Killer hornets. The cancellation of Caillou. Still the market marches on. The party continues.

Considering the historical events that transpired over the past 12 months, it’s hard not to feel uneasy about the unperturbed rise of the stock market. Except, what do your feelings matter anyway? As Josh Brown said about the callousness of investing in a recent podcast: “The stock market doesn’t care how you feel.”

He’s right.

However, you should care how you feel. It’s worthwhile to ensure you make investment decisions for the right, rational reasons, rather than chasing hot stocks or following the herd. Because eventually your luck can run out.

The Stock Market Mirrors Our Personalities

The stock market is propelled by tides of greed and fear. This concept is a famously illustrated in line charts people often share when the market hits an all-time high or sharply declines.

It’s easy for an investor to say that’s not me. I’m smarter than that. I have my emotions in check.

But it may be more accurate than we’ve realized, as our personalities seem to operate on the same undulating trajectory.

Look at this illustration from Dr. Camilla Pang, a postdoctoral scientist in bioinformatics, who recently published the book, An Outsider’s Guide to Humans: What Science Taught Me About What We Do and Who We Are.

Dr. Pang compares our personalities to a playground swing, oscillating between euphoria and despair. The extent of those highs and lows depend on the amplitude of our personalities.

She writes:

Just like people, oscillators can be predictable and they can be unpredictable. They have an expected path to follow, but one that is subject to change depending on the external forces being exerted on them: in the swing example, you might drag your feet on the ground, creating friction, or propel yourself outwards, revving into a salient rhythm. And, just as our personalities can be subdued or extreme, oscillators can have amplitudes (peaks and troughs of their arc) that are spiky or shallow.

Because just as, on the swing, we are quite literally riding a wave of simple harmonic motion, our lives and personalities have their own inherent wave patterns.

Think of the people you know who always seem to be in control of their emotions, never get overly bothered by problems and are essentially “steady.” That is a low-amplitude personality, one which never departs too far from its resting equilibrium. Neither the emotional forces propelling this person nor those dragging them back are ever too great. This is a slow, steady, smooth ride on the swing: no sudden jerks or motion sickness.

By contrast, a high-amplitude person is someone with more energy to burn, whose emotional peaks and troughs are more extreme, and who is also probably traveling faster—at a higher frequency. This is the kind of ride on the swing that can make you feel sick, as the soaring highs are tempered by unsteady downswings and sudden jolts of force when you’re not expecting it.

Whether you are a high- or low-amplitude personality—and both have their strengths and weaknesses—it’s important to understand the rate at which your temperament swings… To make our progress through life as natural as the “good” ride on the swing, we need an understanding both of our own amplitude and that of the people around us.

Many investors today are riding on the cusp of a mental peak, unaware like a functional alcoholic of the risks not realized yet, when everything swings the other way.

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.

Investing on emotion is not a good investment strategy. Credit John Maynard Keynes for arguably the greatest investment quote ever: “Markets can stay irrational longer than you can stay solvent.”

Managing Your Personality When Investing

Conventional finance wisdom says you can control your emotions or change your way of thinking. But that is difficult to do. As an article from the University of California, Berkley explains, “…once our minds are made up on important matters, changing them can be as difficult as stopping a train hurtling at full speed, even when there’s danger straight ahead.”

The good news is that we are not at the mercy of our personalities. There are several ways to manage — or neutralize – our personalities within our portfolios.

One common option is to automate your investment process as much as possible. For those saving in an employer-sponsored account, contributions can be automatically deducted from your paycheck. This is a form of dollar-cost averaging. You invest every month regardless of what the market does. You can also automate your asset allocation by investing in a target date fund. Although target date funds are not perfect, they beat picking funds randomly or based on past performance, or not investing at all.

True, that guarantees you’ll never become an overnight market whiz millionaire.

So, if you are overwhelmed by the desire to speculate on the market, there is no harm in to creating a “play fund” separate from your retirement funds. Consider this a speculative account that has no bearing on your long-term investment objectives. The Wall Street Journal’s Jason Zweig recently recounted the timeless warning of Benjamin Graham to “Never mingle your speculative and investment operations in the same account, nor in any part of your thinking.”

Instead of getting mixed in with the investment flavor of the month, a diversified portfolio of cheap index funds is likely to better serve you over the long run. A classic study, “Determinants of Portfolio Performance,” found asset allocation choices accounted for most of a portfolio’s return, not by market timing or security selection.

Of course, your personality may make it hard to stay the course over the long run.

Perhaps then, the most effective option for you is to work with a financial adviser. Essentially, it is akin to putting a human buffer between you and your portfolio. One the primary roles of a financial adviser is to act as an objective voice of reason. With most financial advisers you can give them discretion over your investments based on the policy agreed to at the start of your relationship. Before making an investment change, you can speak with a professional to discuss your thoughts and feelings in the moment.

There’s no shame in handing over the keys to your portfolio if it is in your best interest.

What You Appreciate, Appreciates

A fundamental principle for growing wealth, love, happiness — everything — lives in a remote corner of India.

More than 40 years ago, a humble farmer named Jadav Payeng started to plant trees on a desolate river island. Known as “The Forest Man of India,” he planted tens of thousands of trees — bamboo, cottonwood and other varieties. What was once a barren sandbar blossomed into a 1,300-acre forest teeming with birds, monkeys, elephants and even tigers.

As he told NPR, it was his way of honoring nature. His small act of appreciation, planting seeds every day, grew to something beyond anything he could imagine.

And that is the way with everything in life.

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.

Money, when invested and reserved for the future, can grow exponentially through the power of compounding.

This graph shows how earnings on earnings will increasingly grow over time if you leave them in your account
Source: Vanguard

Generosity is contagious, as acts of giving and kindness have been shown to inspire observers to help others later — potentially spreading by a factor of three.

Happiness, too, can spread through a network like a cold, for when one person is happy the odds of people connected to that person becoming happy increase.

Gratitude for positive things and experiences leads to having more positive things and experiences.

Social connectedness (i.e., friendship) generates a positive feedback loop of social, emotional, and physical well-being.

Love in a long-lasting marriage endures through small daily acts of connections and passion.

Habits build upon themselves, which grow most effectively through gradual and consistent baby steps, as shown in Stanford behavior scientist B.J. Fogg’s Behavior Model from his book, Tiny Habits.

Tiny habits and the Fogg Behavior Model - BJ Fogg - Minds for Change

Passion for work doesn’t have to be found or followed when it is more likely to be cultivated and enhanced over time through mastery.

Longevity is increased — possibly by more than a decade — by practicing healthy lifestyle behaviors every day, as low-risk behaviors are inversely related to mortality risk.

Creativity begets creative thinking.

Self-confidence rises in those who practice confidence.

Knowledge compounds by learning at least one thing each day so that you go to bed smarter than when you woke up.

Purpose and meaning proliferate in life when you engage in actions that are purposeful and meaningful.

Time becomes more plentiful when you are more protective of your time.

What you appreciate, appreciates.

There are many more qualities and studies out there that can prove this point. The key takeaway: If something truly matters to you, working at it in small steps with both grace and consistency will pay huge dividends.

It moves you closer to the process than the outcome, which helps keep you from quitting when progress seems inconsequential or invisible.

This principle is also a powerful tool for determining how to live your life well. After all, what you spend most your time and effort on becomes your life.

When you know what great things are possible in the future, you gain a greater sense of responsibility for your actions today.

If you want to grow something in your life, heed the wise words of Robert Louis Stevenson: “Don’t judge each day by the harvest you reap but by the seeds that you plant.”

A Lesson to Remember in a Year to Forget

The Chicxulub asteroid had a diameter of possibly 50 miles, or maybe as little as seven. So, the equivalent distance of a nice day drive or morning jog. We will likely never know with certainty. What we do know is its impact on Mexico’s Yucatan peninsula was powerful enough to trigger the extinction of 75% of the species on Earth and alter life on the planet for millions of years.

Had Chicxulub arrived 66 million years later, in 2020, we would have probably thrown it a parade and an inauguration party.  

In truth, we owe this cataclysmic asteroid a token of gratitude. From the human perspective, it was an ecological gift, as mammals came to rule a land now free of hungry dinosaurs. Had it not been for Chicxulub, we may not be here. Or, rather, I may be typing this with razor-sharp claws protruding from the scaly appendages of my reptilian body.

Out of the ashes, new life emerged. Which is to say good things can come from bad events. This is true in life and money. There are always lessons to learn and opportunities to realize. Recognizing them helps us create a better future.

The past 12 months may serve as a reminder of that lesson. 2020 has been a no good terrible year in many ways: as a health reckoning, a political reckoning, a social reckoning, and a financial reckoning. In America, more 17 million people have contracted Covid-19 and more than 300,000 have died. Almost 8 million Americans have fallen into poverty since the pandemic since May. More than 10 million are unemployed.

Unfortunate things happen, but they can shape us in unimaginable ways that would not happen otherwise. You can see flashes of it now with a vaccine developed in record time, creating a blueprint for all future viruses.

That is not to say we should be thankful for 2020. It has been heartbreaking and dispiriting, especially because much of it is a result of human incompetence. Still, the year is not without wisdom; to learn nothing would be equally tragic.

It brings to mind the profound words of Marcus Aurelius: “Accept everything which happens, even if it seems disagreeable, because it leads to this, the health of the universe.”

A study from Oregon State University suggests that how a person responds to a difficult life event, such as a death, divorce, health crisis or loss of a job, helps shape the development of their wisdom over time. Of 50 adults, ages 56-91, who experienced a difficult life event, most changed their outlook and actions afterward. Their “social environment helped to shape their responses to the difficult life event.” These interactions ranged from “unsolicited emotional support from family, friends or strangers” and “seeking out others with similar experiences” to “seeking expert advice” and “learning from society at large.”

The researchers concluded that “some of these social supports and interactions influenced a person’s development of wisdom. Those who received unsolicited emotional support, for example, developed wisdom around compassion and humility. Seeking others with similar experiences exposed some participants to new ideas and interactions, supporting deeper exploration of their new sense of self.”

Not always observable at the time, difficult life events lead us to the wisdom needed most to succeed. You have to wonder how different things would be if Michael Jordan had not been cut from the varsity high school team, or if Steve Jobs had not been fired from Apple to then flounder with NeXT. It is almost necessary. If we never felt pain, our wounds would most certainly kill us.

Therein lies financial wisdom, too. Every financial mistake and misfortune is cause for deeper personal exploration. Though an expectation for bad things to happen will serve you best. After all, the most important part of financial planning is not to achieve big, treasured future goals; it is to keep from getting knocked on your ass when things go wrong.

As an investor, you have to expect bad market days every few years, such as the 34% drop in March. Those who stay the course tend to have developed an admirably resolute attitude. Market downturns are viewed not only as normal but healthy, as a way to reset asset prices, create new opportunities and temper emotions.

When luck, chance, providence, God, whatever you want to call it, shakes the snow globe of your life, you can make something out of the pieces. For many people, 2020 has been that event to do some financial soul searching. It has revealed what it may take to live a happier, secure life: to question what matters most, to build a bigger emergency fund, to find a new career, to take some risk off the table, to meet with a financial adviser for the first time.

You don’t get to choose your obstacle, but you get to choose how you respond.

Charlie Munger suggested a Stoic response to life’s punches when he said: “Life will have terrible blows in it, horrible blows, unfair blows. It doesn’t matter. And some people recover and others don’t. And there I think the attitude of Epictetus is the best. He thought that every missed chance in life was an opportunity to behave well, every missed chance in life was an opportunity to learn something, and that your duty was not to be submerged in self-pity, but to utilize the terrible blow in constructive fashion. That is a very good idea.”

I know these words are no salve for those going through a terrible blow right now. But there is hope. There will be a day when the good that comes after is realized. And for the rest of us, as shown in the Oregon State study, it is a reminder that we can help those suffering to see that good.

For, we never know when the time may come for us.

In the short story “Chicxulub,” which inspired this post, author T.C. Boyle writes: “Flip a coin ten times and it could turn up heads ten times in a row—or not once. The rock is coming, the new Chicxulub, hurtling through the dark and the cold to remake our fate.”

Within only a few years, plants started to grow in the 93-mile wide crater left by the Chicxulub impactor. And in the jungles and grasses, under the gaseous haze of sulfur, furry creatures started to stir.

Supercharging Your Financial Bullshit Detector

Please excuse the language.

To me, the hardest part of writing isn’t the writing. It’s the editing. Specifically, the cutting. My ego believes every word is divine while my brain says most are crap. Deep down I know my work improves when I get the red pen and, as Stephen King incites, “kill my darlings.”

A diamond doesn’t become brilliant until it’s cut. But how do you identify what to toss in the trash heap? It’s a creative choice.

As the artist Austin Kleon writes: “In the end, creativity isn’t just the things we choose to put in, it’s the things we choose to leave out.”

Decisively leaving things out can improve our financial lives, too. Because financial planning is as much an art as a science. By that I don’t mean the more creative the solution to your financial needs the better. Rather, money is personal. What works for you, may not work for me. Wealth is in the eye of the beholder.

As a creative endeavor, financial success depends on knowing what to include as well as what to exclude; being able to separate good advice from bad advice; telling the truth from the bullshit.

A good bullshit detector can go a long way in making better financial decisions.

Following Sturgeon’s Law

In what is eponymously known as Sturgeon’s Law, science fiction writer Ted Sturgeon posited that 90% of everything is crap.

That may sound overly cynical, until you really think about it. Of the estimated 2,000,000+ books published each year, how many are worth reading? How many work meetings have you ever been happy to attend? How many emails in your inbox are important? How many hours do we waste scrolling through social media feeds?

Perhaps, Sturgeon underestimated.

Far from being an indictment of human intellect, Sturgeon’s Law is a personal liberation. It can free you from societal pressures to consume every new product, every piece of news, every new fad. Since the majority of everything is bullshit, you can peacefully tune out the noise and focus on what matters most.

Sturgeon’s Law extends to finance, as 90% is effectively bullshit, too. (I’m using the term bullshit liberally here. I mean information that is not only untruthful or deceptive but also irrelevant to someone who trying to achieve financial independence.)

90% of financial and investing advice is bullshit. You can build wealth by following a handful of timeless steps: spend less than you earn, try to max out your retirement account, avoid bad debt, etc. There is no need for complex financial products or elaborate investment strategies. As University of Chicago professor Harold Pollack showed, the best financial tips can all fit nicely on an index card.

Harold Pollack’s index card of finance tips.

90% of stock market performance is bullshit. What the stock market does on any given day rarely matters. A retirement guide from JP Morgan shows that subtracting just the 10 best trading days would cut the S&P 500’s return by more than half. That means most days are non-events. So, you can avoid trying to time the market. You can blissfully ignore most daily financial news. You can stop wasting time checking your account (as Nassim Taleb notes in Fooled by Randomness, you may have a 93% chance of seeing positive gains if you check your portfolio just once a year).

90% of financial marketing is bullshit. Any commercial with a mid-tier celebrity, or piece of direct mail, or YouTube video proclaiming high returns or instant debt relief is bullshit. Certainly, 90% of steak-dinner retirement seminars are traps to avoid. Most financial marketing is an attempt to convince you to allow someone else to make money off your money.

90% of our thoughts and feelings are bullshit. We shouldn’t apply Sturgeon’s Law to only the external world when our internal thoughts and feelings also lead us astray. We are susceptible to cognitive biases that warp our thinking. Our feelings feed irrationality. I know for me, 90% of my ideas are bullshit, 90% of things I want to buy won’t make me happy, 90% of my fears are over nothing, and 90% of my strongest feelings will pass if I just simply pause. Harsh but true. I take comfort in knowing that. A greater self-awareness can help you make better decisions and avoid costly mistakes.

When you internalize Sturgeon’s Law, your financial life becomes easier to manage. It’s a wonderful tool for choosing what not to include. It allows you to brush aside most news, sales pitches and worthless information. And your financial goals seem more possible when the necessary steps to achieve them are reasonably within your control.

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.”

The hard part is that there is a lot of bullshit – and we’re hardwired to notice it. As hunter-gatherers, every rustle in the leaves or snap of a twig was life or death, 90% of everything was relevant. Humans brains are evolved to see patterns everywhere in the world. We’re effectively conditioned to follow the inverse of Sturgeon’s Law.

The trick is to enhance your ability to distinguish between the good and the bad. In other words, supercharge your bullshit detector.

Supercharging your bullshit detector

Along with exercising a healthy skepticism with Sturgeon’s Law, there are means for seeing right through all the bullshit.

Theoretical physicist Richard Feynman was gregarious yet blunt. He didn’t suffer fools lightly, and he knew how to bring the receipts. His method for identifying pseudoscience was to probe the way in which someone explained something. If someone is unable to express an idea in clear, simple language, and can only regurgitate technically rote definitions and statements out of context, then they are likely full of shit.

The Feynman Technique is a valuable formula for evaluating financial services and products. Be wary of the broker who communicates in unsubstantiated jargon, the insurance collateral accompanied with page after page of fine print, the hypothetical investment returns that sound too good to be true.

Certainly, before giving a piece of information credence, take an extra step to investigate the source. For one, we are susceptible to confirmation bias — the tendency to interpret information as confirmation of our existing beliefs. So, you may find yourself gravitating toward sources that match your own viewpoints. Therefore, seek out opposing viewpoints, which will help you think of issues in a more informed and objective frame of mind.

Further, the person dispensing information may have an agenda. So, above all, ask this question: who benefits most? There is only one person who should benefit from a piece of financial information: you. If you’re not the primary beneficiary of a bit of advice or product or service, then it’s best to walk away.

And with that, I hope you benefit from this post, as I tried as hard as I could to cut all the bullshit.

Do Your Financial Goals Match Your Values?

Tony Hsieh, who tragically passed away last week, was all of us – someone who wanted to know how to live a happy, meaningful life during his short time on Earth.

A concern for happiness was a major reason why the former Zappos CEO focused on transforming work culture. Happy workers made happy customers.

But to create a new work culture, Hsieh had to reevaluate how we typically think about happiness. As he wrote in his bestselling book, Delivering Happiness:

“I thought about how easily we are all brainwashed by our society and culture to stop thinking and just assume by default that more money equals more success and more happiness, when ultimately happiness is really just about enjoying life.”

Hsieh pioneered an innovative work culture centered around 10 core values – one of which was “create fun and a little weirdness.” These values helped employees connect with each other, their customers and the company’s collective mission.

Ultimately, Hsieh believed happiness, as with an effective work culture, could be derived by nurturing its essential parts: “Happiness is really just about four things: perceived control, perceived progress, connectedness (number and depth of your relationships), and vision/meaning (being part of something bigger than yourself).”

This is a lesson on good corporate governance, but also an important money lesson.

When you have the core pieces figured out, you can create an ideal whole. On an individual level, it’s about knowing what matters most to you to then build – mentally, physically and financially – the life you want.

As Hsieh encourages: “Envision, create, and believe in your own universe, and the universe will form around you.”

If your desire is to become a better steward of your money to live your ideal life, then solve this enduring money mystery: what matters most to you? What makes up the universe that you want to bring into existence?

The answer is found by identifying your personal values – family, integrity, health, generosity, self-determination, etc. Because personal happiness and meaning comes from upholding those values.

Many Americans may need to reevaluate their values. The latest General Social Survey from NORC at the University of Chicago shows only 31% say they are very happy while an equally dismal 32% are satisfied with their financial situation. Less than half of are very satisfied with their jobs.

Of course, there are a variety of social and economic factors, such as growing inequality. But it doesn’t explain why these figures have been relatively consistent for decades, even as technology has essentially made life easier. That seems to indicate we spend a lot of time and energy pursuing goals that don’t make us feel happy or satisfied. Or, maybe it’s a case of not yet recognizing what we truly value.

We are supposed to save for a house, for college, for retirement. But do any of those goals reflect what we value?

It is interesting to see what things have transfixed people over time.

The Google Ngram Viewer displays a graph that represents the use of a particular word or phrase in books through time. In a sense, it is a record of what ideas most preoccupied our lives, and perhaps a reflection of our values.

Since the 1800s, work has long been a center point of our culture and society. Is it surprising then that we always ask someone what do you do rather than what do you enjoy?

And yet, above all, there is time. We always wish we had more time; time to enjoy all those other things: our family, hobbies, relationships and, yes, even work (at least the work that we actually want to do).

If there is one reason to be financially responsible it is to reach a point where you gain complete control over your time. Save and invest wisely, you can build enough wealth to do what whatever we want for however long we want.

In my experience, those who are most financially responsible are those who most value their time.

So, how can you be sure you’re working toward the right financial goals? Start with your values.

You can establish your values with a few simple – yet extremely revealing – mental exercises. Popular among financial advisers is to pose these three life questions developed by the Kinder Institute of Life Planning:

1. Imagine you have enough money to satisfy all of your needs, now and in the future. Would you change your life and, if so, how would you change it?

2. This time, assume you are in your current financial situation. Your doctor tells you that you only have five to 10 years to live, but that you will feel fine up until the end. Would you change your life and, if so, how would you change it?

3. Your doctor tells you that you have just one day to live. You look back at your life. What did you miss out on? Who did you not get to be? What did you fail to do?

The purpose of these exercises is to uncover what matters most to you in life. Likely, it isn’t a second vacation home or perfect credit score. It is something deeper and more personal that probably involves relationships or unrealized dreams.

Focus on what matters most and adjust your life and finances accordingly. It is not about quitting your job or splurging your money as if none of that matters. Likely, it will induce you to do the opposite: work harder to become what you want to become, and diligently save to realize those long-held dreams and live life on your terms.

Your core values provide motivation for a better future. And that is where your financial goals should take you.

So, “envision, create, and believe in your own universe, and the universe will form around you.”

How to Develop a Wealth-Building Mindset

You can have all the financial wisdom ever known. Yet, it is still no guarantee you’ll achieve your financial goals and build wealth as you define it.

Knowledge isn’t always an effective antidote for our emotions. Therefore, to put that knowledge into action it helps to have the right mindset.

In my latest article for Kiplinger, I wrote about how you can develop a wealth-building mindset. One of the greatest athletes of all time provides a lot insight on the power of your mindset:

For an extraordinary high achiever, such as NBA legend Michael Jordan, you could reasonably attribute his success to one of many things. His famous work ethic. His high basketball IQ. His shoes. But to His Airness himself, it was the result of a relentless mindset:

“I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. Twenty-six times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”

Jordan acknowledges that he’s had his roadblocks along the way. “Everybody has had them. But obstacles don’t have to stop you. If you run into a wall, don’t turn around and give up. Figure out how to climb it, go through it, or work around it.”

Mindset is a valuable tool in all areas of life. It can make a greater difference in your finances than you may realize:

When you think about what it takes to become financially successful, what comes to mind? A smart investment strategy? Sure. The discipline to spend less than you earn? Definitely. A high-paying job? Certainly helpful. But one thing you may not have thought about — and that is often overlooked — is a Jordan-like mindset. That doesn’t mean the determination to become the greatest investor of all time, but rather, the desire to consistently improve.

In essence, to build wealth, you need the right mindset … a wealthy mindset. In her bestselling book, Mindset: The New Psychology of Success, Stanford psychologist Carol Dweck identifies two basic mindsets: fixed and growth.

In the rest of the article, I explore how each mindset can specifically impact your financial life, along with ways to develop a growth mindset and bring your dreams and goals within reach.

Read it here: Can You Think Your Way to Wealth?

Hitting Pause on the Hedonic Treadmill

One of the most important parts of surgery occurs away from the operating table. Before the procedure begins, the surgical team takes a timeout.

A bulletin from the American College of Surgeons describes it as “an immediate pause… to confirm the correct patient, procedure and site.” This calculated pause has been shown to significantly improve patient care and the surgical team’s performance.

The odds of a successful surgery increase with this one simple thing. A. Pause.

The pause is as much as a surgeon’s tool as a scalpel. And, if a pause can do that in the urgent, high-stakes environment of the operating room, what can it do in our financial lives?

Most of us have had those if only thoughts: if only I had that new car or got a job promotion or moved to a bigger house, I would be happy. Only once that something was attained, the happiness didn’t last or wasn’t as intense as hoped.

So, we direct our time, money and energy toward accumulating even more. And a lot of financial decisions then are made in motion as we chase those bites of happiness.

It’s the hedonic treadmill, the downsides of which can leave us both literally and figuratively poor.

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.

Recognizing the hedonic treadmill

The first step is to recognize that you are running in place.

I grew up in a household where money was almost always doing something. A paycheck, a scratch-off lottery ticket, a dollar found on the ground, you name it. All of it was translated to a material good. The mindset was if you want it, you should have it.

For a long time, I felt success was perpetually out of reach, no matter what I accomplished. There was always someone else who earned more and had better stuff than me. It wasn’t until I got married and had children – when life really stopped being about me – that I fully realized I had been chasing all the wrong things.

Psychologists Philip Brickman and Donald Campbell coined the term “hedonic treadmill” to describe the theory people repeatedly return to a static level of well-being, regardless of what experiences and possessions they accrue.

It can lead to a lot of financial pain as you spend money on more and more material items. But that’s not the worst outcome, because you can run the treadmill your whole life without going broke if you have enough money. The upshot is that you spend your entire life never feeling satisfied.

Perhaps it is best summed up by the classic Will Rogers quote: “Too many people spend money they haven’t earned to buy things they don’t want to impress people they don’t like.”

Unfortunately, it is not easy to admit when you are one of those people. That’s because of the stories we tell about ourselves, which is the root problem.

The stories we tell

Stories help us make sense of the world. They help us form identities. Except those stories are often wrong.

We tell stories of how achieving or acquiring that one thing would make life perfect. Or, we tell stories of how if something else would have happened in the past then things now would be wonderful.  

We create narratives of how we wish to be seen. The things we buy and the things we do help write that story. For many, it is a fiction.

As Seth Godin puts it in All Marketers Are Liars: “Stories let us lie to ourselves. And those lies satisfy our desires.” Of course, marketers are good at selling us on those stories. For example, in the 1960s, ad men helped create thin and light cigarettes to attract female smokers and make them feel healthy.

Often our stories collide. Yours becomes mine and mine becomes yours. We find ourselves trying to follow another person’s story to “keep up with the Joneses.” Consider a paper from the Federal Reserve Bank of Philadelphia that found neighbors of lottery winners are more likely to go bankrupt.

Ultimately, we tend to think of wealth not in objective terms but in comparison: how much more I have now than previously, how much I think I should have, how it compares to other people, etc. 

To summarize: we tend to tell stories of things as we want them to be rather than as they really are.

Ways to pause the hedonic treadmill

Considering our attraction to stories, it would seem impossible to break free, especially as it impacts our financial lives.

But if we take a moment to pause and examine our stories carefully, then it is possible to see the truth and focus on the things that provide lasting happiness. Here are three ways:


The workings of the hedonic treadmill become clear when you thoughtfully observe and reflect upon your life. Everything from how you feel about your job to how you feel about money.

A common practice of contemplation is mindfulness meditation. Contrary to popular belief, the goal of meditation isn’t to empty your brain of thoughts. Instead, you accept and investigate your desires to the point they lose their hold on you. This way, you see things as they are without judgement.

Meditation has been scientifically linked to various mental and physical benefits, such as lower stress and improved memory. Research also suggests meditation can improve our financial decision-making, including as a counter against the sunk-cost bias.

A paper published in the Journal of Personality and Social Psychology concluded that the positive emotions generated through loving-kindness meditation – mentally sending kind thoughts to others – helps to overcome the hedonic treadmill effect.

Meditation is a tool to cast away illusions – like the fictional stores we tell – and perceive things in their true nature. It is a way to pause and take stock of a situation so that you can act with intention rather than react.

Contemplation though doesn’t require sitting quietly for 10-20 minutes every day. Becoming more introspective with your money can be as easy as asking yourself a few deep, personal questions: Am I truly happy? How well do I honor my values? What do I want my future to look like?

Basic financial planning is in a sense a form of contemplation. As you pause to review your spending, saving and progress toward your financial goals, you see in minute detail your efforts to build life satisfaction.


For a more practical solution, you could implement personal stipulations or rules for using money. They can help you fully consider whether the material items or experiences you want will truly make you happy.

One popular rule is the waiting period. If you still desire something after waiting three days, a week, a month, etc., then you can give yourself permission to buy it.

Another spending rule is to calculate the cost of something based on your earnings. You may reconsider buying a $200 pair of shoes if you earn $25 an hour, meaning they cost the equivalent of a full 8-hour work day.

Personal finance writer and Ritholtz Wealth Management COO Nick Maggiulli ascribes to a creative win-win system. For anything he splurges on, he invests an equal amount of money. It makes him pause and think twice about spending too lavishly because it would cost him double. Yet when he does, he is also essentially rewarding his future self.


But why not take human fallibility out of the equation?

You can bypass your emotions and reduce the temptation of the hedonic treadmill through automation. Once you know what truly makes you happy, you can automatically funnel money to those things.

There are several ways to automate your finances, including automatic paycheck deductions for retirement accounts and monthly fund transfers to accounts reserved for goals like a house down payment, as well as a “fun” account to spend however you wish.

Essentially, your absolute financial priorities are always cared for first.

The persistent belief is that happiness is achieved. You must always be doing something or working for something. But most the time happiness is found. Every once in a while, you should stop and take a look around.

You may find that you have been running hard for nothing. Or, you may find that you have a pretty good life and just haven’t recognized it yet.

It becomes amazing.

The things done.




The 44 Stages of Living Through a Financial Crisis

As 2020 mercifully comes to an end, newspapers and magazines are releasing their best-of and year-in-review lists. There is much to reflect upon, or eagerly forget. But, as someone just shy of 40, one of the things that sticks out most to me is the fact this year marked the second major financial crisis of my generation. We are two-time financial crisis veterans.

The feelings of 2008 are indelible. The disillusionment of being only a few years into my career and suddenly asked to take a significant pay cut. The hopelessness and fear of never finding a new job and earning a respectable salary.

Twelve years later and here we are again. I realize this time is different, with optimism of a quick rebound once the vaccine is distributed. But the individual economic pressures remain the same. I was lucky before and am fortunate today. Many people were not then and are still not, and many more will join them.

If nothing else, I hope this generation will be known as resilient. To have shown an ability to endure difficulty and make opportunity out of nothing. And I hope this encapsulates the experience of a financial crisis, and hopefully a little wisdom.

The 44 Stages of Living Through a Financial Crisis

  1. Unbridled confidence to take over the world
  2. Confusion
  3. Denial
  4. Anxiety
  5. Resignation
  6. Panicked check of 401(k) (am I reading this upside down?!)
  7. Breathless scream of four-letter words
  8. Test email to boss (got a response, yes, still have a job)
  9. Increase news consumption 1,000%
  10. Grief
  11. Check 401(k) again (will just work till age 90, no problem)
  12. Watch Federal Reserve announcement
  13. Check 401(k) again (too early to start shopping for vacation homes?)
  14. Furlough
  15. Sleep in
  16. Social media blast of fun thing while friends at work
  17. Quickly realize not working sucks
  18. Official layoff
  19. Social media blast of query for jobs from friends at work
  20. Collect unemployment
  21. Question college major and all other life choices to this point
  22. Grief again
  23. Send resume to top jobs
  24. Send resume to every job
  25. Tap emergency fund
  26. Roll eyes until literally fall out of skull after reading another article lamenting the “lazy self-entitlement” of millennials
  27. Shamelessly use emergency fund to buy beer
  28. Check 401(k) again (clean it out???)
  29. Move back home with Mom & Dad
  30. Convert former bedroom now man cave back into bedroom
  31. Ponder life without marriage, a home or kids
  32. Become a freelancer
  33. Ask friends and colleagues for projects
  34. Work three jobs for the income of one
  35. Start blogging or making videos
  36. Ask friends and colleagues to spread the word
  37. Get a new job or start own business on own terms
  38. Move back out. Start over.
  39. Rebuild emergency fund
  40. Restart 401(k) contributions and don’t stop
  41. Decide never to check 401(k) again until age 60
  42. Revelation: bad things do and will happen, but grace, humility, patience, emergency reserves, optimism about yourself, and the vulnerability to ask for help can get you through just about anything
  43. Compassion for those not so lucky
  44. Resume take over of the world

Friday Five

Ways Covid will reshape aging and retirement

An enlightening collection of expert insight from Anne Tergesen, but most importantly beautiful silver lining that maybe the pandemic will change many things for the better.

As with past crises, including Sept. 11, psychologists are finding that people across generations are focusing on what matters most to them, including relationships.

Listen: Tim Ferriss interviews Mary Karr

There is great synergy between Tim Ferriss and the queen of memoir, Mary Karr. Check it out for great tips on writing and living.

For me, the solution to fear is curiosity and presence. I can’t be terrified and curious at the same time.

Lux Capital on doing good things

I don’t know if it is the creative polymath Josh Wolfe who writes these or if it’s a team effort, but, man, they make VC both highly interesting and inspiring.

what is memorable isn’t always meaningful and what is salient isn’t always significant.

The remarkable story of the first person with Down syndrome to conquer Ironman

Just shoot this inspiration straight into your veins.

It was then that Nikic summoned a well of patient, hopeful perseverance — along with the energizing power of the simple vision he had set for his life.

One step forward, two steps.

One step. Two steps. Three.

Friday Fiction: Laura van den Berg

Some writers are afraid that committing certain events to the page will conjure them into existence. I never paid much attention to such superstitions, but then my last novel featured a writer daughter and a dying father and then, not long after the publication, my own father was handed down a terminal diagnosis and I thought: Yes. All those other writers were right to have been afraid.

Or maybe not.

The thing is: no one knows how any of this works. Which seems impossible, given all that we do know, but it’s true.

Four Things That Make Money Meaningful

Behind the long braids of barbed wire and tall machine-gun towers of Dachau came the unmistakable sound of laughter. A transport of prisoners from Auschwitz had just arrived, and they were joyful. 

To me, this was the most affecting scene in Viktor Frankl’s book, Man’s Search for Meaning, about his physical and spiritual survival in Nazi death camps. He and his fellow captives became elated upon realizing they had been relocated to a camp without a chimney. As he writes: “We laughed and cracked jokes in spite of, and during, all we had to go through in the next few hours.”

Even in the darkest periods of mankind, fleeting moments of felicity could be found. Throughout the book, Frankl details what gave him a sense of meaning – art, humor, work, camaraderie – which helped him carry on over his several years in captivity.

As people tried to take away his humanity, he abided by the very thing he believed makes us human: “[A] human being is not one in pursuit of happiness but rather in search of a reason to become happy…through actualizing the potential meaning inherent and dormant in a given situation.”

Whether you believe it is the pattern recognition system in our brains or some deep ineffable cosmic conscious, it is hard to deny we hunger for meaning. And regardless of your circumstances, you need not go far to find it.

So, if there is meaning to be found in everything, what about money?

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.

It’s why any financial adviser worth a damn will tell you to concentrate on your values, the things that truly give your life meaning. Those things help you use money not to build wealth for wealth’s sake but build life satisfaction. What good is money if you feel empty?

What is meaningful to you, may not be to me; and what is meaningful to me, may not be to you. However, there four things that often involve money and that various studies show are where most people tend to find meaning in their lives.

1. Family

When I look at my bank statement, I can separate expenses into categories like entertainment, food, transportation, etc. But underlying about 90% of them is one thing: family.

Perhaps, you can relate.

A few years ago, the Pew Research Center conducted two separate surveys asking Americans what makes their lives feel meaningful. By far the most popular answers were family and spending time with family.

There are many ways money can meaningfully promote the well-being of your family. A fully stocked fridge. A home in a safe neighborhood. Monthly contributions to a college fund. A weekly move night.

And above all, there is the financial freedom to spend as much quality time with your family as you want. For the greatest asset you can provide your family is your presence.

It’s worth nothing family doesn’t have to mean married with children. It can encompass your extended family, your close friends, any group you belong to, your pets – whomever you call loved ones.

How often do you regret spending money on the prosperity of your family? Probably never.

2. Helping others

World religions and philosophies have been teaching it since antiquity: One of the greatest sources of meaning comes from not what you do for yourself but what you do for others.

Consider what those who have reached retirement have to say. According to an Age Wave/Merrill Lynch study, retirees were three times more likely to say “helping people in need” brings them happiness in retirement than “spending money on themselves,” with the majority of those who donated money or volunteered feeling “a stronger sense of purpose.”

When giving back is a priority, your financial life invariably becomes more meaningful. You may make regular donations. You might arrange your finances so that you can spend more time volunteering both now and in the future. And as you think more of others, you are less likely to spend money on things that don’t end up improving your life nor anyone else’s.

3. Experiences

If you want to use money more meaningfully, then buy more experiences and less material items.

Numerous studies show that people enjoy greater well-being and happiness from life experiences and consider them to be a better use of money.

The joy of material items is short-lived. Whereas joy builds in the anticipation of an experience, is released during the experience and lasts in the form of memory.

A higher value placed on experiences can make you more intentional with your money, or even more comfortable not spending money at all. Experiences help train your brain to find meaning in the abstract – the thrill of riding down a hill on a skateboard, a long walk through the woods, the laughter of a child – things that stay with you long after they’re over.

Meaning is all around you if you look. Frankl believed experiences were one of the primary ways of finding meaning in life:

“The second way of finding a meaning in life is by experiencing something – such as goodness, truth and beauty – by experience nature and culture or, last but not least, by experiencing another human being in his very uniqueness.”

Frankl’s first way of discovering meaning? Work.

4. Work

Meaning isn’t derived only from how we use money. We actually find meaning most in how we earn it. In the Pew surveys mentioned above, work/career was second only to family as the most cited source of meaning.

Sure, your salary can be used as a measure of success. Which is a feeling that is multiplied by all the things your hard-earned money does for you outside the workplace.

But it is the accomplishments, the projects done, the challenges overcome and the creativity involved that make work so meaningful.

It is one reason why many older adults plan to work in retirement – not because they have to, but because they want to. You can’t always replicate the sense of being part of something bigger, the sense of achievement, or the sense of usefulness in a leisure activity that you find in work.

When you find meaning in your work or career, you can boost your earning potential while avoid trying to find meaning by impulsively spending your paycheck.

Money helps nurture the things that give you meaning. But money isn’t a requirement for living a meaningful life. Living a meaningful life though will always lead to using money meaningfully.

Friday Five

It is a pleasure to read a president who can write well

What I can say for certain is that I’m not yet ready to abandon the possibility of America—not just for the sake of future generations of Americans but for all of humankind. I’m convinced that the pandemic we’re currently living through is both a manifestation of and a mere interruption in the relentless march toward an interconnected world, one in which peoples and cultures can’t help but collide. In that world—of global supply chains, instantaneous capital transfers, social media, transnational terrorist networks, climate change, mass migration, and ever-increasing complexity—we will learn to live together, cooperate with one another, and recognize the dignity of others, or we will perish. 

Much wisdom in this thread of Carl Richards’s drawings from How I Invest My Money

Author R.O. Kwon on the power of optimism

Hope is not just a feeling; like love, it is a practice. It is a verb. It is action.

The last interview with Ursula K. Le Guin

You do invent wonderful landscapes. The Earthsea trilogy creates such a vivid picture of the sea — have you done a lot of sailing?

Le Guin: All that sailing is complete fakery. It’s amazing what you can fake… they always tell people to write about what they know about. But you don’t have to know about things, you just have to be able to imagine them really well.

Friday Fiction: Mark Haddon

He had not eaten today nor had he drunk. He would wait until the craving had passed, then allow himself to do both when it became a choice, not a lost battle in his long war against the base needs of the body.

The Super Rad True History of Money

Actually, I don’t know the history of money. Sorry. It probably involves the Romans somehow.

What I do know is that we all have our own personal history of money. A history of money that touches every aspect of our lives. It shapes our work, our lifestyles, our relationships and our futures.

Here is yours. Just fill in the blanks.

My ____________ give(s) me a sense of purpose.

____________ is what I value most.

I feel _____________ about the present and ____________ about the future.

My three most important financial goals, in order, are: (1)____________ (2)____________ and (3)____________.

My greatest financial fear is ____________.

My biggest financial mistake so far was ____________.

My ideal lifestyle is one centered around _____________.

I earn ____________ from working as ____________.

I work on average _____________ hours a week and feel _____________ about it.

____________ is what makes me most happy.

I plan to save ____________ within ____________ years so I can one day _____________.

I want to spend more time doing ____________ with ____________.

One thing I would sacrifice now is ____________ if it means I get more _____________.

Other people (creditors) have a claim of ______________ on my money.

____________ comes into my account every month, and ____________ goes out.

Most of my money is spent on ____________.

Three things that I find are always worth spending money on: (1) ____________, (2)____________ and (3) ____________.

If something is too expensive, I ____________.

Expensive to me is a ____________ car and a ____________ house.

The dumbest big-ticket item I ever purchased was ____________.

If I wake up tomorrow without a job, I have ____________ in cash to pay my bills.

On a scale of one to 10, my confidence in choosing the best performing investments is ____________.

I describe myself as a _____________ investor.

My portfolio is made up of ____________, ____________ and ____________.

I expect my portfolio to earn an average annual return of _____________.

The last time the stock market dropped 15-20%, I _____________.

On average, I spend about _____________ hours each week consuming financial news.

If I die, my assets will be distributed to ____________.

The way I most want to help my loved one financially is ____________.

The first three things that come to mind that I am grateful for: (1) ____________, (2)____________ and (3) ____________.

I will donate ____________ to ____________ because I care about ____________.

I want people to remember me for ____________.

The kind of legacy I want to leave behind is one described as _____________.


The moral is that money is a personal story. It is and always will be written only by you. There are many familiar narratives, but those serve just as general guidelines.

The right one for you depends on your situation, your desires. Put another way, don’t try to relive another person’s money history. Financial success is your own definition. It is the only passage to a truly happy ending.

That’s the cool, rad thing about money. You can use it how you want to shape your life into what you want.

Everyone has a money history. What you do with it is up to you. Some repeat it. Some learn from it. The special ones use it to help others.

Friday Five – Election Week Edition

How to survive the next few weeks with grace

This week has felt like several weeks. Perfect time then to read this meditation from wellness sage and author Rich Roll on not letting difficult times get the best of you.

Only through perspective, by broadening our own aperture, can we put distance between ourselves and the incessant whine of matters beyond what a single individual can control. Perspective provides objectivity on the vast divide between perception and reality. It grounds us in humility. And it is through perspective that we return to what is most important: our shared humanity.

How to mentally handle uncertainty

Morningstar’s resident behavioral economist Sarah Newcomb offers excellent tips to deal with uncertainty and avoid making costly mistakes.

The real existential threat to your finances is short-term thinking. Decades of research show us that short-term thinking is linked to increased impatience and discounting of future rewards[1], impulsive decisions[2], higher debt[3], lower savings [4], excessive risk-taking [5], and poor health decisions [6].

Fear and uncertainty can make short-term thinkers of the best of us. End-of-the-world narratives and our current state of pandemic confusion only serve to exacerbate the problem. It’s hard to plan for a 20-year time horizon when you can’t see past next week.

It’s not the end of your retirement

Ritholtz 403(b) educator and teach advocate Tony Isola provides some much needed perspective on staying the course when everything else seems out of control.

Is this really the end of the world? Do you think it’s worth sacrificing your most valuable asset, your health? Worrying and elevating your stress levels over events that have virtually no possibility of happening and which you have no control over isn’t a good use of your precious time.

Who said winners never quit?

Former poker star Annie Duke writes about the upside of quitting.

If you are stuck deciding between two options, you should choose the one that is easier to quit. The option to quit gives you the flexibility you need to successfully react to new information.

When it turns out that your initial choice wasn’t a good one, don’t stick it out simply because you chose it. Just quit.

Friday Fiction: George Saunders

Every day starts out as a certain day, dear reader, which, when it begins, we call today. Hence, every day, as we wake to a new today, we must assume that today may be the day. For what, though? That is what is unknown, that is what I must find out, and quickly now: for what will each of my coming todays henceforth be for?