10 Lessons to Improve Your Money & Life
Webblogers Editors Team |
April 5, 2023
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I’ve learned a ton during the past decade, thanks in large part to reading, interviews, and trial and error. I covered many of these lessons in today’s blog post.

Here are 17 lessons that can improve your money and life.

#1: Money can’t make you happy, but lack of money can make you sad

They say, “Money can’t make you happy.” But this is a lie.

Researchers have examined the link between money and happiness – guess what else? Money can make you happy to some extent. Several studies found a significant association between money and happiness among low- to middle-income people.

More money = more happiness, up to a certain level. it is not surprising. If you used to make $30,000 per year, and now you make $50,000 per year, this extra money makes a huge impact. You are not under that much stress.

The wealthier the household, the less this effect becomes. Each additional dollar in household income produces a small incremental increase in happiness.

What is Tipping Point? This is up for debate. A well-known study states that there is a large correlation between money and happiness for the first $75,000 in household income, after which it tends to stabilize. Other studies claim that marginal gains start falling between $80,000 and $100,000, while other studies put the number closer to $160,000.

Of course, “enough” depends on the size and location of your family. Earning $100,000 as an individual in Des Moines differs from $100,000 for a family of six in San Francisco. It is very easy to discuss dollars in zero.

But the important thing is that while money cannot make you happy, lack of money can make you unhappy.

#2: Experiences make us happier than things

About a decade ago, University of Colorado psychology and neuroscience professor Dr. Leif van Bowen decided to unlock the key to happiness.

They surveyed hundreds of people about their recent purchases, categorizing these as “experiential” or “content.” They then asked about their self-reported happiness level.

Can you guess the results?

If you want to be happy, spend money not on things, but on experiences.

First, experiences are subject to the bias of nostalgia. Memories get refreshed with time. When we look back on that trip to Disney World, we don’t remember the long lines, fussy kids, or spilled ice cream. We remember the highlights, like the smiles on our kids’ faces when they meet their favorite characters.

On the other hand, commodities depreciate over time. They wear out, break down, and the joy that comes from them fades. We get more pleasure from the purchase (the anticipation) than we get from owning it (the hedonic adaptation). Once we have something, it becomes easier to accept it.

Second, experiences have less of a “keep up with the Joneses” effect. Your neighbor’s wonderful vacation in Costa Rica will make your epic trip to Argentina no less memorable. (Though these days, the Instagram influence can be messing up the line.)

#3: Never Procrastinate

I know I know. It seems the opposite.

Isn’t money management considered a practice of delaying gratification? Shouldn’t we be useless “right now” for a terrible future?

No.

Here’s a framework change: Don’t delay gratification; Reframe satisfaction. Find satisfaction in investing in index funds, buying rental properties, and watching your net worth grow.

Find satisfaction in homemade food, drive a reliable used car, and don’t be brainwashed by fancy labels. Find satisfaction in the fact that you can spend your Tuesdays on a random hike because you have designed your life accordingly.

delay gratification? are you kidding me? Puffft. I’m not delaying Jack. I love when I make a pile of cash for a down payment on my next rental property.

When I check my net worth and see the results of what I’ve made, I find myself deeply satisfied – far more than I would imagine if I bought a few extra pieces of plastic.

#4: Know Your “Millionaire Next Door” Number

Do You Pass the Millionaire Next Door Test?

The book The Millionaire Next Door explains how to calculate whether you are a prodigious accumulator of wealth (PAW) or a lesser accumulator of wealth (UAW). The formula is:

Your age x your annual pre-tax income 10 = your target net worth

Let’s say you are 35 years old and you make $70,000 a year. You would multiply $70,000 by 35 times to get a target net worth of $245,000 and divide that number by 10. If your net worth is more than this, you are a prodigious accumulator of wealth. If it is low, you are an under-accumulator.

If you’re a couple with mixed finances, take your average age and multiply it by your combined annual pretax income.

If you are 30 or older, crunch this number once a year.

Here’s the catch: If you’re in your 20s, this formula may not apply to you just yet.

For example, if you are 25 years old and you make $70,000 per year, this formula would claim that your net worth should be $175,000. Butt…. It doesn’t make any sense. If you are 25, this may be only the first or second year of your salaried full-time job.

Ignore this formula until you are 30. Once you’ve been in the workforce for a decade, start crunching your TMND number.

#5: The less you try, the better

Working harder = getting better results in most professions. But when it comes to investing, the less effort you put in, the better.

We see this in index fund investing. Frequent trading and micro-management often produce worse results than a set-it-and-forget-it, buy-and-hold approach.

We see this in real estate as well. Flipping houses is a ton of work and carries an additional risk premium; A buy-and-hold strategy requires that you grow the workload and then enjoy the results for decades to come. The passive approach creates a long-term recurring income stream. double win.

#6: Simplify Everything

Find the easiest way to do what you’re after. For example:

Index Investing:You can spend hours and hours doing micro-tweaks to your asset allocation, but why bother? Choose an allocation you are happy with and move on.

real estate investment:You can fall down the rabbit hole of every available possibility: rent, flipping, wholesale, tax lien, residential, commercial, office, warehouse, mobile home park…

Nah.

Don’t try to do everything. Choose a niche and a strategy. Focus there. Let the rest go.

My niche is residential property, and my strategy is to buy and hold. It’s not because I believe it is “better”. That’s because I’m simplifying. I’m choosing an investing style, deep-diving in an effort to master and stay focused.

Cash Flow:Don’t bother creating an elaborate, line-item spreadsheet with more than a dozen categories that meticulously manage your budget in excruciating detail. It is unnecessarily complicated. Besides, how long are you really going to live with it? Do you think that in five months, you’ll be motivated enough to match every item from the grocery store?

Be Anti-Budget: Top off your savings, then be quiet about the rest. Choose whatever savings rate you want – 10 percent, 30 percent, 50 percent, it’s your call. Transfer it to savings every month. live on the rest.

You don’t need to create an over-detailed budget. These introduce complexity to the budgeting system, and the more complex a system, the more likely that system is to fail.

work life:

Find an 80/20 solution for each project. Which activities give you the most benefit on your time, energy, and focus?

Ask yourself, “What is it that I can do [for my health, money, relationships, etc.] so that doing so makes everything else easy or unnecessary?”

Exercise:

I don’t need to learn 40 different types of exercise. I need to learn how to bench press, do deadlifts, squats, rowing, some cardio, and some stretching. My workouts don’t need to be more complicated than this. Find a routine that works for you and ignore the urge to shine-item-syndrome when it comes to the latest workout craze.

Simplification is not about deprivation; It’s all about maximizing your enjoyment of the curated selection.

#7: Curate

Fewer but better things to own.

Last year I interviewed Today Show financial editor Gene Chatzky on the podcast. During our interview, she told me that she only buys stuff at full price.

Who’s waiting? Does she only buy at full price?

Yes.

She realized that when she saw a sale, she would pick up “extra” things—items she didn’t need, or that she bought on impulse—only because they were on sale.

“I wasn’t planning on buying a candle, but it’s on sale for $5…”

“I don’t need this table, but it’s on Craigslist for $15…”

By only buying the items at full price, he owns fewer but better things. Her home is less cluttered, as she has put more thought into each purchase.

lesson:

A Craigslist sale is still a sale.

A thrift store sale is still a sale.

A sale is sale is a sale.

When you empty your closet, garage, or attic, don’t ask yourself the question, “What should I get rid of?” Rather, “What should I keep? Is it so wonderful that I can’t even imagine getting rid of it?”

If an item doesn’t meet that high standard, why do you have it? Why surround yourself with mediocre items?

Once you limit your personal wealth to the few things that matter most, you may find that your willingness to spend and accumulate will decrease.

#8: Don’t do anything half-ass; whole-ass right things

Here’s a well-known secret about coupon and deal websites:

Those website owners are successful six- and seven-figure entrepreneurs. They are promoting wealth management through shopping clearance sales, but their own finances are fueled by revenue rather than by bargain chasing.

Sure, they can use the $3 coupon on a package of frozen chicken to relate to the ingredients they’re releasing. But on the same day, they can earn $1,000 in daily gross revenue from the same article.

“If you serve up low-impact activities, you’re taking away time to spend on high-impact activities,” says bestselling author and podcast guest Cal Newport. “It’s a zero-sum game.”

You have time for anything; You don’t have time for everything. Every hour you spend on X is an hour you are not spending on Y.

If your toilet needs replacing and you decide to install a new one yourself, you’re not spending four hours at the gym.

If you clip a coupon to save $12 per week on groceries, that’s an hour you’re not spending on growing a side business.

#9: Work with your nature, not against it

A few years ago, I decided that I wanted to give up most of my freelancing and consulting clients. I didn’t need the money; I’ve found financial independence and wanted to spend my time traveling, writing, and podcasting.

Still, I felt hesitant to cut the rope.

“If I was more disciplined, I could do both,” I told myself. “If I only focused, I could keep my freelance/consulting clients while going to the gym and cooking and traveling and reading and writing and podcasting and making room for a social life.”

I’ll take an honest look at my schedule (including tracking my time in 15-minute intervals) and see how much time I wasted. fifteen minutes here; 20 minutes there.

“If I didn’t waste so much time,” I said to myself, “I could do it all.”

And then I drove myself crazy trying.

Because you know what? I am not very disciplined. I am not very focused. I am capable of a certain amount of daily production, and that is it. My mission is not to increase my output, it is to curb what happens during those hours.

Eventually, I admitted to myself: “I can’t do everything. If I want to lead the type of lifestyle I want to lead, something has to give. ,

That’s when I left my clients and lived happily ever after.

Do you say to yourself, “I would [X] be (happier, more successful, more fit) … if only I had more willpower” or “… if only I was more disciplined?”

you know what? you are who you are. Instead of constantly battling with your nature, find ways to work with it.

#10: Focus on Habits, Not Willpower

When I wake up I immediately drink a glass of water. It is not an act of will or discipline. It’s because I’ve made a habit.

“Willpower isn’t just a skill, it’s a muscle, like the muscles in your arms or legs,” says Charles Duhigg, author of the fantastic book The Power of Habit. “And it gets tired because it works harder, so there’s less power left for other things.”

If you rely on willpower, you will eventually get tired and give up. But if you focus on building the habit, willpower doesn’t enter the equation.

Here’s how to turn anything into a habit:

Find a signal or trigger.

take an action.

get a reward.

My signal or trigger is waking up. The action is drinking a glass of water. The reward is an immediate feeling of hydration.

Here’s the part that most people get wrong: Action should have its own reward.

Most people try to set up a system in which they have a signal (I finish my workday), they take an action (I lift a weight), and they receive an unlinked reward (when I allow myself a glass of wine if I get home).

Author Gretchen Rubin found that unlinked rewards are counterproductive, as you begin to see activity as a means to an end. If you reward yourself with a blueberry muffin every time you run, your brain starts thinking, “Well, if I run, I can eat this blueberry muffin.”

You are not learning to appreciate running for your own sake. You’re just learning to cope with running to get that muffin.

The more effective approach, Rubin found, is to discover the inherent rewards of running, such as the “runner’s high” you feel immediately afterward. Pay attention to this as your own reward.

If you want to give yourself an outdoor reward, she recommends, choosing something that complements the activity of running — like a new pair of running shoes, or a better rain jacket for those days when you’re not a fan. Jogging outside during the drizzle.

Webblogers Editors Team

Webblogers Editors Team

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