Spending Money Well: Living a Rich Life
I hit 50 years of age earlier this year. Amazed to be honest. I’ve struggled with understanding money and its rules for a long time. As I said I grew up in Canada with a Taiwanese immigrant family and academics to boot. We were really hard up when we first got there and this lack of money was seared into my soul and brain. Scars that were unintentional but everlasting.
This caused me to view money as scarce and led me to not managing it well when I got a bunch of it. I’d fall into the hedonic treadmill and just spend it all on stupid things without really understanding why I wanted them.
This continued into my adult life as I went through feast and famine cycles. Barely scraping by when I first ended up in Taiwan, making a pile of it and then wasting it. The same thing happened when I first moved to Silicon Valley, I barely survived the first two and half years there. I had to make choices like “Do I have lunch or dinner?” Cheap microwaveable foods, inexpensive but big Mexican burritos and Trader Joe’s were a godsend.
It was not until I joined Yahoo! that things really turned around, I was paid incredibly well for super interesting work. I also learned the incredible value of equity and stock options. I was so flush that I had no idea what to do with it. I was fortunately able to put some of it into real estate but overall I just spent most of it stupidly.
Some things I don't regret like paying for trips for my parents, trips for my family and lots of fun dinners with friends. Also plenty of books, far too many books. :)
But most of it was stupid, ridiculously lavish brunches, foreign magazines I’d never read, a huge wardrobe of custom dress shirts and suits I’d almost never wear. Complete waste. It was not until we had my daughter Amber did I realize how much $$ I wasted on stupid things. Nothing like a baby to focus you on the important things and wake you up, somewhat.
I ended up taking 2 years off after Yahoo! and I honestly still did not fully understand money even though I had more of it then I ever had at that time. This caused me to foolishly ramp up spending on my lifestyle, which is especially stupid when you are going through your own savings, albeit very extensive savings. A cash crunch in 2013 was my 2nd wake up call. Goes to show you how dense I am at times.
From this, as well as my previously written 2020 issues (3rd times the charm), it forced me to really get my financial act together in my 40s which is absolutely shameful.
So what have I learned? Well, really super basic things.
Don’t spend more than you earn. DUH.
Be Willing to Spend on health related things (gym, supplements & bio hacking stuff) & personal development stuff (books, classes, workshops and conferences)
Always keep one year’s worth of expenses worth of cash in hand. A must and priority for everyone.
Pay yourself first, after your emergency cash, make sure you are putting aside 10-20% and investing it in index funds. One side of the barbell of personal finance.
Equity matters, always try to get and build equity in businesses or real estate (not your home but cash flowing real estate). This is the other side of the barbell.
Track and write down all your spending. It helps you understand where your money is going. I might add that I did not do this from 2002-2013, my most out of control time.
Use money to save time, especially services like Clear at the airport. Or house cleaning services.
Business class flights are only worth it if you have brutally long flights over 15 hours. Paying for airport lounges makes no sense.
Know what gives you pleasure: for me it’s books, good food, gifts or nice things for my loved ones and travel
Focus on the big expenses, don’t waste time on saving money by cutting small pleasures like coffee or such. Save on the big stuff like cars or hotel rooms unless you really care about these things.
Manage your costs but you should really focus on making more much more money
I spent much of my life chasing money. I’m probably still chasing it to some extent but I do feel like I’ve gotten a better handle on it by now. It’s probably something we all will struggle with but it’s important.
As Naval once said: "Money is not going to solve all of your problems, but it's going to solve all of your money problems."Money is a tool and scorecard for a better life. Better to understand and master it as soon as possible so you can use it to improve your family's life.