6 ms·

1. How to spend less than you earn. Lots of people desire “financial freedom”, meaning they can spend what they want when they want it. Solving this via revenue

1. How to spend less than you earn. Lots of people desire “financial freedom”, meaning they can spend what they want when they want it. Solving this via revenue leads to the hedonic treadmill, and you’ll never out earn your growing wants. Instead solve this by controlling your wants, and you’ve achieved financial freedom immediately. 2. How to take risks. Finding the balance between recklessness and absolute risk avoidance is about managing downside, so you get a chance at the upside with acceptable consequences if things go wrong. Get this right, and the world is your oyster, even if this is your only skill in life. Get this wrong, and it will swamp every over accomplishment, skill, and strength you may have. 3. Know what you want, and why you want it. The worst thing in life is time wasted winning at unfulfilling endeavors. The “winning” sucks you I’m and keeps your trapped in a local maxima, where all roads look like moving backward. (Usually, this means understanding and controlling your need for status vs your other needs—-and that requires a lot of introspection.)

schwartzworld 6y ago
1. Spoken like someone who has been lucky. Before I was a dev, I worked less profitable jobs. I was no where near the poverty line, but life is expensive and you can only reduce expenses to a point. Sure, you can probably ease the burden by spending less, but at a certain point spending less means living an ascetic life, free from any frivolous pleasures. The term financial freedom doesn't just mean "making more than you spend". Above a certain income level you get the freedom to splurge. Being able to sit at a restaurant with a friend and not always choose the cheapest option is financial freedom. You can't get that by belt-tightening. 2. Risk isn't the same for everyone. it is fundamentally easier for certain people to take risks. If you make $200k per year, you can probably afford to gamble a little. But what if you only have a couple of hundred dollars to spend after rent and bills every month? Sure there are occasionally successful people who come from nothing, but starting a business or pivoting careers is much easier when you already have money.
- biren34 6y ago
  1. I have been lucky, but I’m also a 2nd generation immigrant. I remember how many things my parents had to deny themselves (and me) growing up. Of course this mileage only takes you so far, but on many incomes, there’s real power here. The fact that it’s painful to deny yourself these things is the point. Most bad financial things happen to people who won’t tolerate that pain, so they get locked in marginal situations with little room to take risks or have anything go wrong. Eventually, something always goes wrong. This is the only way to protect yourself. It doesn’t mean it doesn’t hurt. 2. This is the exact point. Each of us have to judge the consequences of failure for each decision. If you only have a couple hundred dollars left after expenses, risk aversion is the right call—-and falls well within the real of managing your risk.
- cableshaft 6y ago
  Not sure why you're being downvoted. I lived what you're saying. It's a reality for a lot of people. Cheapest option at a proper restaurant: glass of water. I had times where that was the only option that I could manage, unless my friends insisted on paying for me. I'd feel bad, but they were better off and didn't mind (at least they said they didn't mind) and otherwise I might not have even gone out with them. Splurging for me was going and getting 4 items off the dollar value menu at Wendy's instead of 2 or 3. But it wouldn't really matter. I'd get sick, have to go to the doctor, get a bill I couldn't pay, it'd go to collections and wreck my credit, then my car would break down the same week, then it breaks down again in a different way a few months later, and will keep doing so because it's an old piece of shit but you can't get anything better, and there's just no getting ahead. Just sinking further and further into debt. I didn't break out of that cycle until I got a job that almost doubled my salary and dedicated a couple of years to just digging myself out of the hole I had gotten myself into. I'm a lot better off right now. Actually have savings, some investments. House, dogs, wife, spend more money than I should on stuff I don't really need. But I'm way, way behind others my age in my industry, and my credit is just okay now, not great.
  - Arete314159 6y ago
    I've been in the same boat (see other posts). It sucks so much. And so much of the problem is the expense of transport, which is externalized onto regular folks rather than being paid for with taxes. Even when I was broke and living in NYC, I could still afford my subway pass. I mean barely, but I afforded it. That meant I could always get to the temp job I needed to get to without worrying. If you think of car ownership as a "tax" because it's required in most parts of the country, it becomes a very expensive regressive tax indeed.
    - svrb 6y ago
      > which is externalized onto regular folks You appear to be very mistaken about the meaning of "externalized" (this is, of course, the charitable interpretation). Paying for a good or service you yourself consume does not constitute an externality. In fact, the exact opposite is true: if you forces others to pay for your open transportation, that would be an externality.
- mod 6y ago
  1: In 2002, long before I was a dev, I made about $14,000, working at a local YMCA. I had plenty of money. I paid rent (shared), I went out to eat a couple times per week (mainly the $13.50 all-you-can-eat crab at the chinese place), and I spent my leisure time how I wanted--for me that was primarily gaming, fishing (from the shore), programming, and coaching youth sports. I drove a beater car and did not have any luxury in my life, but I had a nice PC, a few nice fishing rods, etc. I managed to save money without much issue, and I moved out of that place with $12k cash. It was a very good time in my life, probably the best time. I think you maybe have a different idea about what makes you happy--those "frivolous pleasures." Simpler living is not the same as asceticism. I am in a position in my life now, having bought a rural property ($60k for 40 acres and a home), where I could live for much less than I did at that time. Some things I find rewarding there are raising a few animals, gardening, hunting, camping on my own property, woodworking in my small woodshop (hand tools are cheaper and I find them particularly rewarding), repairing/restoring things, servicing my own vehicles, and relying more on myself and my own talents. Some of the best times are spent sitting in a chair on my shop porch--a type of meditation perhaps. I don't feel like an ascetic, and I realize that it's not a life for everyone, but surely it's a good life, and preferable to being a drone with no free time and no money to spend in any free time. 2: I think they were speaking less about financial risk, like risking your savings, and more about other kinds of risks. Later in my life I moved to Costa Rica for a time (on an aside, I lived there about as cheaply as I did in my YMCA days). I was scared to do it, by myself, etc, but I looked at worst case scenarios, and it was like...I squandered my savings (10-15k, I don't remember), I was alive, bruised ego, and I went back to the US and got a low-paying job. I held out an amount of money equal to a plane ticket in case that scenario presented itself, and I had a great time in Costa Rica. I moved back with more money than I left with.
  - gamechangr 6y ago
    Just curious - $60k for 40 acres and a home What state are you in and how far from a big city?
    - mod 6y ago
      It's in the Ozarks, and it's 2.5 hours from Little Rock, 90 minutes from Branson. So quite far.
reddog 6y ago
“Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery” ― Charles Dickens, David Copperfield
kharak 6y ago
1, I see clearly as skill. 2, risk management skills can be learned. Risk taking though, I've always regarded as a question of temperament. I'm personally close to zero risk affinity and don't feel an emotion (yes not reason) to take any financial risk, at all (other risk, too, really). To the contrary, mind and body squirm at the thought. 3, this seems unnecessarily tied to "winning". What if I really don't care about winning? Also, if this is really a skill, what is it called? How does progression look like?
- adverbly 6y ago
  3 - I'd agree that it is not really a skill so much as an effect with many possible actionable causes, some of which can be trained. I think you and OP are actually coming at this from a similar angle if you indeed don't really care about winning. OP's point is that many people get sucked into doing things for reasons other than their impact on their long term happiness. Competitiveness, addiction, lack of experimentation can all lead to inefficient return on effort. There are likely many skills that can improve on these, but introspection towards your feelings/emotions to understand how your emotions respond to externalities is probably a cornerstone of many of them.
  - biren34 6y ago
    That’s a fair response. The reason I’d call this a skill is because you could screw it up on purpose—-it’s not random. To achieve this outcome you need to know of your values, be aware of your current emotional state (and the outside factors influencing it), and have the techniques to exert more control over your internal state than the outside factors are seeking to exert. To me, it’s like driving a van in very windy conditions. The skill is to not get blown off the road.
    - adverbly 6y ago
      > To me, it’s like driving a van in very windy conditions. Love that analogy!
    - Xplosiveoctopus 6y ago
rzzzt 6y ago
How do you know what you want?
- andrey_utkin 6y ago
  For starter, https://psychclassics.yorku.ca/Maslow/motivation.htm https://psychclassics.yorku.ca/Maslow/motivation.htm
- biren34 6y ago
  The funny thing about “knowing what you want” is that it’s incredibly simple—on paper. All you have to do is have the most basic level of experience (any 18 year old has enough). Pay attention as you go, and do more of what brings you “joy” and less of what makes you feel bad. Good and bad feeling are terribly defined in the English language, so to be clear, joy in this sense is more a mix of flow, fulfillment and a sense of high regard rather than anything that might be more linked with pleasure. Dancing can bring you joy, going to the club, getting drunk, and finding a one-night stand probably won’t, even if there’s music involved. In practice, it gets hard because there are so many external forces imposing themselves on us, shouting so we only hear them, intentionally drowning out our inner voices. They do this on purpose so they can control us. The message is usually in the form of what “high status” is and telling us what we have to do to achieve it. There’s rarely any overlap between what they tell us to do and what brings us joy. I guess this all boils down to: if you want to know what you want, learn to listen to yourself only, in the face of all this noise. Status is a siren song.
analog31 6y ago
In my view, risk is probability times impact. On average, risking a dollar and spending a dollar are equivalent. Where I think we get risk wrong is how we estimate its magnitude, often due to emotional fear of loss, or underestimating our own ability to innovate our way out of problems.
snak 6y ago
First time I've heard about "hedonic treadmill". Found a little bit of information about the concept, very interesting, but can't seem to find a similar concept/translation in spanish.
- bitxbitxbitcoin 6y ago
  "No ser menos que los demás" seems to be the same concept as "keeping up with the Joneses." For "hedonic treadmill" I imagine something similar to "carrera de ratas" would be closest. Would be interested to hear if anyone else has an oft used translation!
imtringued 6y ago
1. For some reason I always ignored ebay auctions. I wanted a guarantee and a fixed price. Although used items are available through this model I never bought any because the seller demands e.g. 50€ for an obsolete soldering station with hard to source tips. Turns out, most of used items are actually sold for a reasonable price at those ebay auctions. Nobody on earth is going to bid 50€ on that soldering station, so you will actually find good deals. You can often get away with paying the minimum price as well because nobody else bid on that item. I got stuff 50% off which makes buying used actually worth it. I'm talking about stuff that one uses for a few weeks and then just collects dust in a drawer. Like a raspberry pi 3 kit with power supply, case, SD card selling for 40€ including shipping. If you bought this stuff used for a fixed price you'd pay 70€ for it so most people just buy everything new for 80€. I know that because that's what I've done my entire life and I always felt like this was a waste of resources.
audiometry 6y ago
Your number 2 point, ‘learn how to take risk’ isn’t something you ever master, like “learning to play piano” or another discrete skill where you develop a level of proficiency that then guaranteed you can perform successfully at an arbitrary level. Trading is incredibly frustrating in that regard. (Yes, trading is not the only form of risk taking, but it’s my profession and what I focus on). Even after doing it successfully for 20+ years o can’t really explain or teach how to do it, like I would if I was an experienced carpenter , musician, accountant. I think the important lesson that SHOULD be learned about risk is very simple but incredibly important to long term success— avoid existential risk. In trading this typically manifests as people “selling wings” — ie selling very low probability options that have enormous downside in the exceptionally rare case they come to the strike price. Another variation I avoid is taking personal leverage on my own investments. Yeah I don’t make as much in the good times, but I also am never annihilated by a margin call. These two things happen all the time, and way more often than everyone but grizzled survivors appreciate.
Xplosiveoctopus 6y ago
Thank you for sharing your thoughts! Could you point me towards books or some other resources that go in to more detail about number 2. that you`ve found useful, and others(although they are more or less self explanatory).

schwartzworld 6y ago

1. Spoken like someone who has been lucky. Before I was a dev, I worked less profitable jobs. I was no where near the poverty line, but life is expensive and you can only reduce expenses to a point. Sure, you can probably ease the burden by spending less, but at a certain point spending less means living an ascetic life, free from any frivolous pleasures. The term financial freedom doesn't just mean "making more than you spend". Above a certain income level you get the freedom to splurge. Being able to sit at a restaurant with a friend and not always choose the cheapest option is financial freedom. You can't get that by belt-tightening. 2. Risk isn't the same for everyone. it is fundamentally easier for certain people to take risks. If you make $200k per year, you can probably afford to gamble a little. But what if you only have a couple of hundred dollars to spend after rent and bills every month? Sure there are occasionally successful people who come from nothing, but starting a business or pivoting careers is much easier when you already have money.

biren34 6y ago
1. I have been lucky, but I’m also a 2nd generation immigrant. I remember how many things my parents had to deny themselves (and me) growing up. Of course this mileage only takes you so far, but on many incomes, there’s real power here. The fact that it’s painful to deny yourself these things is the point. Most bad financial things happen to people who won’t tolerate that pain, so they get locked in marginal situations with little room to take risks or have anything go wrong. Eventually, something always goes wrong. This is the only way to protect yourself. It doesn’t mean it doesn’t hurt. 2. This is the exact point. Each of us have to judge the consequences of failure for each decision. If you only have a couple hundred dollars left after expenses, risk aversion is the right call—-and falls well within the real of managing your risk.
cableshaft 6y ago
Not sure why you're being downvoted. I lived what you're saying. It's a reality for a lot of people. Cheapest option at a proper restaurant: glass of water. I had times where that was the only option that I could manage, unless my friends insisted on paying for me. I'd feel bad, but they were better off and didn't mind (at least they said they didn't mind) and otherwise I might not have even gone out with them. Splurging for me was going and getting 4 items off the dollar value menu at Wendy's instead of 2 or 3. But it wouldn't really matter. I'd get sick, have to go to the doctor, get a bill I couldn't pay, it'd go to collections and wreck my credit, then my car would break down the same week, then it breaks down again in a different way a few months later, and will keep doing so because it's an old piece of shit but you can't get anything better, and there's just no getting ahead. Just sinking further and further into debt. I didn't break out of that cycle until I got a job that almost doubled my salary and dedicated a couple of years to just digging myself out of the hole I had gotten myself into. I'm a lot better off right now. Actually have savings, some investments. House, dogs, wife, spend more money than I should on stuff I don't really need. But I'm way, way behind others my age in my industry, and my credit is just okay now, not great.
- Arete314159 6y ago
  I've been in the same boat (see other posts). It sucks so much. And so much of the problem is the expense of transport, which is externalized onto regular folks rather than being paid for with taxes. Even when I was broke and living in NYC, I could still afford my subway pass. I mean barely, but I afforded it. That meant I could always get to the temp job I needed to get to without worrying. If you think of car ownership as a "tax" because it's required in most parts of the country, it becomes a very expensive regressive tax indeed.
  - svrb 6y ago
    > which is externalized onto regular folks You appear to be very mistaken about the meaning of "externalized" (this is, of course, the charitable interpretation). Paying for a good or service you yourself consume does not constitute an externality. In fact, the exact opposite is true: if you forces others to pay for your open transportation, that would be an externality.
mod 6y ago
1: In 2002, long before I was a dev, I made about $14,000, working at a local YMCA. I had plenty of money. I paid rent (shared), I went out to eat a couple times per week (mainly the $13.50 all-you-can-eat crab at the chinese place), and I spent my leisure time how I wanted--for me that was primarily gaming, fishing (from the shore), programming, and coaching youth sports. I drove a beater car and did not have any luxury in my life, but I had a nice PC, a few nice fishing rods, etc. I managed to save money without much issue, and I moved out of that place with $12k cash. It was a very good time in my life, probably the best time. I think you maybe have a different idea about what makes you happy--those "frivolous pleasures." Simpler living is not the same as asceticism. I am in a position in my life now, having bought a rural property ($60k for 40 acres and a home), where I could live for much less than I did at that time. Some things I find rewarding there are raising a few animals, gardening, hunting, camping on my own property, woodworking in my small woodshop (hand tools are cheaper and I find them particularly rewarding), repairing/restoring things, servicing my own vehicles, and relying more on myself and my own talents. Some of the best times are spent sitting in a chair on my shop porch--a type of meditation perhaps. I don't feel like an ascetic, and I realize that it's not a life for everyone, but surely it's a good life, and preferable to being a drone with no free time and no money to spend in any free time. 2: I think they were speaking less about financial risk, like risking your savings, and more about other kinds of risks. Later in my life I moved to Costa Rica for a time (on an aside, I lived there about as cheaply as I did in my YMCA days). I was scared to do it, by myself, etc, but I looked at worst case scenarios, and it was like...I squandered my savings (10-15k, I don't remember), I was alive, bruised ego, and I went back to the US and got a low-paying job. I held out an amount of money equal to a plane ticket in case that scenario presented itself, and I had a great time in Costa Rica. I moved back with more money than I left with.
- gamechangr 6y ago
  Just curious - $60k for 40 acres and a home What state are you in and how far from a big city?
  - mod 6y ago
    It's in the Ozarks, and it's 2.5 hours from Little Rock, 90 minutes from Branson. So quite far.

reddog 6y ago

“Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery” ― Charles Dickens, David Copperfield

kharak 6y ago

1, I see clearly as skill. 2, risk management skills can be learned. Risk taking though, I've always regarded as a question of temperament. I'm personally close to zero risk affinity and don't feel an emotion (yes not reason) to take any financial risk, at all (other risk, too, really). To the contrary, mind and body squirm at the thought. 3, this seems unnecessarily tied to "winning". What if I really don't care about winning? Also, if this is really a skill, what is it called? How does progression look like?

adverbly 6y ago
3 - I'd agree that it is not really a skill so much as an effect with many possible actionable causes, some of which can be trained. I think you and OP are actually coming at this from a similar angle if you indeed don't really care about winning. OP's point is that many people get sucked into doing things for reasons other than their impact on their long term happiness. Competitiveness, addiction, lack of experimentation can all lead to inefficient return on effort. There are likely many skills that can improve on these, but introspection towards your feelings/emotions to understand how your emotions respond to externalities is probably a cornerstone of many of them.
- biren34 6y ago
  That’s a fair response. The reason I’d call this a skill is because you could screw it up on purpose—-it’s not random. To achieve this outcome you need to know of your values, be aware of your current emotional state (and the outside factors influencing it), and have the techniques to exert more control over your internal state than the outside factors are seeking to exert. To me, it’s like driving a van in very windy conditions. The skill is to not get blown off the road.
  - adverbly 6y ago
    > To me, it’s like driving a van in very windy conditions. Love that analogy!
  - Xplosiveoctopus 6y ago

rzzzt 6y ago

How do you know what you want?

andrey_utkin 6y ago
For starter, https://psychclassics.yorku.ca/Maslow/motivation.htm https://psychclassics.yorku.ca/Maslow/motivation.htm
biren34 6y ago
The funny thing about “knowing what you want” is that it’s incredibly simple—on paper. All you have to do is have the most basic level of experience (any 18 year old has enough). Pay attention as you go, and do more of what brings you “joy” and less of what makes you feel bad. Good and bad feeling are terribly defined in the English language, so to be clear, joy in this sense is more a mix of flow, fulfillment and a sense of high regard rather than anything that might be more linked with pleasure. Dancing can bring you joy, going to the club, getting drunk, and finding a one-night stand probably won’t, even if there’s music involved. In practice, it gets hard because there are so many external forces imposing themselves on us, shouting so we only hear them, intentionally drowning out our inner voices. They do this on purpose so they can control us. The message is usually in the form of what “high status” is and telling us what we have to do to achieve it. There’s rarely any overlap between what they tell us to do and what brings us joy. I guess this all boils down to: if you want to know what you want, learn to listen to yourself only, in the face of all this noise. Status is a siren song.

analog31 6y ago

In my view, risk is probability times impact. On average, risking a dollar and spending a dollar are equivalent. Where I think we get risk wrong is how we estimate its magnitude, often due to emotional fear of loss, or underestimating our own ability to innovate our way out of problems.

snak 6y ago

First time I've heard about "hedonic treadmill". Found a little bit of information about the concept, very interesting, but can't seem to find a similar concept/translation in spanish.

bitxbitxbitcoin 6y ago
"No ser menos que los demás" seems to be the same concept as "keeping up with the Joneses." For "hedonic treadmill" I imagine something similar to "carrera de ratas" would be closest. Would be interested to hear if anyone else has an oft used translation!

imtringued 6y ago

1. For some reason I always ignored ebay auctions. I wanted a guarantee and a fixed price. Although used items are available through this model I never bought any because the seller demands e.g. 50€ for an obsolete soldering station with hard to source tips. Turns out, most of used items are actually sold for a reasonable price at those ebay auctions. Nobody on earth is going to bid 50€ on that soldering station, so you will actually find good deals. You can often get away with paying the minimum price as well because nobody else bid on that item. I got stuff 50% off which makes buying used actually worth it. I'm talking about stuff that one uses for a few weeks and then just collects dust in a drawer. Like a raspberry pi 3 kit with power supply, case, SD card selling for 40€ including shipping. If you bought this stuff used for a fixed price you'd pay 70€ for it so most people just buy everything new for 80€. I know that because that's what I've done my entire life and I always felt like this was a waste of resources.

audiometry 6y ago

Your number 2 point, ‘learn how to take risk’ isn’t something you ever master, like “learning to play piano” or another discrete skill where you develop a level of proficiency that then guaranteed you can perform successfully at an arbitrary level. Trading is incredibly frustrating in that regard. (Yes, trading is not the only form of risk taking, but it’s my profession and what I focus on). Even after doing it successfully for 20+ years o can’t really explain or teach how to do it, like I would if I was an experienced carpenter , musician, accountant. I think the important lesson that SHOULD be learned about risk is very simple but incredibly important to long term success— avoid existential risk. In trading this typically manifests as people “selling wings” — ie selling very low probability options that have enormous downside in the exceptionally rare case they come to the strike price. Another variation I avoid is taking personal leverage on my own investments. Yeah I don’t make as much in the good times, but I also am never annihilated by a margin call. These two things happen all the time, and way more often than everyone but grizzled survivors appreciate.

Xplosiveoctopus 6y ago

Thank you for sharing your thoughts! Could you point me towards books or some other resources that go in to more detail about number 2. that you`ve found useful, and others(although they are more or less self explanatory).