Wealth vs. Getting Wealthier
What feels great is being on an upward path. That’s when dopamine takes over. That’s when you can extrapolate it and assume it goes on forever, and compare yourself to where you were before, and feel like nothing can stop you.
When that path declines – even if it happens when you have a level of wealth you couldn’t fathom a few years ago – the whole sensation shatters.
An addiction to the process of making money is a version of never having enough and never being satiated. It’s a game that can’t be won but offers the illusion of a finish line right around the corner.
Do less to get more done
In our desire to get better at anything, or when it comes to problem-solving, our typical response is to make things more complex. We add things by default. Yes, things are overwhelming when we first start, the process of figuring things out is painful and slow. So it’s only natural to learn more and more quickly or try out one thing after the other until we find out what works for us.
But following such an approach might not be optimal, trying to do more, and creating too many rules can create more chaos and distract us from what we are trying to achieve rather than help. Sometimes it’s better to take things slow, it’s better to subtract, do less, to get more done. But we rarely think this way;
“The problem is that we neglect subtraction. Compared to changes that add, those that subtract are harder to think of. Even when we do manage to think of it, subtracting can be harder to implement.”
The same plays out when we’re investing in markets as well;
“A bias toward addition can’t be good for investors. It might explain bloated portfolios, complex strategies, and more.
Things that lead to mistakes. Things that are irrelevant, unimportant, and unnecessary to your process. Anything that doesn’t fit what you’re trying to do should be cut out.
The best investors are masters of subtraction. They played the game long enough to simplify their investment philosophy down to a few key principles.”
Think Outside the Portfolio
In the last year, many asset classes have experienced declines in the double digits, including bonds, stocks, and crypto. You might be wondering: what should you do with your portfolio? The most sensible portfolio action to take is no action at all.
The evidence suggests that any big changes to your portfolio are unlikely to pay off because stocks tend to underperform their historical averages following a period of high inflation. The median real performance of U.S. stocks over three years is +28%, but moving to U.S. bonds would also be a terrible idea because, following a year of high inflation, U.S. bonds significantly underperformed.
The most sensible portfolio action to take during times of high inflation is to stay the course and just keep buying (if you can). A dip can be a great time to buy more shares of diverse, income-producing assets at cheaper prices, learn a new skill, or start a business.
If you haven’t worked in a while, consider working part-time to earn supplemental income or lowering your spending rate to get through tougher economic times. You may also consider delaying your spending until asset prices recover, or being flexible with your retirement plans.
There are many other things that you can do if you want to improve your finances. This article summarizes what you can do during times like these.
Credit cards can make you sick.
We have credit cards for the sole purpose of paying for our purchases, emergency needs, and making timely payments without incurring interest. We carry credit cards in our wallets as a backup for everything, but when you miss a payment, the nightmare begins, as lenders slap you with late payment fees, interest charges, and many hidden charges.
The effects on your monthly cash flow can be corrected once you pay off the debt or make up for late payments. However, credit card debt would have caused you a lot of stress and made you sick during these times.
If you ask your friends, family, or coworkers about credit cards, the majority of them will tell you that they regret having one. With all of the slowdown and recession fears, credit card debt can increase substantially.
Here’s an article from the New York Times about how credit card debt can affect your health in the long run.
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