Say What Wednesdays

Financial Independence, spending habits, neurotransmitters, and what you can start doing today

Today’s Say What Wednesday question is from Paul;

“Hey fellas! I think you guys are doing a great a job. Always a fun listen.

Question; I was wondering your thoughts on the world of FI (financial independence) which is getting more momentum, to the likes of Mr Money Mustache and other FIRE? Have you taken a similar approach to these people with your own personal finance, having savings rates as high as or higher than 50% of total take home income?”

For those who don’t know:

  1. Financial Independence Retire Early (FIRE)
    • i.e. Save and invest most of your income now

I really like the idea of Financial Independence and employ it myself to avoid the hedonic treadmill creep. I set a base living standard and then invest everything I earn on top of this figure.

Whilst I was PAYG a little while ago I was saving between 50-60% of my income and investing it, with a decent chunk being salary sacrificed. I’ve been in the process of setting up a new business in the past 18 months which put a dint in the ability to save, but hope to get back to that level shortly. I always reinvest income from investments – starts to make up a larger component of your income.

Keeping things simple – It is hard to get to that point – But with one simple trick you can start working in the right direction. It starts with, ‘How to not care about what I have, or how I relate to others’

Where it comes from – Spending habits – Shopping, cars, etc.

  1. Dopamine – Reward system – Buying something is the easiest way to get this
  2. Serotonin – Status symbols – feeling higher up in the social picking order
  3. Money provides both of these thing – But only in what others can see
    • Dopamine is easier to do. Focus on savings every month and get your hit of dopamine when you achieve the target
    • Serotonin is harder to do. It does require a bit more self-confidence (self-esteem) to be happy not chasing the way out through buying things. If you’re constantly looking at what other people have you’ll always be unhappy – there is always someone else with more.
  4. Why you can never really tell who has real wealth just by looking at them (or if it is funded through debt and cashflow)
    • Met a guy who owns a helicopter, every time I saw him he was in old sneakers, old t-shirt.

What you can do

  1. Play a game – You can think of it as tricking people – turn the game around and as long as you know are making yourself wealthy, and not others buying their stuff it can work.
  2. Endowment effect – Put more value to what you already own
    • Turn it into thinking about Keeping your money – put a premium on your spending habits
      • Essentials – 0%
      • Non-essentials – Gross the price up by a factor:
        • Example – New TV is $3,000 – Life of TV is 10 years
        • Earn 7% on that over the same time – is the TV worth $6,000?
        • Thinking in terms of future value and opportunity cost
      • To part with it, the item better be worth it

Conclusion

You don’t have to live like a pauper – enjoy your life with great experiences. But, just next time you’re looking at a big splurge on something, gross up the value and see if it is still worth it!

Furious Fridays: What happens if the EU collapses?

Furious Friday What happens if the EU collapses? Welcome to Finance & Fury, the Furious Friday edition. For the past few weeks we’ve been talking about the EU and this week we’ll finish up by looking at the flow on effects of the EU breaking up. There’s no way to...

Say What Wednesdays: What’s an Education Fund and what are the tax benefits?

Say What Wednesdays What's an Education Fund and what are the tax benefits? Welcome to Say What Wednesday! This week the question comes from Sean, "You spoke about Education Funds in a recent episode, I’m just wondering if you can explain this further?" In this...

Furious Fridays: The Death of Stalin

Furious Fridays The Death of Stalin Last episode we ended with Lenin’s death. The roll out of Communism was well underway and it was time for new leadership. One his last policies before he died in 1924 was the New Economic Policy (NEP) in 1922… A mixed economy put in...

Say What Wednesdays: The Trump Economy

Say What Wednesday The Trump Economy Today, we’re talking about the Trump economy, and the state of the US market. Love him or hate him, America is doing better than ever – Trump just can’t stop winning when it comes to a lot of political and economic factors. In his...

Goals and Risk profiles, and Philosophy and Strategy workbook guides

Welcome to Finance and Fury Today we will be going through the workbook itself How to put the goals and risk profiles together How to work out the investment philosophy and strategy How to put together the investment plan and checklist Three downloads - Found on the...

Furious Friday: Could social security be the greatest Ponzi scheme ever?

Furious Friday Could social security be the greatest Ponzi scheme ever? Welcome to Finance and Fury, Furious Friday! I saw an ad this week for a movie called ’Wizard of Lies’ – Bernie Madoff movie – 2008. He was a stockbroker, investment adviser and financier who made...

The skinny on spare change investment apps and building wealth when you’re earning $25,000 or less a year.

Say What Wednesday The skinny on spare change investment apps and building wealth when you’re earning $25,000 or less a year. Welcome to Say What Wednesdays – Where we answer your personal finance questions each week. Two questions this week from Chris: No 1 what are...

The number of homes being put up for auction across Australia has plummeted as falling property prices and fewer cashed-up buyers shake the confidence of owners looking for the right time to sell

Episode 25 The number of homes being put up for auction across Australia has plummeted as falling property prices and fewer cashed-up buyers shake the confidence of owners looking for the right time to sell The decline of auction rates and confidence in the market...

Understanding foreign currency

Episode 31 Understanding foreign currency Welcome to Finance and Fury. Before I start I want to say a massive ‘Thank you’ to our listeners. We cracked 150k downloads in the first 6 months which is phenomenal. Also, thank you to everyone who has taken up the course – I...

Say What Wednesdays: Shorten Vs Morrison

Say What Wednesdays Shorten vs Morrison Government "Spending" Everything is portrayed as a ‘cost’, which is ironic. “Costs” from the Government’s perspective is simply NOT charging you tax. Not taking all income earned is a trillion-dollar cost to them.  ...

Pin It on Pinterest

Share This