Personal Finance

Investing is Saying “No” 99% of the Time

September 22, 2018 By Nagesh Belludi Leave a Comment

As an investor in high-quality public companies and startup ventures, I spend very little time each on a lot of investment opportunities and a lot of time each on a very few opportunities. Over seven-tenths of the returns I’ve ever produced have been with just four companies.

I try to learn of as many ideas and opportunities as possible, especially in companies led by first-class entrepreneurs and businesspeople. From time to time, I spend hours at the community library flicking through one-page summaries in the Value Line Investment Survey, arguably the best investment product available on the market.

Exposing myself to many opportunities makes me a better investor. Even if my stock-filtering method quickly guides me to say “no” commonly, my goal is to find a kernel of usable information to add to my “mental attic.” I can’t predict when something might come in handy to help make sound investment choices in the future. As the great investor Charlie Munger said at the 1996 Wesco Financial annual meeting,

Our experience tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly at scale, in doing some simple and logical thing, will often dramatically improve the financial results of that lifetime.

A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind that loves diagnosis involving multiple variables. And then, all that is required is a willingness to bet heavily when the odds are extremely favorable, using resources available as a result of prudence and patience in the past.

Conspicuous Consumption and The Era of Excess // Book Summary of ‘Luxury Fever’

July 3, 2018 By Nagesh Belludi Leave a Comment

The Superrich Influence the Standards for Desirability in Consumer Goods: The Less Rich Emulate Them

The core argument of Cornell economist Robert Frank’s Luxury Fever: Why Money Fails to Satisfy in an Era of Excess (1999) is that the extravagant consumption of the most affluent in our society has a ripple effect on everyone’s spending.

According to Frank, the desire for many to indulge in luxury “possessions” is motivated less by the gratification they may bring than by what others are buying or want to buy. We try to achieve happiness by improving our relative social status. For example, if your neighbor didn’t buy his new Mercedes Benz, you wouldn’t probably feel the need for the latest-and-greatest Jaguar, and you’d both work less, and spend more time with your loved ones and invest in meaningful experiences that bring you joy.

It is not just the rich who have gone on a spending spree. Middle- and lower-income earners have been spending more as well. The prime mover in this change may have been the increased spending of the superrich but their higher spending level has set a new standard for the near-rich to emulate, and so on down the income ladder. But although middle- and lower-income families are spending much more than in the recent past, the incomes of these families have not been growing.

While the rich have the money to indulge their whims, the rest of us tend to finance our wasteful spending through reduced personal savings or through increasing debt. To substantiate this trend, Frank describes burgeoning household debt and a remarkable increase in personal bankruptcies.

Luxury Fever summarizes persuasive biological and psychological evidence that suggests how human nature is such that we measure our success in relation to what others have. In other words, we tend to spend money on luxuries to appear to be more successful than others are. Frank concludes, “Evidence from the large scientific literature on the determinants of subjective well-being consistently suggests that we have strong concerns about relative position.”

Relative Consumption, Not Absolute Consumption, Affects Consumers’ Happiness

Much of the increased luxury spending is wasteful, given that consumers could get the same benefits by consuming non-luxuries with lower price tags. Research has proven that money doesn’t buy happiness,

Behavioral scientists find that once a threshold level of affluence is reached, the average level of human well-being in a country is almost completely independent of its stock of material consumption goods.

Frank’s thesis on runaway consumption and extravagant luxuries seems as valid now as it was in 1999, when his book was published at the height of the dot-com boom. The era of excess has now proliferated to India, China, Russia, and other developing countries that are facing not only widening economic inequalities between their rich and poor, but also mushrooming appetites for luxury goods among their affluent middle classes.

Can a Progressive Consumption Tax Challenge the “Luxury Arms Race”?

Based on the solid evidence he provides, Frank’s thesis on runaway consumption of extravagant luxuries and this era of excess is hard to dispute. Consumers have indeed been saving less, working longer hours, and spending more per capita on luxury goods. However, his claim that the spending patterns of the super wealthy has incited luxury fever among the non-wealthy lacks substantial evidence.

The Luxury Fever‘s solution to this problem is to come down hard on lavish consumption and to encourage more savings. To this end, Frank presents policy proposals that are reasonable in the abstract, but will face serious political and cultural hurdles. Frank promotes a tax exemption for savings and a steeply progressive consumption-based tax as a substitute for income and sales taxes. If Americans expend less on luxury goods, he argues, we’d collectively work less, and make more money available “to restore our long neglected public infrastructure and repair our tattered social safety net.” However, economists have argued that a progressive consumption tax would burden the non-wealthy more than the wealthy because the latter tend to save much larger percentages of their incomes.

The Good and Bad Sides of Consumerism: How to Clamp Down on Conspicuous Consumption and Encourage More Saving

Despite its flaws, Robert Frank’s Luxury Fever is a valuable read in behavioral psychology and behavioral economics. Luxury Fever offers an appealing compendium of interesting case studies, anecdotal evidence, and statistics on society’s current “wants-not-needs” and “more is better” materialistic way of life, and its harmful impact on our lives, relationships, and societies.

Complement with The Millionaire Next Door (1996, read my summary,) a bestselling exposition on the surprising secrets of America’s wealthy.

Wealth and Status Are False Gods

April 25, 2017 By Nagesh Belludi Leave a Comment

While it’s certainly one thing to know that money is a way to fulfill your requirements in life, it’s quite another when money becomes your primary motivation and measure of success, or when you come to equate happiness or worthiness with your wealth.

While there nothing characteristically wrong with material wealth or its pursuit, it’s easy to expect too much from money.

The New Testament (1 Timothy 6:10) reminds you to be aware of the difference between need and greed, “love of money is the root of all kinds of evil.” Money can push you to take on or keep you in unhealthy relationships and unsatisfying careers. It can lead you to neglect your social life and undervalue the importance of relationships. Besides, money can adulterate your soul, germinate dishonorable conduct, and make you unworthy regardless of the wealth you accumulate.

Status Is the Enemy of Passion

Prestige, cachet, status, wealth, and approval as dominant extrinsic motivators are appropriate and can be life-affirming in the short term, but they eventually confuse and undermine you from the things that do offer deeper rewards for a life well led. The British-American venture capitalist and essayist Paul Graham wrote in his stimulating 2006 article “How to Do What You Love” discussed the hollowness of pursuing “prestige”:

What you should not do, I think, is worry about the opinion of anyone beyond your friends. You shouldn’t worry about prestige. Prestige is the opinion of the rest of the world.

….

Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. It causes you to work not on what you like, but what you’d like to like.

….

Prestige is just fossilized inspiration. If you do anything well enough, you’ll make it prestigious. Plenty of things we now consider prestigious were anything but at first. Jazz comes to mind—though almost any established art form would do. So just do what you like, and let prestige take care of itself.

Prestige is especially dangerous to the ambitious. If you want to make ambitious people waste their time on errands, the way to do it is to bait the hook with prestige. That’s the recipe for getting people to give talks, write forewords, serve on committees, be department heads, and so on. It might be a good rule simply to avoid any prestigious task. If it didn’t suck, they wouldn’t have had to make it prestigious.

Materialism is Shallow

As a modern society, we are remarkably driven by status—because we regard ourselves more worthy of others’ respect if we possess a home in a status neighborhood, a vacation property, brand-name or even designer-label clothes, luxury watches, expensive jewelry, and so on. But the pursuit of a materialistic lifestyle comes at a high cost.

Writing about the shallowness of materialism, the Christian apologist Ravi Zacharias wrote in Recapture the Wonder (2003),

In a culture where the possibility of wealth and the acquisition of things is so defining of success, we end up pursuing things that, even if we are successful, can never deliver what we envisioned they would. The reason riches become such a snare is because we end up evaluating life in mercenary terms and being seen by others in such terms, and life is just not so.

Money can buy lots of things that make us feel good and important. However, people preoccupied with money and status are never satisfied. Often, their desires and debts grow faster than their means. The more they have, the more they think they need. Discouraging gluttony and lavish spending habits, the great Roman Stoic philosopher Seneca wrote (per Dialogues and Essays,)

Shun luxury, shun good fortune that makes men weak and causes their minds to grow sodden, and, unless something happens to remind them of their human lot, they waste away, lulled to sleep, as it were, in a drunkenness that has no end…. Although all things in excess bring harm, the greatest danger comes from excessive good fortune: it stirs the brain, invites the mind to entertain idle fancies, and shrouds in thick fog the distinction between falsehood and truth.

Idea for Impact: You are rich if you think you have enough

Put the value of money and the pursuit of wealth in perspective. Feel rich and have a soft spot for certain indulgences. But, don’t get trapped in the spectacle of riches.

Being rich and seeking status can cost a fortune—the things that you may have to do to flaunt your wealth can cost almost as much as your wealth itself. As the French philosopher Jean-Jacques Rousseau once said, “The money you have can give you freedom, but the money you pursue enslaves you.”

You are Rich If You Think You Have Enough

March 7, 2017 By Nagesh Belludi Leave a Comment

Money isn’t the most important thing in life, except when you truly don’t have enough of it. Nevertheless, virtually everyone at every income level seems to place too much importance on it.

The relationship between money and happiness is well established: money can buy happiness, but it can only buy less than most people think. Beyond a humble middle-class living, study after study shows that people with more money are no happier.

What Money Gets You

Wealth can actually give you three essential things.

Firstly, money can help establish a financial foundation. Money can reduce or eliminate the despair caused by poverty and debt. Once you amass a sufficient amount of wealth, financial troubles will not weigh on you so heavily. Money allows you to not only live a longer and healthier life, but also defend yourself against worry and harm. Further, a sizable wealth can give you independence from the entrapment of having to make money just to make money. Berkshire Hathaway vice-chairman and Warren Buffet’s business partner Charlie Munger once said, “Like Warren, I had a considerable passion to get rich, not because I wanted Ferraris—I wanted the independence. I desperately wanted it.”

Secondly, wealth can allow you to have vacations, gatherings, and spend meaningful time with family and friends. Many studies have shown that the tenor of your social life is one of the most significant influences on your emotional wellbeing. Folks with many deep social connections are less likely to experience loneliness, sadness, low self-esteem, and problems with eating, sleeping, and relaxing.

Thirdly, wealth can allow you to invest your time absorbed in activities that you’re passionate about. Happiness research is clear: people are often happier when they spend their money on life experiences rather than on purchasing material goods. We humans seek meaning. Therefore, life experiences—especially those involving other people—make us happy primarily because events often generate vivid memories that we can later recall with pleasure. In contrast, we quickly adapt to material goods we purchase. Harvard Psychologist Daniel Gilbert, author of the bestselling Stumbling on Happiness (2006,) explained the pleasure from buying experiences as opposed to material goods in a 2011 paper in the Journal of Consumer Psychology:

After devoting days to selecting the perfect hardwood floor to install in a new condo, homebuyers find their once beloved Brazilian cherry floors quickly become nothing more than the unnoticed ground beneath their feet. In contrast, their memory of seeing a baby cheetah at dawn on an African safari continues to provide delight. Over time, {people exhibit} slower adaptation to experiential purchases than to material purchases. One reason why this happens is that people adapt most quickly to that which doesn’t change. Whereas cherry floorboards generally have the same size, shape, and color on the last day of the year as they did on the first, each session of a year-long cooking class is different from the one before.

Another reason why people seem to get more happiness from experiences than things is that they anticipate and remember the former more often than the latter. … Things bring us happiness when we use them, but not so much when we merely think about them. Experiences bring happiness in both cases …. We are more likely to mentally revisit our experiences than our things in part because our experiences are more centrally connected to our identities. …

A final reason why experiences make us happier than things is that experiences are more likely to be shared with other people, and other people … are our greatest source of happiness.

Idea for Impact: You are Rich If You Think You Have Enough

Put the value of money and the pursuit of wealth in perspective.

Money is an opportunity for happiness. Money allows you to do what you please. But don’t fall into the trap of thinking that more money and more material goods will unavoidably make you more happy. A certain amount of money will surely make life easier and satisfied, but more money and more material goods bring more problems.

Feel rich, have a soft spot for certain indulgences, and invest in memorable experiences rather than in material objects.

Don’t get trapped in the spectacle of riches.

Don’t let money own you.

Use Zero-Base Budgeting to Build a Culture of Cost Management

May 17, 2016 By Nagesh Belludi Leave a Comment

Traditional Incremental Budgeting

As part of the traditional budgeting process, managers tend to roll their budget over from one year to the next. In addition to accounting for any strategic initiatives or headcount changes, they simply add to every line-item in the previous year’s budget a certain percentage “and then some” to account for cost inflation. They assume that the ‘baseline’ is automatically approved, so they justify just the variances versus prior years.

The drawback of this budgeting process is that nobody questions the underlying ‘baseline’ costs. Further, these cost increases are carried from year to year.

Zero-Base Budgeting

In the 1970s, Peter Pyhrr, a Texas Instruments accountant, formally developed zero-base budgeting. In his influential Harvard Business Review article and a book titled Zero-base Budgeting, Pyhrr advocated that a prior year’s budget should not be used as a benchmark for the next year’s budgeted costs.

With zero-base budgeting, managers prepare a fresh budget every year without reference to the past. Consequently, they start every line-item in the budget from a zero-base even if the amount didn’t increase from the previous year. They are thus forced to justify all claims on their organization’s financial resources as if they were entirely new claims for entirely new projects.

Advantages and Disadvantages of Zero-Base Budgeting

Zero-base budgeting advocates say that it detects inflated budgets and unearths cost savings by focusing on priorities rather than simply relying on the precedent. Managers secure a tighter focus on operations by justifying each line-item in their budgets, thereby reducing the money they allocate to the lowest level possible. Managers can also contrast competing claims on their ever-scarce financial resources and therefore shift funds to more impactful projects.

Zero-base budgeting critics call attention to the many practical difficulties of implementing this time-consuming tool. More importantly, since zero-base involves give-and-take, the budgeting process is susceptible to favoritism, cronyism, and political influence.

3G Capital’s Success with Zero-Base Budgeting

Zero-base budgeting has garnered much attention in the last few years as the centerpiece of an aggressive cost-cutting recipe used by 3G Capital, a thriving Brazilian buyout firm that’s renowned for its parsimonious operations. 3G’s predominant investment strategy is to acquire and then squeeze value out of companies, particularly in the food and restaurant industries.

At Anheuser-Busch, InBev, Tim Hortons, Burger King, Heinz, Kraft, and other acquired companies, 3G’s hard-nosed managers have used zero-base budgeting to initiate sweeping cost cuts. They’ve shut down factories, laid off thousands of factory workers, eliminated hundreds of management jobs, sold off corporate jets, forced executives to fly coach, restricted employees’ office supplies to $15 a month, and even asked employees to seek permission to take color printouts.

Inspired by 3G, many other companies have adapted zero-base budgeting to root out bloat. Some have even gotten carried away—for example, Pilgrim’s Pride (an American meat-processing company) used zero-base budgeting to measure how much soap employees use to wash their hands and how much Gatorade hourly employees consume during breaks.

Idea for Impact: Zero-Base Budgeting Is an Effective Cost-Management Tool

Cutting operating costs is an ever-bigger priority at many organizations. For each line-item in your budget, ask “Should this be done at all?” and “Is this the most efficient and effective use of our resources?”

Consider zero-base budgeting to rigorously find cost-effective ways to improve your operations. It can bring about cost discipline, force your operations to become lean, and ultimately boost your bottom line.

Surprising Secrets of America’s Wealthy // Book Summary of ‘The Millionaire Next Door’

February 12, 2016 By Nagesh Belludi Leave a Comment

The Millionaire Next Door summarizes anthropological research from the ’90s on the attributes of unassuming wealthy Americans. The authors, marketing professors Thomas Stanley and William Danko, offer unique insights into millionaires’ lifestyles and their buying habits. They explain that, in contrast to today’s earn-and-consume culture, the many ordinary folks who accumulate wealth live modestly and prize frugality.

When first published in 1996, The Millionaire Next Door generated widespread enthusiasm for its core message: that anybody could become rich by living below their means, efficiently allocating funds in ways that build wealth, and ignoring conspicuous consumption. Consequently, the book sold millions of copies and stayed on the New York Times bestseller list for three years.

A bulk of The Millionaire Next Door focuses on rejecting the stereotypical view of the wealthy; the authors write, “Most people have it all wrong about wealth in America. Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.”

The authors discuss the fancy trappings of wealth and the high cost of maintaining social status. They explain that wealthy individuals prioritize financial independence over a high social status. Further, they did not receive sizable financial support from parents, and raise their own children to be economically self-sufficient adults.

The Millionaire Next Door is a definitive example of books that present simple concepts by reiterating them ad nauseam with an overabundance of statistics, tables, charts, and anecdotes to attain a respectable book length. For instance, a tedious 31-page chapter discusses how the wealthy purchase cars and includes statistics for average price-per-pound of popular cars.

Recommendation: Skim. The Millionaire Next Door defends the timeless values of thrift, disciplined spending, and prudent accumulation of wealth. However, the book overemphasizes penny-pinching and the merits of hoarding money. The book feels dated (it was first published in 1996) and engages the reader in crude generalizations and oversimplifications.

Don’t Listen to Jim Cramer on Mad Money

September 21, 2015 By Nagesh Belludi 3 Comments

If you ever tune in to CNBC’s popular Mad Money show, you’ll notice that host Jim Cramer speaks about the financial markets with unabashed certainty. Behind the goofy sound effects and the onscreen antics lies his particular brand of stock market punditry.

Cramer’s energy and confidence are most evident in the lightning round where his devotees hail “Booyah” and ask for his take on a barrage of stocks. In response, Cramer presents quick statistics and declares, “Same-store sales in China rose 12% last quarter. It’s a screaming buy; they’re doing great. BUY! BUY! BUY!” Or, he blurts out, “This company is involved with deep water rigs, the deep water market has not come back at all. If it does go up at all, SELL, SELL, SELL!”

What’s most notable about Mad Money is that Cramer is seemingly equipped to answer questions about any listed company with all the gusto he can muster. How could he possibly know the ins and outs of every company: their products, finances, cash flow, competitive positions, market prospects, and current valuation? He may know of many companies cursorily, but how could he have intimate knowledge of every ticker symbol that his fans throw at him? You’ll never hear him say, “Sorry, never heard of them,” or “Gee … truth be told, I’m not familiar with their new products or how they compare to the competitor’s products. I really couldn’t tell you.” He’s loud. He’s boisterous. And, he’s got to have an opinion on every stock—if he doesn’t, there is no show.

Jim Cramer, the best entertainer in the financial media

Jim Cramer’s credentials are impressive: Harvard, Goldman Sachs, hedge fund management, and TheStreet.com. He is the author of many investment-advice books with titles as appealing as “Get Rich Carefully”, “Sane Investing in an Insane World”, “Confessions of a Street Addict”, “Watch TV Get Rich”. He is experienced. He has extensive knowledge of the markets. He is passionate. He is smart.

Nonetheless, do not let Cramer’s credentials fool you about Mad Money‘s intent. His antics are entertaining. He wears silly costumes, yells at the camera, throws chairs around when angry, hits things with mallets, and chews heads off foam bears—all while producing goofy sound effects that include squealing pigs and a flushing toilet.

Jim Cramer’s opinions on Mad Money are often one-dimensional, half-baked, oversimplified, or wide of the mark. In the very first Mad Money episode I watched in 2005, a caller on the lightening round asked him about a company called PetroKazakhstan. Cramer’s response was that he did not trust the Russians. PetroKazakhstan was a Calgary-based Canadian oil company that was led by Canadian executives, did all its business in Kazakhstan, and had little to do with Russia. (The state-owned PetroChina acquired PetroKazakhstan in 2006.)

Don’t identify Cramer’s show with sound investment advice

As with other programs in the financial media that are teeming with talking heads, watching Mad Money can give you pointers as to what’s happening in the markets and in business trends. You can get ideas for what stocks to research or even speculate on. However, none of it constitutes sound investment advice.

Cramer’s job is not to make you money. He gets paid by CNBC to generate viewership and to entertain viewers with the pretext of dishing out dependable investment advice. He is not a trickster; he just is an entertainer on Mad Money, a fact that he acknowledged in a 2007 essay in the New York Magazine: “On the show, I say stupid things, yell ‘Booyah’ with alarming frequency, and occasionally wear a diaper or jump into a pile of lettuce to illustrate the finer points of investing. … God knows why, but there seems to be a market for this kind of idiocy.”

Watch Mad Money for the frenzy and personality-driven entertainment. Don’t take his speculative tips or investment advice seriously. Instead, do on your own research.

Rule #21 in Cramer’s 25 Rules of Investing states, “Be a TV critic: accept that what you hear on television is probably right, but no more than that.” Now, that’s good advice.

Is Day Trading and Speculation for You?

September 18, 2015 By Nagesh Belludi 1 Comment

A few weeks ago, even as stock markets around the world suffered a turmoil triggered by downbeat economic news from China, a prolific 36-year-old Japanese day trader claimed to have made $34 million by betting big against the market trends and timing the bottom precisely.

Notwithstanding frequent mention of such success stories and blaring ads in the media tempting you to stake money on your wits and your instinct to profit from market swings, it can be very hard to make money consistently in day trading and short-term speculation.

As a fundamentals-based long-term investor, I don’t think there is anything wrong with day trading or short-term speculation. With skill, strategy, and the right temperament, it’s possible to be just as profitable in speculating as in investing with any other time horizon.

Over the years, many sophisticated stock-analysis services have emerged to facilitate trading and speculation by amateurs such as these pictured day-traders from Bangalore. Vast online social networks such as StockTwits engage in the exchange of information, opinion, gossip, rumors, and stories of successes and losses.

Day Trading and Speculating by Amateurs in Bangalore, India

For a few successful trades, luck may be the main factor. However, in the fullness of time, the most important factors for consistent stock market gains are discipline, temperament, and risk management.

Most day traders fail because it’s too darn hard to time the market. They lack a coherent technique that works consistently. Instead of following a definite strategy rooted in fundamentals or a structured thought-process, they follow the news-tickers, minute-by-minute stock prices, volume- and price-trends, and poorly understood media-fed euphoria. Moreover, most day traders engage in short selling, a complex skill that goes against the grain of the conventional buy-and-hold mindset. Worst of all, most speculators don’t understand how their emotions come into play—both when they lose and when they win.

Like anything that requires focus, drive, discipline, persistence and a stroke of luck, day trading and speculation are hard to do successfully. It may take years of painful education and experimentation before creditable success. The U.S. market regulator Securities and Exchange Commission (SEC) offers the following cautions on day trading:

Be prepared to suffer severe financial losses

Day traders do not “invest”

Day trading is an extremely stressful and expensive full-time job

Day traders depend heavily on borrowing money or buying stocks on margin

Don’t believe claims of easy profits

Watch out for “hot tips” and “expert advice” from newsletters and websites catering to day traders

Remember that “educational” seminars, classes, and books about day trading may not be objective

Idea for Impact: Most studies on day trading and speculation reckon that over three-fourths of amateur traders lose money, some of which may have been borrowed. The high risk that comes with high-yield investments and the self-inflicted stress of loss and debt may not be for you.

A Low-risk Alternative: There is no fail-safe way to invest without any risk. If you don’t have the time, energy, determination, or a strong understanding of investing, consider low-cost index funds. Do your own research. Read my previous article about John Bogle, founder of Vanguard and his tireless advocacy of low-cost index funds.

Recommended Reading: Edwin Lefevre’s 1923 classic, “Reminiscences of a Stock Operator”, is a fictionalized biography of Jesse Livermore (1877–1940), one of the greatest stock market speculators of all time. This “font of investing wisdom” (per Alan Greenspan) is filled with insightful trading advice and shrewd market/price movement analyses.

This Man Retired at 30 and is Ridiculously Happy

December 12, 2014 By Nagesh Belludi 1 Comment

“What’s money? A man is a success if he gets up in the morning and gets to bed at night and in between does what he wants to do.”
—Bob Dylan, American Musician

Early in my professional life, I pursued an ambition to attain wealth—not because I sought after luxury, but because I wanted to realize a financial foothold that could help me become financially independent and invest in a meaningful life. I’ve been “retired” for two years now, work very hard on my true pursuits, and live life on my own terms. I might fancy a change in the future; for now, I am living the dreams and I couldn’t be happier.

Money is a False God

Most people spend the better part of their adult lives chasing the almighty dollar in an ostensible pursuit of success and happiness. Wealth, characteristically manifested in the acquisition of things, becomes so defining of their success that it becomes their primary measure of accomplishment. Later in life, they wake up to the distressing fact that everything they’ve earned isn’t bringing them the wonderful life it was supposed to.

Pursuit of riches becomes such a trap because many people easily appraise life in terms that are defined by others.

Enjoy a Life of True Wealth

I admire anyone who is self-disciplined and is willing to live their life on their own terms. Last year, The Washington Post carried an interesting interview with a man who had retired at the age of 30, not caused by extreme wealth but by living with less. Mister Money Mustache realized early that the pursuit of material things could lead to a persistent sense of emptiness. Rather than being unfulfilled, his family’s live-with-less way of life has made them “ridiculously happy.” Here is an excerpt of the interview.

Q: You describe the typical middle-class life as an “exploding volcano of wastefulness.” Seems like lots of personal finance folks obsess about lattes. Are you just talking about the lattes here?

A: The latte is just the foamy figurehead of an entire spectrum of sloppy “I deserve it” luxury spending that consumes most of our gross domestic product these days. Among my favorite targets: commuting to an office job in an F-150 pickup truck, anything involving a drive-through, paying $100 per month for the privilege of wasting four hours a night watching cable TV and the whole yoga industry. There are better, and free, ways to meet these needs, but everyone always chooses the expensive ones and then complains that life is hard these days.

With Needs, Without Wants

December 2, 2014 By Nagesh Belludi Leave a Comment

Contentment is worth more than riches. Having few desires and feeling satisfied with what you have is vital for happiness.

Be Happy with What You Have

In a This I Believe essay, Marianne Bachleder of San Francisco reminisces about consumerism and about being conscious of how much she already has:

We forget to be happy with what we have and in our forgetfulness we spread the infection of discontent. It’s a mistake easily made in a world where everyone is expected to pursue every want—the newest gadget, the latest update.

…

I may want shiny things, but I don’t need them. What I do desperately need is the peace of mind found in moments of contentment and gratitude. I need to identify each of my wildcat urges to purchase or possess as either “want” or “need.” My needs are basic, predictable, manageable. My wants are chaotic changelings, disturbers of the peace that can never be satisfied.

I will tend my needs, I will whittle my wants, and I will say often, “I’m happy with what I have.”

Thrift to Wealth

Jonathan Clements, personal finance columnist at Wall Street Journal and author of ‘The Little Book of Main Street Money’ and the forthcoming ‘Money Guide 2015’, spoke of thrift and the wealthy in an interview with Vanguard:

Over the years, I have met thousands of everyday Americans who have amassed seven-figure portfolios—and the one attribute shared by almost all of them is that they’re extremely frugal. When I was at Citi, I used to joke to the bankers that they would know a couple was wealthy if they pulled up to the branch in a second-hand Civic, wore clothes from J.C. Penney, and asked to have their parking ticket validated.

Shop at Amazon & Support a Noble Cause

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Personal Finance

Wondering what to read next?

The Superrich Influence the Standards for Desirability in Consumer Goods: The Less Rich Emulate Them

Relative Consumption, Not Absolute Consumption, Affects Consumers’ Happiness

Can a Progressive Consumption Tax Challenge the “Luxury Arms Race”?

The Good and Bad Sides of Consumerism: How to Clamp Down on Conspicuous Consumption and Encourage More Saving

Wondering what to read next?

Status Is the Enemy of Passion

Materialism is Shallow

Idea for Impact: You are rich if you think you have enough

Wondering what to read next?

What Money Gets You

Idea for Impact: You are Rich If You Think You Have Enough

Wondering what to read next?

Traditional Incremental Budgeting

Zero-Base Budgeting

Advantages and Disadvantages of Zero-Base Budgeting

3G Capital’s Success with Zero-Base Budgeting

Idea for Impact: Zero-Base Budgeting Is an Effective Cost-Management Tool

Suggested Reading

Wondering what to read next?

Wondering what to read next?

Jim Cramer, the best entertainer in the financial media

Don’t identify Cramer’s show with sound investment advice

Wondering what to read next?

Wondering what to read next?

Money is a False God

Enjoy a Life of True Wealth

Wondering what to read next?

Be Happy with What You Have

Thrift to Wealth

Shop at Amazon & Support a Noble Cause

Wondering what to read next?