Afford Anything - Random Smattering of Lessons on Money, Work and Life — plus A Call for Radical Authenticity

Episode Date: November 13, 2017

#103: On today’s show, I'm sharing this random smattering of lessons on money and life.⠀ ⠀ 1) Simplify everything.⠀ 2) Risk = Probability x Magnitude.⠀ 3) Curate.⠀ 4) Never delay gratification.⠀ 5) Know your net worth, relative to your lifetime earnings.⠀ 6) Don't half-ass anything. (Whole-ass a few things.)⠀ 7) When you're not at work, don't be at work.⠀ 8) Yes, and.⠀ 9) Money can't make you happy, but a lack of money can make you unhappy.⠀ 10) Every conversation about money is really a conversation about values.⠀ 11) The less you try, the better.⠀ 12) Work with your nature, not against it. ⠀ 13) The thing should be its own reward.⠀ 14) Practice radical self-reliance.⠀ 15) Achieve being through doing.⠀ 16) What is stated, happens.⠀  ⠀ I elaborate on each of these in today’s episode. In addition, I’m also sharing my mini-keynote from FinCon on the importance of authenticity and passion in online business.   Enjoy!   You can subscribe to show updates at podcast.affordanything.com -- just throw your email address into that big box above-the-fold. Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every decision that you make is a trade-off against something else. And that's true not just of your money, but also your time, energy, focus, attention, anything in your life that's a scarce or limited resource. And so the questions become twofold. Number one, what are your highest priorities? And number two, how do you align your day-to-day actions and behaviors to reflect those priorities, those values? Answering these two questions is a lifetime practice. And that's what this podcast is here to explore.

My name is Paula Pan. I'm the host of the Afford Anything podcast. And today I'm going to share with you two speeches that I recently delivered at two different conferences. One of these conferences was down in Ecuador a few weeks ago. It was a week-long financial independence retreat. And so what I'm going to share today is the speech that I delivered at that retreat in Ecuador. And that's actually one of two speeches that I'm going to share with you today. The topic of that particular talk is a summary of the many lessons that I've learned over the past decade about money, work, human psychology, happiness, fulfillment.

It encapsulates a lot of the highlights of things that I've learned through reflection and trial and error. So that is coming up on today's show. The other talk that's coming up on today's show is a mini keynote that I delivered at FinCon, which is a conference that was in Dallas this year. and that conference is geared towards people who blog or podcast about money. So it's a little bit of a behind the scenes conference. And the talk that I gave was aimed at that audience. So it's more of a behind the scenes talk about what we do here. And that particular speech is about the importance of being authentic online.

The talk that I gave in Dallas, by the way, it's only 10 minutes long. And it's harder to give a 10 minute talk than it is a two-hour talk, I've noticed, because a 10-minute talk just needs to be so much more polished. And that talk was there were 1,700 people at the conference. So it was the biggest crowd I've ever spoken to. And so in order to prepare, I hired a public speaking coach. We've had eight sessions together over the past few months. So I'm going to start by playing that talk for you.

Later on, I'll be posting videos of both of these talks to YouTube. I don't know exactly when that's going to be ready, but YouTube.com slash afford anything. You can check for it there and I'll let you know on a future episode when those are ready. With that said, let's begin. So here is talk number one of two

of what I'm sharing in today's episode and this is the talk that I delivered in Dallas about the importance of being authentic online. Does this sound familiar? You're tired of working at a nine to five doing whatever your boss wants. So you start freelancing. Then you realize,

that your clients are your boss, and you're sick of doing what they want. So, you start blogging. Finally, you have no boss, and you can do whatever you want, but you want to make some money. So you decide to sign up for some affiliate programs, start an email list, and maybe even launch a course.

But the only problem is that you have no idea what you're doing. Does this sound familiar? Can you relate to this? This was a position I found myself in a few years ago. And so I decided to read mountains of advice about email marketing and product launches. Most of this advice can be boiled down to two steps. Discover what your audience wants. And then serve it to them. Have you heard this?

I mastered step one. I gathered survey data. I ran heat maps. I tracked clicks and open. and shares and comments and likes and unsubscribes, I discovered what my audience wants. And then, I stopped caring. I had all the market research in the world, but no motivation.

At first, I couldn't figure out why I'd lost my mojo. Was I depressed? Was I self-sabotaging? It didn't make sense. I mean, when I started blogging, nobody read me. I'd struggled for years, slowly building an audience, and now finally, here I was, with an email list that I was proud of and a platform that I loved, and yet I had no motivation to keep writing. Why? And that's when I realized, I don't want to serve my audience.

Not if that means that my audience would become my new boss. You see, I was letting my audience tell me what to write. I was letting them drive my content. But no audience survey will ever say, we want you to be bold, we want you to be creative, we want you to dig deep and think big. No, what they say is, oh, can you explain how to pick homeowners insurance?

Or how do I set up an LLC? Look, you don't need me to answer that. A thousand people have answered that. a thousand times all over the internet. My answer will not be unique. And since value comes from scarcity, my answer, therefore, will not be valuable. Value comes from what's unique within. Value comes from your ideas, your thoughts, your insights, not your willingness to write for clicks and keywords. And look, I get it. It's natural to be worried about what other people think. and it's natural to want to do things for other people.

But you cannot create your best work if you're coutowing to the crowd. You won't find artistic vision in an audience survey. I mean, think about it. When Michelangelo was up on the scaffolding of the Sistine Chapel painting his masterpiece, do you think that he was ever like, oh, hey, guys, hey, where do you think I should paint the hand of God?

And do you like these colors? And really, the ceiling you think it should. should be there? Of course not. He didn't ask that because he knew that design by consensus yields average results. Value comes from creating what only you can create. As bloggers, podcasters, and YouTubers, we are judged by the size of the crowd that forms around us. But there is only one way to win at this popularity contest. Stop caring and start creating. True connection comes from work that's inspired, not work that's email six out of ten in Autoresponder A. Now I'm curious about how many of you have felt this same experience.

Raise your hand if you've ever felt so pressured by audience expectations that you forgot to listen to yourself. You forgot the sound of your own voice. When somebody asks you to write about something, do you ever feel compelled to obey? The other day, one of my readers asked me to write an article about the tax implications of Airbnb being a primary residence. And the thing is, I don't really want to. I write less than one blog post a month. I don't want it to be about that. And I have learned slowly that just because somebody asks for something doesn't mean you have to give it. If Elon Musk had asked people what they wanted, they would have told him to invent a car with better gas mileage. But Elon never bothered asking. Because he knows.

you can't change history from the middle of the bell curve. And ultimately, counterintuitively, you can help the most people if you lead from a place of vision and inspiration. Your audience sees you as a thought leader. But if you follow their demands, you're no longer leading. You're following your followers. And now nobody knows who's in charge. Remember, you're the boss.

You're the visionary. This is your outlet. The revolutionaries who came before us, the people who shook the worlds of architecture and music and food and art and technology, they thought bigger than the crowds. And that's why their work outlives them. Ultimately, our work will be our legacy. And if your goal is to leave a legacy,

not just make a buck or two, but to leave behind work that represents your time on this earth, you cannot follow the crowd. You must ignore the crowd and serve the craft. I'll repeat that. You are here to serve the craft, not the crowd. Pandering never builds a legacy. Ultimately, don't you want your grandkids to remember you for more than just writing articles

on five ways to save on car insurance? We will, at the end of the day, hopefully leave behind more than just a pile of Facebook likes. Each of us are called to create, regardless of your religious affiliation, whether you believe that your calling comes from God or the universe or the flying spaghetti monster. We are all called here to create, and that creation cannot be guided by market research. Never let conversion analytics usurp your purpose. Now, you might be wondering, okay, Paula, what does that mean you don't care about traffic or money? Don't be silly. Of course I care. Who doesn't like money? But I'm not going to pander to it because that may produce short-term gains, but it'll be counterproductive in the long run. Everybody hopes that their book will become a bestseller, or that their podcast will pull in six figures, or that their blog will get a million visitors a month. Everybody hopes that. But the way we handle that hope is different. Some people handle it by surveying and then catering to the crowd, and the result

is a generic Me Too brand that lacks stickiness and longevity. Others, however, become bold originals who demonstrate radical authenticity. These are the ones

we remember. At the end of the day, there are only two reasons to read any blog or listen to any podcast. Number one, the creator has something meaningful to say. And number two, they say it well. Be real and your tribe will find you. When you are painting the ceiling of your own Sistine Chapel or redesigning the future of transportation,

do not worry about momentary public opinion. Just create. Just create. Thank you. All right. So that is the speech that I'm giving tomorrow by the time this airs. I will have already given it. That's the speech that I'm giving here at FinCon. And as you've just heard, it is a talk about the importance of being authentic, being real, and providing something of genuine value when you are starting a business. So for those of you who are listening who are interested in entrepreneurship or side hustles or starting some type of an online business, the TLTR of what I've just said is don't be formulaic

and don't let your decisions be guided by conversion analytics and market data. be real, provide something unique, and bring your own value out into the world. And I know that that sounds a little hippie-dippy, but truly, genuinely, at the end of the day, being you is the thing that is going to stand out, particularly if you have some type of creative pursuit, writing, podcasting, some art or craft, or something that you make, being you and bringing yourself into it is ultimately the thing that will sell best. It's the thing that will perform best. So that's my online entrepreneurship tip for the day.

Up next, I will be sharing the speech that I gave in Ecuador about random musings on money, work, and life. We'll come back to the show in just a second. But first, regardless of whether or not you have debt, managing healthy credit is important if you want to buy houses. whether it's a personal residence or an investment property, or if you want to open up new credit cards, if you want to lease a home in a different city for lots of other things,

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to you by LinkedIn Learning, which now features Linda.com content, which is the leader in the online learning space for more than 20 years. LinkedIn Learning is a platform that offers courses and tools that you can access, regardless of whether you are trying to learn how to boost productivity, how to optimize routine tasks, heck, even how to be a better photographer. They have courses on lots of different topics. If you're interested in learning how to improve your skill set in Excel, Outlook, Google apps, Microsoft Project, Project Management Tools like Jira, they've got courses on how to boost productivity on almost any software.

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Well, I hope you enjoyed that. The next talk that I want to share with you is about what I learned during my journey from being somebody who made $21,000 per year to being somebody who reached financial independence. So I call this talk. This is the talk that I delivered in Ecuador at the financial independence retreat. I call this talk a random smattering of lessons about money, work, and life. I call it that because I was trying to find some kind of. cohesive narrative thread that would give these lessons some type of shape, but life doesn't fit into cohesive narrative threads. And so this is just a random assortment of the lessons that I've learned over the years. Again, there are slides that are associated with this talk, and I will have those slides on YouTube. That's YouTube.com slash afford anything. I'll have those on YouTube along with an audio version of this podcast. So check that out. YouTube.com slash afford anything. That said, let's get started. A random smattering of lessons about money, work, and life. First of all, for anybody who doesn't know me, I'm just going to briefly introduce myself in order to give you some

background or context behind this. When I got a job, I figured I'd be a traditional W-2 employee for the rest of my life. It never occurred to me that there was any other alternative. And so, like most people, when I graduated from college, I got a job that seemed to be the only course of action that I could think of. Now, there was one thing that was a little bit unusual about me, which is that when I got my first job, I already had the intention of quitting. And the reason for that is because I've always loved to travel. When I was in college, I really wanted to study abroad. But those programs, the study abroad programs, were prohibitively expensive. $15,000 to $20,000 for a single semester.

And so I thought about it and I realized I don't actually want to study. I just want to go abroad. So I figured that I could graduate, get a job, work for a few years, save up some money, and then quit and go travel. At the time, I had no idea that financial independence, which I define as the state at which your passive or residual income from investments earns enough money to support you, such that you don't have to trade time for money anymore. That's my definition of financial independence. At the time, I did not have that definition.

I had no idea that such a concept existed. So at the time that I graduated, I figured I would get a job, work for a few years, save up some money, quit, travel, spend down that money, and then reenter the workforce again. And in fact, that's more or less exactly what ended up happening. So my plan was to follow a model of working, quitting, working, quitting. I call this the mini-retirement model where a few years of work are followed with a few years of relaxation and you kind of swap back and forth between the two. The analogy that I sometimes use is that it's like running sprints. You sprint, then you rest, then you sprint, then you rest. It's the interval training form of organizing your work life. Now, what I didn't know at the time was that as it turned out,

I only ended up being traditionally employed by an employer with a W-2 salary for three years. And I was employed from 2005 to 2008. In 2005, I had a starting salary of $21,000. And in 2008, when I quit, my ending salary at that job was $31,000. That's the most I ever made through traditional employment. So here's what I did. During those three years, from 05 to 08, I had a side hustle in the evenings and weekends as a freelance writer. Over the course of those three years, I lived on the money.

that I earned from my regular day job, and I saved all of my side hustle money, and after three years, I'd managed to save $25,000. This was in 2008. So, once I had the $25 grand in my pocket, I quit my job. And then I spent the next couple of years traveling in countries where the dollar exchange rate really worked in my favor, traveling in Southeast Asia, primarily. I spent 10 months in Australia, but I was living in a car at that time, camping. every night. So for the next two years, I was just traveling. I worked a little bit during that

trip, but not very much. I would write the occasional freelance story here or there just to keep my skills fresh and to keep my contacts active, but for the most part, I just lived on my savings. When I came back to the U.S., which was in 2010, I had just a couple of thousand dollars, a couple few thousand dollars left over. I didn't want to go back into the workforce because having had a taste of autonomy, having had that taste of not having to be at my desk in an office at a particular hour, I didn't want to go back. So I figured at that time that I would be self-employed for the rest of my life. At the time, I still, this is in 2010, I still had no idea that financial independence was a concept. I didn't know it existed. I figured that I could live a life

of freedom and flexibility by virtue of being self-employed. And since I had already been freelancing for a number of years, I had the confidence to know that I could get freelance assignments. And that's huge. So very slowly, I started making a full-time career for myself as a freelance writer. And eventually, freelance writing actually grew into all types of digital consulting. So digital marketing, online management, brand management. That was later a couple of years down the road. In the beginning, in 2010, I just started making a self-employed career for myself, writing articles for websites. Now, at the same time, I was totally freaking out about lack of security. I was worried that

these assignments were going to dry up, and my worst fear was having to get a job again. I still had no idea what financial independence was as a concept, but I knew that I wanted to create multiple streams of income in order to safeguard myself against having to go back into the workforce. And so what I did was, I mean, at the most basic level, I looked at how I could increase the gap between what I was earning and what I was spending. Now, at the time, this was in 2010, Will and I had just moved to Atlanta and we rented one bedroom within a three-bedroom unit. So we lived with random roommates that we found on Craigslist. Our rent for that one particular bedroom in a shared space was $400 a month. And Will and I split that. So our rent was $200 per month

per person plus utilities. I drove a car that had a resale value of $1,500. And Will is a vegetarian anyway. So our grocery costs were the cost of eating vegetarian from Costco. So we lived very, very frugally at the time. We weren't making very much. Will had just gotten a job. He had been traveling with me, so he'd been unemployed during the years that we were traveling together. And so when we, in 2010, when we came to Atlanta, he got a job making $40,000 a year. And I was getting my freelancing business off the ground, which eventually did well, but in 2010 it had a very slow start. So we weren't making much, but also we weren't spending very much either. Like I said, our rent was $200 per person. And that was how we were able to increase the gap between what we

earned and what we spent. And we were hustling hard. I mean, I was up late at night writing articles and up early every morning just pitching editors and accepting every assignment, regardless of how mind-numbing it was. And the motivation for all of that, again, I didn't know anything about financial independence. I just wanted to create some type of other stream of income, some sort of passive or residual income. Again, not because I wanted to be FI, but because I just didn't want to ever have to go back to the workforce, the traditional workforce. And I wanted to ensure myself against that. And so anyway, to cut a very long story short, we were hustling hard, we were saving really hard. Then we just plowed all of our money into buying rental properties.

Then the snowball starts to roll faster and faster, right? Like the more you buy and the more passive income that you're making, eventually that fly we all just start spinning faster. And so that's what ended up happening with us. And so now we have seven rental units. That's one triplex and four single family homes. And over a long-term average after expenses, they collect between $3,000 to $4,000 per month net as a very, very, very, very long-term average. So as I share in my cash flow reports, there are some months where, you know, July 2016, the rental properties brought in negative seven thousand dollars for that particular month because we were making a big repair. But May 2017, the rental properties brought in positive $7,000. So over a very long-term average, they bring in

ballpark three grand net, but I want to emphasize the volatility there. So anyway, that's my background. That's my story. That's a journey that I've been on between 2005 and today. The reason that I'm sharing that as context is to introduce some of the lessons that I've learned over the course of that time. And so here they are. Lesson number one, simplify everything. Humans are super bad at multitasking and bad at complexity. We have fragmented attention.

In order to accomplish things, counterintuitively, simplify them. Don't try to optimize everything. Find the simplest way to do whatever you're trying to do and then move on. So, for example, within your investments, you could spend hours and hours making micro tweaks to your asset allocation. But why bother? Just pick some asset allocation that you're happy with and move on. Same thing with rental properties. You could spend so much time going down the rabbit hole of, all right, well, what about there's rentals and there's flipping, there's wholesaling, there's tax liens, and there's residential, and there's commercial, and there's offices and warehouses and mobile home parks.

Dude, don't try to do lots of fancy stuff. Just pick one niche and one strategy. So for me, my niche is residential properties and my strategy is buy and hold. And it's not because that's quote unquote the best. It's not at all. It's because I'm not trying to do everything. I'm simplifying. I'm picking one thing, learning how to do that one thing, doing the one thing, and moving

on. Likewise, simplify your cash flow. By which I mean, if you're trying to save money, don't bother creating a detailed line item spreadsheet with loads of different categories where you're like, okay, this is exactly how much we're spending on groceries, this is exactly how much we're spending on clothing, because that's complicated and it's time consuming and how long are you really going to stick with it. If you want to simplify that whole process, there's only one thing you need to do, and it's called the anti-budget. And the way it works is very easy. You pull your savings off the top first, and you chill out about the rest. So pick a savings rate. Could be 15%, 20%, 30, 40, 50%, whatever it is that you choose. Automate pulling it off the top

first, and then don't worry about whatever's left over. Just take that leftover amount, use it to pay the bills, And if there's money left over after paying the bills, then cool, you've got some fun money. But you don't need to create a hyper-detailed line item budget because that introduces complexity into the system. And the more you introduce complexity into a system, the more likely that system is to fail. Simplify your work. Same idea. With every project that you undertake at work, find the simple 80-20 solution. Simplify your workouts.

This is big. I've finally figured out that I don't need to learn 40 different types of exercises. I just need to do a few. Bench, deadlifts, squats, some cardio, some stretching. I don't need it to be any more complicated than that. Simplify your eating. Think through the way that you shop and plan and prepare for meals and then ask yourself, all right, how could this be simpler?

And your answer is going to be different things for different people. Like for some people, you'll just eat the same thing over and over and over. For some people, you'll subscribe to a meal subscription delivery service. For some people, you'll just give up on eating entirely and drink soylent. Have you all heard about that? That's like a meal substitute thingy. I've got a bunch of friends who are really into it. Whatever it is that you choose, just think through your eating process.

Wow, I make it sound like a lot of fun. Woo! Think through your eating process and simplify it. So that's lesson number one. simplify everything. Lesson number two, risk equals probability times magnitude. Think of every decision within this light. So if the probability of something is low, but the magnitude is high, then there is inherent risk. And by the way, low probability high magnitude events are the ones that you definitely want to insure for. I have health insurance

with a super, super high deductible. So if I get hit by a bus or if I get diagnosed with cancer, that's when it's going to kick in. But for a hospital bill for $4,000 or $5,000, I'm going to have to pay for that out of pocket. The reason that I have that health insurance is because when it comes to something like getting hit by a bus or cancer, the probability is very low, but the magnitude is high. Therefore, it is a risk that I want to cover. Conversely, if the probability of something is high but the magnitude is low, then I don't need to ensure for that event. I do need to recognize that it is an inherent risk, but I don't necessarily need to insure for it because the magnitude is so low that I can handle it myself. Furthermore, the framework of risk equals probability times magnitude gives you a way to think about decisions.

So when you are making a decision about an investment or a career-related move, or if you're sending a bid to a client, you can use this within that thinking process, that decision-making process, frame your decisions within that light. And also ask yourself, what's the worst that can happen? Because oftentimes, once you start to think through the worst-case scenario, you'll find that it's actually not that bad. and many of the things that scare us are pretty survivable. So that is lesson number two. Lesson number three. Never delay gratification. Now this might sound counterintuitive, right?

But isn't money supposed to be the practice of delaying gratification having a sucky right now for the sake of an awesome future? I would argue no. Like change your framework. Be gratified about growing your investments. be gratified by putting money in index funds. Be gratified by watching your net worth grow. I'm not delaying Jack. When I put money aside for the down payment on another property

or when I max out a retirement account, dude, that's not delayed gratification at all. I love doing that. When I track my net worth and I watch that number grow, that's extremely gratifying, much more so. than buying a piece of junk. So lesson three is don't delay gratification. Change the things that gratify you.

Lesson number four. Know your millionaire next door number. So there's this formula in the book The Millionaire Next Door that determines whether you are a prodigious accumulator of wealth or an underaccumulator of wealth. And that formula is your age, multiplied by your annual pre-tax income divided by 10, and that number is your target net worth.

For example, if you are 35 years old and you make $70,000 a year, well, 35 times 70 divided by 10 is 245,000. So according to this formula within the millionaire next door, that's your target net worth. if your net worth is higher than that, you are a prodigious accumulator of wealth. If it is lower, then you are an underaccumulator. And by the way, this formula does not work for people who are in their early to mid-20s. If you're 25 years old and you make $70,000 a year, well, then according to this formula,

your net worth should be 175,000. There are not going to be a lot of 25-year-olds who have that net worth. If you graduated from college when you were 22 and then maybe stayed in grad school until you were 20, Well, great, you've been in the workforce for one year. So ignore that formula if you're in your early to mid-20s. But for people in their 30s, 40s, 50s, keep checking in with that formula because that's a number you ought to know. By the way, if you're a couple, the way that you can work with that is just take your average age

multiplied by your combined annual pre-tax income. The book doesn't say that. That's just like my own workaround. All right, lesson number five. don't half-ass anything, whole ass a few things. There's a fantastic quote from an author named Cal Newport, who was also a previous guest on this podcast, where he says,

if you service low-impact activities, you're taking away time you could be spending on higher-impact activities. It's a zero-sum game. Essentially what he's saying is that you have time for anything, you just don't have time for everything. and any hour that you spend on X is an hour that you're not spending on Y. There's a trade-off there. So be very careful and cognizant about how you spend your time.

Clipping coupons is probably not the best use of your time if you could otherwise spend that time building a side hustle instead. I mean, if you're going to spend four or five hours a week doing something that relates to improving your financial life, well, I would argue that those four or five hours would be much better spent, building a micro business or learning about how to make investments, rather than stacking up like buy one, get one, ketchup bottle offers. Lesson number six, when you're not at work, don't be at work. Either be focused on work, on doing your actual work, or be focused on something

else. Never be in between. This is the art of being present. One of my pet peeves is when I go to a party or even actually this happened the other day in an Uber. Anytime that I meet a stranger, the natural opening question is, oh, so what do you do? And that question leads to a conversation about work. And it's one of the ways in which people are at work, even when they're not at work. You know, you're not working at the time, but your mind is still there. I've actually started a new game where if somebody's like, what do you do? I'm like, okay, I'm going to list three different things and you have to guess.

and that kind of turns the conversation, it gives it more of a fun flair. The other way to do it, and I really enjoyed this one, someone said this to me at a party, he was like, okay, I'm going to ask you what you do, but here's a stipulation. You have to lie. You have to invent an imaginary career. And I'm going to ask you a whole bunch of follow-up questions, so you have to make it believable. And I was like, sweet, game on. And so that was a lot of fun because it provided an icebreaker that allowed us to be creative and imaginative and have a really interesting conversation. it essentially turned the interaction into a little bit of improv, which was a lot more fun and a lot more meaningful than going back into the routine scripts of like, so what do you do? Well, so what do you do? That's just one example of the broader point, which is when you're not at work, don't be at work. When you're not at work, don't constantly be thinking and talking about work. You're not there. Don't be there. So that's lesson number six. Lesson number seven. Yes, and. Speaking of improv, life gets a whole lot of lot easier when you take a yes and attitude towards whatever comes your way. And that example that I just shared, you know, you're at a party and someone's like, so what do you do? Rather than pushing back with

resistance and being like, oh, I don't like to talk about work or, oh, I don't come to parties to talk about work, you know, that kind of puts up this wall and it cuts off the conversation. But if you yes and it, like, oh, hey, that's a great question. All right, I'm going to list three things. You've got to guess. You know, that's a lot more fun. That yes-ands it and brings it to another level. So that's lesson number seven. Yes, and. Lesson number eight.

Money can't make you happy, but a lack of money can make you unhappy. There have been multiple studies that have looked at the correlation between money and happiness, and they have found that there is a massive correlation between money and happiness at the lower to mid-levels of the income bracket. So essentially, going from 30,000 a year in income to 50,000 a year in income, that has a massive, well-researched, well-documented correlation with happiness. That money will make you happier. But the richer a family gets, the more you hit diminishing returns. Each additional dollar increase in household income begins producing marginal gains. different studies have postulated different ideas about what that kind of tipping point is.

There's a very famous study that says the first $75,000, there's a huge correlation between money and happiness. After 75, it diminishes. There are other studies that show that the marginal gains start dropping off somewhere between 80 to 100,000. Some studies show 160. Of course, it all depends on how large your family is and where you live. You know, $100,000 for a single person living in Iowa is not going to be the same thing as $100,000 for a family of eight living in San Francisco. So it's a little oversimplified to talk about dollar amounts in a vacuum. But the broader point is, and that is, again, going back to lesson number eight, money cannot make you happy, but a lack of money can make you unhappy.

Lesson number nine, every conversation about money is really a conversation about values. Every financial conversation is really a discussion about tradeoffs, opportunity costs, priorities. Again, it goes back to you can afford anything, but not everything. By the way, when we talk about money and specifically when we talk about spending money, there's also been some research about the correlation between discretionary purchases and happiness. And what researchers have found is that spending money on experiences and time does have a happiness correlation, whereas spending money on material items does not. The satisfaction that we have with experiences actually increases over time. One of the theories behind this is that when we spend money on experiences, those experiences are then subject to nostalgia bias, which means that when we look back,

on that trip to Disney world, we don't remember the long lines and the kids getting fussy and the dropped ice cream. Like, we don't remember that. When we look back on that memory, we remember the highlights. So experiences actually become rosier and become more cherished over time, whereas objects depreciate. All right, lesson number 10, oftentimes in the world of money, the less you try, the better. We see this in index fund investing. Trying to constantly optimize to the point of over-optimizing often produces worse results than the set-it-and-forget-it approach. The people who often hop in and out of the market, buy low, sell high, buy now, sell then. Oftentimes, over a long-term aggregate

average, do worse than people who just maintain a very consistent dollar-cost averaging approach into their investments without attempting any market timing. They simply maintain a reasonable asset allocation, rebalance periodically, and leave it alone. In the world of investing, often less is more. Lesson number 11. Work with your nature rather than against it. Don't try to fight your own nature. Don't ever tell yourself, well, if only I had more willpower, if only I was more disciplined.

You know what? You are who you are. Accept it. And then find ways to work with your inherent nature rather than constantly battling against it. So, for example, a couple of years ago, there came a point where I decided I wanted to drop the vast majority of my freelancing and consulting clients because I'd gained financial independence through rental properties. So I didn't need the money. And I'd rather spend that time traveling, writing, podcasting, you know, doing things that I thought were much more interesting. And I really struggled with that because I thought, well, if only I were more disciplined, I could do both.

If only I were more disciplined and focused, I could keep a lot of the clients that I have and continue to make money while also going to the gym and cooking more and traveling more and writing more. But you know what? I'm not more disciplined. I'm not more focused. And eventually I just had to accept that and realize, you know what, I can't. can't do everything. So if I want to lead the type of lifestyle that I want to lead, well, then something's got to go. Another example of this is the use of forming habits rather than willpowering or disciplining yourself into something. For example, when I wake up in the morning, the first thing

I do is I drink a glass of water. And it's not because I have willpower or discipline. It's because I formed a habit. And so at this point, it's muscle memory. I don't even think about it. I wake up and boom, I'm chugging a glass of water. Done. There's a great quote by Charles Duhigg, the author of The Power of Habit, which is another fantastic book, where he says,

willpower isn't just a skill. It's a muscle, like the muscles in your arms or legs, and it gets tired as it works harder. So there's less power left over for other things. In other words, don't try to rely on willpower. Instead, form habits.

And in order to do that, keep the old cue or trigger, and deliver the old reward, but insert a new routine in that gap between trigger and reward. That is how you form a habit. And so for that habit that I just named, the trigger or the cue is waking up. And the reward, to be quite honest, the reward is inherent. The reward is feeling better as a result of doing that. And I can, I mean, maybe it's psychosomatic, but I can feel the effects almost instantly.

I feel better after drinking a glass of water. So I have a cue, I have a reward, and then I have a routine in that space in between cue and reward. That's how the drinking a glass of water habit formed. So that's lesson 11. Work with your nature, not against it. Lesson 12. The thing should be its own reward.

My reward isn't, oh, I drank a glass of water, therefore I get a chocolate chip cookie. My reward is, I drink a glass of water, therefore I feel better. I feel more hydrated. The author Gretchen Rubin has done a lot of research around this. She has found that rewards are counterproductive because you begin to see an activity as a means to an end. And so if the means change, you could ignore those means in pursuit of the end. For example, if you reward yourself with a blueberry muffin every time that you go running,

then your brain starts to think, okay, well, if I go running, I can eat this blueberry muffin. You're not actually learning to appreciate running for its own sense. sake, you're only learning to cope with running in order to get you to that muffin. The better approach is to find the inherent rewards of running, like how you feel immediately after a run, and focus on that as its own reward. The thing itself must be inherently rewarding in and of itself. Remember what I mentioned earlier about don't delay gratification, how I get super

gratified through the knowledge that I have contributed to a retirement account, I'm not delaying gratification into the future. The investment itself, the knowledge that I have made an investment into my retirement account, that itself is inherently rewarding. I don't give myself a cupcake when I max out an IRA. I just max out the IRA and I love the fact that I've done it. So that's lesson number 12, the thing should be its own reward. Lesson number 13, radical self-reliance. Everything is figureoutable. You are more resilient than you think and you have the ability to draw upon your own inner resources. So believe in your ability to rely upon yourself. Now, part of the idea behind radical self-reliance involves staying inside of your locus of control.

In the book Seven Habits of Highly Effective People by Stephen Covey, he illustrates these two circles. One is called your circle of concern. And inside your circle of concern is everything that you could possibly be worried about, from nuclear war to whether or not your socks match. Inside of your circle of concern is something else that's called your circle of influence. And those are the things that you are concerned about that you also can directly influence. like whether or not your socks match. So in order to be effective, focus on what is inside your circle of influence. You can't control whether or not we find a cure for Alzheimer's,

but you can directly influence whether or not you have contributed to that cause. We can't directly control what's happening out there in the world, but we can directly influence how we are managing our own. lives, our own money, our own finances, our own careers, and our own families. You cannot control the general obesity rate in the United States, but you can make sure that you yourself are healthy. So stay inside your circle of influence. And as you do, the more that you stay inside of that circle of influence and that locus of control, the bigger that circle of influence grows until you are able to directly influence more and more. That is the power of living inside

of your circle of influence or your locus of control. That's lesson number 13. Lesson number 14, achieve being through doing. Act first and the feeling will follow. The best cure for writer's block is to start writing. The best cure for not wanting an exercise is to start moving. You don't need to feel like you want to do something before you do it. You do it first, and then eventually the feeling will catch up. There's this triangle, thought, behavior, and emotion. If you want to change any point on the triangle, you change the other two. So by changing your behavior, you can influence your own thoughts and emotions.

So that is lesson 14, achieve being through doing. Lesson number 15? Curate, own fewer but better things, put more thought into each item. Previously on this podcast, we interviewed Gene Chatsky, the financial editor of the Today Show, and she mentioned that she has a personal rule for herself. She only buys items at full price. And the reason for that is because she found that when she was shopping sales, she would pick up things that she didn't need because they were a good deal.

So now, by only buying things that are full price, she owns full price. she owns fewer but better things and has less junk because she puts more thought into every specific individual purchase. When you're clearing out your closet or clearing out your garages or your attics, the question is not what should I get rid of, but rather, what must I keep? What is so amazing that I want to keep it? And if something isn't in that top echelon of this is so great that I really want to keep it, then why do you have it around?

And once you get rid of a lot of your things, once you've really curated your personal possessions, and you own fewer but better items, well, you'll find actually that your taste for spending drops. Your taste for wanting to accumulate a bunch of stuff drops. There is nothing frugal about going to yard sales and buying a bunch of stuff. you feel lukewarm about. You're better off spending your Saturday mornings, working on a side hustle, or even sleeping in and getting some rest or exercise,

rather than building a habit around accumulating more and more. It isn't about accumulating. It's about curating. And the final lesson, lesson number 16, What is stated happens, which, by the way, has a cute acronym, What is stated happens? And what I mean by that is that our words seal our fate and our actions follow our words.

If you say things like, oh, I'm not a very good investor, well, guess what, then you won't be. If you say things like, oh, I'm not very hands-on, or I'm not good at math, or I'm not good at science, I'm not very social, if you say that, then you're not going to be. Our actions follow our words. So be careful about the words that come out of your mouth. That's why I don't believe in the statement, I can't afford it. That is a self-defeating statement. You can afford anything, not everything, but anything. Those are 16 lessons that I have learned about money, work, and life.

And that was the presentation that I made in Ecuador a couple of weeks ago. Thank you so much for tuning in. My name is Paula. This is the Afford Anything podcast. And before you go, I just wanted you to know we have set up Affordanithing.com slash help Texas. This link redirects to a GoFundMe page where there's a fundraiser where you can help the victims of the Sutherland Springs church shooting. Unfortunately, shooting victims have to pay a lot of costs. There's healthcare costs. There are funeral costs. There's missing time from work. Being a crime victim is very expensive. If you can give just $5 or $10 to help out the victims of the Sutherland Spring shooting, afford anything.com slash help Texas will take you to a go fund me page where you can make a small donation of whatever you can manage. Every five or ten bucks helps. So thank you so much.

My name's Paula Pant. This is the Afford Anything podcast. You can catch the slides for this on YouTube.com slash afford anything. check that out, and I will catch you next week. If you like this episode, by the way, share it with a friend. Bye.