A reader asks my thoughts on financial matters,
Hi RQ. With the GME short squeeze/bubble (whichever term you prefer) making headlines, it made me curious what your perspective is on investing and financial security. Obviously one of the best ways to improve your finances is to not get married, something you have espoused all the time, but I would love to read a whole post about the subject.
Don’t have a unique view or expertise here… a lot of finance advice is pretty wasteful because there are only really two or three ways to really achieve financial freedom:
- Spend less.
- Earn more.
- Invest in assets that earn more than inflation.
That’s it. Numbers 1 and 2 are both hard (if they were easy, we wouldn’t have a $10 billion finance industry trying to sell us on ways to do them).
Re: #1, I rely on Mr Money Mustache for ideas, so start there… he has a nice philosophy too, where he says, “What are you really on this planet to do?” Money is usually a way to achieve other goals, e.g. make friends, create things, etc. The advertising industry is there to convince you the way to have a better human existence is to buy shit (hint: it’s not).
Re: #2, that’s good as well, and you should develop valuable skills, but many high performers spend whatever they make, cause the hedonic treadmill is real, and it’s also not easy to make a lot of money, in most cases (if it were, more guys would do it). A lot of guys who focus on making a lot of money forget why they want to (to live a better life). I’ve not maximized earnings in my life, and have spent more of it than I should have living on the edge, partially due to some choices that, from a finance perspective, haven’t always been the best. Okay and worth it, but I’ve taken a lot of risks with sex.
Re: #3, see John Bogle’s books on index funds. See A Random Walk Down Wall Street, and other finance classics that extol index funds. Efficient markets hypothesis is mostly correct and most people don’t beat the market, sorry. The math behind lower fees and dollar cost averaging is sound, unless you are RenTech or someone like that (extremely rare).
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