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S4.E3 - Psychology of Money - Ch. 7-11
58 Plays5 months ago
Welcome back to another episode of the Books Brothers Podcast! Listen as Thomas leads our discussion of chapters 7-11 from The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel.
- Chapter 7: “Freedom” - (0:45 - 18:21) Have you experienced the feeling of “reactance” (feeling overly controlled because of lack of money)? What would you have done during that time if you had more money? What about instances of having freedom due to your financial situation?
- Chapter 8: “Man in the Car Paradox” - (18:22 - 30:31) Have you ever bought something to convey a sense of status or prestige? What was it? How did that work out for you?
- Chapter 9: “Wealth is What You Don’t See” - (30:32 - 40:20) What were your general thoughts on this chapter?
- Chapter 10-11: “Save Money” and “Reasonable > Rational” - (40:21 - 50:46) Have you ever made what you thought was a rational plan but soon realized that it was very unrealistic to implement?
Resources referenced or discussed in today’s episode:
- American household credit card debt: here
- Link to podcast providing doctors, dentist and other health professionals with financial tips: here
- Dave Ramsey’s nationwide study of millionaires: here
Next week we’ll discuss chapters 12 - 14 (pages 121 - 154).
You can buy the book on Amazon by clicking here.
You can also borrow it at your local library. Don’t have a library card, or unsure where your local library is? Search on Google Maps, or find your local library by clicking here.
Follow us on Instagram @booksbrotherspodcast
Connect with us at [email protected]
Please subscribe and give us a review! We would really appreciate it.
See you next week! Until then - read, reflect, and connect.
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Transcript
Introduction to Books Brothers Podcast
00:00:06
Speaker
Welcome back to the Books Brothers podcast. We are a group of 30-something dudes who met in college, and being the wild guys that we are, we read books together. Reading together keeps us in touch, provides the structure and time needed to connect, and we share our experiences and reflect on how these topics relate to our lives. I'm Thomas. I'm Adam. I'm Garrett. I'm Matt. And I am Pless.
Book Introduction: The Psychology of Money
00:00:31
Speaker
Today we continue discussing the psychology of money, timeless lessons on wealth, greed, and happiness by Morgan Hassell. In today's episode, we will explore chapters 7 through 11.
Financial Independence & Control Over Time
00:00:43
Speaker
In chapter 7, freedom
00:00:46
Speaker
We focus on the liberating power that comes from understanding and embracing the core principles of financial independence. Greater control over how we live our lives leads to increases in happiness, and money is one thing that allows us control over many aspects of life, but especially control of our time. The highest value item you can buy with money, control over your time. The author asks, who is more wealthy than someone that can say, I can do whatever I want today?
00:01:17
Speaker
After all, the ability to do what you want, when you want, with who you want, for as long as you want, is priceless. According to the work of Angus Campbell, a psychologist who studied happiness, having a strong sense of controlling one's life is a more dependable predictor of positive feelings of wellbeing than any of the objective conditions of life we've considered. And even doing something you love on a schedule you can't control can feel the same as doing something you hate.
00:01:45
Speaker
Psychologists have a name for this and it's called a feeling of reactance. The author goes on to describe what control over time might look like with different levels of wealth.
00:01:56
Speaker
For someone with low wealth, you might barely be able to take a couple days off work and still pay your bills. Have a little more wealth, you might be able to get laid off and take your time finding a job you like instead of desperately grabbing at whatever opens up first. If you have six months of expenses saved up, you might be able to quit your job because of a bad boss.
00:02:19
Speaker
And if you have even more, you can work less hours, take a lower paying job than you're used to, or deal with a medical emergency without having to worry about the cost or how long it might take.
Personal Finance Challenges
00:02:31
Speaker
One of the quotes in the book is using your money to buy time and options has a lifestyle benefit that few luxury goods can compete with. So I asked the boys, have you all experienced the phenomenon of reactants or feeling overly controlled because of lack of money? What would you guys have done differently during that time if you had more money? And what about instances of freedom through finance?
00:02:58
Speaker
Yeah, I mean, I think I can maybe relate to this from being a personal trainer, having a strong passion for fitness and getting into that role where oftentimes, you know, like, for example, I was working like 5am to sometimes 8 o'clock at night, but it's very sporadically throughout the day.
00:03:21
Speaker
And so the schedule is like, you're controlled by that. It's all day, but you're not really making that much money because you're maybe working an hour here,
Impact of Student Loans and COVID-19
00:03:31
Speaker
an hour there. And so then it's like, this is something you love, but you're controlled by the schedule. So then it becomes, you can get burnt out pretty easily and then can become something that you hate. So I can relate to this from that standpoint, if that makes sense. Yeah, I think whenever,
00:03:51
Speaker
whenever I had first started, like entered the career field, you know, I'd gone to four years of undergrad and three years of graduate school. And Ruth had obviously went to college too. And so we had a lot of debt, really a lot of student loan debt between the two of us. And
00:04:09
Speaker
coming out and making, you know, making, doing okay, but really just having so much of our income go every month towards debt. And then I think over time, you know, as we saw things like rent increase, those kinds of factors really played a role and I mean, it really caused us to feel stressed, caused us to feel like we, you know, it kind of feels like you have to make, you know, big decisions, I think.
00:04:37
Speaker
I think that's how it felt for us. I mean, we always knew we wanted to buy a house, but really buying a house through, it did feel like that was like a step towards financial security also, because when you're renting, at least for us, it just felt like living in the Phoenix market, it was just getting more and more expensive. And now we've been in a home for like five years and really thankful for
00:05:03
Speaker
When you bought and the ability to buy a home, but it's nice not having a moving cost of like our for paying for rent anymore That was big. I mean honestly for us to like when it comes to student loan stuff, so I graduated seven years ago now Eight years ago. I graduated eight years ago now. I really think that
00:05:23
Speaker
You know, COVID, the time of COVID, the pandemic obviously did a lot of things, but like the freezing of student loans was, I would say it was a pretty helpful thing for us. And it did give us a little bit of freedom in that time to kind of have a little more control over finances.
Work, Freedom, and Career Choices
00:05:39
Speaker
And I still think that, you know, obviously to some extent, everyone's going to feel controlled by their income and their expenses, but I feel like we're starting to feel more like cut up now and able to
00:05:53
Speaker
do a little more like we want to do. Yeah. Did you feel controlled anyway by that debt? Did you feel like you had to do a certain thing because you had that sort of hanging over your head? I think that I felt as though my role in our family was to be like the primary breadwinner, to be the, you know, I've gone to graduate school and we eventually knew we would want to have Ruth not working full-time.
00:06:22
Speaker
And I think that can cause you to, that maybe cause some of feeling like not having control. Cause it was like, I can't really control like how much I, you know, I was working in a job where if I worked harder at that job, I didn't really make any more money, like having a fixed income. And so I think the thing that I felt was like, I have to find ways to create more like avenues of income. And.
00:06:52
Speaker
I mean, at the end of the day, like money isn't everything. You know, one thing I thought about a lot in this chapter was how, yes, obviously money can give you freedom, but also sometimes the work that you have to do, you lose freedom, right? Like if you're working so much to earn, then you're going to lose some of the freedom that you're desiring. And so I think it's a balance. And I think I'm,
Job Satisfaction and Burnout
00:07:15
Speaker
I don't know if, I feel like we all have talked about this some, you know, I think being guys in our early thirties,
00:07:21
Speaker
Definitely feels like a time of life to work more. And, you know, I'm obviously made a big career change this last fall. And a lot of that was motivated by, you know, wanting to be able to provide better for my family, wanting to be able to feel like we had control to kind of make decisions we wanted. One thing I don't know if I've shared with some of you guys, but Ruth and I had kind of been considering in light of like, as we were having kids and stuff, it's like, are we going to be able to keep living in
00:07:49
Speaker
Phoenix, just because it's a more expensive place to live. Like are we going to need to move back to Midwest or really like on the outskirts because we live pretty central in the city here to be able to afford our expenses. Long answer. Sorry. I ultimately, I do want to come back to, I do feel very like blessed in our current circumstances. But I do think it's challenging us at the same time not to
00:08:13
Speaker
think on the ways that money does play a role in controlling our lives. And I knew as we were going to be talking more about this book, it's going to get into topics that are a little bit more personal, right? Just diminishing returns at some point. The amount of money you're making versus how much you're working versus how much it impacts your other areas of your life.
00:08:33
Speaker
I can relate to that. We were just talking about this at the gym with strength gains. You get to a point where you're getting stronger and stronger in the gym. And then it's like the amount of effort and time it takes to continue getting stronger. At some point you're going to have to negate some other areas of your life. And it's like, why at some point kind of relatable to this. This, this chapter.
00:08:58
Speaker
It kind of reminds me of the quote or the saying work smarter, not harder kind of thing, right? Because if you can get a little buffer between you and some sort of desperate situation where you're forced to make decisions that aren't ideal, financially or otherwise,
00:09:19
Speaker
then it opens up a whole new world for you to pursue the things that eventually will allow you to make more money with less effort, with less time, all that other stuff. And a lot of people get caught sort of in just like living on the edge of that, right? There's no buffer between them and the next thing that could lead to financial ruin. And that means that they're working hard or not smarter. They're just always kind of like,
00:09:49
Speaker
Worried to take that next step to
Financial Buffers and Flexibility
00:09:51
Speaker
greater financial independence because the downside is high because they don't have anything to fall back on. It's kind of how I feel. But what were you going to say, Matt? Yeah, to answer your question, I've experienced reactants recently. Actually, one of the things I love is music and audio production.
00:10:17
Speaker
Things like that. So with the tech director job I was doing at my old church, that's something that I loved to do. I loved just manipulating sound, trying to make live music sound really good in person and having control over that. It's something that I've always enjoyed. But when it became a job and I was tied to a schedule of being there every Thursday night,
00:10:46
Speaker
And every Sunday for six or seven hours on a Sunday, it definitely became a job and quickly became something that I didn't love to do because I was tied to that schedule. But I felt like I had to do it because we had just, we had two kids. Um, we were looking at.
00:11:13
Speaker
buying a house, then we ended up buying a new house that cost more than our previous house. And so I felt like I had to have the job in order to pay the bills. So doing something I love quickly became something that I resented, but felt like I had to do. If I had more money, I would have not done that as a job. I would have just volunteered on my own time.
00:11:42
Speaker
because I would have liked to do it. But when I felt like I was forced to do it just to pay off some bills, then it became something that I didn't hate, but I did not enjoy. I feel like this speaks to a broader, it's not just about schedule for me. It's also about who I worked with, because I've experienced reactants in the past
00:12:09
Speaker
not necessarily because of my job schedule, but because of who I'm kind of forced to be around all the time. Like if you have kind of more of a negative work culture or you're around people that kind of hate their jobs, a lot of times that rubs off in a negative way. And I've experienced reactants to that in the sense that like, I'm doing a job, I don't mind. The schedule's not bad.
00:12:37
Speaker
I don't hate the pay, but the fact that I'm with a team that's not ideal makes it just something that I'm really not interested as much anymore. And I think it can be like a combination of things too, because I have felt before like
00:12:56
Speaker
you kind of get this, it's kind of an emotional drain, right? Like Matt was saying, you get to this point to where you feel like you've given to others too much or to your company or to like the schedule and then you just don't want to volunteer or do your best anymore. It's kind of like you've had it up to here and
00:13:18
Speaker
you just kind of want to like draw back a little bit because you already kind of feel spit. We did talk about reactants, but what about the other side of the equation where you actually have a buffer against these sort of situations and you feel like you have
00:13:38
Speaker
increased amount of freedom through finance. I mean, I can't really speak for stealing fully, but I think we both are in a similar situation in terms of like the last year taking a chance on a job that isn't necessarily in our wheelhouse. We had to learn a lot. We don't really know if it'll pay off, but we both just kind of jumped into something new thinking
00:14:04
Speaker
Well, hey, if it doesn't pay off, we're going to be okay. I personally feel like my ability to save over the last few years definitely helped me do that without too much fear. Yeah, I can speak to that a little bit. So as I mentioned before, I quit that tech director job at the end of January. So it's been a few months since I've been doing that.
00:14:31
Speaker
And I was able to quit because I had more financial freedom and got a promotion last year. And ever since quitting that job, I have felt this weight lifted off of me in so many different aspects of my life. I have more time with my family. I have more time with my kids. I have more financial freedom and I feel like I'm not
00:15:00
Speaker
you know, just tied down to that schedule and, uh, and just being in that job. It's very freeing and yeah, life changing. It's great. I do miss that church, but I don't miss the schedule of it.
Respect and Material Possessions
00:15:25
Speaker
Oh, you even, you now go to a different church entirely.
00:15:30
Speaker
We are looking for churches that are just closer in proximity. Got it. I don't think you were driving. It was a long drive, right? About 30 minutes. One way. I was just going to say, I can obviously relate to the part about potentially getting laid off or losing your job and not having to take the first opportunity that comes your way. That's huge. I mean, because, you know, starting a new job, you're very busy.
00:15:57
Speaker
So that would take away time on applying for other jobs that you could potentially want more. So having a buffer and more time to be able to.
00:16:09
Speaker
put more of that time into applying for jobs that you might want, actually. It's huge. So yeah, I don't really know what else to say about that, but I personally can attest to that, my own experience. I really feel like this is one of those points in the book that people can't understand until they actually go through a situation like that. It's kind of hard for him to just write it in the book and people to take it at face value and believe it.
00:16:34
Speaker
Because people look at like, okay, six months of expenses, what would that be? Wow, that's a lot of money. I don't really want to save that much. Like I need this money now. Let's take a quick break for a word from our sponsors. Meet the Talkback Toaster, your new breakfast companion. This toaster doesn't just toast bread, it roasts you. Burn another piece, huh?
00:16:57
Speaker
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00:17:13
Speaker
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00:17:39
Speaker
Like a grandma option, you know? Yeah, like mother-in-law's in the room. Just all kind of way to light-hearted jokes. And now back to the show. So in chapter eight, Man in the Car Paradox, it's a short chapter where Hassel argues that most people today admire the thing more than they ever admire the person with that thing.
00:18:06
Speaker
So for instance, they admire the guy's car rather than the guy driving the car. And he just kind of mentions that when you watch someone drive by in a fancy car, you're more likely to think, wow, that's a beautiful car. Or rather than, wow, that guy is so cool. I want to be that guy. So why do we subconsciously assume people will think we're cool because of our stuff when we ourselves don't even think that way?
Status Symbols and Self-Worth
00:18:37
Speaker
the keeping up with the Jones's effect that we mentioned earlier, thinking that because we have something, it's going to give us a greater level of respect from others in a meaningful way. So yeah, I mean, have you guys ever bought something to convey a sense of status or prestige? What was it? And did it work out? I mean, I think this too, it just really has so much to do with like how
00:19:07
Speaker
at the root of sometimes who we are, how self-centered we can be. And not everyone is like always like seeking like, Oh, bigger, better, you know, but in general, like most people, it's like, they want nice things that show that they, that they're someone, right? And so I think it really, to me, it like, it highlights how we're just very self-focused. We're very self-centered.
Perceived Status vs. True Value
00:19:32
Speaker
Um, when I was reading, uh, reading through this chapter and I saw that this was going to be the questions, um, I don't feel, I can't think of any like very specific, like bigger expenses over, over my life, but I feel like, um, clothes has always been something for me and particularly like outdoors clothes. Like I always like that, like nice outdoor clothes brands. Like I like to write Patagonia or North Face. And I think that's something that.
00:20:01
Speaker
like, Oh, it's like really nice quality. And like, I'm all doing these like wild things. So I need something that's really nice quality. And that's one where I think that I felt like, Oh, people probably like think I'm cool because I have this or that. And I mean, yeah, the reality is, is like, I'll see someone with like, uh, some sort of like, I've got like this, like as tech Patagonia, right. And most of the time if I see someone's like that, I'm like, Oh man, that guy's such a bro.
00:20:26
Speaker
And it's like, yeah, I have one, right? Like, um, I think that like one of the bigger ones that I can think of and, uh, it's. So when we bought a house, we bought a house that has a pool. Um, I live in Phoenix, Arizona. I would say probably 30% of homes have pools. Um, but it definitely growing up in Missouri, growing up in St. Louis.
00:20:53
Speaker
Like having a pool is definitely like a, like a status thing. And so I think that that's something that I kind of would go back and forth of like, when I was talking to like, you all are their friends from Missouri of like, yeah, I bought a house at the pool. Or, you know what I mean? Where it's almost like I, I.
00:21:12
Speaker
I knew it had this status component to it when I would talk about it with friends, not from here. And like, sometimes I would like try to downplay that as a result. Like I might like lead in front of it, but I mean, the reality is, is like, yeah, there's probably something about us buying a house that had a pool was like, Oh, that's cool. Like, which it is, it's definitely nice to have a pool. Um, but that's maybe one, like on a, uh, like a larger expense level that I can relate to.
00:21:38
Speaker
So I was just going to mention, you know, he talks about how like we do that, like make these purchases because we're seeking respected admiration from other people, but the people that you actually want respect and admiration from aren't going to respect and admire you more because you bought those things. So I was just going to mention like,
00:21:57
Speaker
I didn't like, I didn't even think about your pool, you know, like we've been best friends for years and like it didn't make me respect or admire you anymore.
Societal Norms vs. Personal Needs
00:22:05
Speaker
You know what I mean? And I feel like all of us, all of us would be that way with anything that we would all buy. You know what I mean? And like we are the people that we care about most. Like, like we're the people that matter. You know what I mean? And so yeah, it's a, I liked that he mentions that
00:22:24
Speaker
little small part in this chapter. And then to answer your question, I think, you know, if I personally bought something to, you know, keep up with the Joneses, I guess in dating, I think I can relate to this a little bit in a little bit of a different way. Subconsciously, there's the thought of, you know, if you portray more money or like, you know, higher status type things that you'll attract more higher quality woman.
00:22:53
Speaker
there may be some truth there maybe I don't know but then there's also there's also the respect and admiration aspect of that too because then you're probably not attracting the person that you want for the right reasons you know yeah I'm gonna I'm gonna upgrade I'm gonna gonna get get like a nicer apartment now so my rent is gonna go up so like logically on paper you know I'm not buying anything so it's like
00:23:23
Speaker
It's losing money, but I'm going to have a nicer place. However, I just want a nicer place. It's not like I'm showboating it to people, you know, so, but there is the aspect of like, you know, now if I, you know, there's a little bit more of a confidence boost and like, if I am dating somebody and they come back, you know, to hang out at my place, it's going to be a nicer place. So I guess that's.
00:23:48
Speaker
There's a little bit of a bad aspect there. Maybe having like, you know, even a title, maybe a job title that could possibly portray more money is, you know, a little bit of a different way to think about it too. There are certain job titles that people probably think about that a little bit more, especially if you're putting it on a dating app. You know, that's something that I have consciously thought about for sure. I won't lie about that.
00:24:17
Speaker
Yeah, I'll probably leave it at that. That's enough examples for me. Dalen, I didn't judge you good or bad because you had a pool until I visited, and we had a couple beers chilling in the pool, and I was like, damn, this guy's so cool. Now I did respect it in my room more because of the hat. Yeah, I was like, man, this dude's got a whole little oasis back here. I'm loving it.
00:24:47
Speaker
Yeah, I would add, I think I disagree somewhat with the author's argument that we never think, wow, this guy is so cool to quote his sentence.
00:25:01
Speaker
I think there's probably a few different tiers of relationships we have. It's, if this person is completely random driving a Ferrari, I agree with him. I look at the Ferrari driving by, that's super cool. What a nice car. Wow. I would hate having that because of how expensive that is. And then just move on. And then I agree with what Fles said. I will say, I was like, wow, Stalen has a pool or
00:25:30
Speaker
Wow, like Thomas can afford to live in Hawaii or whatever. Like Matt just bought a house before we had a house, things like that. I think there's some level of like, wow, that like looking at your peers, but to your point, Flez.
00:25:49
Speaker
because of the depth of our relationships that goes by pretty quickly because we ultimately care about the person and who they are.
Wealth vs. Appearance of Wealth
00:25:59
Speaker
I think there's this third tier where there's kind of like these tweener relationships where they might be there.
00:26:07
Speaker
Did you say tweener? Yeah, tweener. Okay. Like this? Yeah. Did you spell that for me, please? Is it two E's? Tweener. T-W-E-E-N-E-R. Tweener. Okay. Okay. Got it. What's the origin?
00:26:29
Speaker
Use this sentence. I think what I was trying to say is this in-between group if that can help you all be more mature. Let's use the term tweener. Okay, it's tweener where they're not randos who you don't know and they're not really close friends. They're acquaintances, maybe neighbors, maybe colleagues, co-workers where you have some level of relationship but
00:26:54
Speaker
as the other chapters hit on, we don't really know what people make. We don't really know how rich or how wealthy they are. So external things is what you see and make judgments on. So I think that is probably like the cohort, if you will, that could potentially be that more tempting position of comparing yourself to your neighbors when you think of keeping up with the Joneses.
00:27:20
Speaker
In our own personal examples, I think some of the temptation when she finished residency is like, no one ever said anything, but there's this expectation, okay, now we should purchase certain things, or we will look odd if we
00:27:40
Speaker
don't purchase a certain level of a house or things like that. So I think there's sometimes these external pressures that no one's actually audibly putting pressure on, but we put on ourselves. And I can't think of necessarily a purchase we've made specifically to
00:27:59
Speaker
have a sense of status or prestige, but this medical doctor who's started a podcast on teaching doctors about managing their finances and wealth, because doctors aren't really taught that in medical school and residency, is there's a huge temptation when you graduate to then increase your level of standards of living. But you've already been living on a resident's salary.
00:28:26
Speaker
And you haven't been getting any like 401k matching.
00:28:30
Speaker
you probably have a lot of debt. Anyways, I'm dragging this answer on. But ultimately, I'm saying there's a lot of temptation, I think, with kind of that middle tier of acquaintances and peers. And then there's also this temptation of like, oh, finally, I've earned this promotion. I've earned this job title. Now I need to elevate my standards of living rather than like, oh, now I can start saving more. Now I can start investing more or paying off debt at a higher rate. So that's all I was trying to say.
00:29:01
Speaker
No, I think that, I mean, I think that's really interesting. And I mean, Garrett, I really can relate to it as you're talking about with, with Brooke there as being a physician and such, where I think when you're around a lot of people doing kind of around the same thing, like if you have a community like that, it's, it definitely is, you look around a little more, obviously not the same level, but you know, I was in a graduate program with 40 other students. And so, yeah, you kind of just your, oh, what's so-and-so doing what's so-and-so doing it.
00:29:30
Speaker
you're like, oh, they're living like that? Like, does that mean I can live like that? And I think your bar for, you know, living within your means might be, it should be very different than others, right? Like, based upon things, I mean, a lot of people don't live within the means, a lot of people put themselves in really bad financial situations.
00:29:49
Speaker
For anyone interested in that sort of phenomena that Garrett mentioned, I followed, I mean, I know Stalen has brought it up too, but the Dave Ramsey stuff. And he did a study of a bunch of millionaires a few years ago, and he broke down the average millionaire in terms of what they do, how they earned their money, how they saved.
00:30:19
Speaker
in the top five professions, doctor is not one of them. And the reason he attributes doctors to not really being able to make millionaire status as much as like a school teacher or an engineer or something else is just because of the way that they're almost conditioned to spend their money rather than have a high savings
Consumer Debt and True Wealth
00:30:40
Speaker
rate. So that's really an interesting study for anybody who wants to look into that a little more.
00:30:45
Speaker
That really leads us into the next chapter, chapter nine, where the chapter nine is called wealth is what you don't see. And the author differentiates between being rich versus someone who is wealthy.
00:31:01
Speaker
And people can act rich because of their current income. However, when people do that, they end up with more of the things rather than the money itself. And only through financial prudence and savings can true wealth be achieved. Real meaningful wealth consists of financial assets that haven't yet been converted to stuff you and I see.
00:31:25
Speaker
Without knowing someone's personal finances, the easiest way to make judgments about their wealth is by what we outwardly see, such as cars, homes, expensive trips they might go on. But this can be very misleading and difficult to judge from the outside.
00:31:45
Speaker
Yeah, I mean, you look at sort of some, I put a graph here for you guys to kind of look at, but you look at some of the current trends and the economy in terms of debt, and you can see that almost every type of debt is pretty much at record highs. There's credit card debt, there's student loan debt, there's mortgage, and let's see, car loans,
00:32:13
Speaker
you name it, I just feel like, you know, this is a very obvious thing that I think down deep, we kind of all know a lot of people are kind of riding high and it looks like, you know, maybe we might be falling behind, but in reality, I do a lot of times look around and wonder how much of it is, is simply just kind of a facade. Um,
00:32:40
Speaker
Do you guys have any comments on, on that whole chapter? Yeah, that graph you presented is crazy. There's so much credit card debt in America and that just baffles me. I was taught to never fall behind on credit card payments. And I've been fortunate enough to be able to pay off my credit cards every month since I've had a credit card.
00:33:09
Speaker
I know some people can't do that, but I never put myself in a position where I cannot pay it off. So looking at the graph, that's just baffling to me. But in regards to their rich versus wealth argument, I appreciated that. I like that the author put that in here. I kind of see it as like,
00:33:36
Speaker
the difference between knowledge and wisdom. Like if you're rich, you just have a lot of stuff. If you're knowledgeable, you just know a lot of stuff, but are you wise with what you do with it? Do you have wisdom in making good choices? Are you wise with your finances? Are you wealthy in the term, in the sense that
00:34:04
Speaker
you are making good choices with your life and your finances and that you're living a fulfilled life.
Social Media Influence on Finances
00:34:13
Speaker
Yeah, I appreciated that part. Um, I don't know the, I don't know if I am part of the problem of America consumerism in general, I probably am.
00:34:33
Speaker
Because peer pressure is a real thing. If I see my close friends doing things, then I want to do similar things. My wife, Emily, will definitely agree with me on that part. Um, but I don't know in terms of debt, as you're referring to Thomas.
00:34:57
Speaker
Really the only thing that I have right now because I've tried to pay off all my debts is mortgage. And I just don't have the finances to pay off a mortgage, but I, uh, I try to save up enough to where if I do have to make a big expense, I can pay for the majority of it upfront. I don't like being in debt. I don't like owing people anything. Um, so I try to be financially free if I can.
00:35:26
Speaker
you guys ever have friends that you see obviously making horrible financial decisions that are outward and you're just kind of like, oh wow, great, good for you. Congratulations, because you know they're looking for that. I feel like I've done that before and I feel like, am I part of the problem for kind of
00:35:49
Speaker
feeding into the whole ego driven consumerist mania that people kind of look for validation on. I wonder if there's any correlation between social media and this whole like facade of, you know,
00:36:07
Speaker
trying to portray your rich richness. Did you guys see the fake Coachella influencers of girls doing all these videos? Probably guys too, but people doing all these videos of like, hey, get ready with me on Instagram to go to Coachella. And they do all these different outfits and pretend they're about to go to the concert. And then they just, that's it. It never shows them at the concert because they didn't go.
00:36:37
Speaker
When we first moved out here, I was working at a clinic in Scottsdale, Arizona, which I feel like has a reputation. And I remember someone introduced me to the concept of the $30,000 millionaire. And I was like, what do you mean? They're like, it's someone who makes $30,000 a year, but it lives like they're a, but like outwardly you'd think they're a millionaire by like their social media or like what they wear. It's like, yep, you see it. I feel like our generation,
00:37:08
Speaker
It seems like we're very trip and experience focused with our money. Whereas prior generations have been that way with maybe vehicles or homes or other possessions like that. I think that we still have a similar sense with the possessions, but I think that people portray more of how much they make by their trips.
00:37:38
Speaker
going to these exotic places and stuff. Yeah. I will say those were most of my like, I feel better that I'm in Hawaii on this hike and said, I'm going to post this. There's definitely part of that. So that's like a, yeah, that's a facade, but also like I love hiking and it's Hawaii. So, you know, um,
00:38:02
Speaker
But yeah, I would agree with that. What was I was going to say? Oh yeah. But I recently deleted all my social media. So put my money where my mouth was on that. Get out of the matrix. I was telling, I was telling, I think I know a bit of vulnerability here for me. So I, as you all know, I just had a birthday a couple of days ago.
00:38:22
Speaker
Happy birthday, man. Thanks, man. Yeah, it's OK to get older. You don't have to be worried about that, dude. No, no, this is the next part is more of a vulnerability. Oh, OK. So, yeah, I mean, like, when I was on Facebook or Instagram, like, I would, you know, you'd get people message you or people like, oh, they like they'd see on Facebook their birthdays. They text you like the amount of people that know it's my birthday when it's a birthday is pretty small. And and I think it's I tell them it's like,
00:38:50
Speaker
It's like, yeah, there's definitely like a really vain part of me that's like, yeah, it wouldn't be, it would be nice to like hear a little more, but it's like, that's like, but then I hear myself saying it and it's like, I know that's wrong. Like, I know it's wrong and it's so vain and it is funny because like, I do feel like the further, so I got off of Facebook in 2020, April of 2020 and the more time has removed, the more I realized like,
00:39:18
Speaker
like the things that I, like the things that I got out of it were more vain.
Reasonable vs. Rational Financial Planning
00:39:23
Speaker
And that's not a ruin. That's not saying for everyone is bad, but for me it was bad. Yeah, I can relate to that. That's my vulnerability. You guys both kind of mentioned Hawaii and I try not to
00:39:38
Speaker
I don't know, post anything about living here, really. Like, I don't post pictures of here. Oh, really? Because I know, well, yeah, because like, I know how it's going to be perceived. Yeah. And then I know, like, when we're talking about Stalin's pool and him thinking like maybe people would think something of it. Like, I feel the same way, but I also feel kind of self-conscious about it. So like, when someone brings it up in passing, when I'm back home or whatever, I'm like, oh, yeah.
00:40:05
Speaker
I do live there, but don't be that impressed. You feel like you have to justify it. Yeah, or I have to downplay it because I don't want people to think, yeah, like I don't want people to think like, oh, wow, you must think you're cool. I mean, you are for sure. I mean, I do want to point out, Thomas, you are wearing a Hawaiian shirt right now.
00:40:24
Speaker
which I don't feel like you ever wear wine shirts. Living stereotype. Shout out to my dad. It's an old dad shirt, so thanks. Bermuda shorts there too? There's some short khakis. Short khakis, yeah. Target. You know, only the highest quality for me. Luxury. Tarjay.
00:40:50
Speaker
In chapters 10 and 11, in chapter 10, save money, Hausl emphasizes the importance of consistently setting aside a portion of one's income, regardless of size. Often savings rate makes a bigger difference than how much money you make. And we focus so much on making more money instead of using what we've got more efficiently or lowering our expectations as consumers.
00:41:16
Speaker
The value of wealth is relative to what we need, and what you need is often what sits just below your ego. As we've discussed previously, making more money usually comes with the urge to also spend more, which leads to little to no chance to increase your savings rate. When investing, there are many things you can't control.
00:41:39
Speaker
However, we can always make decisions that control personal savings and frugality, and this often has the most significant impact of all. In Chapter 11, reasonable is greater than rational
00:41:53
Speaker
This chapter discusses the importance of being reasonable rather than strictly rational when it comes to making financial decisions. Hausa argues that while rationality is often seen as the ideal approach to decision making, it's not always practical or feasible.
00:42:09
Speaker
Being reasonable involves understanding one's own emotions and limitations and making decisions accordingly. For human beings, flexibility, adaptability, and recognizing the influence of human nature on financial choices outperforms the most mathematically optimal strategy, which might appear the most rational on paper." So we all know about
00:42:34
Speaker
you know, how New Year's resolutions almost always end up going by the wayside. And I feel like that's a really good example that other people can kind of think of when they think about sort of this reasonable versus rational strategy and what's more important in a plan. So since as humans, we love to make plans and promptly abandon them,
00:43:02
Speaker
You guys feel like you've ever made too rational of a plan only to realize that implementing it was going to be nearly impossible, or you tried over and over to implement it just to realize your plan was just not human enough in a sense? Are we talking finances? Anything. I mean, I think obviously this book's all about finances, and I can come up with examples myself.
00:43:30
Speaker
for the financial side, but I mean, I think this speaks to really any type of plan. I know for fitness, I've tried to do things that were unsustainable. Yeah, definitely with fitness, I can relate to that. I mean, every running program I've done, I never hit all of it. Like never. I feel like if I can hit 80% of it, that's pretty good. But Adam, you laugh, but like if you aim high and then you miss, it's like if I miss 10%, 15%, it's like,
00:43:58
Speaker
still did a pretty good job. I mean, the one that I can think of, it still is rational. It still is rational. It's still a goal that could be attained. So looking back, it's one that Ruth and I could have done, but we consistently failed at it. And I think it was for a good year, maybe a little less than a year, but we tried to, as far as eating out expenses, we tried to
00:44:26
Speaker
personal eating out expense was no more than $20 a month. And then like together, the two of us no more than 50 a month. And so like in total, it was like, it'd be 90 a month, which that's very possible. Um, well, at least it was very possible five years ago, maybe not now.
00:44:43
Speaker
Um, but even still, like two Starbucks drinks, right? Just don't eat out. Like, you know, and, but I think we did it one month. I think we did it one month and then consistently did not do it again. And it was one where we just ended up like readjusting our, like our plan. Took to quote Peter LaFleur. I found that if you have a goal, you might not reach it, but if you don't have one, then you're never disappointed. And I got to tell you, it feels phenomenal.
00:45:15
Speaker
I mean, there's some truth in that. That's why it's kind of funny. I actually like do the opposite of motivate us, right? When a goal is too extreme or like not attainable, it just makes us want to not even think about it because it's just kind of depressing to know that you haven't set yourself up for success.
Balancing Frugality and Comfort
00:45:37
Speaker
Yeah, as a project manager, I feel the failure of plans pretty much every day at work.
00:45:43
Speaker
Nice. Because planes are always changing. Sorry, planes are always changing. But yeah. I was just laughing at you all day. I think of.
00:46:00
Speaker
This is, I promise you, this is not a dig at Rob because he's not on the call. So that's not fair to him. So we can, we can talk about him now then. Yes. But you'll find out about it a couple of times later. This is genuinely my own experience. This is not about Rob passively, but I think of utility bills or
00:46:26
Speaker
It costs like I'm, I am much more willing to put on sweatpants and a sweatshirt in the winter and let the house get colder. And I'm a lot more willing to get sweaty in the summer and let the house get hotter. If it means saving 10 or 20 bucks on our utility bills.
00:46:48
Speaker
And Brooke doesn't like that. She likes the variability of the temperature to be much more fine and set. And there, and that was like, just put a blanket on or put a t-shirt on. And it finally, well, sorry, that sounded weird. Put a blanket on. We'll stick with the.
00:47:08
Speaker
Um, and put your underwear on naked sweatpants without underwear, right? I ultimately came to a point where I'm like, we could have this tension over $30. Hmm.
00:47:36
Speaker
Or I could just not care and set the temperature at what she wants and pay an extra 30 bucks. And maybe I, to your point, don't go out to eat or whatever. But it was like, is this something I really want to potentially have conflict over? So I think I had a rational, like, or I had an ideal approach. It's like, Hey, we can save money by just putting on more clothes or taking more clothes off. But it.
00:48:06
Speaker
wasn't reasonable when you're living with somebody else who doesn't share those necessarily the exact same thoughts. And it's like, this is something I'm not going to cause a fuss over. And one last thing to possibly have tension and issues over.
00:48:20
Speaker
Well, yeah, I swear every summer, I swear every summer route, like there's very few things that I remember the exact number at, but it's like, I remember always what we put the temperature at in the house in the summer. Cause it's hot here, right? And like every summer, Ruth's like, no, there's no way we did that last summer.
00:48:39
Speaker
You got to think about it this way too. You will indirectly get better sleep by controlling that temperature and then you'll perform better at your job, make more money. Boom. There you go. I'm on Brookside. You can justify anything. There you go. She listened for the pods. She's going to give you a big hug for that. Have you guys ever seen anybody on like
00:49:05
Speaker
like an extreme frugal, like someone who's so frugal that, I don't know, I feel like I've seen videos or interviews with people that are extremely frugal and they do really weird stuff. Like they don't use a washer, they use their dishwasher to both wash their dishes and their clothes and then they line dry their clothes or something like that. Like just some weird stuff that you're like, that is ridiculous, come on.
00:49:33
Speaker
I don't know anyone personally, but I know of, I've heard of people like coupon cutters who like, Oh yeah. Who I don't want to say hoard, but they comb through newspapers, ads, whatever. And then they'll go to the grocery store and they got like a wad of coupons and cash them all out. I've never seen it, but I've heard about it.
00:49:52
Speaker
Yeah, they have like a whole shelf of Don dish soap and toilet paper and they're like, I'm good. Actually, I do recall one thing when, gosh, when was it? It was when I lived in Denver. So it was a few years ago. I think there was a pipeline closure or some political issue with Russia, or maybe it was
00:50:20
Speaker
I don't know, maybe Biden, what was it? He closed off a pipeline. I don't know. I don't know, but basically there was concern that gas prices were gonna shoot up overnight. And I happened to need gas that night. I wasn't even thinking about it. And I look over and there are people filling bins and bins like, and stocking their entire trunk, their entire truck bed of gasoline. And I was like,
00:50:50
Speaker
Maybe I'm just really ignorant, but I thought that was so strange. And prices went up, but then a few weeks later they went back down. Or something like, I just recall like, what if your car caught fire? That'd be a huge explosion. That was probably not a rational thought.
Conclusion and Listener Engagement
00:51:11
Speaker
Thank you for listening to this week's episode of the Books Brothers Podcast. Join us next time as we discuss chapters 12 through 14 from the book, The Psychology of Money by Morgan Houssell. If you haven't yet, there's still time to get the book so you can follow along with us. If you've enjoyed listening or benefited from our conversation, please subscribe, give us a review, and share with a friend that you want to connect with.
00:51:35
Speaker
Lastly, we'd love to hear your thoughts. You can reach us by email at connect at booksbrotherspodcast.com or on Instagram at booksbrotherspodcast. Until next week, read, reflect, and connect.