Today i’m diving into questions I’ve received from readers. Want yours answered next? Just comment below this article.
How did your childhood and upbringing shape your relationship with money and career path?
I grew up in the Soviet Union. It was a command-controlled economy. Just think about it – all prices and the salaries of every single person in a country of two hundred fifty million people were set by bureaucrats thousands of miles away – that system was set up to fail.
Bureaucrats in some dark room in a featureless building in Moscow decided that professors with PhDs should make more money than doctors or mechanics.
My father was a professor at a university and had a PhD, thus he was well paid. Yet, despite a very modest lifestyle, we never had much money. We never went hungry, but my mom constantly worried about what she was going to feed us. Similar to the rest of the populace, we had little savings and lived paycheck to paycheck.
I have a message for the young generation, to those who may be fantasizing about the fairness of socialism. You are right! Let me agree with you – it is the fairest system of them all. It is the very best system at equally distributing misery.
If you take the lives of the bottom 20% of the economic strata in the US, they are swimming in abundance compared to the experience of 95% of the population of the USSR. I know this because for the first ten years of our lives in the US, we were them. Every member of my family, except for my 13-year-old brother, worked. And we all had minimum-wage jobs.
The contrast between the two systems – socialism in the Soviet Union and capitalism in America – is stark. Experiencing the lack of opportunity in the Soviet Union and seeing what this country had to offer made me want to be successful. But maybe because of the influence of my parents, I never had an obsession with money.
I am (only slightly) embarrassed to say that in choosing my career path, I did not consider money. Looking back, I was young and naïve. I thought you could make money in all careers. When I was in college, most of my dating wasn’t with girlfriends – I only had a few of them – but with majors. I dated a lot of majors. I even wanted to be a lawyer for a semester because at the time every TV channel was focused on the O.J. Simpson trial.
Then, by complete accident, I fell in love with investing. Two things happened at once – I was hired by an investment firm to help them with computers, and I started taking finance classes. My major dating was over. I was not nine like Warren Buffett; I was 21. But I was very lucky. Knowing with great certainty what I wanted to do for the rest of my life gave me focus.
I wrote about this in Soul in the Game: when my wife and I got married, we had a very strict budget – we sat down and prioritized what was important to us. Travel, experiences, our kids’ education, and a rainy day fund were our top priorities, while house and cars were less important. Thus, we spent our small paychecks accordingly. I think we bought a new kitchen table and couches ten years into our marriage; until then, we used hand-me-downs from my brother Alex. This was not a great sacrifice – it just was not that important for us.
Fast forward a few decades, our income is greater, and there’s a lot more air between our earnings and spending. Maybe it is looking at corporate income statements every day when I analyze companies that programmed me that way – but I always recognized that making more money (growing revenues), though important, was not the only way to have higher net income. Our wants – our expenses – can always outmarch our paychecks. As you make more money, if you’re not careful, wanting more and more becomes a constant tune played in your head.
Our consumerist society is a slave of money; this is what keeps our economy going – always wanting more. I am not sure if it is our genetic programming, more likely cultural. I’d rather be its master.
Today, I am constantly working to deemphasize (deprogram) the importance of money in my life. I know this may sound strange coming from the guy whose job is to grow his clients’ nest egg. I find tremendous satisfaction in my job, I take it very seriously, but it is an incredible intellectual riddle, and opportunity to learn and to help others. But while I am doing, I am not obsessed with what it is going to do to my bank account.
You’ve written that ‘money should be buying time’ rather than the reverse. How do you think about the relationship between time and money?
I read a line said supposedly by Carl Jung recently: “Life does begin at forty; before then you are just doing research.” There is truth in that line. When you are young, life feels infinite. This changes your relationship with time. At least it did for me. When you cross forty, you realize that you’ve just crossed the halfway point of your life. You can look back and then look ahead and more or less visualize the amount of time you have left – I have as much left as I have lived.
At about that point, I realized that life is not a game where whoever has the biggest pile of money at the end wins. As my income went up, instead of buying myself things, I turned to buying time and experiences.
It’s a trade-off. We have lived in the same house for twenty years. In the past, we never bought new cars, always used ones. A small mortgage and not having car payments, intentionally living below our means, gave us extra resources to buy time.
I probably have written about this before, but I’ll repeat myself. I am going out of my way to keep my life simple. I see how, as people earn more money, they start complicating their lives with second homes and tax shelters. We went the other way – we embraced Airbnbs and simplicity.
We all trade money for time and time for money. Working is trading our finite time for money. Every time you eat at a restaurant, you are trading money for time. I’m just being more intentional with the process, and today I have more resources than I did twenty years ago.
It’s also about what you choose not to do. In the past, I’d be trying to sell an old bicycle or just let it sit in my garage for years; today I’d just give it away. One way to approach it is to put a dollar amount on your time. Let’s say you get overcharged by, pick an amount, and it would take one hour to dispute this charge with the credit card company. Would you spend that hour to dispute $10? $100? $1000?…
Once you realize you only have a limited number of hours on this wonderful planet, you start spending more to buy time than your paycheck might strictly seem to support.
You write that happiness comes from ‘having and solving good problems’ and that while money may not bring happiness, lack of money causes unhappiness. Tell me more about your views on happiness and money.
Happiness is a cocktail that has a concoction of ingredients. Good problems are a very important ingredient. Any creative activity that brings us long-term happiness has friction, which is often accompanied by pain, which is what we usually call problems. I call them good problems.
I’ll use my life as an example. Investing – the market can make you look like a complete moron for years. Kids – my father said, “small kids don’t let you sleep; older kids don’t let you live”. Writing can be excruciatingly painful and frustrating.
But I would not trade any of these “good problems” for anything. In fact, this pain is the source of meaning and growth. While we are going through problems, we may only feel pain, but knowing that there is growth, meaning, and happiness on the other side of it is very helpful.
About money. It is very simple. Think of it as water. If you have an unlimited supply of drinking water, it is not going to make you happy. However, if you have no water, thirst will make you unhappy very fast.
We often tie our happiness to more… especially, more money. There we get on two different treadmills – absolute and relative – both bring frustration and dissatisfaction. On the absolute one, we tell ourselves, “I’ll be happy when I have X amount of money.” Once you reach X, it just becomes a foundation for new reset. It never ends.
The relative treadmill is even worse; you are trying to compete with your neighbor or your brother-in-law. It is worse, because their success, instead of making you happy for them, makes you miserable.
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