I really wish this post would be perfect. I wish my home was just a bit cleaner and tidier. If I spent a little more time I’m sure I could make my work perfect, or that project for school just right, or that party just a little better. The pursuit of perfection can be paralyzing. From something as simple as having friends over for dinner and planning a surprise party to starting a blog or a small business, fear and the desires to make things perfect often keep us from taking action. Given enough time, almost all of us could make the activities in our lives perfect. Or at least pretty close to it. Whether it be work, school, family, sports, finances, or exercise, surely perfection would be obtainable. Wait, is perfection actually obtainable?
I want to do the things that are most important in my life well. I actually enjoy working hard and working efficiently. I enjoy seeing a job well done. I also enjoy relaxing. The nagging thought of perfection can rob us of relaxation. For most activities there is a point where good is good enough. We don’t have to be perfect to meet our goal. Often, getting to good enough takes much less time than perfection. In some cases, getting to perfection takes more time than we will ever have. It is rare that a blog post will impact me for years to come, but J.D. Roth wrote about this subject (picture from GRS) when defining the fundamentals of personal finance. Understanding good enough is one of the key tenants to an efficient life and a primary factor that determines how well we are able to relax. Continue reading
One of the most powerful motivators that exists is an awesome example. People enjoy looking at Warren Buffet’s success in investing or Michael Jordan’s dominance on the court. And if you are trying to achieve personal financial domination, Mr. Money Mustache might be a slightly exaggerated example. But most of the examples in our lives are much closer to home. Most of our influences are close friends, teachers, mentors, or parents. The examples that influence our opinions and actions most are those with whom we are closest to.
Examples are both good or bad. Just ask someone who had a parent who smoked while they were growing up. Rarely do you see a smoker’s child ambivalent about smoking. Most, either casually fall into their parents’ footsteps, or despise the substance and go out of their way to avoid it. We influence other people whether we realize it or not. In almost every situation there is someone who takes notice of our actions and attitudes. We are setting an example. Sometimes that is good and sometimes it might not be as positive as we wish. Continue reading
We live in an interesting world. Your Boss, Your Professor, Your Girlfriend, Your Kids, Your Job, Your Readers, Your God, Your Debts, Your Friends, and Your Television are all competing for your time, attention, and priority. And everyone wants to be your top priority. We are forced to economize our time. We must, by definition, make choices about how we live our lives. What do you do when school, work, children, civic duties, sleep and hobbies all command 40 hours a week? You don’t do them all. You must make difficult choices about which parts of your life will not get your full attention. You already prioritize, you just may let others do it for you.
If you do not define your priorities, society and others will define them for you. Have you ever taken the time to consider and actually list out what your priorities are? List your top five ideal priorities in order. What comes first? Pause: do it mentally or write it down. For bonus points take out a scratch sheet of paper and actually write them out. What do you spend the majority of your time, money, energy and attention concentrating on? Is it close to ideal? We must enforce limits to maintain our sanity. Our health and relationships will often give out before our money does. I would guess that there are very few people at the end of their lives that would trade more “success” for quality relationships or a healthy body. Our goal is to simply use the time we have efficiently so we are able to do the things that are most important in our lives. Our goal is also to move in the direction of mental and physical sustainability by moving our current priorities toward our ideal. Continue reading
Not having any money sucks. Have you ever been to the point where you’ve run out of money? It’s not very fun. In fact, when you don’t have any money, difficult challenges are compounded by the fact that all emergencies also become financial emergencies. Living from crisis to crisis is both painful and expensive. You may know someone like this. It may be you, your friend, or a family member. Someone who is stuck trying to break the cycle of impecuniousness. And what you’ll find is that financial fitness often has surprisingly very little to do with income. The irony is that life is actually more expensive when you don’t have any money. When you don’t have money: debt becomes more expensive, margin is gone, planning is difficult, risk mitigation is expensive and even your stress and your time management are affected. When you have money you can relax. You can plan. You can develop margin and efficiency. You can develop a life that is much less expensive to maintain. The goal here is to begin the process to break the cycle of broke. To create a little buffer that leads to more relaxation, financial peace, and ironically, money to spare.
So, what do you do? Well, the first step is pretty simple. In fact, it is so simple it is often overlooked. The first step is simply to decide. To make the choice if you want to be broke or not. It really is a choice. There is someone else out there who makes half of what you do and has plenty of money to spare. It doesn’t even start with earning lots of money or crushing your expenses. It starts with the decision to start. To begin the process. To make the choice that your life can look completely different a year from now. Continue reading
We’ve all tried drugs at some point in our life. It may be tylenol. It may be caffeine. It may be alcohol, tobacco, or even something a little bit more experimental. But we’ve all had drugs. And drugs are pretty amazing objects. They have the ability to completely change the way our body operates, heal us when we are sick, and even feel no pain under extreme distress. They can make us grow, make us lose weight, keep us from having babies, or even see things that do not even exist. Drugs are pretty amazing.
Drugs are pretty powerful. They can be good, bad, or indifferent. But we all know they contain power. Drugs can often be both mentally or physically addictive. They can be entertaining or depressing. They can make us feel great. And they can make us feel awful. The consistent thing we notice across almost all different types of drug classes is the amazing ability of our body to adapt to the drug. We have the ability to become tolerant of even the most powerful substances. At the first dose, just a small amount of a drug affected our body. But after repeated doses, we began to adapt. In fact, there are plenty of times when we can take a small amount of a drug, even one that originally had a great effect, and not even notice. It takes incrementally more drug to produce the same level of satisfaction. It is easy to see with alcohol, pain medicine or caffeine; but luxury is a new class of drug whose addictive properties are much subtler but impressively powerful.
Investing does not need to be complicated. In fact, after reading this post, you will have enough information to get started and invest more efficiently than almost every other casual investor. For basic investing, simple index funds will give you broad diversification and returns that will match the overall market. In addition, low fees and low turnover minimize taxes and expenses that can decrease your gains over time.
In the long term, economic theory suggests individuals will not beat the market when risk is considered. This idea stems from academic research developed at Princeton and MIT and is often referred to as efficient market theory. In addition, past performance does not predict future performance. Take a look at the companies who debuted on the S&P and see how many still exist. Broad based index funds take into consideration the rise and fall of individual companies, and position themselves to mimic the entire economy as a whole.
If you really want detailed guidance you can read the single best book on investing: A Random Walk Down Wall Street by Malkiel. The book is quite old but is updated every few years. Buy an older copy because the investing principles do not change. It can be a bit tedious, especially to non-investors, but the concepts are timeless and backed by more actual academic research than any other popular investment book. Continue reading
What is an efficient life? What is efficiency for that matter? We’ll start with defining our term. Efficiency is any system designed to achieve maximum productivity with minimal waste or expense. And this has truly become the thesis for Simple Economist. An efficient life is one lived without wasted time, money, or resources. It is a life where the unnecessary has been removed and only the useful remains. It is a life in which we understand what brings us true satisfaction and we are actively pursuing it. It is about knowledge, self control and behavior. By applying the principles defined in economics, we can leverage efficiency to live a fulfilling, productive, relaxing, and awesome life.
The post is designed to be an evergreen post with further reading in almost every category. I’ve listed 9 practical areas in our lives where inefficiency tends to creep in over time. Areas where we end up wasting time, energy, money, or resources due to disorganization and poor planning. I’ll be the first to admit that I am not always productive as I wish. I still waste more than I should. I’m only slowly becoming aware of when I’m being efficient and when I’m not. And we must be careful because inefficiency is quite profitable for others. McDonald’s and Visa know this. Marketers are fully aware that we live inefficient lives and are often there to fill in the gaps. If we take the time, we can utilize the knowledge and resources we have developed to live awesome, exciting, efficient, waste free lives. Continue reading
Does having more choice make us happier? Is there a point where too many options leave us confused or uncertain? Certainly most would agree that some level of choice makes us happier. But, in wealthy countries like the United States, have we crossed the point where the plethora of options makes us less satisfied? For even the most basic choices like what to eat- there are literally thousands of options to choose from and hundreds of microdecisions that need to be made every day. Other things like choosing investment options, picking out a salad dressing, or selecting your next travel destination have hundreds and hundreds of choices.
A paradox is simply a statement that suggests an apparent contradiction that may be true. And the paradox surrounding choice is simply that. Contrary to popular belief, we may actually be happier with fewer options. Classical economists would suggest that more options give us the opportunity to find an object that provides the absolute highest satisfaction. But in reality, we are often constrained with time and mental energy; therefore, the idea of having a limited set of options may actually make us more relaxed. In addition, when there are fewer choices, there is actually less mental energy spent thinking about what might have been or what you didn’t choose. Continue reading
I’ve spend most of my life addicted to something. My addictions ebb and flow and have changed over time. I’ve been temporarily addicted to silly things like email/angrybirds /twitter/news; but over time I’ve realized there are a few categories that I seem to resurface time and again. There are certain areas of our lives that seem to gravitate towards dependency. Places where subtle addictions slowly creep into our lives.
It is a lot easier to see addiction or dependency in other people. Americans are certainly one of the most marketed to population in the world and it is apparent in our appetites and habits. When we look around, we notice the people we care about and are often aware of the addiction in their lives. I like the idea of being completely free from dependency. To be independent of so many addictions that we see in ourselves, family, friends or loved ones. The notion of freedom from all addictions stems from a great lesson from Sean Seay. In one of his messages about families, he introduces the notion that the one thing we all want, at the very least, is for our family to be free from dependency. If we have children it is even more paramount. We don’t want our children or people we love addicted to food, drugs, alcohol, video games, cell phones, or spending. Continue reading
There are very few things that can upset parents, politicians, economists, environmentalists, or anyone who is thinking of growing a mustache more than simple, unapologetic waste. It will look different for each person or individual. And rarely are the monetary issues the largest concern. Growing up, there was nothing that peeved my parents more than opening a coke, having a sip, then leaving it out to get flat. A kid loading up pounds of food on his plate- taking a bite then throwing the rest away, spending by politician’s opponents, sprinklers on in the rain, or idling in an SUV for fifteen minutes on a trip across the street, are enough to make the skin crawl of some individuals. The common denominator is that we all have a point where we find wastefulness painful to watch. For some it is our kids (or others’ kids), our friends, celebrities, or even rich people.
So what exactly is the sin of unapologetic waste? Well, I use the tongue-in-cheek term sin as a notion in which all people understand as bad. Not necessarily in a religious sense, but something that cross culturally is accepted as unacceptable. The concept of unapologetic refers to the idea that someone is proud, guilt free, or boastful of their situation. Someone that trumpets their own accomplishments and waste without a hint of remorse. And wastefulness can be anything including encompassing money, time, food, relational capacity, transportation, or natural resources. Although most often associated with natural resources and wealth, the frustration of wastefulness is a shared emotion of anyone who has ever lived in America or spent time in a first world country. Continue reading