Page 204 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)
P. 204

This would not work for everyone, and it only works for us because we
                both agree to it equally—neither of us are compromising for the other. Most
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                of what we get pleasure from—going for walks, reading, podcasts—costs

                little, so we rarely feel like we’re missing out. On the rare occasion when I
                question our savings rate I think of the independence my parents earned
                from years of high savings, and I quickly come back. Independence is our
                top goal. A secondary benefit of maintaining a lifestyle below what you can
                afford is avoiding the psychological treadmill of keeping up with the
                Joneses. Comfortably living below what you can afford, without much
                desire for more, removes a tremendous amount of social pressure that many

                people in the modern first world subject themselves to. Nassim Taleb
                explained: “True success is exiting some rat race to modulate one’s
                activities for peace of mind.” I like that.


                We’re so far committed to the independence camp that we’ve done things
                that make little sense on paper. We own our house without a mortgage,
                which is the worst financial decision we’ve ever made but the best money
                decision we’ve ever made. Mortgage interest rates were absurdly low when

                we bought our house. Any rational advisor would recommend taking
                advantage of cheap money and investing extra savings in higher-return
                assets, like stocks. But our goal isn’t to be coldly rational; just
                psychologically reasonable.


                The independent feeling I get from owning our house outright far exceeds
                the known financial gain I’d get from leveraging our assets with a cheap
                mortgage. Eliminating the monthly payment feels better than maximizing
                the long-term value of our assets. It makes me feel independent.


                I don’t try to defend this decision to those pointing out its flaws, or those

                who would never do the same. On paper it’s defenseless. But it works for
                us. We like it. That’s what matters. Good decisions aren’t always rational.
                At some point you have to choose between being happy or being “right.”


                We also keep a higher percentage of our assets in cash than most financial
                advisors would recommend—something around 20% of our assets outside
                the value of our house. This is also close to indefensible on paper, and I’m

                not recommending it to others. It’s just what works for us.
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