Page 48 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

Few of us will ever have $100 million, as Gupta or Madoff did. But a
measurable percentage of those reading this book will, at some point in
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their life, earn a salary or have a sum of money sufficient to cover every

reasonable thing they need and a lot of what they want.

If you’re one of them, remember a few things.

1. The hardest financial skill is getting the goalpost to stop moving.

But it’s one of the most important. If expectations rise with results there is
no logic in striving for more because you’ll feel the same after putting in
extra effort. It gets dangerous when the taste of having more—more money,

more power, more prestige—increases ambition faster than satisfaction. In
that case one step forward pushes the goalpost two steps ahead. You feel as
if you’re falling behind, and the only way to catch up is to take greater and
greater amounts of risk.

Modern capitalism is a pro at two things: generating wealth and generating
envy. Perhaps they go hand in hand; wanting to surpass your peers can be
the fuel of hard work. But life isn’t any fun without a sense of enough.
Happiness, as it’s said, is just results minus expectations.

2. Social comparison is the problem here.

Consider a rookie baseball player who earns $500,000 a year. He is, by any
definition, rich. But say he plays on the same team as Mike Trout, who has
a 12-year, $430 million contract. By comparison, the rookie is broke. But
then think about Mike Trout. Thirty-six million dollars per year is an insane

amount of money. But to make it on the list of the top-ten highest-paid
hedge fund managers in 2018 you needed to earn at least $340 million in
one year.¹⁴ That’s who people like Trout might compare their incomes to.