Page 148 - Morgan Housel - The Psychology of Money_ Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

Part of the reason people like Ronald Read—the wealthy janitor we met
earlier in the book—and Warren Buffett become so successful is because
COBACOBA
they kept doing the same thing for decades on end, letting compounding run

wild. But many of us evolve so much over a lifetime that we don’t want to
keep doing the same thing for decades on end. Or anything close to it. So
rather than one 80-something-year lifespan, our money has perhaps four
distinct 20-year blocks.

I know young people who purposefully live austere lives with little income,
and they’re perfectly happy with it. Then there are those who work their
tails off to pay for a life of luxury, and they’re perfectly happy with that.
Both have risks—the former risks being unprepared to raise a family or

fund retirement, the latter risks regret that you spent your youthful and
healthy years in a cubicle.

There is no easy solution to this problem. Tell a five-year-old boy he should
be a lawyer instead of a tractor driver and he will disagree with every cell in
his body.

But there are two things to keep in mind when making what you think are
long-term decisions.

We should avoid the extreme ends of financial planning. Assuming

you’ll be happy with a very low income, or choosing to work endless
hours in pursuit of a high one, increases the odds that you’ll one day
find yourself at a point of regret. The fuel of the End of History Illusion
is that people adapt to most circumstances, so the benefits of an
extreme plan—the simplicity of having hardly anything, or the thrill of
having almost everything—wear off. But the downsides of those
extremes—not being able to afford retirement, or looking back at a life

spent devoted to chasing dollars—become enduring regrets. Regrets
are especially painful when you abandon a previous plan and feel like
you have to run in the other direction twice as fast to make up for lost
time.

Compounding works best when you can give a plan years or decades to
grow. This is true for not only savings but careers and relationships.
Endurance is key. And when you consider our tendency to change who we