Energy
A quick lesson on efficiency:
In the 1970s it looked like the world was to run out of oil. The global economy was growing, and required increasing levels of energy (hence, the heavy reliance on oil). But the problem was, that at the time we couldn’t drill up enough oil to meet demand. With a fuel shortage, and quadrupling global prices it was nothing short of a crisis. But how did we overcome this?
Well we know the world didn’t plunge into a fallout esq warfare over oil, yet the capacity to generate reliable energy from sustainable sources is questionable even today, let alone in the 70s. The beautiful thing about the 1970s oil crisis is how it was a catalyst for innovation. We didn’t find more oil, we just developed factories, vehicles and homes that required less energy.
The lesson is that we didn’t generate more energy nearly as much as we increased our efficiency of the existing energy available to us. The same lesson is true with money. Increasing your capacity to earn more — through investment returns or payrises — takes a combination of time, experience and many other factors outside of our control. Results are shrouded in uncertainty. You never know if the market will co-operate and climbing into higher tax brackets can take years of work.
Our wealth is the product of the rate we save at against the income we earn. Increasing how much you save is rooted in what you can control → your spending habits. Much like energy, if your pathway to financial freedom is driven by volume, your well-being is at risk.
Past a certain level of income, what you need is just what sits below your ego — Morgan Housel
Ego
In simple terms, our capacity to save is the difference between our ego and our income. Keeping a lid on our own self-importance is crucial for suspending purchases today for something more profitable tomorrow. When our social circles begin to earn and spend more, our first instinct is to match it, so as to not fall behind and risk not fitting in. Even in my work now, it’s hard to not feel the need to stack up against the yo-pros and go-getters. The solution to saving more then is not to raise our income, but to raise our humility. Going beyond a reasonably low level of materialism is just a reflection of ego, and our desire to fit in. Although we might satisfy our insecurities in the short-term, the people that do the best in the long-term usually don’t care much for what other people think.
These individuals have riches just as we say that we ‘have a fever’, when really the fever has us — Seneca
Flexibility
The funny thing is, I’m willing to bet that if you have something that you’re distinctly saving for, you’re probably pretty good at it. We have an uncanny ability to save if the goal is meaningful enough. Where we fall short is saving for the sake of saving. Without a goal, it’s too complex to measure the intangible benefits of saving, but it is crucial that you do. In an unpredictable, globally-connected world where you must compete with talent pools from as close as Australia and as far as Europe, the ability to control your time, and wait for opportunities that mean the most to you is valuable currency in todays economy. The flexibility to think things through, slow down, deal with adversity and change course on your own terms is a return on savings that is incalculable.
What is the return on freedom for you?
Just Something To Consider.
🔗 Sources
Housel, M. The Psychology of Money. Harriman House.
Anais, P. Less Ego. More Saving. A lesson in personal finance. https://priscillaanais.medium.com/less-ego-more-saving-a-lesson-in-personal-finance-b5c529bed47c
Holiday, R. What does it mean to be wealthy. https://dailystoic.com/what-does-it-mean-to-be-wealthy/