The inability to deny a potential dollar will eventually catch up to you.
Morgan Housel, The Psychology of Money
Warren Buffett says successful people say no to almost everything.
The hardest thing to say no to is more money.
Money is important.
We need money for food, shelter, and healthcare.
We also need to be saving money for retirement when we will be working less or not at all.
As important as money is, there are things more important than money.
Being healthy is more important than being wealthy.
Experiences are more valuable than a big bank account.
Relationships are more treasured than possessions.
But there is another factor that must be included in the decision whether more money is a good thing: the marginal value of a dollar.
The first dollar you earn is more valuable than the last one.
If you need money for food, those dollars are more valuable than dollars you would use to remodel your kitchen.
As you get more money, each individual dollar is less valuable to you.
A potential dollar should be valued the same as the last dollar.
Then we must decide if what we must trade for that potential dollar is a good deal.
· Will there be a cost to my health?
· Will there be a cost to my relationships?
· Will there be an opportunity cost?
We always trade something for the potential dollar, and it’s usually more than just our time and energy.
Another useful question is, “What advice would my future self give about this decision?”
These are the questions we need to ask ourselves when
· We are considering a new freelance project.
· We are offered overtime.
· We are thinking of starting a side hustle.
It is tempting to tell ourselves we need just a little bit more.
Or we say, “I’ll work just one more year before I retire.”
We tend to “move the goalposts.”
This happens with the size of our emergency fund and with the value of our retirement portfolio.
There is another danger: embezzling from our future self.
We need to prepare for the future.
We need to put money aside for emergencies.
We need to save for retirement.
Like so many things in life, either extreme leads to ruin: trading more valuable things for money we don’t need and squandering our finances on possessions we don’t need leaving little for the future.
Money is a useful tool, but more money is not always better.
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