How Much Happiness Can Money Buy?
Lessons from making and losing one million dollars before age 25
There’s an affiliate link to the book that jumpstarted why I wrote this specific newsletter. If you like this edition, consider buying the book to support the newsletter. It’s the first time I’ve tried doing an affiliate link :)
The behavior that gets you rich isn’t the behavior that keeps you rich.
At 24 years old, I had a crypto portfolio worth just over $1,000,000.
Long story short, throughout the years of 2017 - 2020, I invested about eleven thousand dollars in Bitcoin & Ethereum. In early 2021 my crypto holdings would grow to about eighty thousand dollars. I then used that crypto to buy VeeFriends & Curio Card NFTs, which turned into just over a million dollars.
As far as I was concerned, I was a genius. I clearly had the innate ability to spot trends and make money off of them.
But as the first sentence of this newsletter alludes, keeping my money in crypto while waiting for the next high-risk, high-reward trend wasn’t a fruitful venture. The crypto market slowly and painfully deflated in value over the next 12 months and I was left with far less than $1,000,000 in crypto assets.
Buying highly volatile assets and putting all of the profits into another highly volatile asset isn’t the most sound investment decision one could make. It might make you rich but it definitely won’t keep you rich.
The behavior that would’ve kept me rich would be to sell about 90% of the crypto assets and put the majority of the cash into long-term stable investments like a diverse portfolio in the stock market and buying cash-flowing rental properties.
That’s an easy plan to come up with two years removed from the intense emotions of becoming rich quickly and feeling like one of the smartest investors on planet Earth.
For the record, having money didn’t make me happy. In fact, I was pretty depressed the day after discovering I had a net worth of over a million. I had recently quit my job, bought a house, and realized I didn’t know what I was doing in life. I had spent a significant amount of time isolated from friends and family and for some reason on that day, it all hit me. My net worth was not a band-aid to the challenges I was facing.
You may or may not experience a significant and sudden increase in your net worth in your lifetime. But you should understand the role money can play in your happiness and quality of life, just in case you do suddenly become rich.
According to the book The Psychology of Money by Morgan Housel, there are significantly diminishing returns on one’s happiness once earning $75k.
And if you do earn a salary of over $75k you’ll be tempted to earn more in a classic case of lifestyle inflation.
I think many people confuse the concept of being comfortable with impressively successful. We’re delusional to think the majority of Americans can’t be financially comfortable making around $80k a year.
There’s an exercise you can do to understand how much money you need to live a comfortable life. It’s only three steps.
How much money do you need to live your dream life?
Understand your current monthly expenses
Visualize your dream life
Guesstimate your dream life expenses
This calculator isn’t sexy, but you’ll be able to find your number in about 10 minutes.
Let’s get a little more realistic and have a healthier relationship with money.
Not having enough money for your basic needs is a problem. Having money fixes it.
Money won’t solve ALL your problems.
Most of your problems are caused by you, and you can’t buy respect and admiration from those who have the solutions.