Weekly Nugget of Wisdom #9

Lifestyle Creep

Welcome to another Nugget of Wisdom! A weekly post I send out every Thursday. These are designed to be short and sweet, a quick read to (hopefully) impart some sort of wisdom, or at the very least to get you thinking about something interesting.

Lifestyle creep is the silent killer of many

One of the silent killers of wealth is lifestyle creep. It has nothing directly to do with your trading or your ability to find or make good plays, or to make mistakes, but rather how you live your life.

It’s extremely common and something that almost everyone falls victim to in some capacity. It usually goes something like this:

The crypto bull market is going strong. John has turned his initial investment of $10,000 to $150,000. John is riding high and feeling amazing. He starts to extrapolate: “oh wow, if my gains continue going at this pace — I might make a million dollars this year!”

“With a million dollars a year, of course I can afford to fly first class. And I can treat myself to a nice car and watch too. Oh and all my crypto buddies are flying to Singapore for that conference? I can definitely go, and I’ll stay at a nice hotel and eat out at Michelin Star restaurants too. I’ve made it!”

If it were true and guaranteed that John could make a million dollars every year, then perhaps this lifestyle adjustment might be sensible. At the end of the day - what’s the point in having money if you can’t use it to improve and enjoy life and splurge a bit?

The issue is that John is extrapolating from a small sample size of bull market gains and expecting to earn the same (or more) for the rest of his life.

John is also probably not thinking about tax, about how he’s probably not going to sell the top, or about all the other expenses and ways that he’s likely to come away with less money than he thinks when all is said and done.

At the end of the day, true wealth isn’t from making more money and having more things anyway. It’s about being content with what you have, and using your money to buy the true source of wealth: time. If you can buy more time to spend with your family and friends, more time to spend on hobbies and things you enjoy, more time to do what you want to do and not what you have to do — that’s wealth.

Lifestyle creep and chasing “more” is a deadly silent killer of this true wealth and happiness.

I’ve always loved this Kurt Vonnegut story that sums this up nicely: