Questions to Help You Get Unstuck | Part 2

In Part Two of this series, we’ll focus on Investing and Spending. A bit of a departure from Part One, but still aligns with our theme of Helpful Questions to Keep Close, to carry with you on whatever journey you’re on. I hope you find them useful, or at least interesting to think about.

On Investing

There’s a little something for everybody here. So here’s a question for all you dealing with and trying to make sense of the markets.

5. “What would I need to see to tell me I’m wrong?”

This is a good question to ask to cultivate an anti-confirmation bias. I picked this up from Adam Robinson and it was in the context of investing when he shared it. Often times when we have a view or opinion about something, any and all incoming information we receive gets filtered and we automatically cling on to what agrees with our thesis and discard what doesn’t. Confirmation Bias. And that can be deadly in investing.

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

When you enter the game of investing, you bring with you a view (that you’ve hopefully studied and scrutinized) and you express that view through your investments, through how you position your portfolio. The position of your portfolio is a representation of the views that you have in the investment landscape, and how you think things are going to play out.

The Covid-19 Pandemic became apparent to the world in early 2020. The US (and global) stock market declined more than 30% bottoming in March of that year. Many, including myself, were absolutely positively sure that the decline of the markets was just beginning. And that we were in for a further crash. How else could it play out? There’s a Pandemic going on and businesses are being shut down! Many months have passed, and the US stock market has now doubled from its March lows. All throughout the rest of 2020 and 2021 people clung on to this view, that the markets will and should crash, It has to! People clung to this view despite evidence of the contrary being played out right in front of them — the stock market was steadily marching upward.

Confirmation bias literally makes you blind to what is right in front of you. Confirmation bias makes you sensitive, makes you hungry, for the things/views/opinions that agrees with your own. And in this example, it made a lot of people (again, myself included) discard the ultimate evidence telling them that what they should actually have done is increase their position in the stock market. The evidence was clear and right in front of everybody’s faces: the strong upward march of the stock market, backed by liquidity and 0% interest rates. That upward trend was the ultimate reflection of what was actually going on.

And so what should an investor cultivate? An anti-confirmation bias. And this question helps you develop that. Whenever you come across new information, or consume media or literature, you should try to also view them with the lens of “What do I need to see to tell me that I’m wrong?” so you don’t automatically discard crucial information just because it doesn’t support your view.

If you’re one who’s deliberate with how you position your portfolio or what investments you pick, then what you have now — what specific stocks/funds, asset classes and what asset allocation — is an expression of what you think the investment landscape is going to be, in the time horizon — 10, 20, 30 years? — that you set for yourself.

You already have a stance, a belief. Gathering evidence that says you’re right is nice, but unnecessary. Being sensitive to information that might tell you you’re wrong and that you should change your position is crucial.

Even though we’re talking about investing here, I believe this question can be applied more broadly — to bring humility to any discussion or debate, to temper arrogance, to be open to learning new things and perspectives. I think these are such important matters, in the world of investing or otherwise.

On Mindful Spending

6. “How many days/hours of working is this purchase equivalent to?”

(I might have gotten this from you, Joel)

Every purchase that you make, you make by exchanging it with your time and energy. It might not be direct or apparent, but it is a fact. And the more you are aware and mindful of this relationship, the more deliberate you can be with how you live your life.

Those in the FIRE (Early Retirement) and Minimalist community will agree and be familiar with this concept (and fact). But this thing isn’t new. From Vicki Robin and Joe Dominguez (authors of Your Money or our Life) in the 1970s, to Pete Adeney (Mr. Money Mustache) in the 2000s, and even way back to Thoreau in the 1850s, this principle has been guiding people on mindful spending (and living) for generations. I think we all know this subconsciously, but it helps to bring that knowledge to the surface, so we can embody it. This question helps with that.

This is a question I like to ask myself when I’m on the fence about a certain purchase, whether it’s something material, or it’s a trip I’m planning that might cost a lot. This question brings the relationship of money, to time and energy, a lot closer. How many days/hours of working is this $1,500 laptop equivalent to?

It helps to think that you don’t have that money yet, and then ask yourself: Am I willing to work for an extra X number of days just so I could have this fancy laptop? And if your work is stressful, factor that in as well! You will be paying for this thing with your time, energy, and maybe even extra stress! Will it be worth it?

Then there is the question of how much you actually earn in an hour — your real hourly wage. If you want to get into the fine details of the hidden costs of working and see how much you actually earn per hour taking into account your prep for work and commute, gas money, etc., see this section of Your Money or Your Life’s summary: Money is something we choose to trade our life energy for.

For me, since I live close to work, so that commute and gas money is negligible, I just use what my net pay is. Because for me tax is the biggest “hidden” cost that is not reflected on my hourly wage on paper. So if my employer pays me $30/hour, and I have 8-hour days, I don’t think that $240 is what I earn for working a full day. It’s lower than that. Taxes (Federal, State, Social Security, Medicare, etc.) eat away about (roughly) 25% of my gross pay.

So what I would actually take home with me after I work a full day is $180. Or effectively, an hourly wage of $22.5/hour (there is much to be said about what your effective tax rate actually is, but for simplicity’s sake, we won’t go too deep into the rabbit hole). So sometimes I view my purchases in “180-dollar” increments, which is equivalent to one day of working. Going back to that fancy $1,500 laptop, that would cost me 8.33 days of working. Would that be worth it for you? For some, that might be a Yes. And there’s nothing wrong with buying a fancy $1,500 laptop (confession: I recently bought a fancy laptop myself, but less than $1,500!). The important thing is that you’re fully aware of what and how much you’re actually trading for that purchase.

7. “Is this purchase removing a negative in my life?”

If you’re lucky enough to be one who’s basic needs are met and live a pretty cushioned lifestyle, the challenge then becomes this: To simplify. I admit I continue to struggle with this (see above confession of a fancy laptop purchase). Adding this question to your decision-making process when buying something can really hone that skill of mindful spending.

“It is not daily increase but daily decrease, hack away the unessential.” Bruce Lee was talking mainly about martial arts, but like all universal truths, it can be applied more broadly. At its core, the message is to simplify. It’s about “restraining our impulse to keep adding on and accumulating.”

This philosophy ties in perfectly with this question, which I got from Pete Adeney (Mr. Money Mustache). In his interview with Tim Ferriss, when asked about his thought process or internal dialog when considering buying something, Pete says:

“And finally, I ask myself is this removing a negative in my life? Because it’s pretty well studied that happiness is not very much affected by adding positives to your life. Especially in a rich world environment like we live, it’s mostly accomplished by removing things that are a strong negative to every day. So getting myself a remote control photography drone is unlikely to make me happier because my life doesn’t currently suck due to the absence of a photography drone, quad copter thingies. Whereas if there’s something that every day I’m like, dammit, I just wish I didn’t always trip over this broken dishwasher or whatever. Then replacing your dishwasher is probably going to be a happiness boosting proposition.”

— Mr. Money Mustache, from The Tim Ferriss Show podcast, ep #221 (https://tim.blog/podcast/)

That’s it for Part Two. I guess this will turn out to be a three-part series. And you won’t want to miss the next one, because as promised in my introductory paragraph for this Questions Series, we’re going to get to the bottom of things. I’ll see you then, and thank you for reading.

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