A couple of months ago I read the books, “The Psychology of Money: Timeless lessons on wealth, greed, and happiness” and “The Art of Spending Money: Simple Choices for a Richer Life” by Morgan Housel. They are pretty similar, so you’d probably be fine just getting the first one if you just wanted to get an idea. The best part of the book are anecdotes or small stories from the past which illustrate a point. Other than the short stories, there was a lot of filler talking about people spending all their money on silly things.
Taking a step back, what I wanted to write about in this blog post is using software for retirement planning. I follow a youtuber called Joe Kuhn who posts about retirement, see sample video using software. Given the amount of money involved in retirement planning, I feel like a lot of people don’t give it enough attention. As the saying goes, “Penny wise pound foolish.” I think the overall theme in a lot of the money/personal finance area is that people aren’t focused on the right things, but I think that can be a solvable problem if we use software to help us.
I went to this place called “Lucky Claww” yesterday with my wife and kids and watched them pay $56 for some tokens that netted us with a couple of stuffed animals worth $5. It was interesting to think about the psychology of spending money on short experiences (arcades) vs longer experiences (buying a game that would give you 40 hours of playtime). I don’t think there is a right answer… Does it take too much fun out of it if you want to at least make it a conscious decision on which to prioritize?
One of the things that fascinates me in investing is compound interest. Warren Buffet talks about it a lot as well I think. He might not have the highest percent returns on his investments, but he’s been in the market as long as anybody. The above books I read have some fun facts about this, here are some that I pulled from Gemini in general:
- 99% of Warren Buffet’s net worth was earned after his 50th birthday. (Roughly 96% after he turned 65)
- If he had quit investing at age 60 and put his money into a standard savings account, his net worth today would likely be around $11.9 million (instead of $100B+).
- Morgan Housel (book author above) gives the example of Jim Simons getting like 3x annual returns compared to Buffet, but his time in market is significantly less so he has accumulated less money.
Interest on money doesn’t get modeled in a lot of video games, which can be a good or bad thing depending on how you see it, but I really enjoy how Balatro has a money interest feature which really affects the way you play the game.
Taking a common example I see is the cost of replacing a roof or investing in solar panels. Sample video here or here. I feel like the authors of these videos rarely compare how much they save when looking at the other alternatives (opportunity cost). Of course, you can’t necessarily put a price on energy independence similar to home ownership (vs renting), but any analysis on the amount of money you save should have a baseline that takes into account inflation, interest, etc. One of the comments I like on asphalt vs metal roofs is that you could take the extra money you’d save by going with asphalt, invest it in the stock market, and then use that to pay for new asphalt roofs indefinitely.