My colleague Nick Maggiulli posed a rhetorical personal finance question last week:
He’s right of course.
Big houses, luxury automobiles, nice boats, fancy clothes, expensive vacations, etc., these are status symbols.
Portfolio wealth is what you don’t see — the money saved, invested and not spent. I am in total agreement with Nick that we should celebrate the people who create wealth by not flaunting status.
We laud the billionaires and fake billionaires who pretend to be rich on social media by showing off their lavish lifestyles. Most people should look up to the Millionaire Next Door types who live below their means, save money on a regular basis and prefer a normal lifestyle with infrequent spending splurges on things they prioritize.
That’s my American (personal finance) Dream.
Nick’s thought gave me an idea though.
Let’s say you’re on a game show. I would say The Price Is Right, but kids nowadays would prefer Mr. Beast. What if you won a prize and had to choose between a $3 million house and a $3 million portfolio?
Which one would you pick?
We polled our audience and the results were as you would expect:
The money offers you far more flexibility and liquidity. A house comes with property taxes, insurance, maintenance and upkeep. Money is the sensible choice.
I would take the house.
Surprising, right?
I’m a numbers guy. That would be an irrational decision.
Here’s my explanation — at this stage of my life, a $3 million home would give me far more utility when it comes to experiences and happiness.
I know as a personal finance person I’m supposed to tell you the dopamine rush you would get from the house would wear off over time. I’ve read all the studies. But that hasn’t been my experience in practice.
Our lake house has made me happier over time. It’s more time spent with family. More time outdoors. More time on the water. More experiences.
I don’t find any joy watching the value of my portfolio go up. Sure, it offers a sense of comfort and safety. But the wealth goalposts don’t bring me more joy in my life.
Obviously, you don’t need an expensive house to create memories and experiences. I’ve simply learned that turning money into utility I can use over and over again, that brings me joy in life. Another number on a screen doesn’t do that.
Had you asked me 20 years ago, my answer would have been completely different. It might be different if you ask me in 20 years.
Your preferences can and will change based on your age, circumstances, and life experiences.
Sometimes they might even surprise you.
Michael and I talked about this financial exercise on this week’s Animal Spirits video:
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Further Reading:
The Best Investment I Ever Made
Now here’s what I’ve been reading lately:
Books:
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