2675: The Goldilocks Zone of Personal Finance by Nick Maggiulli of Of Dollars and Data on Financial Security

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[00:01:00] This is Optimal Finance Daily, Episode 2675, the Goldilocks Zone of Personal Finance by Nick Majuli of of Dollars and Data.com

[00:01:11] And I'm your host and personal finance enthusiast, Diana Merriam. Welcome back to Optimal Finance Daily, where every day I read the best personal finance blogs on the web with permission from the authors of course.

[00:01:24] So with that, let's get right to our next article as we optimize your life.

[00:01:31] The Goldilocks Zone of Personal Finance by Nick Majuli of of Dollars and Data.com

[00:01:40] Being at the bottom sucks. I know the feeling growing up as a small kid with no athletic abilities, I got used to getting picked last or near last for any team sport.

[00:01:52] The experience was always stressful for me as Robert Sapolsky explains in why zebras don't get ulcers.

[00:01:59] Quote, for a subordinate animal life is filled with a disproportionate share not only of physical stressors but of psychological stressors as well.

[00:02:09] Lack of control of predictability of outlets for frustration. End quote.

[00:02:16] In the sports world, I was that subordinate animal. I didn't feel like I can control the outcome or get better so I focused all of my efforts on improving in the classroom and it worked.

[00:02:27] From elementary school onward, I was always near the top of my class academically. However riding high in the world of academics has its own pressures.

[00:02:37] Any time I had to prove myself to a new teacher or perform well on a standardized test, it was like being picked last for kickball all over again.

[00:02:46] Why did I experience moments of acute stress even when I was doing well?

[00:02:50] I recently found my answer in an experiment done by Jay Kaplan on stress and social hierarchies among monkeys.

[00:02:58] Like prior researchers Kaplan demonstrated that those monkeys near the bottom of the social hierarchy experience lots of stress and had worse health outcomes than those higher up. No surprises there.

[00:03:10] But Kaplan also found that under a particular set of circumstances, those at the top of the hierarchy also experienced profound stress.

[00:03:19] Sapolsky summarizes it well.

[00:03:22] Quote,

[00:03:53] End quote.

[00:04:03] Personal finance isn't all that different. Those people near the bottom experience lots of chronic daily stress around money that impacts their whole lives.

[00:04:12] For example, the famed Whitehall study felt that even when you control for smoking, level of exercise and other factors, lower socio-economic status is still associated with higher cardiovascular mortality.

[00:04:25] However, people near the top have their own set of money problems. Tyrone Ross highlighted some of these difficulties in a video he recently posted on Twitter.

[00:04:35] Quote,

[00:05:06] As I've written before, there are hitting costs associated with being wealthy, such as figuring out who you can trust and dealing with the expectations of friends and family.

[00:05:15] On a podcast episode with Russ Roberts, David Owen, author of the first national bank of Dad, echoed this sentiment when discussing the difficulty of teaching kids about money.

[00:05:26] Perhaps to Ben Carson for sharing this.

[00:05:30] Quote,

[00:05:31] I think it should be said that it's easiest to teach kids about money obviously when there is money in the family, but not when there's too much and not when there's too little.

[00:05:39] I think money is the hardest where money is very tight and in situations where money is essentially boundless.

[00:05:45] I think as hardest for the poor and the rich to teach their kids about money.

[00:05:50] The first because poverty is not much of a teacher, there's not much to learn, it's all necessity.

[00:05:56] And at the rich end, it's hard to create the kind of artificial scarcity that you need to make decisions seem as though they mean anything.

[00:06:04] It's easier in the middle.

[00:06:06] End quote.

[00:06:08] Owen's point goes beyond just teaching your children about money though.

[00:06:11] It also applies to what level of wealth you should strive for or what I call the Goldilocks Zone of Personal Finance.

[00:06:19] Enough money to have comfort, security and motivation, but not so much that you add guilt, stress or existential longing.

[00:06:26] It's not too little and it's not too much, it's just right.

[00:06:30] My challenge to you is to find and stay in your Goldilocks Zone.

[00:06:34] I can't define exactly how much that is since it varies from person to person, but I would wager that the amount is less than you think.

[00:06:42] Why do I recommend this?

[00:06:44] Because it provides the base level of security that the bottom doesn't have while avoiding the conflicts that are common to those at the top.

[00:06:52] It's the best of both worlds and a privilege that many of you will attain in your lifetime.

[00:06:58] The sad thing is that some of you are already in the Goldilocks Zone, though you continue to crave more and don't realize it.

[00:07:05] You might disagree with my logic and say that there is no such thing as being too rich.

[00:07:10] If so, please consider the warning given by Felix Dennis in how to get rich.

[00:07:16] Quote.

[00:07:17] Still, let me repeat it one more time.

[00:07:19] Becoming rich does not guarantee happiness.

[00:07:21] In fact, it's almost certain to impose the opposite condition.

[00:07:25] If not from the stresses and strains of protecting wealth, then from the guilt that inevitably accompanies its arrival.

[00:07:33] End quote.

[00:07:34] The upside to having more.

[00:07:37] Despite the difficulties associated with being rich, the one upside to having immense wealth is that you can improve lives through charity and private enterprise.

[00:07:46] So if you do decide to go beyond the Goldilocks Zone, make sure you know why and ask yourself whether that reason will satisfy your soul.

[00:07:55] You just listen to the post titled The Goldilocks Zone of Personal Finance by Nick Majuli of Dollars & Data.com.

[00:08:07] And I'll be right back with my commentary.

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[00:09:24] The Goldilocks Zone that Nick describes in this article reminds me of the importance of figuring out how much is enough.

[00:09:32] I used to think it was a number such as the baseline formula for reaching financial independence,

[00:09:38] an investment portfolio worth 25 times your yearly expenses, or a level of achievement such as a yearly salary goal,

[00:09:46] number of social media followers, or selling out my event the economy conference.

[00:09:52] But now I realize that enough is not a destination or goal to be reached. It's a state of mind to be cultivated.

[00:10:00] The reality is, I already have enough. I have enough money, friends and achievement.

[00:10:06] But until I developed an abundance mindset rooted in gratitude for what I already have, it was never going to feel like enough.

[00:10:15] As one reaches higher and higher levels of success, there's a tendency to move the goal post of enough so that nothing ever feels like enough.

[00:10:24] This is why there are multi-millionaires in the world with countless awards, accolades and professional successes that are still miserable.

[00:10:33] Without peace of mind and the capacity to enjoy the abundance they've created, what's all that success even worth?

[00:10:41] If you'd like to explore this concept of enough further, I recommend you check out the speech titled The Journey to Enough by Rose Lundsbury on the Economy Conference YouTube channel.

[00:10:53] And that's another edition of Optimal Finance Daily. Thank you for listening and I'll be back tomorrow as usual, so I'll see you there where your optimal life awaits.