By | Morgan Housel | www.cnbc.com
Personal finance hacks are not easy because shortcuts rarely exist. Rewards take time and effort. The personal finance industry — filled with advice that sounds and feels good, but doesn’t actually move the needle — needs to recognize this.
As a partner at a venture capital firm who has spent much of his career studying and writing about behavioral finance, I’ve found that the sooner you follow the money rules below, the bigger the payoff will be. (It won’t be easy, but ignoring them may lead to regrets later in life.)
1. Accept that living below your means requires suppressing your ego to below your income.
Spending a certain level beyond your basic needs is mostly a result of ego and social climbing. So savings is just a diversion from boosting the appearance of your status today for more productive use tomorrow.
When you define savings as the gap between your ego and your income, you realize why many people with decent incomes save so little. It’s a daily struggle against instincts to extend your peacock feathers to their outermost limits and keep up with others doing the same.