Money Archives - Page 7 of 10

Parkinson’s law and lifestyle inflation

Have you heard of Parkinson’s law? The principle states that “work expands in order to fill the available time.” For example, if you organize a meeting at work and set it for 1 hour (as are most meetings), the meeting will last for the whole hour, even if the objectives are complete after 30 minutes.

In productivity circles, Parkinson’s law is often used as a tool to manage time, but I believe it applies equally to managing your money. In this case, Parkinson’s Law may be rephrased to read: “Spending expands in order to consume available money.”

Lifestyle inflation explains this phenomenon. Even if you get a raise at work, you may still be left with no extra money to save. A $100 shopping trip is more likely to result in you spending $100. You are also expected to spend thousands if you have that much money to spend.

Early retirement groupthink

I keep noticing a very annoyingly condescending attitude in the FIRE (financial independence/retire early) “community” towards people outside of it, the “normal” people. I think this is the consequence of early retirement groupthink.

What am I talking about?

Some of the symptoms of this problem are: mocking people that work full time, policing FIRE people that work on gigs or part-time projects, and idolizing people that reached FIRE. Ironically, those gig-and-part-time folks are often practicing what now has a name — Barista FIRE, and its quieter cousin Coast FIRE.

Lessons from the 2019 letter from Warren Buffett to Berkshire Hathaway investors

After a few years of reading the famous annual letter from Buffett (tag) to his investors, and three years of following the live Yahoo! stream of the annual meeting in Omaha, last year I shared my impressions for the first time. Here is the second installment.

The Greater Fool

The greater fool theory of finance says it’s sometimes possible to make money by purchasing overvalued assets (items whose purchase price exceeds their intrinsic value) and reselling them for a higher price later.

This theory states that prices go up when people can sell overvalued securities to the “greater fool,” regardless of whether the securities are overvalued. Suppose one “fool” purchased an overpriced asset, hoping that he could sell it to an even “greater fool” who would profit from it. A system like this can only work if new “greater fools” are willing to purchase the asset at ever-higher prices. Continue reading “The Greater Fool”

Easterlin Paradox and Early Retirement

Throughout this post, I discuss the relationship between two concepts from the field of Economics(?): the Easterlin paradox and early retirement.

Early retirement is a controversial issue in economics and personal finance. I have written about it in an earlier post. Many Americans consider early retirement more than just a chance to have the most relaxing time of their lives. They can either succeed or drown at a crucial point in their lives from this point.

Easterlin paradox, on the other hand (or coincidently?), explores the relationship between income and happiness, or lack thereof.