Introduction: The Greatest Show On Earth

More importantly, the value of wealth is relative to what


you need.

Say you and I have the same net worth.

And say you’re a better investor than me. I can earn 8% annual returns and you can earn 12% annual returns.

But I’m more efficient with my money. Let’s say I need half as much money to be happy while your lifestyle compounds as fast as your assets.

I’m better off than you are, despite being a worse investor. I’m getting more benefit from my investments despite lower returns.

The same is true for incomes. Learning to be happy with less money creates a gap between what you have and what you want—similar to the gap you get from growing your paycheck, but easier and more in your control.

A high savings rate means having lower expenses than you otherwise could, and having lower expenses means your savings go farther than they would if you spent more.

Think about this in the context of how much time and effort goes into achieving 0.1% of annual investment outperformance—millions of hours of research, tens of billions of dollars of effort from professionals—and it’s easy to see what’s potentially more important or worth chasing.

There are professional investors who grind 80 hours a week to add a tenth of a percentage point to their returns when there are two or three full percentage points of lifestyle bloat in their finances that can be exploited with less effort.

Big investment returns and fat paychecks are amazing when they can be achieved, and some can achieve them. But the fact that there’s so much effort put into one side of the finance equation and so little put into the other is an opportunity for most people.

Past a certain level of income, what you need is just what sits below your ego.
Everyone needs the basics. Once they’re covered there’s another level of comfortable basics, and past that there’s basics
that are both comfortable, entertaining, and enlightening.

But spending beyond a pretty low level of materialism is mostly a reflection of ego approaching income, a way to spend money to show people that you have (or had) money.

Think of it like this, and one of the most powerful ways to increase your savings isn’t to raise your income. It’s to raise your humility.

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.

People with enduring personal finance success—not necessarily those with high incomes—tend to have a propensity to not give a damn what others think about them.