I love ice cream. Jeni’s. Ample Hills. Salt and Straw. Van Leeuwen. If it’s cold, creamy and chocolate-y – I love it. But as a 42 year old, ice cream and the Notorious B.I.G. have something in common: > Mo ice cream, mo problems. (That is a terrible dad joke.) You see, the _Chocolate Gooey Brownie_ as a free sample (remember those?) tastes delicious. It leaves me yearning for more. However, 3 scoops of this dark and delicious delight will send my stomach into knots, ruin my sleep and make me ornery the next day. An economist would say that the first bite brings a lot of utility (or _satisfaction_ or _joy_). And that the 30th bite brings the problems. This could actually be illustrated with a simple line graph: ![Blog post image](/images/blog/marginal-utility-1.png) The __marginal__ utility____ describes the _incremental_ _joy_ that arises from the _incremental bite_ of ice cream. And you know what else has the same arc of utility? __Money.__ ## I thought $75,000 was the magic number In Daniel Kahneman and August Deaton’s 2010 paper [Does Money Buy Happiness](), the economists argue that happiness curve flattens at $75,000. That number itself has become a pop culture lore. Clearly they’ve never tried to rent a 1 bedroom apartment in NYC. ![Blog post image](/images/blog/image-1-769x1024.png) (Further studies have demonstrated that [happiness does increase with income](), but at a much flatter rate.) But for this post, let’s drop the dollar amount and just examine at the shape of the curve. Then we’ll apply it to our own lives. So let us begin with the edge cases. If you’re in the bottom left quadrant and struggling to make ends meet – any amount of money will significantly boost your utility. You can think of this as the bottom layer of [Maslow’s Hierarchy of Needs](): > The biological requirements for human survival, e.g. air, food, drink, shelter, clothing, warmth, sex, sleep. If these needs are not satisfied the human body cannot function optimally. Maslow considered physiological needs the most important as all the other needs become secondary until these needs are met. > Now let’s book it to the other end of the curve with Elon Musk. Musk’s net worth clocks in at a whopping $316 Bn. To put that in context, if you secretly put every single share of Hertz into his brokerage account (worth $15 Billion in aggregate) he probably wouldn’t notice. (It would be like giving someone with $2 million an additional $23,000.) So we can all agree that the curve flat lines at some point. Which leaves one juicy point to reckon with: Point B. Point B is the perfect amount of ice cream (a kid’s single scoop for a grown man). It’s the point at which __you’re deeply satiated__ , yet well aware that anything beyond it __won’t really move the needle.__ As a blog catering to high-performing professionals, irrespective of the X-axis (i.e. how much money you have), I suspect most of you are beyond point A. Some of you are probably closer to Point C than you think, but more on that later. Let’s look at each point on the graph. ## The scarcity mindset keeps you anchored at Point A (when you’re really at Point B) The scarcity mindset is that pernicious feeling that there’s always __another shoe to drop__ – irrespective of how much money you have saved or you earn. The post [How to overcome the “scarcity mindset”]() describes the root causes of this _doomsday_ mindset. It arises from the (false) belief that there’s never enough and that someone’s bound to be left out: > Everyone can’t make it. Somebody’s going to be left out. There are way too many people. There’s not enough food. There’s not enough water. There’s not enough air. There’s not enough time. There’s not enough money. There’s not enough becomes the reason we do work that brings us down or the reason we do things to each other that we’re not proud of. There’s not enough generates a fear that drives us to make sure that we’re not the person, or our loved ones aren’t the people, who get crushed, marginalized, or left out. > > The Soul of Money, Lynne Twist It’s the reason why [millionaires fear they’ll be broke]() (and [billionaires tragically commit suicide]() during market downturns). And the reason why retirees don’t _actually_[let themselves spend during retirement](). Intellectually all these individuals are at Point B, __yet emotionally they’re stuck at Point A.__ ## It is possible to quantify Point B As you move from Point A to Point B, you realize that: Housing prices are through the roof. The all-in cost of college has more than doubled (from $40,000/year to $90,000/year) since I stepped foot on campus in 1997. And don’t even get me started on the healthcare premiums for a small business owner. (Many have argued that the aforementioned price increases have [hollowed out the US middle class]().) There’s no one-size-fits-all approach to navigating Point B. However, with some large-ticket expenses (education, a down payment) it’s very possible to model out the required savings rate. For example, if your child was born today and you wanted to fully save for their college in 18 years, it would require (roughly $1,000 of savings a month _for those 18 years_). It’s ridiculously high, but very easy to quantify. In theory, this would give you a roadmap from Point B to Point C. Point B also provides an opportunity to evaluate the trade-offs between competing needs and desires. If you’re willing to live in a smaller house, point B slides down the curve. You can slide down the curve by electing for public education or requiring your kids to incur some college debt. (Heck, you can even pass on the Tesla.) These decisions are all highly personal, but to be clear Point B is _not_ about financial security. It’s about living covering your basic desires. ## Point C may be closer than you think Something interesting happens on the glide path from Point B to Point C. You realize that you don’t want more money. __You want more time.__ To return to our edge cases, Elon Musk cannot pay anyone to exercise for him. Nor can he pay someone to read a book for him, teach his kid how to ride a bike or attend a (Grimes?) concert on his behalf. The most obvious way to think about Point C is the traditional sense of retirement. You __trade today’s time__ (for income) and then you __get back free time__ at a later date (retirement). But beware, this can set you up for a slippery slope. Take the lawyer who works endless hours aspiring to get promoted into the partnership. Once they get promoted, they _still_ work their butts off. Then, at 55 they get a back a ton of time. Only this lawyer will know if the hours they worked (and how much of “today’s time” they sacrificed) were worth the delayed pay-off. This is the trade-off that I made in leaving Wall Street. I _was that lawyer_. But I made the very conscious decision that __I’d rather work til I’m 65 and spend tons of quality time with my young kids while they’re in[the magical window]().__ Conversely, you can look at the Great Resignation where younger workers are saying, _I don’t want to play the delayed time game_. I want to enjoy some of that time _right now_. NPR’s [Now Hiring series]() covered the story of a 27 year-old software developer named Jonathan Caballero: > At 27, his hair was thinning. The software developer realized that life was passing by too quickly as he was hunkered down at home in Hyattsville, Md. > > There was so much to do, so many places to see. Caballero envisioned a life in which he might end a workday with a swim instead of a long drive home. So when his employer began calling people back to the office part time, he balked at the 45-minute commute. He started looking for a job with better remote work options and quickly landed multiple offers. > > “I think the pandemic has changed my mindset in a way, like I really value my time now,” Caballero says. Instead of treating Point C as some way distant goal, Caballero prioritized flexibility, happiness and the ability to decide how he spends his time forward. Anyone who hasn’t reached Point C should consider the question: __What if I gave up a bit more future time for some time today?__ ## Don’t confuse Point C with happiness Just like 3 scoops of ice cream won’t make you happy, neither will Point C. Yes, it does go up, but the slope of the happiness curve unquestionably flattens. We already established that there’s a limit to how much time one can buy back. But more importantly, money cannot [fill the internal voids]() we all feel in our souls. If you need to feel validated, money can’t fix that. If you fear [your own mortality or irrelevance](), money can’t fix that. If you don’t know what makes your heart sing and [truly come alive](), money can’t fix that. Sure, having more time gives you the space for that exploration. But the first step towards any of these questions ia a couple hours of introspection – accessible to you, _yes you_ , my dear RadReader. Then what? Maybe a single scoop of Jeni’s. ## You may enjoy * [The dubious promise of financial independence]() * [Why is it so hard to take a walk without headphones]() * [The magic of doing $10,000/hr work]()