[43] Are you being too hard on yourself?

Plus: No Loss Lotteries, White Elephant Origins, Think In Percentages and Budgeting Against Net Worth.

written by oz chen

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Edition 43 personal finance newsletter behavioral investing tips

Compliment of the week: You make things easy for yourself, and others.

I hope this newsletter receives you in good spirits. The holidays can be a fun and stressful time, but I’m just glad it’ll be normal-ish compared to December 2020. I’ll be seeing family in Florida for the first time in 2 years (saw that 3x fast). Then hopping on a plane to Puerto Rico, also first time! If you have any can’t-miss things to do in PR, let a friend know.

Here’s a random pic of a real candy cane house in Long Beach. Festive AF!

This week I’ll start by sharing some lessons learned from my inaugural money coaching sessions. Then I’ll cover: No Loss Lotteries, White Elephant Origins, Think In Percentages and Budgeting Against Net Worth.

🪨 Are you being too hard on yourself about money?

A big thank you to the brave souls who replied to the last newsletter for money coaching. All slots are booked for now, but you can fill out this form — I’ll return in January with more announcements.

One of the themes that showed up was self-judgment. I feel guilty for not saving enough. Am I falling behind? I’m not making as much as my friends...

Self judgment is easy when you’re only comparing yourself to a goal in your head. Goals are good – but an over fixation on financial goals can make things feel unnecessarily tight. I help people find space by reframing their worries into wins.

Here are some results from recent coaching sessions:

  • Removing guilt from taking a holiday vacation
  • Go from feeling “behind” to celebrating financial wins
  • Feel excitement vs dread about making extra income
  • Embrace progress over perfection

There was also a meta takeaway from these coaching sessions: just having any conversation about money is helpful. This is because money – and I mean the specifics of money – are so rarely discussed.

As I experiment with coaching, I’ll keep this reminder in my back pocket. It’s less so giving clients tips and tricks as it is creating a safe space to talk about money. From that safe space, a sense of ease and power tend to follow.

If you’re interested in money coaching, fill out this Google Form:

> Money Coaching Form <

I look forward to helping more people feel good about finance in 2022.

🌊 PoolTogether: A No-Loss Lottery?

Normal lottery: buy a lotto ticket, lose 99.99% of the time.

PoolTogether: a no-loss lottery running as a DeFi (crypto) app. How it works:

  • Connect a crypto wallet like Metamask to PoolTogether
  • Deposit the USDC stablecoin
  • The funds “pooled together” earn interest, which are then paid out to winners in the network
  • Even if you don’t win, you never lose your initial investment!

This is a neat concept based on the idea of Premium Bonds, which the U.K. government has been issuing since 1956. Citizens buy bonds, those bonds become part of a prize pool, and the government promises to buy back those bonds and pay interest.

Why don’t we have this in the U.S.?

That’s a good question. As DeFi creates more money legos, it’ll unlock financial vehicles previously unavailable due to geography (“we can’t do that here!”) or social class (“you need to have good credit first!”). The beauty of DeFi is that it’s permissionless – on the blockchain, people can build innovative tools like PoolTogether for anyone to access.

💸 Origin of the White Elephant Gift Exchange

Speaking of pooling together…isn’t White Elephant the best invention ever? Gift giving can be awkward, and especially stressful if you’re shopping for multiple people. Gift exchanges like White Elephant and Secret Santa invert this model for less stress :)

Legend goes that “White Elephant” came from the King of Siam (now Thailand), who would gift albino elephants to people he didn’t like. He did this so that recipients would get financially ruined trying to maintain the rare animals.

Today, White Elephant gift exchanges are a lot more fun and less petty. A group decides on a date and maximum amount to spend. You then show up to the exchange, draw numbers, then open gifts randomly according to your number. In the White Elephants I’ve been part of, we allow a max of “2 steals” for each gift item.

I like how the game helps people save money and reconnect with others in a memorable way. Stealing is often the most fun part of the exchange, because game theory and hilarious pettiness comes out. That damn snuggie is mine!

Secret Santa is a more boring alternative, but works better if not everyone can get together in the same space.

If you want to start an easy gift exchange, use Elfster. It’s free!

% Think in percentages %

I was once asked to attend a weekend trip to Palm Springs. I love the desert, but I was put off by the sticker price: $500 for two nights in a shared AirBnB.

My typical baseline was ~$200 for a shared house with lots of other people. At the same time, I felt weird cognitive dissonance: I knew I could afford it, and I wanted to go…but why did I feel so much resistance?

I had no baseline. After thinking through my goals (experiences over things), I landed on a $5000 annual vacation budget. Even giving myself such a budget felt like a bold move, but relieving.

$500 was only 10% of my newfound budget, and I already had half the year left. Done. I said yes to the trip and felt way less anxiety about it.

Thinking in percentages is a powerful way to work through financial scenarios.

How much should I save? What’s the proper amount of money to invest? Should I feel guilty for spending this much?

For all these scenarios, you can make calculations based on a percentage of your income or net worth.

Personal finance is hard because there’s no one “right” answer for everyone. What makes sense for one family in the Midwest may not make sense for a single tech worker. That’s why it’s called personal finance, not everybody’s finance haaaa #dadjoke

📜 Budgeting against net worth

Even though I do a bulk of my shopping on Black Friday, the prospect of spending so much at once (relative to the rest of the year) gave me anxiety.

That was part of the inspiration for thinking in percentages, and I baked that idea into a spreadsheet:

What if we compared our budget against our net worth or total monthly expenses?

Here’s the spreadsheet (Google Sheet)

You can input other measures here—whatever feels more relevant to you. The only unique feature about this way of budgeting is a matter of framing: compare expenditures against some sort of baseline.

Instead of monthly expenses, you can put in monthly income. Hope you find this helpful!

Just for fun:

“Sorry I can’t make it to your Christmas dinner. A professional cricket team stole my bicycle.”

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