A classic old painting of an old man in bed in a garret.

I am currently involved in a couple of financial disputes. This isn’t normal for me and I’ve lost sleep over it.

Several thousand pounds are at stake, most likely. Perhaps sneaking into five-figures. That sounds a lot of money – it is a lot of money – but I asked myself this morning why exactly is it bothering me so much?

Is it the money – or is it something else?

I can afford to lose the claims. It would represent a small hit to my net worth. I say that not to boast (many readers could brag considerably more than me) but for context.

My point is the money shouldn’t matter to the extent its potential loss has me awake at 3am.

Money money money…

I care much more about money now I’ve got some compared to when I had none.

I’m not proud of that but it’s true.

Causation, correlation, or coincidence?

A bit of all three I suspect, and more besides.

As a student and into my early 20s, I only thought about money in the abstract. Like a cliché from central casting, I spent more time flirting with ideas like communism and anarchism.

Obviously it’s easier to eschew personal property when you haven’t got any. Even so, I made no effort to materially level up.

I’d avoided student debt thanks to a grant, a few part-time jobs, and some nascent financial savvy, but after a stint working on at college after graduation I was unemployed for six months.

I told myself I was a writer, but I didn’t write anything. Eventually I realised I’d soon not have the money to cover my rent for a room in a dubiously converted garage in Brixton, and a friend explained how to sign-on.

I went along, felt ashamed, didn’t claim anything, and started applying for jobs.

My first job paid well enough, though nothing like what my degree might have earned. No matter, I soon quit anyway for a 50% pay cut to do something I was excited about. I proceeded to earn mediocre money but have a lot of fun for a decade – and to save a slug of what I did earn.

I dumped my savings into high interest savings accounts. I thought about them maybe once a year.

I won’t go into my not-buying-a-property saga again, except to say that chasing house prices was what first made me pay attention to getting more money as an adult.

But even then, I did so inefficiently.

I didn’t invest (fortunately, as I dodged the dotcom bust) and I did extra freelance work in my spare time rather than leveling up my earning capacity. And then, 15 years or so ago when I was finally earning a reasonable amount relative to my flaky ‘career’ path, I jacked it in to co-found a company that in a couple of years I’d extracted myself from for breakeven1.

My friends recently sold that company for a few million.

Money is a mind virus

This was around the same time I got serious about investing. But I continued to live a double life, like Keanu Reeves’ Mr. Anderson in The Matrix.

Friends saw the same freelancer living his breezy graduate student lifestyle. I continued to favour freedom and fun in my work over a higher income.

But by night I was devouring investing forums, financial books, and company reports – and turning what had been a house deposit into a six-figure investment portfolio.

If someone saw contradictions, I explained my Bohemian investor philosophy to them.

But perhaps I was already changing.

Money had started becoming important to me, or at least something I thought about everyday. It was becoming part of my identity – if only in secret to myself.

Starting a financial blog might have contributed to this shift. I don’t think it was a big factor. My idea of financial independence is the freedom to not think about money, not the strictures of hitting a target to quit work or live off some particular sustainable withdrawal rate. I’ve never been very goal orientated in that respect.

Before I bought my flat, I realized I could probably stop working if I wanted to, and if I was prepared to live well within my means.

But I didn’t want to – though I didn’t much want to spend the money either.

I was much more interested in beating the market. And I think it is precisely tracking my returns and my net worth for the past half a decade that has really made a mark.

My experiments in ultra-active investing – and also the meticulous record keeping involved – has reminded me multiple times an hour exactly what my net worth is, and how it has fluctuated since yesterday or even in the past 20 minutes.

Live that every day for a few years and it must change how you see the world.

Before I mostly only logged into my broker accounts when I’d found a better idea to replace one of my existing ones, and so wanted to trade. There could be months in between. I didn’t track my returns, just my net worth – and only when I remembered to or was bored.

It was like a game, and almost as a side-product I grew wealthier. But eventually, thanks to all the tracking – and the aim of market-beating – my own money became like the all-important high score to beat.

On the house

I’d argue though that until a couple of years ago I still wasn’t taking it all super seriously.

I believe buying my flat (and getting a giant mortgage) is what has really focused my mind on money, in terms of how much I have – and what I now have to lose.

As I’ve long suspected, owning even a new home is a mini-money-pit.

First you incinerate a chunk of your savings with stamp duty and legal fees. Then there are the escalated material demands – a fancy sofa here, a distressed mirror there – and beyond even that owning a home is a kind of Bizarro fruit machine that only spits out bills that need paying, at least until you’ve a few years of price appreciation on the docket. (Something I don’t expect for a while…)

In addition, for me getting a mortgage was partly an experiment to see how it would feel to run what’s effectively a levered portfolio.

It turns out I don’t like the feeling very much.

I’d fully intended keeping my (interest-only) mortgage indefinitely but I can see that thinking may change. I suspect the debt is mildly stressing me out.

Either way the mortgage definitely has me thinking far more often about my net worth and my liabilities.

The mortgage has introduced paths where I can go bankrupt. They’re not high-probability paths, but without any debt they weren’t there before.

Mo money mo problems

So that’s the backdrop that I believe has me losing sleep over contested money that once I would have gunned for but not been overly disgruntled about.

If I wanted to stress out about money, I should have started 20 years ago:

  • Compared to the money that went begging for all the years I had a fun job and wasn’t paid very much, the amount at stake doesn’t matter – yet I didn’t think about money in those days.
  • Compared to what I’ve missed out on by not sticking at that first employer (which was acquired a few years later by Microsoft, and everyone had shares) or my start-up or believe it or not two other on/off employers where I would have eventually had a stake, it doesn’t matter. But I never thought about staying at those places for money, either.
  • Even compared to certain woeful stock picks I’ve made over the years, this money isn’t a huge deal – yet I usually just shake my head and move on when an investment goes wrong. I felt bad in the financial crisis, but I don’t think I lost an hour of sleep. (I had other things to worry about.)
  • Compared to the gains I’ve missed out because I de-risked my portfolio after buying my flat – because I care now about losing what I’ve got, and I want more buffers – it’s again a minor sum. Opportunity costs count!
  • Compared to the amount I’ve chucked away in stamp duty and (likely) house price falls it doesn’t matter much.

And yet it has got to me like none of the above.

I suspect it’s partly a bucketing issue. My mental accounting is going awry, because I feel wronged.

That’s illogical.

I believe there’s probably also something extra going on because one of the disputes involves my flat. There’s no doubt your own home feels more personal to you than even a closely-watched portfolio.

I probably also feel a bit dumb for not spotting one of the issues earlier. But stock picking has revealed my inadequacies many times before, so that’s really no excuse.

Money boxed

Warren Buffett talks about the sins of omission compared to the sins of commission. Buffett means that he regrets not buying multi-bagging Amazon or Google more than he kicks himself for buying shares in a loser.

In conventional investing, the most you can lose is whatever money you put in. But the potential upside you miss when you don’t invest is unlimited.

Something like that is true in life.

In my brain – though evidently not my gut – I know it’s not worth getting stressed out about a few thousand pounds now when I might have been earning six-figures decades ago if money was all-important to me.

Perhaps it’s the same for you, maybe not. We all have missed opportunities, or at least paths we didn’t take.

But I fear I’m also more stressed because I’m getting old and crotchety, and old crotchety people end up caring more about money.

You see it all the time. Is it because we’ve more to lose as we get older? Or is it because there’s less time to make back whatever we lose or never had – a kind of holistic sequence of returns risk?

Is it because young people are so rich in ways we will never be again, whatever we do – and so we can’t bear to lose any compensation for that impoverishment?

Or is it simply what the economists call loss aversion? That the pain of loss is greater than the joy of equivalent gains, and so when you’ve more to lose you’re naturally exposed to more pain?

I’m not sure but I don’t like it.

One reason I bought my flat is because I saw I’d been succumbing to what I call Buffett’s folly – the idea that every purchase today has to be priced in terms of the 30-odd years of compounded returns forgone.

But in the real world you have to live – and spend – in the now, a little, now and then.

Excessively caring about money as you get older sees everything from wealthy but freezing pensioners refuse to put the heating on to One More Year syndrome when you really want to retire to the spectacle of Californian tech titans buying their third back-up nuclear-bomb-proof bunker in New Zealand.

Being reckless with money is beyond foolish.

But being good with money also means keeping it in perspective.

Do you find yourself caring more about money then you’d like to admit as you chase down financial independence, strive to secure your retirement, or even just pursue higher returns from the stock market? Bare your soul in the comments below!

p.s. Since I wrote this post – and did all this musing – the larger of the disputes has been resolved. Karma or coincidence? I don’t know but I’ll take it, along with the insights it produced. A friend who read the draft suggested I spare you this update for the sake of dramatic tension, but I don’t want anyone getting out their tiny violins for me without cause. Besides, the point of the post is that it wasn’t *really* a big deal. And I feel the lesson for me may ultimately be more valuable…

  1. After taking into account the money I’d put in and the opportunity cost of lost earnings.

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