7. Live Below Your Means for Freedom

People living far below their means enjoy a freedom that people busy upgrading their lifestyles just can’t fathom.

People living below their means have freedom

Nivi: Any other big things you should avoid, other than renting out your time?

Naval: Yeah, there are two tweets that I put out that are related. The first one I was talking about where someone, like, how your lifestyle has to upgrade, shouldn’t get upgraded too fast. And that one basically said, people who are living far below their means enjoy a freedom that people busy upgrading their lifestyles just can’t fathom.

And I think that’s very important, just to not upgrade your lifestyle all the time. To maintain your freedom. And it just gives you freedom of operation. You basically, once you make a little bit of money, you still want to be living like your old self, so that just the worry goes away. So, don’t run out to upgrade that house, and lifestyle, and all that stuff.

The most dangerous things are heroin and a monthly salary

Let’s say you’re getting paid $1,000 an hour. The problem is, is that when you go into a work lifestyle like that, you don’t just suddenly go from making $20 an hour to making $1,000 an hour. That’s a progression over a long career.

And as that happens, one subtle problem is that you upgrade your lifestyle as you make more, and more money. And that upgrading of the lifestyle kind of ups what you consider to be wealth, and you stay in this wage slave trap.

So, I forget who said it, maybe it was Nassim Taleb. But he said, “The most dangerous things are heroin, and a monthly salary.” Right, because they are highly addictive. The way you want to get wealthy is you want to be poor, and working, and working, and working.

Ideally, you’ll make your money in discrete lumps

And this is for example how the tech industry works. Where you don’t make any money for ten years, and then suddenly at year eleven, you might have a giant payday.

Which is by the way one reason why these very high marginal tax rates for the so-called wealthy are flawed because the highest risk-taking, most creative professions you literally lose money for a decade over your life, while you take massive risk, and you bleed, and bleed, and bleed.

And then suddenly in year eleven, or year fifteen, you might have one single big payday. But then of course Uncle Sam show up, and basically say, “Hey, you know what, you just made a lot money this year. Therefore, you’re rich. Therefore, you’re evil and you’ve got to hand it all over to us.” So, it just destroys those kinds of creative risk taking professions.

But ideally you want to make your money in discrete lumps, separated over long periods of time, so that your own lifestyle does not have a chance to adapt quickly, and then you basically say, “Okay, now I’m done. Now I’m retired. Now I’m free. I’m still gonna work because you got to do something with your life, but I’m gonna work on only the things that I want, when I want.” And so you have much more creative expression, and much less about money.

Chapter 8 >>