You Get 3 Wishes – Go

Translating the genie metaphor to your life and your moneyworking macbook computer keyboard

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You know how in cartoons and movies when there is a magic genie it grants you 3 wishes? The lucky beneficiary who stumbled upon this incredible power thinks about it, then gets the 3 things that he or she believes will make them happy, likely with a predictable plot twist along the lines of “the best things in life are free”. Meanwhile, we the viewers are always left thinking, “you dumbass, you’re supposed to ask for more wishes”.

The premise of this narrative is obviously a fantasy, but there’s a lot we can learn and apply to our financial health and quality of life. If you have a spare ten thousand dollars in your bank account (use whatever number makes sense for you), you can invest that money in the market and earn, let’s say 8% annually. That gets you eight hundred bucks the first year which compounds from there with little to no effort from you. By doing that you’re not just being responsible and “saving money” per se; you’re effectively¬†buying income.

Would you rather spend that money to upgrade your car or to invest it and ask the genie for more wishes? In that sense the choice seems pretty obvious. This general mindset makes it way more compelling to put money away so you can use it to generate and support whatever lifestyle you want over time.

Buying income is a choice

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Anchoring to this idea makes you rethink every dollar that comes in or out of your pocket. If you feel like you’re underpaid at work, buy some more income. If you feel like you don’t have enough to save for your kids’ college, buy some more income. If you can’t comfortably make ends meet to support your preferred lifestyle, buy some more income (or lower your preferred lifestyle). By contrast, is there ANY material thing you could possibly buy instead that is more valuable than multiplying your capital? Advertisers spend millions getting you to think so, but the answer is no.

Of course, many among us have no surplus in their monthly cash flow even after eliminating all luxuries, but if you do, don’t blow it and then complain about being underpaid. You’re not underpaid – your finances are poorly optimized and you’re buying shit that doesn’t help you in any way, shape, or form beyond the initial window of satisfaction that soon depreciates to zero.

Solve today or solve forever

man and woman sitting on brown wooden bench
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Ray Dalio in his book, Principles, discusses the concept of 1st, 2nd, and 3rd order consequences. What he means by this is the immediate impact of our actions relative to the subsequent domino effects after the fact. For example, if you hit the gym regularly the 1st order consequence is feeling tired and worn out while the 2nd and 3rd order consequences are feeling healthy and getting in better shape. Alternatively, if you eat donuts and bacon everyday, the 1st order consequence is feeling satisfied while the 2nd and 3rd are feeling unhealthy and getting out of shape. Pretty simple, right? 1st order consequences generally reflect our desires while 2nd and 3rd order consequences reflect our goals.

The interesting thing about this is that 1st order consequences are almost always inversely related to 2nd and 3rd order consequences. Ice cream tastes better than kale. Watching a movie on the couch initially feels better than building a business. Hanging out all night at the bars is more fun than cleaning up your kid’s vomit (though maybe equally sanitary). It’s nature’s way of tempting us into things that steer us away from what we really want, so that making the conscious decision to change course and plan for the long game becomes that much more gratifying in the end.

Our spending and money management follow the same principle. If you have been fortunate enough to generate some healthy income and accumulate savings, what is the most instinctive thing you think to do with it? Do you buy a pair of shoes or do you invest? Do you make a down payment for a car upgrade you don’t need or do you invest? Do you get a new flat screen or do you invest?

Every time the answer of what to do with money you don’t need isn’t “invest it”, you’re the dumbass who didn’t ask the genie for more wishes.


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