The Simple Shift in Mindset That’ll Help You Do More With Money
Embrace and live by the distinction between sacrifice and compromise
Sacrifice versus compromise. I mention it frequently in my writing. In this article, we break down the distinction and illustrate why it matters.
In personal finance — and in most aspects of life — sacrifice sucks. It rarely works out. It ends up like most diets. Or relationships. You give up something you like — maybe as much as a part of yourself — but receive nothing in return.
While this might sound recognizably noble, it’s hardly sustainable. In fact, it’s unacceptable. Don’t sell yourself short.
Remove sacrifice from your vocabulary (at the same time as eschewing “retirement”). Redefine the choices you make as compromises. Play a psychological trick on yourself if you must. Make yourself believe you’re not giving anything up. Go all-in on making a trade where the net effect does nothing but improve your life.
By the end of this article, hopefully, you’ll understand what I mean. If I do my job, you’ll be one step closer to financial self-awareness you can apply to other parts of your life.
Compromise isn’t a bad word.
It’s just a choice you make in one area to get something you want more in another.
That’s from my second most popular Medium article to date. It’s the key to executing an insanely low cost of living and a great life.
Consider beer. I like beer. A lot. Because it has the tendency to do things I don’t like to my body, I have given up beer in countless fits and starts over the course of my 30 years as a drinker. (No, I’m not old. I just started young!).
Giving up — sacrificing — beer solves very little. It’s an exercise in inane futility. Yet, I have gone through these motions too many times to count. More often than not — scratch that — every single time, I end up with one of two results:
- I end my beer hiatus early and end up drinking a lot of beer.
- I end my beer hiatus on schedule and end up drinking a lot of beer.
I receive zero benefit from this sacrifice.
When I stopped drinking at the beginning of the pandemic, I swore off sacrifice and committed to compromise. I wasn’t going to give anything up without getting something I want more in another area.
If I stop drinking beer, there has to be a well-considered reason why and enough upside where I don’t miss beer. In fact, I associate it with how amazing I feel because I no longer keep beer as a focal part of my life.
No beer equals, um, better digestive health.
No beer equals a better body.
No beer means I sleep better.
I hate stomach problems. I don’t like to feel fat. I despise shitty sleep.
Is beer responsible, wholly and completely, for improvements in these three areas? Most likely not. Do I benefit by blaming beer for these three things? Absolutely. Because I’m pretty sure it’s a smart lifestyle choice to not drink beer frequently, if at all. I know this because when I stopped drinking beer, I immediately noticed enhanced digestion, looks, and sleep. I associate eliminating beer with these enhancements.
I let myself have a beer or two from time to time. I have done this two or three times over the last eight months or so. Each time, I witnessed small digestive and nocturnal regressions, which, over time, would have led to undesirable changes to how I look and feel. This helps reinforce my decision to compromise beer for three things that once dogged me. Three things I want more than the taste of beer and all it entails.
The key—I can feel and see the impact of the beer compromise almost immediately. Like it or not, we’re wired for instant gratification. I need to see quick results from whatever it is I choose to do, or I’m just not going to keep doing it. I know this about myself. I don’t think I’m an oddball in this regard. I know my limitations.
From a personal finance standpoint, this might bring the latte effect to mind. The great Ben Le Fort defines and nicely riffs on the latte effect here. The difference between giving up beer and the latte effect lies in how fast we’re able to feel the resultant impact.
As the personal finance fable goes, you give up your morning coffee from your local coffeehouse because it saves you $5 a day. Five dollars a day saves you $150 a month. One hundred-fifty dollars a month morphs into like $87 million in 40 years, according to the melodrama the gurus who tout the latte effect spew.
Savers and investors have enough difficulty realizing the impact of compounding (essentially how that $5 builds on itself into a significant amount of money over time) without having to give up something they enjoy. It takes a long time to see the fruits of compounding. The equally as great Marc Guberti nicely illustrates the timeline compounding functions on here.
If you’re going to have to wait — a long ass time — for something good, it’s going to hurt to give something up that you really enjoy to make it happen. Think about this. It’s illogical to not pay for coffee when the perceived result of not paying for coffee doesn’t start to show itself in any meaningful way for like 5, 10 years or more.
Keep your coffee habit. For me, it provides something I want — and need — in my life. There’s the social aspect of visiting my local coffee shop on the regular. The ritual of my morning coffee, which I often follow with a morning walk, makes me happy. When I’m happy, I’m more creative. When I’m more creative, I’m more productive. By not giving something up, I gain so much in other areas.
Simply put, I refuse to torture myself in service of little more than symbolic dogma.
OTOH (when it was cool to do this, that meant “on the other hand”), when I give up square footage and pay less than market rate for an otherwise lovely apartment in gritty East Hollywood, Los Angeles, I experience the impact almost instantly. It’s tough to miss paying more for rent than I really need to when I see the benefit of saving rather than spending the $1,000 (or more) I’d need to spend to live in, say, relatively posh West Hollywood.
There’s a sweet spot where sacrifice morphs into compromise. When you don’t feel the hunger pangs of giving something up, it’s more like compromise. The positive flipside of the negatively-connotated sacrifice. When you situate your decisions with give and take rather than a soulless, uncritical, and unequivocal take.
I hope I did my job. Drawing the distinction between sacrifice and compromise. It’s the type of relatively deep-in-the-weeds psychological stuff we don’t discuss nearly enough in relation to money. I’m convinced we can blame most of our money-related failures on ignoring the underlying psychology that ultimately can seal their fate.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.