Make Money Decisions Like You’re 70

I walked into a tattoo shop down the street to get my first tattoo. It was going to say memento mori. In latin: “Remember you will die.” It’d be a permanent reminder that time is precious.

Nobody working in the shop says anything to me. I sit down and start leafing through those books of ready-made tattoos.

Tattoo machines are buzzing away in the background, laying down lines of permanent ink, and I start thinking, “Will I want this tattoo when I’m like 70?”

Yeah, I want it right now, but I don’t think I’ll want it then, so why do it?

Not getting the tattoo was insignificant, but I quickly realized this decision was a smart way to live: try to make the more difficult short-term decision, in service of your future self.

Take your health. It’s easy to sit there eating junk food, never going to the gym, staying up late watching television. You only care how you feel in the moment.

Which reminds me of that scene in “Becoming Warren Buffett” when he’s speaking to a classroom of students:

“Imagine you’re going to be given a new car. Any car that you want is yours. It will be at the front of your house with a bow on it when you get home. There’s one catch. That’s the only car you’re ever going to have in your life. So you better take care of it.”

He follows with an analogy, “You’re only going to get one body and one mind in your life, so you better take care of it.”

You don’t realize it at the time, but being healthy later mostly comes from the little things you do today. It’s from eating real food, working out, getting plenty of rest.

Think of it like laying the foundation for a house, but this foundation isn’t for you, it’s for your future self. And this is the same concept you can use to build wealth.

You’ve probably heard that story about the guy who invented chess. It goes like this. An inventor shows his chess board to the emperor of India, and he’s so impressed he offers the man whatever he wants. Sacks of gold, chests of jewels, a palace.

The inventor says he wants grains of rice. One grain for the first square on the board, two grains for the second square, four for the third, eight for the fourth, and so on, up to the last square on the board. The emperor agrees.

But on the 40th square the emperor would have had to put a billion grains of rice. The last square, the 64th, more than 18 quintillion. That’s 210 billion tons of rice!

While I doubt the story is true, the message is important to understanding the power of compound interest.

That when you invest, gains look tiny at first, modest in the middle, and then take off like a rocket. It’s why Buffett made most of his wealth after age 50.

The problem isn’t that compounding doesn’t work. We all know it does. The problem is that when you’re just starting out — investing small amounts of money — getting rich seems impossible.

It’s easy to get bored or lose interest after a short while. This is why people start looking for shortcuts. The instant abs. The instant riches. Unfortunately, shortcuts don’t exist.

The trick then is getting excited when you make your first $100 investing, because the way you make $100 is the same way you make $1,000, $10,000, even $1 million.

Just like multiplying grains of rice.

The reality is that building wealth takes time, but if you’re doing it in service of your future self, who cares?

In fact, there’s a fascinating experiment about this. Participants were shown a present day photo of themselves or a digitally aged one at 70, and then asked how much they wanted to save for retirement.

The people who saw a picture of themselves at 70 — their future self — contributed twice as much money to their retirement savings.

It doesn’t matter whether you pretend you’re 63 or 77, what matters is you can’t step into a time machine to tell your 20- or 30-something self to take care of their body and mind, or start saving.

So, you have a choice: make easy short-term decisions and create a more difficult life later, or make difficult short-term decisions, and put your future self first.