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"What the Way of Heaven Hates Most is Extravagance"

I came across this story about Tokugawa Ieyasu from the "Tokugawa jikki." For context, remember the era and how hierarchy was treated at the time - this was actually recorded by a scribe 400 years ago.

Remember the societal roles of the era, which will seem out of place compared to 2011. That's not the point of sharing it - it's the views on money, austerity, and what to prioritize that are worth learning from -

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Once, Okaji-no-tsubone ordered her women to wash a white kosode [of Ieyasu] that had become smudged. The women hurt their fingers, and blood flowed from the wounds; she thought it a very cruel task. Since he did have so many clothes, she asked whether it would be all right that they would not wash them anymore, and that he would wear only new clothes. Ieyasu answered: "This is not something that you, foolish women, have to understand, but I will explain it to you, nevertheless. Come and listen."

He called a great number of the women together, and said: "The thing about which I have been most careful all my life, is not to offend the Way of Heaven. What the Way of Heaven hates most, is extravagance. Having seen all the treasure I have amassed here, in Sunpu, you no doubt think that it is much?" All of them agreed. "This is not my only treasure house," Ieyasu resumed, "I also have them in the capital, in Osaka and in Edo, all filled with gold, silver, cloth, and silk. So even if I would wear new clothes every day, what shortage could there ever arise? However, the reason why I have amassed [all this wealth] is, to dispense it at times to the people of the empire, or, by accumulating it for the future generations of my descendants, to prevent the state from ever being short of funds. Therefore, we should not waste even one robe." Although they were women, they were all [impressed by] the wisdom of his holy teaching and did obeisance to him as one does to a Buddha or a god, with the palms of the hands joined together.

Saving more than you spend

On Ideas

One of the biggest mistakes I see young people making is spending their money capriciously and not saving. If your bank account or investment portfolios aren't growing, or you are not expecting them to grow something is awfully wrong. S&P 500 has been shown to go up around 10% every year in the long run. There are treasury bonds and other investment vehicles as well which can ensure that your money is at the very least keeping up with inflation.

When I started earning some money last year I ended up investing or saving up 4/5 of it, and kept spending my money frugally and only splurged once or twice. Being frugal, saving up, and thinking about the future is crucial, especially at a young age because you have so much time for compound intrest to take hold

One of the clearest ways to picture this was an example given in the book the slightest edge, whereby two young post-graduates at the age of 24 agree decide that they want to retire millionaires and will invest 2,000 a year into an 12% account every year until they can make it a reality.5 years later they meet each other and ask how its been going. One of them has followed the investing religiously, while the other hasn't. The one who hasn't asks the other how close he is to his investment goal and the the other friend says "I'm done". It turns out that with just 6 years of investing, the compounding interest will be sufficient enough to get him to 1 million at retirement. The other friend decides he has to get to it, but when he does the math, he realizes he has to invest 2,000 a year for the next 33 years!

This story underscores two things. One the cost of waiting, how waiting to long to do something keeps you from taking advantage on the magic of compounding interest. and second how important investing and not overspending is.

The biggest reason by far not to overspend though, is so you can increase your freedom. I'm not saying money always equals freedoms, but having a good amount of money in the bank significantly opens your options and lowers your anxiety levels. Living paycheck by paycheck, or not having a clear long term financial goal can lead to distress and insecurity.

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