Hi everyone, it’s been 2 weeks since I last posted. My 2 brothers came over from Israel (for the Euros). This meant I was not only “busy” hosting, but also running around the city. I learned I’m not as young as I used to be and leaving Wembley later than I usually go to sleep now takes its toll. That’s why I didn’t write last week. You’ll be happy to know I regret nothing, these were good decisions in retrospect. I also learned something about judging your decisions retrospectively.

Before I go into today’s topic I want to share 2 things we probably knew but became a lot clearer in the past 2 weeks:

• London is amazing! The atmosphere all around the city during the semi-finals and final was electric and I loved it.
• Family is important, it made us realise the price we pay for living in this amazing city. Our daughter got some quality time with her uncles, which I wish she had more of.

Can the quality of your decisions be judged in retrospect?

Would you take the bet?

I would like to present you with a hypothetical situation:

You go on a game show with a fair coin (50/50 chance at heads or tails) and are offered this deal:
If it’s heads- you win £10,000
If it’s tails- you lose (need to pay) £100

Would you take the bet? I would.

Of course, the amounts might change your mind as we explored in the post about diminishing marginal utility.
Yes, it was also proven that the pain of losing £1 is greater than the joy of winning £1, that’s why I used a prize 100 times larger than the one you can lose.

Anyway, as I said- I would take the bet and I assume most of you would as well.

Judging your decisions retrospectively- The bet

Now let’s say you took the bet and it ended up being tails. You lost £100, does that mean you made a bad decision?

I don’t think so. I think that you can be unhappy with the outcome. However, as long as you don’t discover new information (for example, the coin toss was rigged or something like that), you still made a good decision that ended in a bad outcome.

In Israel, there is a term called “the results test” (“Mivhan ha’totsa’a” in Hebrew), which means judging decisions based on the results/outcome. I see the logic in that but tend to disagree with this approach. My test is “would I make the same decision again, knowing what I know today?”. If the answer is “yes”- it was the right decision.

“OK, but what does that have to do with FIRE, the Euros or your past 2 weeks?”

My Euro 2020 final tickets

My brothers came over from Israel because I won 4 tickets to the “fans first” (or whatever it’s called) category for the first semi-final (Italy vs Spain). We had a great time, watched a quality game of football and paid a very cheap (in my opinion) price for the tickets.

However, the tickets for the final cost a lot more. The price actually got me to consider it for quite a while. I knew it was a large amount of money (probably too much for a football match). However, the decision I saw in my mind was this:

I have a 50-50 chance (roughly, of course) of watching England lift a major trophy after 55 years in London! Now that would be something to tell your grandkids about one day.
I also have a 50-50 chance of watching England lose in the final, which means (for me) a regular football match.
If England loses, it would not be worth the price of the ticket. However, if England wins, the experience is worth several times more than the price of the ticket. It’s very similar to the gameshow coin toss I presented earlier.

As life is more complex than a straightforward A or B question, more things were running through my head. One of them was that if someone offered me a flight, accommodation (assume a simple Air BnB) and tickets to the final for that price? I’d take it in a second. If that’s true, why would the fact that I live in London mean the experience is worth any less? That meant I could spend more on the actual tickets.

It is also VERY important to add that if you and your partner have joint finances, the money belongs to both of you. That means the decision of what to do with your money should also be a joint decision.

Judging decisions retrospectively- My Euro 2020 final tickets

Assuming you haven’t been living under a rock, you probably know England lost. I was asked by several people “was it worth it?”. The answer to that question has to come in 2 parts:

1. No, it was not worth it. I enjoyed the experience and the atmosphere but had I known England would lose, I wouldn’t have paid that price.
2. I still think I made a good (the right) decision. As there was no way of knowing the final outcome in advance, I still think I made the right decision (for me) given the information I had at the time.

Spending money on experiences

Mr Money Mustache wrote an amazing blog post once (you can read it here, I highly recommend you do). In essence, it says that everyone knows that spending money on experiences is better than spending it on “stuff”. However, there is a third option- investing it. Instead of buying “stuff” or experiences, you can buy your freedom (or time). If you save enough (see the 4% series), you can retire early and not have to work 8 (or more) hours a day. As our life is the time we have on this planet, you are literally buying your life back, or more life, depends on how you look at it. Investing/saving money also gives you peace of mind. If you ever had money problems, you know the stress they bring. That means that using money to save/invest is also buying peace of mind and some good sleep.

Despite the above, you can’t save 100% of your income. To make this process sustainable, you need to determine what you spend money on and how much, while maintaining a savings rate that you’re happy with. For us, it’s 40% long term.

That means that part of the money will go to “stuff” and/or experiences. Usually, looking back, people value experiences more than they value “stuff”. In which case, I will maybe look back at the Euro 2020 final with a bit less disappointment.

Regretting things you did vs. regretting things you didn’t do

I’m not sure if this is common knowledge but I tend to feel that I regret not doing things a lot more than I regret doing them. The regret I feel from actually trying something and not getting my desired outcome is a lot less powerful than the regret of “I wish I tried”.

What does all of this have to do with FI?

You can implement these concepts in many ways. One of them is to judge yourself less harshly on some expenses you make if you think you made the right(/ a good) decision. You can also take this post to the direction of spending more money on experiences rather than on “stuff”. You can also focus on the “we regret things we do less than things we don’t do” part and maybe start implementing part of your post-FI life right now, like a side hustle or a hobby.

The main conclusion I would take from this collection of random thoughts is actually about investing. In the long-term, investing in a broad low-fee index fund will give you a very nice return (based on past performance which is, of course, not a guarantee for future performance). This means that if you invested just before a crash, that does not mean you made a bad decision! It also doesn’t mean you should stop investing. Quite the opposite, if the market crashed, the shares are now cheaper than they were before the crash. This means your financial future is literally on sale. Shares are one of the only things in the world that people buy less of when they’re cheaper, don’t make that mistake.

On that note, I will wish you a great weekend, that football will come home soon, and that you look back at your decisions with pride rather than regret.