Personal finance advice often feels like a maze of contradictions. Save everything. Live a little. Invest aggressively. Play it safe. After years of grappling with these mixed messages, I found clarity in Nick Maggiulli’s “Just Keep Buying.” Through its data-driven insights, I discovered a more nuanced – and ultimately more liberating – approach to building wealth.
The Myth of the Endless Treadmill
The conventional wisdom about the hedonic treadmill has always troubled me. We’re told that as our income rises, our spending will inevitably follow, leaving us stuck in place. But Maggiulli presents a more hopeful reality, stating plainly: “Increases in income aren’t followed by similar increases in spending.”
This simple observation changes everything. While our lifestyle might expand with higher earnings, it doesn’t consume every additional dollar. Each raise, each bonus, each successful project becomes an opportunity for genuine financial progress, not just fuel for an endless cycle of consumption.
The Truth About Building Wealth: It’s About the Starting Line
I used to believe that extreme frugality was the key to building wealth. Cut every expense, and prosperity would follow. The reality, Maggiulli shows, is more complex and profound. Drawing from global research, he highlights how initial capital, not just saving habits, shapes financial trajectories.
He cites compelling research from the London School of Economics: “Empirical research from around the globe has demonstrated this beyond a reasonable doubt… researchers at the London School of Economics released a paper titled, ‘Why Do People Stay Poor?’ that illustrated how the lack of initial wealth (and not motivation or talent) is what keeps people in poverty.”
The study’s findings are striking: “[We] find that, if the program pushes individuals above a threshold level of initial assets, then they escape poverty, but, if it does not, they slide back into poverty… Our findings imply that large one-off transfers that enable people to take on more productive occupations can help alleviate persistent poverty.”
This insight shifts our focus from obsessing over daily lattes to building meaningful capital through strategic career moves and investment choices.
The Retirement Reality Check
The financial industry profits from our retirement anxieties, but the data tells a different story. Maggiulli reveals that most retirees manage their wealth more effectively than we might expect: “What percentage of retirees do sell down their assets in a given year? It’s only about one in seven. As the Investments & Wealth Institute reported, ‘Across all wealth levels, 58 percent of retirees withdraw less than their investments earn, 26 percent withdraw up to the amount the portfolio earns, and 14 percent are drawing down principal.'”
Even more revealing is the long-term picture: “According to a study by United Income, ‘The average retired adult who dies in their 60s leaves behind $296k in net wealth, $313k in their 70s, $315k in their 80s, and $238k in their 90s. This data suggests that the fear of running out of money in retirement may be overblown.'”
These findings don’t eliminate the need for retirement planning, but they offer a more balanced perspective. Instead of being paralyzed by fear, we can focus on building sustainable wealth through consistent investing.
The Relativity of Wealth: You’re Probably Richer Than You Think
Perhaps the most striking insight comes from understanding how we perceive wealth. Maggiulli challenges our self-perception directly: “Well, guess what? You probably don’t act all that different. How do I know? Because you are likely far richer than you think. For example, if your net worth is greater than $4,210, then you are wealthier than half of the world, according to the 2018 Credit Suisse Global Wealth Report. And if your net worth exceeds $93,170, which is similar to the median net worth in the U.S., that puts you in the top 10% globally. I don’t know about you, but I would consider someone in the top 10% to be rich.”
This revelation forced me to confront how relative our perception of wealth truly is. As our income grows, our reference group shifts, constantly moving the goalposts of what feels like “enough.”
