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Maximizing Life Returns

The drivers of a good life are great relationships with family and friends, fulfilling work, spirituality, and physical/mental health. As we never have all the time and money to do all of that, the question becomes: How do we allocate our time and money throughout our lives to "maximize" our happiness?

To answer that question, we need to understand the best “investment returns" depending on your life stage and the trade-offs involved in these choices. Let's dig into it.

Money compounds. If you invest US$200 a month starting at 20-year-old in an index fund, you should have US$500,000 by the time you are 60. Money compounds exponentially, so focusing on maximizing your income early on makes all the sense. However, don’t maximize income before finding work you love and can do well. Happiness requires work that provides a sense of purpose, engagement, and achievement.

Your investment in work compounds in phases. Studies have shown that you need 10,000 hours of practice to master your work. So, in that sense, work compounds. However, there is a trick: Your peak performance at work happens between 20-40 years old, depending on your profession. After that, your fluid intelligence declines, and your investment in mastering your craft yields decreasing returns. When that happens, you should move to a second phase of the work journey by leveraging "crystalized" intelligence (wisdom) which can start compounding again.

Family relationships. Family is a considerable investment. It will and should consume time from other important drivers of happiness. Usually, "prime time" at work coincides with children at a young age. “Family” investment is very time-sensitive. People between 15-20 years old spend, on average, 200min a day with their parents. This number drops by 60% by the time they are 30. Most of the time spent with children will happen before they go to college. Time with children is precious AND very short. If you are an absent parent for this crucial period of their lives, it will be hard to become their best friends when they are 30. Loneliness kills, and your investment in your family is the best "hedge" you can have.

In sum, here are just some provoking thoughts from an economist thinking about life, resource allocation, and return optimization.

- Don't settle young for work that doesn't fulfill you. Then focus on maximizing your income from your 20s until you decide to have a family.

- Understand your choices and their consequences around family. You can marry and have kids later in life (when you hopefully have more financial means and work optionality) or choose a work that accommodates the time investment you need for your family. You can’t simultaneously dedicate 100% to work and family. You can also choose to sacrifice your family, but don't assume they will not do the same with you when you are old.

Happy Life,


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