The Hidden Cost of Signaling

Front-Load the Effort

I was listening to Diania Merriam on the Fit Rich Life podcast, and she said defined financial success in a way I'd never considered:

"People talk about success with money as if it's a number to be reached. To me, success with money is that I don't think about it anymore."

I love that.

Most people spend their entire lives negotiating with money. Every month is another series of decisions: Can I afford this? Should I buy that? Am I saving enough? Will I ever catch up?

Financial Independence flips that equation.

Instead of making thousands of tiny compromises forever, you front-load the effort. You save aggressively. You learn about investing. You automate your finances. You build good habits.

The early years require intention.

But eventually, the system runs itself.

It's like pushing a flywheel. The first few turns are hard, but once it gains momentum, it carries you forward with surprisingly little effort.

The goal of FI isn't to become obsessed with money.

It's to become free from having to think about it.

To me, that's what wealth really looks like.

The Hidden Cost of Signaling

I've become increasingly convinced that a huge percentage of our spending has very little to do with utility and a lot to do with signaling.

Why do people buy luxury cars?

Sure, some are nicer. But is a $90,000 car really three times better than a $30,000 car?

Not usually.

The extra $60,000 is often paying for a signal.

The same thing happens with colleges. Do most people really believe students learn dramatically more at Harvard, Duke, or Stanford than they would at a great flagship state university?

Probably not.

But the diploma sends a signal.

The challenge is that signaling is deeply human. We all want status, approval, belonging, and respect. The problem is that marketers understand this and have built entire industries around selling us signals disguised as products.

One question I've found useful is:

If nobody else could see this purchase, would I still want it?

If the answer is yes, you're probably buying utility.

If the answer is no, you might be buying a signal.

This doesn't mean all signaling is bad. The clothes we wear, the cars we drive, and the choices we make communicate something about us whether we like it or not.

But becoming aware of signaling gives us a superpower. It helps us separate what we genuinely value from what we're buying to impress people who probably aren't paying much attention anyway.

And that's where financial independence gets interesting.

FI is one of the few games where you win by ignoring the signals that everyone else is chasing.

The Decision Was Right. The Outcome Was Wrong.

One of the most useful mental models I've encountered comes from Annie Duke, who coined the term "resulting."

Resulting is our tendency to judge the quality of a decision based solely on the outcome.

If things worked out, it must have been a good decision.

If things went poorly, it must have been a bad decision.

But that's not how life works.

Life is probabilistic.

Imagine you invest in a broadly diversified index fund. That's a decision with a strong historical track record and favorable odds. If the market drops 20% next year, that doesn't suddenly make it a bad decision. Likewise, someone who puts their life savings into a speculative stock and gets lucky didn't necessarily make a good decision.

The quality of a decision should be judged by the information available at the time the decision was made.

Did you gather relevant information?

Did you thoughtfully consider the alternatives?

Did you understand the risks and tradeoffs?

If so, you may have made an excellent decision—even if the outcome wasn't what you hoped for.

The flip side is equally important. As new information arrives, we should be willing to update our beliefs and forecasts. The best forecasters in the world don't stubbornly cling to yesterday's conclusions. They continuously adjust their probabilities as new evidence emerges.

In other words, make the best decision you can with the information you have today.

Then be willing to change your mind tomorrow.

That's not inconsistency.

That's wisdom.

ChooseFI Updates

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