House Money

One of humans’ greatest strengths – and most insidious curses – is our ability to adapt to nearly any change in our circumstances.

It’s not always, of course. Sometimes a great tragedy befalls someone and they never recover. But most of the time, they do! People get life-altering injuries or make career-ending mistakes, and life goes on. They not only adapt, they ultimately return to baseline happiness. They find new things to give them joy. The fact that most humans do this is why it’s such a tragedy when a few can’t.

Why did I say it was an insidious curse, though? Because it works the other way, too. When things go well for us, humans very quickly raise their new baseline expectations. I’ve seen it happen so many times. Someone is living quite happily on $50k/year, and suddenly they get a job that pays triple that. For whatever reason, it doesn’t last more than a year, and the person goes back to making $50k. You’d think that would be no problem, right? But no. The adaptation process has to happen all over again, and it’s often slow and painful.

My father used to tell me that the best position to be in was “playing with house money.” In a casino, you walk in with whatever money you have and you start gambling. If you’re under what you came in with, you’re betting your own money. You’re probably losing it, too. You might be responsibly having a good time with a budgeted amount, but you’re still losing that amount. On the other hand, if you can get an early win or two, my father said, you should immediately put away all the money you originally came in with. For the rest of the night, just gamble with your initial winnings. If you “lose everything,” then you’re – at worst – back where you started, but having had a pleasant evening. Gamble, in other words, with house money.

It has other advantages besides protecting your stake. When you play with house money, you can have more fun – you can take more risks, try wilder things. The important thing to remember is that it is house money. It’s not yours. Don’t start feeling entitled to it.

That lesson stuck with me. I remember when I was a young man, I lived with some roommates and (being too poor for a car at the time), I walked to work. One of my roommate’s friends left a car with us for a few weeks while they went out of town, and my roommate immediately started driving to work. I would be fine borrowing the car for a night out, but I didn’t change my daily routine. Sure enough, when the friend came back into town, my roommate had a hard time adjusting to walking to work again, even though it had only been a few weeks!

Good times and lean times both come and go. When the good times come, enjoy them – but remember that they’re house money. Don’t instantly adjust your expectations of life up to the maximum. If you’ve made $50k for a long time and you suddenly get a big raise, keep living like you make $50k. Put the rest away. Maybe you’ll never go backward – but many people do.

And sure, you can adapt. But why make it harder on yourself? Playing with house money rules. But don’t quit your day job.