On maximizing your net psychic wealth...

     Obviously, our parsimonious approach required some compromise.  We left the neighborhood we'd been looking in and moved about a hundred feet across North Capitol Street, because doing so knocked $100,000 off the price.  The house we finally bought, on a beautiful tree-lined street, had about two linear feet of kitchen cabinets and peeling laminate countertop, and a backyard that ... well, if you've seen one of those gritty, depressing indie films about down-and-out heroin addicts, this is where the director would shoot a scene to let you know that the addicts had finally hit bottom.  The fence sagged like old lettuce, broken blocks of concrete jutted through a sprinkling of topsoil, and everywhere you looked you saw broken glass and strange fragments of ancient metal.  The only thing missing to complete the look was a car up on blocks.   And nothing could be done about any of it very immediately, because we had already agreed that there would be no home equity loans.  In fact, six months after we moved in, I started paying extra on our mortgage, which horrifies all the bankers I know.  Lose your tax deduction paying off a debt that only costs you 4.5 percent a year, when you could be getting 8 to 10 percent on that money in the market?
     Their math may be correct.  But life does not unfold mathematically.  Our house is inhabitable, and slowly, it is becoming nice.  It is big enough for us.  And we sleep better in it than we would in a house that cost us twice as much....Taking out a little mortgage, and paying it off early, means that we can afford to take big risks where it really matters....
     If you want to be able to take big risks, and then recover and move on, you cannot have everything riding on any one outcome.  Diversify your emotional and financial investments.  Hedge against the future.  Minimize your fixed obligations.  Maximize your net psychic wealth.
     Of course I don't mean that you should avoid all commitments.  But you should maximize your commitments to the things that matter.  Marriage.  Kids.  Parents and siblings.  Friends.  Your passions.   You can make more of the commitments that count when you have fewer commitments to granite countertops, sunroofs, and cell phone contracts.
-Megan McArdle,  as excerpted from The Up Side of Down:  Why Failing Well Is the Key to Success