The road to financial independence is conceptually pretty simple. There are proven vehicles to facilitate our road to success, we just need to put in the time. Now, there are people who got lucky and there are people who worked hard. What I’ll cover in this post is parallel to that spectrum.
These are a few things that helped me budget better, save more, and put me years ahead compared to where I could have been without them. More importantly, they are a strong base for both creating opportunities to get lucky, and also to support working hard towards our goals.
Sometimes it even feels like a real-life cheat code.
And lastly, I said that these things helped me, but they can also help anyone who adopts them. No matter how you earn your money, certain decisions and habits can put you way ahead in life.
1. Not overspending
This is where it all begins.
And of course, for us, personal finance & FIRE obsessed individuals, this item might seem obvious or even redundant. But think about it – this is exactly what separates us from the general public.
Basically, people resisting consumer indulgences are rare. But even rarer are people not even having to resist consumer indulgences because we saw they’re meaningless. And when I witness how much money is spent on liabilities and expensive consumables because of insecurities and the need to impress other consumers, I see the major advantage we have by simply spending less than we earn.
This item alone is the cheat code, all the others are extras!
I’d have even go as far as putting minimalism as the first item, but I don’t think conscious spending should be frowned upon. And I’m not promoting being cheap either. What I am saying is that buying a big house with a mortgage of $500k under succubus pressure just so you can catch up with your dumb friends is a trap.
So yes, this is the first pillar of my financial success so far. It all starts with saving money.
Let’s see what else I’ve built on top of this habit.
2. Take calculated risks
Taking a risk doesn’t mean falling for a scam or entering a ponzi scheme. It also doesn’t mean putting your money in something you haven’t researched at all. So don’t respond to free BTC or FX trading messages on Instagram. Don’t even use Instagram unless you’re branding something.
What I mean by this item is developing a risk tolerance in accordance with our income, savings rate, current wealth, and investment horizon, as well as understanding the risk/reward ratio and making the right calls at the right time.
For example, when taking risky positions, many people are concerned with getting their initial capital back and earning pure profit afterwards. Nothing wrong with that, of course.
However, what I found beneficial is looking at our portfolios as a whole. That means that I’m not even hoping to get a 100% return before I start being more aggressive. I just don’t allocate a position big enough to hurt my budget and I sleep well.
So yes, taking a risk with 1-10% of my net-worth is well inside my comfort zone. Even as a teenager, I played a modified Martingale roulette strategy in casinos with a budget I could afford to lose.
And if everything goes south, I’ll just continue living my life.
But not without the emergency fund I have. Not without the current asset allocation and investment strategy. And most importantly, not without researching the market I’m putting my money in.
As explained in my How I Invest post, the Cryptocurrency market made a huge impact on my portfolio. And this was completely attributed to what I said before. I watched BTC through the dip this year and didn’t sell a portion of it – because even if it went lower, I wouldn’t suffer at all. And I can tolerate a non-recurring 10% hit to my portfolio any day. Especially while still earning good income and with all the years I have to make things right.
3. Finding a job abroad
Best decision ever, in case you have FIRE aspirations and especially if you’re not born in one of ~15 countries sharing certain qualities.
Even for those born in first world countries, I’d say that leveraging geographic arbitrage might be a gold mine if done properly. Even if you don’t plan to spend your (early) retirement wealth back home, maximizing your earning potential is a smart decision while in the accumulation phase.
I already explained how different it can be in the 3 Financial Mistakes I Made post which I’ll highly recommend to anyone to read. I’ll just say that, although most importantly it’s about maximizing earning potential, the reasons to moving to another country are beyond just income.
4. Healthy lifestyle
Where do I begin?
A taxi driver was complaining to me that he’s struggling to make ends meet while smoking cigarettes. So let’s start with the obvious: don’t smoke.
First of all, it’s expensive. Cutting this particular cost can grant you a free all-inclusive vacation for 2 weeks in the best places on this planet. Not once… Every year!
And second of all, why? If your mind craves for a bad habit you can do on auto-pilot, try substituting this one with something else. The world offers lots of dopamine boosters nowadays. Don’t be weak.
Simply, cut all detrimental habits out of your life. You don’t need them! And this goes for any consumable that’s bad for our health.
And it comes with a side benefit: it’s incredible how shopping time decreases once you adopt this mentality. You basically go in to take only the things you need, no need for browsing stupid shelves filled with fancy packaged death, and saving tons of money in the process. And the extra? You save time – the exact thing you’re selling so you can spend.
Beautiful!
While at it, learn to cook. I’m not the best representative myself, as I also eat out sometimes, especially when traveling and willing to try different kinds of foods, but I understand the potential of preparing our own food. Especially as office workers, where all the shops are so expensive and making a 10x ROI on carbohydrates… Not worth it.
By the way, if you enjoy reading about personal finance blended with philosophy and a touch of health, follow me on Facebook and Twitter or put your mail below and never miss a post from MonkWealth.
And lastly, working out. Especially when you combine it with no gym membership! Check out my approach to Calisthenics & strength training if you need a place to start.
Maybe the financial benefits are invisible at first, but as I said in the above-mentioned post:
The future value of the price of neglecting proper care of our bodies today can be pretty high.
And don’t forget, it’s not just about the money – these also have health benefits.
5. Passive investing
This is the big one!
Although still a small data set, when looking into how my net-worth grew before and after I started investing, the difference is obvious.
Basically, there is no better financial decision than employing your own money to make you some more. Unlike the risky investments from point number 2, this is regarding asset classes in which I’m more comfortable allocating a greater portion of my wealth.
What I’m talking about is paying ourselves first after each paycheck, by putting a predetermined dollar amount in the stock market using an ETF that tracks a diversified index, such as the S&P 500. No stress, no exit strategies, no time-consuming portfolio management. Just watching your portfolio perform in line with the market itself. Do you need a reminder that it always goes up? Or you want to compare a 30 year stock market performance with a cash portfolio?
When you’ve already accumulated a substantial amount, just doing the daily grind for the hell of it makes no sense! Basically, when your salary is less than 5% of your net-worth (for example: when you have >=$50k saved and earning saving money makes people financially literate by default.
And if you need a place to start, look no further than Become an Investor Series – the most structured guide to passive investing and maintaining a lazy portfolio.
6. Curiosity
I can list an endless amount of non-financial benefits I got from researching various fields, but I’ll stick to the financial ones here.
Of course, being interested in the job market made me make good decisions in regards to where to steer my career towards. Researching trading and investing allowed me to save higher amount of money than I’m earning, even after accounting for expenses. Even if we leave making money aside, curiosity especially helps with not losing money. Learning about scams, conceptually and specifically, made me less ignorant, naive, and greedy. Learning about marketing and sales techniques as well as going deep into human psychology, NLP, influence, and suggestion made me understand how vulnerable we all are and made me more aware on daily basis.
I can keep listing specific cases, but the abstraction is where the money is.
We can extract value out of every type of knowledge we have, no matter if it’s theoretical, practical, financial, common, or personal. There are no downsides to acquiring knowledge. Getting deep into certain fields might be associated with high opportunity cost, but a wide spread of at least a slightly above-average knowledge is a must!
And the best part? Reading a book or two on a subject can put you way ahead of the majority. Try it.
7. Partner
Last but certainly not least.
I’ll keep this on financial level and not even go deeper into the benefits of sharing experiences or having a person you can trust.
Basically, imagine two people renting two separate apartments, 1000$ each. That means they spend 2000$ on rent. If they met, started a relationship and moved in together, they can lower their cost 40-50% easily.
But it’s not just about housing expenses… Now, how many sets of plates do you need? How many TVs?1 How many beds? How much are the heating costs? Maybe slightly higher, but not x2. Internet bill?
And forget about expenses, what about income? Even if one of the people earns half of the other, now you have 50% more to spend as a couple. And on top of that, all that money that didn’t go into renting / housing expenses for another apartment? Those become a part of your budget and thus purchasing power.
Pairing up with the right person is a fast track to wealth. Sharing the same ideas about your future or simply having a FIRE mindset is amazing.
Now, I know… Partner… It can be a huge cost for many, but with the right alignment can put us way ahead in life.
And of course, this can all go south even before two people live together. I’ve seen materialistic relationships and people tolerating inhumane behavior from greedy evil partners. In those cases, you should see what you’re missing out upon, man up and admit you’re better off being single than in this endless hole you idiots dug. I would never be in peace being with someone that I’m not aligned with.
A partner can be a multiplier to your accounts. The only question is whether it’ll be in the asset or liability column.
And semi-related: don’t marry, have kids, or get a joined mortgage until you have it figured out. If you need an explanation about when is that, you most probably still haven’t.
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