When Kim and I go to bed each night, we spend time casually browsing Reddit on our iPads. It's fun. Mostly.
She and I enjoy sharing funny animal videos with each other (from subreddits like /r/animalsbeinggenisuses, /r/happycowgifs, and /r/petthedamndog). Kim dives deep into /r/mapporn and /r/documentaries. I read about comics and computer games and financial independence.
But here's the thing. After browsing Reddit for thirty minutes or an hour, I'm left feeling unsatisfied. In fact, I'm often in a bad mood. After browsing Reddit, I have a negative attitude. My view of the world has deteriorated. Why? Because for all the fun and interesting things on Reddit, it's also filled with a bunch of crap.
You see, I also subscribe to /r/idiotsincars and /r/publicfreakout and /r/choosingbeggars — and dozens more like these. These subreddits highlight the worst in human behavior. And while viewing one or two posts from forums like these can be entertaining and/or interesting, consuming mass quantities of this stuff leaves me feeling dirty. (Plus, there's the Reddit comments which tend to be juvenile, dogmatic, and myopic. Reddit comments are so bad that Kim refuses to read them.)
It's taken a while, but I've come to believe that Reddit -- or the way that I use Reddit, anyhow -- is a net negative in my life. It causes more harm than good.
I've been thinking about his concept a lot lately. Behind the scenes, I've been making many small, subtle changes to my environment and daily routine. My aim is to decrease my depression and anxiety by removing people, things, and experiences that are net negatives and replacing them with people, things, and experiences that are net positives.
Last night's HelloFresh recipe was Bulgogi Pork Tenderloin. As always, the instructions were clear and easy to follow. As always, it took me about twice as long to prep things as the recipe card said they would.
I chopped the vegetables, boiled the rice, seared the meat, made the sauce. But when I reached the final step -- "finish and serve" -- I hit a wall of sorts.
"Ugh," I said to Kim, who was playing with our three cats and one dog simultaneously. "The recipe calls for a tablespoon of butter in the rice. I hate adding butter to rice. It makes it gummy and gross. But HelloFresh always wants me to do it."
"I like butter in my rice," Kim said, throwing a bacon ball for the dog while kicking a catnip toy for the cats. "But if you don't like it, don't add it."
I sighed. Of course, she was right: Just don't add the butter! Such an obvious solution, right? Yes — and no.
You see, I am fundamentally a Rule Follower. When I'm cooking, I follow the recipe exactly. When I'm building an IKEA desk for my new office, I follow the instructions exactly. On the road, I generally stick to the speed limit (which sometimes drives Kim nuts). I used to take pride that never once did I cheat on my homework or tests in high school and college — and I never helped anyone else cheat either.
As I said: I am, fundamentally, a Rule Follower.
This has been true when it comes to managing my money too. Since beginning my quest to become the CFO of my own life fifteen years ago, I've surrendered to wiser minds than mine. I tend to heed the time-tested "rules of money", rules like:
- When average people like me are wondering how to invest, the best answer is usually "set up automatic contributions to an index fund".
- When setting up a budget, it's more important to pay attention to the Big Picture than it is to fret over details. Follow the balanced money formula and you should do okay.
- When you want to get out of debt, use the debt snowball method. If possible, pay high-interest debts first. Many folks (including me) have more success, though, if they pay off low-balance debts first. And still others use a debt snowball approach in which they start by tackling the debts with the greatest emotional weight.
- If you're going to use them, know how to use credit cards wisely. If you're unable to use credit without digging yourself into debt, then throw away the "shovel".
- And so on.
Following these rules has proved profitable. These "rules" are rules for a reason. Because they work. They allow folks to get out of debt and build wealth. Crazy, right?
Here's the thing, though. As effective as these financial rules have been for me, as much as I like strictly following a recipe, I've also come to realize that sometimes it makes sense to (gasp!) break the rules.
The challenge, then, is determining when to follow the rules — and when to break them.
His name is Dave. A retired Naval officer, he’s written two novels and about to publish his third. His books (thrillers in the style of Dan Brown and John Grisham) have been well received and even won awards, yet he’s still a relative unknown in the competitive world of fiction.
Her name is Michal. She’s a residential and commercial painting contractor in central Ohio. She’s a natural artist, a trait she inherited from her father and passed on to her daughter. She’s truly gifted, yet has struggled to grow her young business.
His name is Rob. He wants to achieve financial freedom at a young age. Yet, fresh out of college, he has mountains of debt. He makes a good salary, but most of it goes to paying school loans and everyday expenses. He manages to save and invest $100 a month, but feels like he’s making little progress.
Last December, I took a trip to Europe with my cousin Duane. Before I left, I received email from a GRS reader named Matthias. "If you come through Switzerland, let me know," he said.
The stars aligned so that Matt was able to join us for several hours on a train across the Alps. He brought Swiss chocolate and a bottle of whisky. As we talked -- and became pleasantly buzzed -- he told me about how he and his wife tackle couple goals together via five-year plans for their future.
"I love this idea," I told him. "Will you write about it for Get Rich Slowly?" He did. This is Matt's story about creating a shared vision as a couple. Enjoy!
In the spring of 2006, I'd been living and working in Taipei, Taiwan for two years and my contract was about to expire. Soon, I'd be returning home to Switzerland.
On a pleasant weekend evening in my downtown flat, my Taiwanese girlfriend and I were reminiscing about all of the wonderful memories we'd made. We waxed nostalgic about the two years we'd enjoyed together. But it dawned on us that if we didn't make some bold moves, our relationship might be coming to an end.
We opened a bottle of fine wine in order to enhance the depth and wisdom of our conversation. Before long, we'd switched from sweet nostalgia to dreaming about our potential future -- together.
Imagineering the Future
My girlfriend had just graduated from college and was working in her first job. For my part, I’d just received an offer for my dream job — but it meant I'd have to move back to Switzerland.
The wine was an effective dream enhancer. We let our imaginations loose as we talked about how we could potentially live our lives together. The future took many shapes.
- Where would we live?
- What jobs would we work?
- How could we both be as happy as possible together?
Honestly, it was overwhelming. Our lives three months ahead were like a blank slate. Everything seemed possible! Nothing was certain! Anything could happen!
In order to conceptualize our thoughts and concerns, we decided to write down all of our dreams and goals on yellow stickynotes. This mother of all brainstorming sessions took us half an hour. We each wrote down what was important to us, stuff we’d like to achieve, skills we’d like to acquire — in short, what we’d like to do with our lives in the next few years.
Next, we organized those dreams in terms of feasibility, urgency, and requirements. (To meet certain goals, we had to accomplish others first.) During this process, we tried to keep things fair. We both got the same number of stickynotes. All goals were open to debate, yet at the same time we tried to figure how to best help each other achieving them going forward! Our aim was to work together as a couple.
Step three was to put up an A3 formatted white paper on the wall, draw a timeline from 2006 till 2011 – yes, we were going to plan out the next five years of our life! – and arrange our couple goals in a meaningful way to our life’s “game plan”.
Our dreams included things like:
- Get married.
- Move to Switzerland.
- Save for a new home.
- Learn German.
- Start a business.
- Become parents.
In a nutshell, nothing extraordinary — the things young people usually dream of. It was clear that some goals had to be achieved before others. We agreed that pursuing them in a specific order made sense. Then we arranged them accordingly on the timeline.
Becoming a Dream Team
Planning our future was an ecstatic activity. In fact, doing so was the defining evening for our relationship.
That very evening, we actually decided to get married. We decided to chase our dreams together as a team. She was 23 years young; I was 26. Little did we know that this shared activity would help us tremendously on the path to our dream life. We had become a dream team!
Note from J.D.
Last October, I had a chance to read an advance copy of Grant Sabatier's new book, Financial Freedom, which was just released this morning. I liked it. I loved parts of it. In fact, the second chapter of Financial Freedom inspired my article about how time is more valuable than money.
Today, I'm pleased to present a (heavily edited) excerpt from that second chapter. Here's Sabatier on why time is more valuable than money -- and why you can and should retire early. (Links and photos are from me. Everything else is from the book. Note, however, I've heavily edited this chapter in order to abridge it and to make it more readable in blog format.)
If some ninety-year-old rich dude offered you $100 million to trade places with him, would you do it? Of course not. Why? Because time is more valuable than money.
The average person has approximately 25,000 days to live in their adult life. If you’re reading this, you likely need to trade your time for money in order to live a life that is safe, healthy, and happy. But if you didn’t have to work to make money, you’d be able to spend that time however you wanted.
No one cares about your time as much as you do. People will try to take your time and fill it up with meetings and calls and more meetings. But it’s your time. Your only time. Financial Freedom is designed to help you make the most of it. Make money buy time.
My goal is to help you retire as early as possible. When I say retire, I don’t mean that you'll never work again, only that you’ll have enough money so that you never have to work again. This is complete financial freedom — the ability to do whatever you want with your time.
Traditional Retirement Advice Doesn't Work
I don’t ever plan to retire in the traditional sense of the word, but you could say that I’m “retired” now because I have enough money and freedom to spend my time doing whatever I want. I no longer have to work for money, but I still enjoy making money, and it’s attached to many of the things I enjoy doing. I love working and challenging myself and hopefully always will, so checking out to a life of leisure just isn’t my vibe.
If you want to “retire” sooner rather than later, you need to rethink everything you’ve been taught about retirement and probably most of what you’ve been taught about money. As a society, we have collectively adopted one approach to retiring: get a job, set aside a certain portion of your income in a 401(k) or other retirement account, and in 40+ years you’ll have enough money saved that you can stop working for good.
This approach is designed to get you to retire in your sixties or seventies, which explains why pretty much every advertisement about retirement shows silver-haired grandmas and grandpas (typically on a golf course or walking along the beach).
There are three major problems with this approach:
- It doesn’t work for most people.
- You end up spending the most valuable years of your life working for money.
- It’s not designed to help you “retire” as quickly as possible.
The first major problem with traditional retirement advice is that even if you follow it perfectly (and most people usually don’t), you still might not have enough to live on when you are in your sixties.
The popular advice to save 5% to 10% of your income isn't enough. You should be saving as much money as early and often as you can. If you want to be sure you'll be able to retire at 65, you need to start (and keep) saving at least 20% of your income from the age of 30.
Here’s how big a difference it makes.
I read a lot of books. Nearly every book has some nugget of wisdom I can take from it, but it's rare indeed when I read a book and feel like I've hit the mother lode. In 2018, I've been fortunate enough to read two books that I'll be mining for years to come.
The first was Sapiens, the 2015 "brief history of mankind" from Yuval Noah Harari. I finished the second book yesterday: Thinking in Bets by Annie Duke. Duke is a professional poker player; Thinking in Bets is her attempt to take lessons from the world of poker and apply them to making smarter decisions in all aspects of life.
"Thinking in bets starts with recognizing that there are exactly two things that determine how our lives turn out," Duke writes in the book's introduction. Those two things? The quality of our decisions and luck. "Learning to recognize the difference between the two is what thinking in bets is all about."
We have complete control over the quality of our decisions but we have little (or no) control over luck.
The Quality of Our Decisions
The first (and greatest) variable in how our lives turn out is the quality of our decisions.
People have a natural tendency to conflate the quality of a decision with the quality of its outcome. They're not the same thing. You can make a smart, rational choice but still get poor results. That doesn't mean you should have made a different choice; it simply means that other factors (such as luck) influenced the results.
Driving home drunk, for instance, is a poor decision. Just because you make arrive home without killing yourself or anyone else does not mean you made a good choice. It merely means you got a good result.
Duke gives an example from professional football. At the end of Super Bowl XLIX, the Seattle Seahawks were down by four points with 26 seconds left in the game. They had the ball with second down at the New England Patriots' one-yard line. While everbody expected them to run the ball, they threw a pass. That pass was intercepted and the Seawhawks lost the game.
Duke argues, though, that the call was fine. In fact, she believes it was a smart call. It was a quality decision. There was only a 2% chance that the ball would be intercepted. There was a high percentage chance of winning the game with a touchdown. Most importantly, if the pass was incomplete, the Seahawks would have two more plays to try again. But if the team opted to run instead? Because they only had one time-out remaining, they'd only get one more chance to score if they failed.
The call wasn't bad. The result was bad. There's a big difference between these two things, but humans generally fail to differentiate between actions and results. Duke says that poker players have a term for this logical fallacy: "resulting". Resulting is assuming your decision-making is good or bad based on a small set of outcomes.
If you play your cards correctly but still lose a hand, you're "resulting" when you focus on the outcome instead of the quality of your decisions. You cannot control outcomes; you can only control your actions.
Last week, Ben Carlson from A Wealth of Common Sense published an interesting article about how staying rich is harder than getting rich. He writes:
Research shows over 50% of Americans will find themselves in the top 10% of earners for at least one year of their lives. More than 11% will find themselves in the top 1% of income-earners at some point. And close to 99% of those who make it into the top 1% of earners will find themselves on the outside looking in within a decade.
It's great that so many people get to taste what it's like to earn a lot of money, if only for a little while. What's not so great is that as most people earn more, they spend more. But if you spend all (or most) of what you earn as you're surfing an income bubble, you can find yourself in trouble when that bubble bursts.
Carlson quotes a story about a couple that lived a lavish lifestyle because they were making a lot of money. When the income dried up, they realized they had nothing left. They were broke. Says the husband: "The money was just coming so fast and so easy that my ego led me to believe that, 'Oh, this is my life forever.'"
I've been thinking about that last line for a week now: "This is my life forever." This couple fell for a common (but seldom examined) mental trap: the forever fallacy. The forever fallacy is the mistaken belief that you will always have what you have today, that you'll always be who you are today.
The Forever Fallacy
It's easiest to see the forever fallacy at play in extreme cases. Take professional athletes, for instance.
In a 2009 Sports Illustrated article about how and why athletes go broke, Pablo S. Torre wrote that after two years of retirement, "78% of former NFL players have gone bankrupt or are under financial stress." Within five years of retirement, roughly 60% of former NBA players are in similar positions.
Fundamentally, the problem here is the forever fallacy. Athletes (and popular entertainers) tend to enjoy a few years during which they earn great gobs of money. The challenge is to figure out how to make five years of income last for fifty years. This never occurs to most of them. As the money is rolling in, it feels like the money will always be rolling in. When the income stops, the pain begins.
"[A pro athlete] can't live like a king forever," says Bart Scott in ESPN's Broke, a documentary about pro athletes and their money problems. "But you can live like a prince forever."
The forever fallacy doesn't just trap athletes and entertainers and lottery winners. It snares average folks like you and me too.
I'm sure we've all had friends who found themselves flush, whether from a windfall or from a raise at work. They succumb to lifestyle inflation, spending more as they earn more. They buy a bigger house, a new car, a boat. Then, without warning, something awful occurs and they're no longer rolling in dough. It felt like the good times would last forever -- but they didn't.
The forever fallacy manifests itself in lots of little ways too.
- When you choose not to keep an emergency fund because you've never needed one in the past, you're succumbing to the forever fallacy.
- When you take out a large mortgage, one that pushes the limits of your earning power, you're giving in to the forever fallacy.
- When you fund your lifestyle through debt, you're living in the forever fallacy.
The forever fallacy doesn't apply only to positive expectations. People also give in to the forever fallacy with negative expectations. They're trapped in a minimum wage job and project that they'll always be working minimum wage. They're in a shitty marriage and let themselves believe that they'll always be trapped in a shitty marriage. And so on.
The key thing to understand is that everything changes. You change. Your circumstances change. The people around you change. Nothing is forever. The challenge then is to balance this concept -- everything changes -- with living in the present. You must learn to enjoy today while simultaneously preparing for possible tomorrows.
I spend a lot of time talking with people who have retired early or are otherwise financially independent. From a purely anecdotal point of view, I'd say most of these folks are well-adjusted. They work to maintain balance in life, and especially with their personal finances.
That said, I've noticed that a lot of retirees -- early retired or otherwise -- struggle to know how much they should spend. I believe this dilemma exists for a couple of reasons:
- First is the life expectancy problem. You don't know how long you're going to live. If you did know the precise date of your death (or even the year of your death), retirement planning would be much easier. You'd be able to say, "Okay, I have ten years left and $300,000 in the bank. Based on that, I should be able to spend $30,000 per year." But you don't know when you're going to die, so a lot of retirement planning becomes guesswork.
- Second is the question of what your money is for? Do you want to leave a legacy for your children (or somebody else)? Do you want to maintain a chunk of change for possible end-of-life medical issues? Or do you want to use your wealth to live life to the fullest while you can? In my case, my ideal would be to die broke. If I could spend my very last penny on the last day of my life, that'd be perfect.
The general response to these two problems is to follow what has been dubbed the four-percent rule. Generally speaking, it’s safe to withdraw 4% from your portfolio every year without risk of running out of money. (There are a lot of caveats to this guideline. To learn more, follow that link to my Money Boss article -- or wait for that story to migrate to Get Rich Slowly in a few days!)
The AAII Journal -- the monthly magazine from the American Association of Individual Investors -- has published two articles in recent months about the problem of spending in retirement. Let's look at what they have to say.
Happy blogiversary! Twelve years ago today, I launched a humble little blog about personal finance -- this blog, Get Rich Slowly. It was meant as a way for me to share the things I was learning as I dug out of debt. It turned into so much more.
For the next couple of weeks, I'm on the road in the southeastern U.S., speaking to people about personal finance and meeting with readers.
This morning, for instance, I spoke to the 76 people attending Camp FI in Spring Grove, Virginia. My topic? No surprise: The importance of having purpose in your life. As you can see, I am a PowerPoint genius...
If you've spent any time reading my material, you know that I believe purpose is the foundation on which all plans -- financial and otherwise -- ought to be built. Purpose is a compass. It helps you set big goals, sure, but it also acts as a guide when times get tough. Your mother died? Your wife left? Your husband lost his job? If you know what your primary purpose is in life, these stressful events are much easier to deal with.
For this presentation, I added a new twist. You see, a lot of folks who are interested in money tend to pick things like "getting out of debt" and "becoming financially independent" as their purpose or mission. But I think these are poor choices.
I've seen far too many folks make debt elimination a goal -- then fall right back into debt once they've achieved it. And there are plenty of people who reach FI (or retire early) only to find they no longer know what to do. (It's like aiming to reach a certain weight instead of choosing to make lasting lifestyle changes that lead to weight reduction.)
Instead, I think it's important to recognize that your financial situation should be side effect of pursuing some greater purpose. Financial independence ought not be your aim; it's merely a means to an end.
When I speak about purpose (which is often), I tend to fall back to the George Kinder/Alan Lakein personal mission statement exercise. I feel like it's one of the best available tools for helping people find focus. But it's not the only tool.
Today, to celebrate this site's twelfth birthday, I want to present twelve alternative exercises for discovering your purpose and passion. If you've tried one (or more) of these without success, try another. One of them is sure to be useful for you.
Note: I've done my best to credit sources for these exercises. (Many come from Barbara Sher's excellent book Wishcraft, which is all about crafting the life you really want.) At the end of this article, I'll give you a list of recommended reading -- and tell you what I think is the single best book for discovering passion and purpose.
Your One-Hundred Word Philosophy
The first exercise is one I created myself. It's based on CrossFit's "world-class fitness in 100 words" statement. There's no time limit for this exercise, but it could take a while so be prepared.
Your aim is to write out your life philosophy in exactly one hundred words -- no more and no less. This can take any form you want, from a statement of values to a list of instructions. Begin by writing down your core beliefs and values. It might also be helpful to think about books that have had a big impact on your life or powerful advice you've received in the past. Based on your experience and beliefs, what is your life philosophy?
As an example, here's my own hundred-word philosophy, which I've written as instructions to myself:
Some of those admonitions are my own invention. Some come from books like The Four Agreements and The Power of Now. "Refuse to let fear guide your decision-making process," was advice from my girlfriend. "Create your own luck" is based on my friend Michelle's advice to "create your own certainty".
Again: Target one hundred words exactly. It'll force you to spend time thinking and editing and being introspective.
As you can see, I paid an artist friend to create a pretty letterpress poster of my 100-word philosophy, which I've hung on the wall here at home. I look at it every day. Obviously, you don't have to go that far.
At Get Rich Slowly, my goal is to help you make the best possible decisions with your income and spending. Having said that, we're all human. We all mistakes. We all do dumb things with money. And I feel like April Fools' Day is the perfect time to talk about some of the stupid things we've done in the past.
Let me give you an example (or three) from my own life.
To begin, I'll retell a classic tale of my financial foolishness, one that has delighted my readers for over a decade. It's all about how I paid $1500 for a "free" Frisbee.
The Not-So-Free Frisbee
On the first day of college, I opened my first bank account. The gym was filled with registration tables, not just for classes and clubs, but also for banks and credit cards. Since I was receiving a small stipend to cover living expenses, I needed a checking account.
The two banks vying for attention used different methods to attract students to their tables. A small local bank had a sign that promised "free checking". A large national bank gave away a Frisbee to anyone who opened an account. The choice seemed easy: I wanted the Frisbee.
I signed up for my checking account, deposited my money, and got my free Frisbee. I spent the afternoon on the quad tossing the disc back and forth with my roommates. When it was time for dinner, I took the Frisbee up to my room, put it in the closet, and never used it again. Ever. But I had that checking account for nearly two decades.
Classes started. I forgot about the Frisbee and the checking account. The next month, I received my first bank statement. There was a $5 service charge. It didn't seem like a big deal. I figured it was part of the package, part of being a grown-up. My parents had always paid a service charge on their checking account, and I expected I always would too.
For the rest of my college career, I paid $5 per month to maintain my checking account. When I graduated, I continued to pay $5 per month. During the 1990s, that fee increased to $8 per month, but I barely noticed.
In fact, I paid a monthly fee for checking from September 1987 until June 2004. For 202 months -- nearly seventeen years -- I paid for the privilege of writing checks. Then, when I started turning my financial life around, I left the major national bank and moved to a local credit union. I've had my checking account at that credit union for nearly fourteen years now and have never been charged a fee of any kind.
One foolish choice as I entered college cost me nearly $1500 -- enough to buy about one hundred Frisbees. And that's just one of the foolish financial choices I've made in my life.