It’s been the two busiest months in a long time for me work-wise, and I’ve spent most of the spare time researching, thinking about and working on a couple of major investments.
In this context, and with my hands full, I kept going through the following two questions:
On Work. I’m working a lot – but – thank god – I really like what I do. Yet – what if I didn’t? What if I had to put on the long hours but didn’t enjoy the job? Up to what extent would a higher salary/income keep me in that job regardless?
On Investing. If I would make a major investment, what should be my main driver? Should I look to increase the quality of my lifestyle, or should I be more “Spartan” and aim for longer term benefits?
I don’t think these two questions have a right/wrong answer – but, below, I’ll share some thoughts on how to tackle them. (Plus, obviously, a short travel update ;))
In my opinion, the greatest luxury in the world is not to worry about money.
If you’re not constrained or worried about money, you’ve real freedom – and you can make the short and long-term decisions that will drive you to live the happiest and most fulfilling life possible.
“Not to worry about money” need not to be a utopia. I assure you, everyone – regardless of their income – can work towards achieving this luxury.
If you don’t worry about money, you can quit that job if you don’t like it – and do so without second thoughts.
In return for this luxury you’ve trade-offs to do though – to get this freedom you’ll need to sacrifice smaller indulgences on the way.
Keys for Not Worrying About Money
You’ll only have financial freedom – and from a job and from worrying about money at all – if you have enough passive income to cover your basic day to day expenses. Let’s define these two:
– Passive Income. This is steady, flowing income that comes to you with little or no extra effort, “automatically” – e.g. rental income from properties, stock dividends, book royalties, online business income, pension, and so on. This, crucially, doesn’t include your salary, consulting fees, nor any other situation where you trade your time for money.
– Basic Day to Day Expenses (Overhead). This is the short, frugal list of things you must pay every month – e.g. rent and/or taxes/expenses on your own property, food and drink, insurance, basic subscriptions (fitness club, phone). This doesn’t include the party or travel budget, new iPhone, etc.
To have more freedom, you need to a) maximize passive income, and b) minimize you day to day expenses.
For Those Not So Rich (Yet)
If you’re just starting out, it’s unlikely you’ll have considerable passive income. I don’t have much myself right now.
(I used to earn a very nice passive income back when I ran the “Dating Beautiful Women” advise website (true story), but now, like most people, my primary income is a corporate paycheck , with the books and video courses acting as a nice but comparatively tiny side benefit.)
Living off a paycheck is not necessarily bad, but it shouldn’t be your end-game – it should, instead, be a means to your end-game – meaning, the job should be a) helping you develop keys skills and credentials, and/or b) helping you save enough so as you can invest to build your passive income.
Putting Option B in Action
In case you don’t have the passive income yet, your key for freedom “right here, right now”, is to go with b) as per above – to minimize your expenses.
If you’re frugal and have a small relative overhead – say, your basic expenses are 30% or so of your salary, you’ll be in a strong position as well: you won’t need to take a job just for the money, and you’ll be able to make your investments with more clarity, looking ahead into the longer-term.
Frugality in Practice
I’m a very frugal person. I’ve spent – roughly – the same amount in housing, food and other basic expenses for the past five or six years. I’ve a (pre-travel expenses, mind) savings rate of 65-70%-ish, which has given me a ton of flexibility.
I’d four job offers last year, and I went for the job that paid – by far – the least. I got offered much more money than what I finally settled with, but it wasn’t even a discussion – I knew I would enjoy the specific job I picked much more than the others, so it was a no-brainer.
I’m happy with the decision, but I know a ton of people who would have gone for the money instead. I don’t know if they would be too happy with that themselves – but, perhaps they wouldn’t have a choice.
If you’ve a very expensive lifestyle, then you might be forced to go for the higher-paying job – even if you don’t like it as much. If you’ve low (or non) passive income and very high overhead, then you’ll need to take the job or the lights would go off.
It’s Harder Than It Looks, But Worth It
I’m 30 already and, like many before me, right now I would like a bit more comfort – eat/drink what I want without looking at the price, buy that latest gadget, fly in a bit more comfortable flights, etc. It’s normal.
I could do all that, but I know I would be jeopardizing my freedom. I would have less money to travel, or I would need to take a higher paying job, etc.
It’s all about priorities. There’s no right or wrong answer here – what works for me, might not work for others.
However, the pros say you should always look for the plan with the most options, and more freedom <=> more options.
Short Travel Update
I haven’t seen much of travel in 2017 – it’s been a very slow start.
I’ve traveled only once between New Years and Easter, and in all, spent a personal record of over two full months home in Copenhagen. I almost got cheap last-min flights to Kamchatka but chickened out.
Things are changing though – I’ve spent now the Easter week off in Nepal, and I’m cooking a still-secret development that could make me travel quite a bit over the next three months back in my very own Latin America.