Don't plan, work.
This was a simple piece of advice I heard today in passing, and I agree, to an extent. With the extent being that I reckon work is more important than planning, but planning should be done in order to create an intentional direction, with part of the work being a feedback loop that monitors and guides for adjustment.
Yet, work is out of favor.
Pretty much daily, I see several articles or am in conversations where it says something like "Boomer gives unbelievable advice to the young" as if older people don't know anything. Then, there are articles essentially encouraging young people to give up their work or do as little as possible, to cheers from the peanut gallery.
You are being lied to.
If you want to get ahead in this life financially, you have to work. Sure, the work you do should be considered, but if you are looking to minimize your work, rather than maximize your income, you are likely not going to do that well. There are several reasons for this, but a couple of the main ones are that working brings opportunities you are likely to miss otherwise and the main one I will focus on now is, having additional income is financially investable, having additional time is not.
One of my friends came to the realization whilst we were talking the other day that he should have done what I had mentioned to him probably five years ago, which was to get a side job doing something (anything) to increase his disposable income. I did the math for him and he realized that doing five or six shifts a month stacking shelves at the local supermarket, would conservatively give him over a 10 percent increase on his normal income.
So, in a hypothetical scenario where he earns 5000€ from his normal job, has a mortgage, a car payment, utilities and food etc, he saves 500 a month (10%). This gets split into investments and a little for savings to build a reserve. This is 6000 a year being invested. However, if he is able to add 10% to his income, his investment potential doubles, meaning that he has a 100% increase in investment, 12,000 a year. If he had started this five years ago, he would have inputted 60,000 in total. Assuming 10% returns and straight line inputs of 1000 per month for all of that time.
@ 5 years
Contributions = 60,000
Value = 77,500
@ 10 years
Contributions = 120,000
Value = 205,000
@ 15 years
Contributions = 180,000
Value = 415,000
What this means is that all other things remaining equal, after 15 years of a second job, he would be 207K better off in his portfolio. But, things don't remain equal, because in those 15 years he will also likely get increases in his income through pay rises, promotions and as well as investment opportunities.
Fifteen years is a long time!
No, it isn't. Starting this at thirty years of age means having at least (assuming 10%) 200K more invested at forty five years, which is still twenty plus years away from retirement. Even if the person quits the part-time job and contributes nothing more to the portfolio, getting 10% on the 415K for the next twenty years would mean having 3.04M worth in the portfolio, to go on top of the compulsory retirement fund contributions made on the job, which will pay an annuity.
The problem I find with a lot of people is that they look at what they are earning now, without considering what the value of it is in the future. This is largely because we aren't good at seeing into the future, let alone compounding value over time. However, we are pretty good at looking backward, and this is essentially what the "Boomers" are doing when they are giving some advice, which is saying what they wished they had realized when they were younger.
And, one of the other things that holds people back is the "embarrassment" of being a professional and doing an odd job of some sort on the side, like flipping burgers or stacking shelves. However, that fifteen years of "shame" working part-time, is the difference of millions - being able to buy apartments for kids, investment properties, stocks, Bitcoin.
For instance, let's say after 15 years of odd job on top of professional work, that additional 207K was put into two small investment apartments mortgage-free, the rent they would generate would likely be able to keep adding the additional 500 that the side job was giving, without the work. Putting that into the investment along with the other 500 from the work for the next twenty years until retirement (1000 p/m), would mean the portfolio is now worth 3.8M.
And remember, this is all straight line earning on the 5000 a month, which would change over those years, assuming expertise are kept relevant and employable. And, from the hypothetical above, my friend was paying a mortgage from 30 years of age, which would have been cleared by 55, ten years before retirement, giving an additional 10 years of potential contributions, or, holidays.
At retirement, there would be
- an owned house
- two owned investment apartments
- 3,800,000 in an investment portfolio
- retirement fund contributions
Not bad from adding an odd job into the mix for 15 years.
And, fifteen years is the time we are in school up until a bachelor degree. They say that education is the most valuable investment you can make and there are far more hours put into those 15 years of school, than that of the odd job. So, which one has the higher return?
Well, as said, if you are trying to work less, you have to work more, because those school years allowed for my friend to have a good job with opportunity and skills that can grow with the changing economy. Without that, stacking shelves wouldn't be the side job, it would be the job. But, part of the education should realize how the value of time investment works and just like getting in on the ground floor of a successful startup will see massive returns, the value of the odd job is highest in the early stages, as long as it is invested wisely.
Personal time is valuable of course, but I think that these days, we maximize our free time, but overvalue the way we spend our time. This is even more true when whilst we are minimizing our work, we are also struggling financially and are forced into saving more, rather than making more.
Everyone is scared of the bear markets, but it is at these times that the value of work is at its highest, because it means that extra can be invested into low prices, making them far more valuable in the future. Yet, it is during the downtimes that people will often work less and eat further into their savings to maintain a lifestyle they can't afford to live, and invest. This essentially pushes a person into a personal bear market cycle, where eventually, there isn't enough income to keep the value of life up.
And then, the chances are that a person will end up stacking shelves to make ends meet, rather than stacking them to increase investment potential. Or, live off handouts.
Which is more embarrassing?
So, while I agree with the "work" part of the quote at the start, a little planning can help understand what the end goal of the work might be - or at least - point in a useful direction.
Taraz
[ Gen1: Hive ]
Posted Using LeoFinance Alpha
When my wife and I were first married, we had a bit of debt we were trying to get out of. On top of that we knew we wanted to get a camper and start travelling. She worked a second job at a bait shop and I did side tech consulting so we could more easily achieve our dreams. It was a hard time not seeing each other as much, but it put us in a better spot for where we are now.
I'm glad it worked out for you :) Saved money does tend to add up quickly, with discipline 🙌
Most people these days would value the time together more than what they think the value will be for that time in the future. I suspect, that if you hadn't done what you did then, you would face far more stress and have fewer options now. It is hard to say what has higher value, but we tend to overvalue the present and undervalue the future.
Not really, time has more value. That being said,if we want to enjoy that time we need to get busy. The question is when.
If we were to work like mad, never seeing loved ones, and they passed before we were able to spend time with them, it would be tragic. But if we saved, and they needed funds for treatment in the future, it could potentially add years of joy.
Very true.
When you put them all into numbers and extrapolate it like that, it definitely makes a very interesting argument. Having the foresight and persistence to see this through is another matter all together. Us humans are mainly hindsight driven and always look at past events as indicators of what the future might hold.
Technically you and I can decide to do this side hustle for the next 15-20 years if we want to, but with changes in life, especially with a family, are we willing to give that time we have with our daughters? The value proposition doesn't seem so attractive anymore, at least for me.
I wonder how many "kids2 listen to this kind of thing. For those that do, they will likely be in a very good position come their mid-life crisis and perhaps, avert a crisis altogether.
This is why it is more a young man's (or old man's) game. There is a window where some things are possible, but at some point, it is no longer practical. There are always options however. My friend for example wouldn't actually need to stack shelves, he would be able to teach a few side classes (in his background) as a sole proprietor. He used to do this as a main job, like I did. I kept it going though, he didn't. It opens up other opportunities too.
Also, I wonder if something like shelf stacking would be a good way to get some mental rest from other things, whilst still adding value. Mindless work, interacting with a different set of people.
Young people never listen......lol If you tell your younger self, "Hey mate, don't go partying and go stack them shelves from 10pm-2am so you can use that money to invest and be rich in the future". What do you think your answer will be? My answer would be sure and I will blow all that money I earn on supper and drinks :)
Mind numbing work is good sometimes, in small doses. I like the idea of once the task is done, it's done. no need to think about it anymore.
This is what I did too - but, I was bad with money and had very few good role models.
Low thought required and, time to think about more important stuff.
Like wen lambo?
I was sort of lucky as I was taught about money from a young age and I was interested in money and the mechanics around it. But when you are young, you always think you are going to earn even more money in the future, so you spend what's in front of you and worry about saving later.
Those calculations have been dream in my country. People used to be able to buy a house with the severance payment after retirement. Today, they can't even buy an average car with that money.
This is why (unfortunately perhaps) I think we should be doing more where possible. I don't think it is helping us to acknowledge that it sucks and do nothing about it. It might not be ideal to work more, but I think in most cases, it is better than the alternative of not working enough.
Here you really sounded like a personal finance coach, as I love the sound of it, learnt a lot...
Especially the aspect of planning it's true plans can never be realistic except it is acted upon,
We use to say No Food for lazy man, any reasonable person in life that hasn't gotten this revelation yet is bound to fail for life no two ways about it..
Personally I'm kin on having multiple streams of income ,recall earlier this year I was doing a part time job, and also engaging Hive, this gave me the fulfillment of having two streams at the time, by the way I just graduated so but won't wait for white collar job I'm I had to work and plans financially cause I know it's just me and my future ..
Thanks a lot buddy for these insight....it was helpful
multiple income streams tend to lead to more valuable income streams in the future. Most people only look at the "now money" without thinking how all of this compounds.
That's exactly what I'm seeing with Hive accounts. There's no way anyone is going to get rich quick here. But I'm starting to see that over time, it's definitely possible to get rich here if one is patient and a little lucky.
Definitely true
There's a lot of wisdom in this post, coming from someone who has spent sufficient time stuck in the 'planning loop'
Quite apt.
These days I prefer taking any form of action to laying out well detailed strategies for days on end, only to see reasons why it won't work. We certainly need to work and earn the breaks we get in this life
Any action is generally better than no action, and even if the action is negative, at least there is something positive to learn from it :)
Sometimes family pressure and also the family issues can limit the income expansion too. A lot of people limit their potential due to the people that drag them down. I suppose it is something they said in book called "12 week year", where they said, we do things we want and we could do things as per our potential.
Yes, there are lots of factors involved, so it is up to the individual to work out what suits them, but pretty much everyone can do something, right? Perhaps these days, many people have narrow skills and no will to apply them?
Einstein is told to have stated: "If I would be asked to cut down a forest I would spend 60% of my time sharpening my axe and studying an effective way to do it and 40% to effectively cut."
Still, we see that work is largely considered and we should not be "resty" reading that most part of the time can be spent in planning (that for lazy people equals to "losing time"). Cutting down a forest is an extreme example made for an extreme complex and long task. In all the other cases, I set the way and start. Sometimes I adjust trajectory while going
And once he had the technique good enough, he would likely spend the 60% of the time working at something else valuable. :)
Planning is good of course, but at some point, that step into action has to happen.
The projections and analysis that you do in your post are very interesting. The key is to be aware of everything you mention, and to maintain perseverance throughout the time it takes to make a profit. 10 or 15 years can be seen as a long or a short time, everything is relative and it will depend on the vision of the people in that sense. I found your post excellent. Greetings.
A decade seems like a long time in the future, until looking back at it into the past.
It's like with hodling crypto and even pouring in more during a sharp dip or bear market. Most people find it counterintuitive, at least until they see the markets in action.
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And it is easier to see in crypto, as the cycles are far shorter. Screw up once, and you will have to wait 3 or 4 years. In other areas, screw up and you won't get another good chance.
Putting in the work so that you don't have to work in the future is what I think more people need to do. People just don't seem to understand and I don't want a crisis to wipe out everything I have. Having that buffer really helps a lot. It makes me wonder just what is enough to live comfortably though.
Exactly. Hand to mouth living will see the hand and mouth empty at some point.
No idea!
I agree. Having an extra stacking job to have the extra funds to invest is way better than avoiding the opportunity to work because of the effects the power of compounding interest will do on those portfolios we choose to invest in today.
Even a couple random years of extra and putting it into investments makes a difference.
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I think in some jobs our time spent on job is affected our income but in some our time is fixed but people can earn a good profit and this i see only in highest investment businesses
Great lesson on compounding interest. I've always been about the side hustle -- Magic the Gathering was that for almost 30 years now and Splinterlands is slowly taking its place. I just need to be more disciplined on taking and investing the profits.
Oh boy! ¡Wadda odd optimistic math for a world where nothing unexpected happens!
Yeah! ...there are realities of realities in this world!!
You call it optimistic?
I call doing nothing and expecting something the height of optimism.
Yeah! your math results. I call your math results quite optimistic.
¿How comes anyone could expect accumulate such figures and property possessions without having never spent a single penny throughout the way of 15 years on an obvious plethora of unexpected unforeseen contingencies?
Have you read what you have written? Yeah, go ahead, read it again!
You seem to have skimmed the post.
in a hypothetical scenario where he earns 5000€ from his normal job, has a mortgage, a car payment, utilities and food etc, he saves 500 a month (10%).
He has a job. A good job. He is able to save as well, from the job alone, like most people with a decent job. Unexpected events often happen - regardless of whether you have a good job, additional income, or no job. Personally, in that situation, I would rather have a good job and additional income sources - but you do you.
12x15x500 = 90000€
An extra odd side job stacking shelves at the local supermarket or whatever = Only God knows how much more one can add to the pot.
The eventual %APR revenues & profits from these savings, investments and whatnot = An even harder & wilder unknown.
And all this assuming one can conserve the same well paid jobs during the 15 years and if one is some sort of almighty & omniscient wise investor to make the best and infallible decisions about where to put our money without any potential setback & losses and without have had to spend a single penny of that in anything at all.
So again. How one can expect to accumulate at the end of 15 years the necessary do$h to posses: