Is it better to tell someone what they want to hear or tell them what they should hear? I choose the latter, because sooner or later the fairy tale will end. Between the ages of 10-16 I started reading a lot about Eastern philosophies, particularly the concept of karma. I used karma as an excuse for everything!
“If I’m meant to get into a good university, I will, so don’t worry about my studies mom and dad!”
“If I’m going to die young, I will, so let me buy the 600cc Honda CBR motorbike OK?”
“I cannot change whether I’m going to be rich or poor, so let me have some fun while I’m still alive.”
“I can’t do anything about this bully. Let fate handle him.”
“We’re either destined to be together, or not. I’m not going out of my way to woo her.”
Karma is a pretty neat way of rationalizing not having to study, be safe, work hard, fight back or go after what you want. My dad finally knocked some sense into me when I asked about the motorbike for the umpteenth time. He said, “Son, don’t be stupid. A colleague of mine just drove his motorbike into a wall and died. You want that to happen to you before your life even starts?”
“Oh, OK. Maybe I’ll stick with riding my bicycle to school then,” I remember saying. I actually did end up buying a mini-50cc replica racer motorbike without them knowing in high school. Its top speed was only about 45 mph so I figured if I did hit a wall I’d survive. Too bad it ended up getting stolen because it was sweet!
My father also said something that really deflated my enthusiasm for tennis during high school. When I didn’t win some difficult match sophomore year he consoled me by saying, “Well, I guess you’re just not good enough.” That was a zinger because I stayed after school every day during tennis season to practice for 2.5 hours. By the time I got home all I wanted to do was sleep, but I had another 3-4 hours of homework to complete. Even my hero at the time, Andre Agassi loses, so why can’t I? For about a month I didn’t do jack shit because I was depressed.
It was hard to hear “just not good enough” at the time, but the reality is I wasn’t good enough to take my game to a Division I school. It was better I spent that extra hour practicing for my SATs instead of on my backhand. I did end up getting a small scholarship to play for a Division III school, but I passed to go to a better institution.
The one thing about sports is that scores don’t lie. You are either a winner or a loser. I’d like to think I’d come to my senses on my own about not being good enough after losing one too many difficult matches, but who knows. Maybe I would have stayed in a long state of denial that would have been detrimental to my life.
At the end of the day, I think we need to know hard truths so we can focus on areas that will bring us happiness. Here are three truths I plan on reminding myself every so often to make sure I’m on track.
1) Your Business Model Is Flawed
My definition of being a successful entrepreneur is making at least the per capita income of your city, state or country within three years. If such a profitable income cannot be achieved in this time period, then we are just spinning our wheels as hobbyists. If we cannot recognize that we are failures after three years and get a job, then we will probably go down a financial path of destruction as we keep investing more time and money towards a lost cause.
Certainly there are many great businesses that took longer than three years to see tremendous revenue growth or profitability. Tim Westergren from Pandora is a famed example where he went through over 200 Venture Capital rejections before finally getting funding. Now Pandora is everywhere and Tim is a hundred millionaire. But for every Tim, there are thousands of failures who end up way poorer for joining a startup than if they had just worked for a traditional corporate.
A day job is so much easier than entrepreneurship. But the one thing that entrepreneurship has over a day job by a mile is excitement. I wake up by 6am every single morning because I’m so excited to see what happened to my business while I was sleeping. At midnight, I get another wind because that’s when potential clients in Europe get in at 8am. To be able to run my online properties from an iPhone in Europe for three weeks is exhilarating!
Unfortunately, the good times don’t last forever in business. We must keep adapting or else we will die due to competition or structural changes in the industry. Always reassessing the business model is a good way to stamp out flaws before they become all consuming.
2) Money Can Make You Happy
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” – Groucho Marx
Unfortunately, this is one of the rare occasions where Groucho was slightly off the mark. We all know that money can buy happiness up to a certain point. That income point is $200,000 a year based on my experience of making much less to much more. Don’t listen to researchers who say $75,000 is the magical income for maximum happiness when the most they’ve ever earned is $75,000! They don’t know.
While that’s not to say being rich doesn’t come with its own unique set of challenges, the champagne problems of the upper classes are infinitely preferable to the challenges faced by the impoverished who have no money to fall back on until their next payday. The only people who pretend wealth isn’t intrinsically linked to happiness are the super rich, who annoyingly have all the money in the world, and the impoverished who console themselves for not having much.
I sometimes tell myself money doesn’t buy happiness given my passive income is only 55% of where I want it to be. I’m progressing in my quest to build a $200,000 a year passive income stream, but damn does it take a while given low interest rates. The slow progress often times makes me want to quit.
Money continues to be around 70% of the reason why marriages fail. A lack of money is stressful. Having enough money reduces this stress. Reduced stress leads to greater happiness. It’s pretty simple logic.
Obviously, there are some caveats. Happy, frugal, not so wealthy people are everywhere out of choice or out of necessity. In addition, there are plenty of other (arguably more tangible) things that make us can make us happy, and money isn’t the be all and end all of life, but it’s a pretty huge factor.
Finally, the pursuit of money itself can lead to a greater net stress than the acquisition of money can reduce – i.e. it’s inadvisable to chase a pay rise so hard you end up having a heart attack before you’re forty. So once you get to $200,000 a year, take a load off for a bit. You’ll live longer as a result. The government is watching.
3) You’re Not Working Hard Enough
Although it might not be apparent with the amount of content that is produced here every week, I suffer from laziness. The Lazy Devil is always sitting on my left shoulder telling me why the hell would I bring a laptop on vacation, so I don’t even though my business is content. The Lazy Devil tells me to take naps after lunch every day, so I do. The Lazy Devil tells me that life is good so why bother trying so hard, so I don’t anymore. Damn you Devil!
We’ve discussed previously but it bears repeating: if you’re only working 40 hours a week (or less), it’s not enough if you want to outperform. Try adding another ten or twenty hours, and then you’ll start getting somewhere. Single digit workdays are for folks who are happy with the status quo. And those who complain about not being able to get ahead while only working single digit work days can never be saved.
If you’re happy with your current work life balance and the trajectory you are on, certainly don’t ever let yourself feel guilty about working 40 hours a week or less – you’re not a slacker, and it’s not that your dreams aren’t big enough. All it means is that you’re one of the very few people to have reached a Zen state, and you should embrace that for all its worth.
For many of us, we’ve got places we want to be, and understand that we’re not going to get there solely on safe, salaried hours. Obviously it’s counterproductive to burn one’s self out, but realizing that you only get out what you put in is one of the key underpinnings to a successful business mindset. It shouldn’t be something you hate doing, either, otherwise you might be better off sticking to the ol’ nine-to-five after all.
Every day can be a Friday or a Monday when you work for yourself. Whenever my lazy meter stays on a Friday for too long, I tell myself to get going. After all, Fridays are great because of painful Mondays through Thursdays are they not?
Recommended Actions For Getting Ahead
Manage Your Finances In One Place: The best thing you can do to grow your net worth is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to track my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing, and where my spending is going. Their 401K Fee Analyzer tool is saving me over $1,000 a year in fees I had no idea I was paying. There is no better free platform out there that is helping me manage my money. The entire sign-up process takes less than a minute.
Check Your Credit Score: Check your credit score at least once a year given the risk of identity theft as well as the importance of having a good credit score when borrowing money, apply for a mortgage, and applying for a job. For over a year, I thought I had a 790ish credit score and was fine, until my mortgage refinance bank on day 80 of my refinance told me they could not go through due to a $8 late payment by my tenants from two years ago. My credit score was hit by 110 points to 680 and I could not get the lowest rate. I had to spend an extra 10 days fixing my score by contacting the utility company to write a “Clear Credit Letter” to get the bank to follow through. Check your credit score for free here at GoFreeCredit.com and protect yourself. The average credit score for rejected applicants is 729.
Start your own online business: It’s been around six years since I started Financial Samurai and I’m actually earning a good passive and active income stream online now. I never thought I’d be able to quit my job in 2012 just three years after starting Financial Samurai. But by starting one financial crisis day in 2009, Financial Samurai actually makes more than my entire passive income total that took 15 years to build. If you enjoy writing, creating, connecting with people online, and enjoying more freedom, see how you can set up a WordPress blog in 15 minutes with Bluehost. You never know where the journey will take you!
Photo: Fishing in Westchester, NY. Updated for 2015 and beyond.