Although I’ve got a lot of opinionated posts, it doesn’t really matter if you disagree with my stance so long as what you do with your money doesn’t adversely affect others. If your way works for you that’s all that matters. If it stops working for you then you might just find yourself on a site like mine searching for answers.
I’ve learned long ago that you can’t force anybody to do anything. They’ve got to experience some sort of hardship on their own before they are willing to change. Maybe it takes a heart attack to stop eating so poorly. Or maybe it takes a massive market correction to not be 100% allocated in stocks. Whatever the financial situation may be, only experience can really have an affect on someone’s outlook.
The people who are the most argumentative are also the ones who are the most unsure about their finances. They are unwilling to expand their myopic views about how they see the world. For some reason they are also almost always in their 20s and think they know it all. If you’re so inflexible in your 20s there’s a high likelihood you’ll hit a tremendous roadblock later on. When I was in my 20s all I wanted to do was learn different strategies from those who’ve been there. What changed with Gen Y?
I sincerely hope readers find different ways of looking at things on Financial Samurai. To be unable to see varying points of view is an absolute mental failure.
PEOPLE WILL FIND A WAY TO HELP THEMSELVES
Nobody here is stupid. In fact, I would argue that readers here are much more intelligent than average. Over 70% of Financial Samurai daily readers are new and seek answers to their problems through search. “How much should I have saved by 30?“, “Are CD rates about to go up?,” “Should I get my PhD?“, “Great professional resumes,” are a few search phrases that readers have typed in to land here today.
We do not impale our eyeballs with needles because it doesn’t feel good. Nor do we keep on spending ourselves into oblivion if we ever want to reach financial independence. One can argue that we are exactly where we should be financially. Let’s look at some examples.
* Getting promoted and paid. If we want to ascend the corporate ladder we’d get in earlier, leave later, and continuously find value added things to offer our company and clients. We’ll learn to get along with as many colleagues and managers as possible to build a proper support network.
* Quitting a job. Nobody quits a job unless they have enough money to support themselves during the transition. So let’s not worry about young Johnny who can’t hold onto a job for more than one year because he’s bored. Anybody who has read my book or read articles on getting laid off will also agree with the premise that leaving potentially thousands of dollars in severance on the table is unwise.
* Entrepreneurship. You either succeed or you fail. If someone cannot make at least the median annual income of their state in three years then they are a hobbyist instead of an entrepreneur. Nobody will keep spinning their wheels for an indefinite period of time. Furthermore, nobody goes into entrepreneurship without the supreme belief they will succeed or the ultimate determination to work as long as it takes.
* Making more money. Everybody knows that education is one important variable to making more money. With knowledge in marketing, programming, selling, and investing you can do very well for yourself. You’ll do well in school or take classes after work to enhance your knowledge. You’ll read as much content about how to make more money and implement what you’ve learned. Those who truly want to make more money will invest more than 8 hours a day at their jobs. They’ll spend hours before or after work to work on their side hustles. Such side hustles might eventually grow so large that there’s no need to work at all.
* Asset allocation. Although I’m against anybody at any stage of their lives having 100% of their investments in one asset class like stocks, every person who has such allocation has never showed any concern. Their simple response is, “I’ll just buy more stocks on sale!” even if their portfolio is tanking. They are comfortable with their asset allocation as they have an endless supply of money to invest for now. Only when things get so bad that their portfolio losses outweigh what they can contribute do they think maybe it’s a good idea to be diversified. Before then, their financial nut is too small to matter. Let’s not talk about how a prolonged market slump can negatively affect one’s job stability either.
* Investing. There are many different investing styles that are suitable for everyone. History has shown that investing in the stock market pays off over the long run. What’s important is matching your risk tolerance with your investing style. If you plan to work the traditional route until 60+ then dividend investing is fine as you’ll have a more stable portfolio of large cap stocks. If you’re willing to take more risk while you’re younger to potentially build a financial nut in order to live off your dividends, then growth investing is preferred. I tell investors to take a look at the amount they have in their portfolio at their age to see whether they are where they want to be. If it is, then great. If it’s not, then something must change.
* Getting out of debt. The main reason why people get into consumer debt is because buying things you cannot afford feels wonderful. If it didn’t feel wonderful then people wouldn’t get into consumer debt. At the same time, getting out of debt also feels like a terrific accomplishment. Think about all the people who proclaim their debt-freeness with glee. Getting into and out of debt could seriously be the most alluring thing in finances. Hence, can we ever blame someone for maxing out their credit cards to buy the latest electronic gear or go on fantastic vacations? Of course not.
* Raising a family. Everybody knows that raising children can be very expensive. We also love our children with everything we have. Hence, it’s rare people have more than one child without being able to afford one child. It’s even more rare for a family to have three or more children if they can’t afford two children. We should not worry about other people’s family lives. There are even some families that have 10+ children and are doing fine.
* General savings. There’s all this talk about Americans not saving enough. Hogwash I say. Who are we to determine how much enough really is? I’ve got the opinion that we should all save at least 20% of our after tax income after contributing as much as we can to our pre-tax retirement savings vehicles because I believe people get tired of work after 20 years. We can conclude that people who don’t save “enough” really love to work for a very long time which is terrific for the economy. Spending is necessary to keep profits, GDP growth, and jobs growing. Here’s a realistic savings chart by age I put together.
* Early retirement. All you’ve got to do is save a high portion of your income, grow your financial nut, and build multiple income streams. I’ve seen people who only made $60,000 a year retire well before 60. On the flip side, I know of plenty of people who make multiple six figures a year and can’t afford to retire even after 20 years of such income. Early retirees are willing to sacrifice a little pleasure now for a lot of freedom later. There is no secret to early retirement, only execution.
* General retirement. If you read the post, Retirement Savings By Age Show Why Everyone Is Screwed, it explains the dire financial condition many American families are in. You can take the negative angle like the media often does and say this is terrible. Or you can take the positive angle and say, this is AWESOME because people are spending their hard earned money on life. There’s no point making money if you aren’t going to spend it!
* Managing your money. There are so many free tools to help manage your money for free. My favorite is Personal Capital where they track your net worth after you aggregate all your accounts so you don’t have to do so by hand or on an Excel spreadsheet. They saved me $1,700 in 401(k) fees I had no idea I was paying in 2012 through their 401(k) fee analyzer tool. And now I run my portfolios through their Investment Checkup tool once a quarter to make sure my risk levels are appropriate for my objectives. To not take advantage of the internet and technology would be silly.
DO WHATEVER YOU THINK WORKS FOR YOU UNTIL IT DOESN’T
There’s no need to reinvent the wheel. Thousands of people before you have achieved financial independence and thousands more people after you will achieve financial independence long after you are gone. My writing only presents what I think is the right way. Avoiding a ROTH IRA, spending no more than 10% of your gross income on a car, and hunting for lucrative investment opportunities while you are still young aren’t laws. If you think your way is better, then great! Go for it. If things don’t work out, then try something different.
There is no such thing as a person who wants to be financially well off who is unwilling to do anything to get there. Once we accept this tautology, then we realize it’s unnecessary to worry about anybody’s finances again.
Track Your Wealth For Free: Worry about your own finances! In order to optimize your finances, you’ve first got to track your finances. I recommend signing up for Personal Capital’s free financial tools so you can track your net worth, analyze your investment portfolios for excessive fees, and run your financials through their fantastic Retirement Planning Calculator. Those who are on top of their finances build much greater wealth longer term than those who don’t. I’ve used Personal Capital since 2012. It’s the best free financial app out there to manage your money.
Updated for 2018 and beyond.