Hey Ho!
Hope you all are safe and well! Welcome to yet another 5-year theme-based post.
Introduction
Recently, I realized that it’s been five years since I started walking the road of Financial Independence (FI). Earlier, I wrote a blog post on the numbers: how my portfolio is faring and where I am at in relation to my FI goal.
Continuing that theme, in this post, I would like to share the top 5 lessons I learned during the last 5 years. These are personal lessons that I learned from my mistakes and the mistakes that I see my closed ones do. Let’s get right into it!
Lesson 1: Don’t be an Occamy 🐉
Occamy is a mystical creature in the Harry Potter universe. This is a creature that can shrink or grow to fit any available space. You force that into a teapot, its going to fit in pot. You let it loose in a room, its going to cover the entire room.
Our lifestyle is like an untamed Occamy. Sadly, it seems that, rather than taming it, the Occamy is always allowed to expand to what we can afford.
When we are student, our lifestyle is constrained by what we can afford then. But when we are employed and start making money, we kinda let the lifestyle-occamy-creature loose. For instance,
- 1-time-eating-out/week becomes 4-time-eating-out/week.
- 2-pair-of-nice-shoes becomes 7-pair-of-nice- shoes.
- (other examples that is personally relevant for you).
But, we are not any more happier than when we were students. So obviously letting the creature loose is not very helpful. The best thing to do is rein in the creature and have that inside your control.
I am not saying live like a stingy scrooge, but live like a happy student. Find out whats the Occaminess in your life. My occamy pets have been : Sports Equipment and Tech Gadgets. I am already reining them in.
Rein your Occamy in Folks!
Lesson 2: Don’t confuse speculation with investment 🤔
Probably, the biggest mistake I see my friends do. They often conflate speculation with investment. I already talked about this with backing numbers here and here. They will say things like :
- I will buy low and sell high.
- I will pick individual stocks.
- I will try this new fad fancy investment trend that came up.
Unless you are doing these things full time, you are not investing for the future. You are speculating at the present.
I can almost say with certainty that 99% of the readers of this blog are defensive investors. The course of action for defensive investors is simple. When you speculate, you risk yourself putting yourself in the hybrid zone and have sub-standard performance.
Maybe, you still want to speculate. Because you like the intellectual thrill it gives you. Then I recommend allocating a percentage in your monthly-cap. Say 10% or 20%, you are free to speculate with that.
Invest the rest for the future!
Lesson 3: Walk your own road of FI 🚶♀️ 🚶♂️
One that I personally struggled to reconcile for a while. But I am over it now.
Like everything else in life, everybody has their own race to run. Their own road to walk. Your road is unique, strange with its own bumps and hurdles, and fun pit-stops. But we can lose track of this and find ourselves constantly comparing with others on “far” they have walked. Their distance has no real meaning in your own world.
In context of FI, here is one example of how fell into this trap. Being the logical and numbers-driven nut I am, I would find the average salaries of all my peers (friends from abroad/ friends from here/colleagues), and compare that to mine in absolute numbers. I would find that I fall somewhere in 45th percentile, i.e if I have 100 friends then 55 would be making more money than me. This would drive the younger version of me crazy.
Why can’t I be making as much? Did I undersell myself? Did I take take the right turns in my life? Should I have taken that high-paying job instead?
But, looking at back I realize how foolish this thinking is. Foolish on looking that one metric. I have walked and am walking on my own mountains. And to be honest, reflecting back, I would not trade my own mountains for anything else. Its been a fun ride. Nowadays, I set up own goals that is personally relevant and relentlessly focus only on that.
And, also I have started looking at others, instead of comparing, I try to get inspired. To see how they are pushing themselves in their run and use that as a source of motivation. I don’t compare their race to mine.
And I also try to share my run, help and hopefully inspire others in my own teeny little way (this blog for example).
Run your own race!
Lesson 4: Remove you 👈 from investing
I struggled with this. I am over it. But I still see some of my closed ones struggling with this. It ties with the Point-2 discussed above. But slightly different. Defensive investing, in my opinion, should be like brushing your teeth in morning. Hear me out.
Every morning, you don’t stop to think
- whether you are going to brush today or not?
- what brand of toothpaste or toothbrush to use?
- when will you brush?
Essentially, you have removed yourself from the “brushing-teeth” decision. You are not decision fatigued. You have created a habit and you do it! This gives your the freedom ponder about other important things in your life.
Replicate this for investing. Avoid the investing decision fatigue. Trust me when I tell you investing is as easy as brushing a teeth. Probably even easier. If you can open a regular bank account, you can open an investment account and get this entire thing set up. Then pick an investment habit and stick with it! Let it run on auto-pilot. If interested, I talk about how to practically do this here and here.
Habits do not restrict freedom. They create it.
James CLEAR – ATOMIC HABITS
Lesson 5: FI and Investment are means to an end 🛑 . And not the end 🛑 ✋ in itself.
One that I struggled with. And still have to periodically remind myself. Its good to have a north-star on your life on why you are doing things and not get lost with this FI process.
Why I do this?
The reason I pursue the path of FI and investment, is not because I want to be rich or I want money. But, in my life, I want meaningful work and meaningful relationships.
- And I want freedom to purse the work and hobbies that excite me. That get my heart pumping.
- And I want freedom to be around people that I love. To create memories that I can cherish.
FI is an enabler for that freedom.
How I realigned?
When you focus too much on the path, its easy to forget why you are doing this in the first place. And you may get lost. That was the case for the first 3 years when I stared this journey. I was hell-bent on optimizing the FI path that I forgot my meaningful work part. I was miserable.
So, I took a 27% pay-cut. Flew to a new country. And picked a work that I like. I am way happier. I am walking the path slower but importantly I am walking where I want to.
Remember FI is means to an end. And not the end. Remember your north star!
Conclusion
- Those are the five personal lessons that I learned.
- What do you, the reader think? Do some of those resonate with you.
- Maybe, you have your own lessons to share from your own journey. I would be very happy to hear and learn from them. Let me know them in the comment section.
- Thanks for reading! And good luck folks.
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Until the next time, Ciao!
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