Younger Me - Keeping up with the Joneses Is for Suckers
This is the third part in a series I’m doing called “Younger Me,” in which I write as if this were something the younger version of myself could pick up, read and have a head start on achieving financial independence.

Message #3: Keeping Up With The Joneses Is For Suckers

Typically, financial independence and being frugal go hand in hand. The general answer to people asking the question, "How can I retire early?" goes something like this -- "Save 25 times your annual expenses and withdraw at a 4% rate." Think about that for a second. The message we're sending to people just getting into their groove with saving for retirement is to save their annual expenses twenty-five times over. It's no wonder so many people think it unachievable. I'm sure the psychology behind brushing the idea off is tied to people thinking they automatically have to earn more income to reach such a goal, while a little bit of reading blogs like Mr. Money Mustache (specifically, the post on the math behind early retirement) will let you in on the little secret to retiring exponentially earlier: spend less. A person who can cut his or her annual expenses in half, for example, can retire much sooner. This is a light bulb moment for some people and there's no confusion in it. All I have to do is spend less and I can get to doing whatever I want sooner? Uh, yes please. And then there are those who realize you can do both and retire even sooner. For anyone just getting started though, you've already got a head start. You're not spending much. The trick, then, is to keep from accumulating things for the sake of checking things off of a list. Young FI Monkey was guilty of just that. Having relatives who had much more money than I did buy toys was somehow offensive to my manhood when I couldn't just go out and buy the same thing. And that's just skewed thinking. That pursuit is empty. Once you have the thing they have, rather than feeling like you've evened the scales of justice, you feel good for a few minutes until the scales start tipping once again. This never ends. The secret to general happiness is not difficult: be satisfied with less and mindfully appreciate what you already do have. There's a lot more to it, of course. Unfortunately, there's no one-size-fits-all solution but that's a pretty damned good rule to go by. Of course, I didn't have this wonderful advice to read when I was in my 20s. Like sand slips through the fingers, so went all the money I traded in my time for. I'm not saying there weren't amazing experiences (there should always be a healthy mix of those) along the way, but I failed to put my money to work for me so I wouldn't have to trade my time in for money for the rest of my life. I saw what others were buying and wanted the same. This is starting to feel more like a confessional than a helpful article, but I suppose that's an important part of understanding my reasons behind wanting to be free from a job. We must re-focus from time to time, because it's easy to lose sight of that one simple desire. Repeat after me: I don't want to need a job my whole life. There, we've refocused. Meditating on that single thought and holding it in comparison to just accumulating things helps bring shocking clarity to doing what everyone else is doing without questioning it. Of course, that thought had been in my head since I was about 18, but sort of clunking around in the back. It was more of a general nameless feeling back then. It's the driving force behind my reading so many books about getting rich and what were effectively get-rich-quick scams. I call them scams because if the thing being sold to you is a way to sell the same thing to someone else, to me that's a scam. That's exactly what I'd read about time and time again. It's also the reason I got into Internet Marketing for a long while. I knew I didn't want to need to work for someone else. Every time I go on a vacation, I never want to go back. I often read or hear about working people who go on vacation and can't stop thinking about work until about a week in. For me, it takes mere hours to forget about the trivialities of work and enter vacation mode. And that's something I want to hold on to. Coming back to work after that kind of letting-go is, frankly, depressing. Whether it takes a week or even if it's instantaneous, there's a reason we feel this way. It's because we don't truly feel free unless we aren't scheduling freedom in between work hours. So the goal is to eradicate scheduling freedom and make freedom the default. Going back to the point, when freedom is the default, you no longer need that job your whole life. So if we can consider this whenever the idea of keeping up with the Joneses creeps up, the decision is immediately made simple. Does buying this thing get me closer to being comfortably jobless? If the answer is no, you should probably sleep on it. I am in no way saying that there isn't room for just having fun and a huge part of your twenties should be primarily about that. On the other hand, that fun should happen with what's left after you save. Pay yourself first and then go nuts. Do not go nuts and then pay yourself with what's left.
Younger Me - Knowing Helps but Execution Is What Matters
This is the second part in a series I'm doing called "Younger Me," in which I write as if this were something the younger version of myself could pick up, read and have a head start on achieving financial independence.

Message #2: Knowing Helps but Execution Is What Matters

When I was around 18, I had a bank account but I barely knew what to do with it. I had a very vague concept that you could put your money into it and take money out, but I was interested in other things. Mainly, programming. But at the time, there was just so much I didn't know and I suppose part of me was just waiting for someone to come along and teach me. Someone to take me aside and say, "What are you doing with all the money you're making? Nothing? Well, let me show you what can be done." That never happened. And even if it had, who knows whether it would help? Looking back, I can honestly say that I wasted so much money on things that didn't matter. To paint a picture, I bought a pair of $80 polyester pants once when I was 17. I think I wore them a few times. That's the kind of hole money was burning in my pocket back then. So even if someone had taken me aside and shown me how investing works, I probably would have assumed I'd start sometime later and just push the burden on future me. Knowing wouldn't have helped. Young FI Monkey thought he had all the time in the world to stuff money into a savings account and catch up. Of course, if he had seen message #1 in this series, he would have known how much easier things are if you start earlier. But that doesn't mean he would have actually done anything about it. And I suspect it's the same way for most people in our generation. And probably for most people in the next generation, too. So what was holding young FI Monkey back? Well, if we go back to the bit on how much I didn't know, that was probably the biggest factor. To clarify further, it was what I didn't know about investing beyond scratching the surface with a simple graph, as I did in the previous post. For example, I didn't know that in 2001, the year I graduated, it wasn't unheard of to see high-yield interest rates at around 5%. Had I stuffed the $2000/year I mentioned in the last post into an account that averaged even 3%, over the last 10 years that $20,000 would have already been over $25,000. And that's just a savings account! Had I known about the power of an IRA, I would have jumped on it. Except, no I wouldn't have, because around 2003 or 2004, I actually started my first IRA after my roommate -- who was studying to become a CPA -- talked me into setting one up with regular deposits. Yes, I did honor the $100/month deposits but I remember it feeling like I couldn't touch the money. Then there were the fees. I just didn't realize how, if you don't pay attention, fees eat away at your savings. But again, no one told me and I wasn't willing to put in the leg work to figure it out. Still, I had an IRA at that point, but I was putting the bare minimum into it. So bare, in fact, that by the time I rolled that IRA into a new one not too long ago, the account had about $4,000 sitting in it. You read that correctly. An account that I had been stuffing $100/month into for the past ten years didn't have anywhere near $12,000 in it. Because I had been so naive and careless (and because of the 2008 crash), fees had eaten away at most of the money I'd been mindlessly shoving into the account. Had I done even a bit of research and done some comparisons between banks offering retirement accounts, I would have inevitably stumbled on the fact that most banks charge you a monthly fee if your balance is below a certain mark -- usually $5,000 from what I've seen. This is something my roommate had left out of his very moving sales pitch. The point is, I should have done my research. Because someone was telling me, but I still felt like there was too much involved. You know what I've learned since then that was so powerful? There just isn't that much involved. Had someone given me the following plan and told me where to go for each of them, I'm fairly certain an 18-year-old could handle it:
  1. Find a bank with no required minimums and a high APY for savings accounts. Open an account.
  2. Figure out what your average expenses are, multiply that by six and save that amount in the bank as fast as possible. This is your emergency fund. Don't touch it unless there's an emergency. If you take money out, you must replace it as soon as possible.
  3. Once you complete number two, open up a new savings account in the same bank.
  4. Go to and look at Roth IRA accounts. Whatever the minimum amount is to avoid fees (say, $3,000), that's your new savings goal. Save that up in your second savings account.
  5. Once your savings reaches $3,000, open up that Roth IRA account and transfer over the funds. Invest it all in VFINX. Your new goal is to invest AT LEAST $2,000 in this account each year.
And that's it. Had someone who knew what they were talking about given me those instructions, I would have been well on my way. Of course, I would throw something in about what to do during potential bear markets and crashes (and what a bear market is). Obviously I could tell young FI Monkey to buy up all the Apple Stock he can get his hands on, but that's cheating. Young FI Monkey would have been able to establish two savings accounts. In the process, learning that opening a savings account is no big deal and costs nothing. It's like having a separate envelope for your money (just please, never over draft). Also young FI Monkey would have learned that a Roth IRA is just a tax-efficient vehicle for investing in things as opposed to imagining it to be the slimy pocket of a salesman who would add money once in a while but always charge enough fees to make sure it would never grow. (I still have some issues to sort out). To wrap things up, my point is that even if I knew I needed an emergency fund and a Roth IRA, I wouldn't have known how to set them up. At least, not initially. And that's the missing piece. In the end, narrowing the gap between knowing a thing and actually doing a thing is what I hope this post to be. Until next time. Disclaimer: I am not a financial advisor, but merely explaining what I would have told younger me. And the funny thing is, not much of that would change if it were 42-year-old me saying the same thing to 32-year-old me. Suffice it to say, if you do all this and the stock market crashes or somehow Vanguard goes under, please don't blame me. Also, I understand that the above scenario may not be the absolute best, but the point is that it would have been 1000X better than what actually did happen.
Younger Me - You Are Trapped and No One Else Will Save You
An interesting thought occurred to me today as I was listening to some of my favorite podcasts. If I could send messages to my younger self, what would I possibly send? For anyone who has seen Back to the Future 2, you should know better than to try to take a sports almanac because Biff will inevitably steal it and end up ruining your life in one way or another. So let's keep things basic. Simple financial advice and basically lots of pleading for him to stop wasting all his money. Younger me, this series is for you. You and anyone who is near or in their twenties.

Message #1: You Are Trapped and No One Else Will Save You

When I was younger (I'm 32 now, so I mean when I was about 18 - 22), I definitely wanted to be rich but the way I spent money was a clear indication of the opposite. For the longest time, I had absolutely no savings to speak of. I remember realizing that but thinking that I'd just have to get better paying jobs. The problem with better paying jobs is that an uneducated person won't know to keep from inflating life to meet the new salary. I also remember feeling trapped. This was sort of good in a strange way because it encouraged me to do a ton of reading, test different strategies for alternate sources of income and just generally gave me a fire. And while I did have that in short bursts, inevitably it would burn out. There was this feeling like the Universe would come along and offer me a way out. After all, my first word was "money" according to my mother, so having it was inevitable. Don't get me wrong, I am not a superstitious person. I'm not even a little-stitious. But there was a period in my life where I felt like I was destined for greatness. However delusional that might be, I don't actually think that's always a bad thing. I guess some delusions can be good. But now let's talk about the down side. The problem with the idea that I was destined for greatness is that I wasn't taking steps to work on my long, slow game. I was all about the quick buck. So on top of telling myself about being trapped, I would also relay to myself the importance of accumulated wealth. If you're a long-time reader of anything related to financial independence or passive income, you have no doubt seen an infographic depicting the power of investing earlier in your life. Well, that's something I would have liked to have seen when I was younger. Something like this infographic from MFEA:   The_Power_of_Investing_Line_Chart Wow, those lines are so spot on it's frightening. I know for a fact I could have scrimped together $2,000 every year from 22. It wouldn't have been easy during those first years, but with enough determination, I could have done it. But the point is that I didn't. And a huge reason for that was that I wouldn't have known where to even put all that money. So I think I will save the next post for telling younger me what an index stock is and how I could have been sheltering growth from taxes for the last ten years. It's not that I beat myself up for not having invested that whole time. Hell, I will probably look back at 32 year-old me when I'm 42 and want to strangle that guy. On the other hand, 32 year-old me is at least putting forth great effort to help older versions get closer to the dream of financial independence. And, of course, this all goes back to delayed gratification. Younger me, you don't have to save everything you make. All I ask is that you save $2,000/year until can afford to put more in. Even if it means skipping on eating out a few times a month. Now, of course, you're wondering where to save that money. And I'll tell you. In the next post in the Younger Me series.
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