Category: money

Remember what you’re working for

For the high achievers out there, remember what you’re working for. Some people refer to this as finding your “why.” Why are you working so hard? What is it that you really want?

Sure, you may like what you do, you may find enjoyment getting recognition or accolades from your employer, or you want to be seen as successful in the eyes of your peers/family members, but is that in alignment with what you actually want?

I’ve been working hard for a long time. I worked in high school, worked my way through college, and upon graduating I worked multiple jobs and many hours of overtime to pay off any student loans I had, pay off cars, a mortgage, etc. But after having kids, I had to re-prioritize my life goals. Did I still want to earn financial freedom? Absolutely. But I need to do it in a more sustainable way so I can see my family. Working 60-70 hour work weeks will help me earn income, but at what expense?

The questions I had to ask myself were:

1) What am I working so hard for? What is my new why? The answer to this, I think, is to create the best life possible for my family. That doesn’t necessarily mean to have or to make the most money though. Instead, I think it’s to raise respectful children with good work ethics who are happy with life…and me NOT being around just so I can earn more money or do something I’m “passionate” about is actually a very selfish thing to do.

2) Instead of racing the the financial freedom finish line, am I willing to maybe work a few more years to have a better quality of life (more free time to spend with my family, friends, and hobbies)? The answer to this is yes. What’s the point in rushing to retirement when you might lose your family (say, if you get divorced as a result of never spending time with your spouse), you lose your health (because you’re “too busy” to work out), lose your friends (because you never hang out with them anymore), and have no hobbies (are you just going to sit at home and watch tv all day)?? That life would be so unfulfilling to me.

So, as I conclude, I just want to say that everyone is different. We feel different things, have different goals, and are in different stages of life. Our life experiences are different. Our expectations are different. There is no right or wrong when it comes to why you’re working as hard as you are. But the key thing is to think about what you’re working for and adjust your time accordingly.

How to be financially prepared when things go sideways

The difference between an emergency fund and a sinking fund, as illustrated by The FI Guy. ​
The difference between an emergency fund and a sinking fund, as illustrated by The FI Guy.

Most financial experts recommend having at least 3-6 months of expenses set aside as an emergency fund. This is used for true emergencies/things that you weren’t expecting (like a job loss or car accident). Hopefully these things never happen, but if they do, at least you’ll be covered. If you have to dip into your emergency fund, re-supply it as soon as you can to get it back to where it needs to be.

The “sinking fund” is something not as many people know or talk about. This is for known future expenses. For example, if you’re a 1099 self-employed individual, you better be setting aside money for taxes, because the tax man comes around every year to collect. And guess what? The car you drive? It will need an oil change and new tires every so often. Christmas and birthdays? They come at the same time every year, so if you plan on giving gifts, you should put money away in a sinking fund to cover those expenses.

Less, but better

Focus more on quality (of experiences and of items), not quantity.

Why do you want a bunch of junk? Just because you’re getting more of something doesn’t make it better. In fact, having a surplus of worthless items creates more clutter, more stress, and more work for you.

Even is you consider a less extreme example, why would you want many mediocre items to manage or care for when you can gain more time back and improve your experience by having higher quality items?

Sometimes, less is more. Focus on having less material items to care for, but making sure that the ones you do have bring joy to you, serve a purpose, and are of the best quality you can reasonably afford.

Thinking about diversification

Does diversification really make sense? I used to think, of course it makes sense! When you diversify, you are spreading out (aka minimizing) your potential risk. But you’re also minimizing your potential reward. So now, my thinking is…maybe. I think it depends on your level of knowledge in what you’re investing in.

Diversification for the novice investor can be thought of as risk mitigation, but for the expert in their field, instead of putting all of their eggs in the basket they know best, they would be putting some eggs in that basket and some in other baskets which they have limited information/knowledge on how to properly optimize their return on investment. An analogy would be to consider a generalist versus a specialist. A generalist might be a jack of all trades, but a master of none, just as diversifying your portfolio makes you “good” in several areas, but not excellent in any. This is because you have spread yourself too thin to truly become an expert in one area.

For the novice investor (which I am, so no judgement is being passed here), I think diversification makes sense. But if you are an expert in your field and you know something better than 99% of the population, why would you reduce your investment where you have an informational advantage? Does it really make sense to invest in things that you don’t know as well just so you are diversified?

Does a top-tier athlete try to go pro in multiple sports or do they eventually select one and try to be the best at that? When you are starting a business, will you get as far by trying to do a little bit of everything and serving every type of client or does it make sense to niche down and become the “go-to” person/business for one specific type of client? That’s where the saying comes from, “when everyone is your customer, nobody is.” You don’t differentiate yourself from your competitors who have either become the experts in their field or who have the name brand recognition and can afford to spread their resources thin.

“On sale”

You know that clearance rack, or the item that is on sale?

You can walk past it without buying anything…

Before you put whatever item is on sale into your shopping cart (whether that’s online or in person), ask yourself if this is something you actually need or if you just like a “bargain.”

One could argue that it’s not a bargain at all if you end up spending money on something you didn’t intend to…