It's normal to dream about being rich. But the real question is whether you want to be rich or do you want to be free? Personally, I chose freedom in 2012 at the age of 34. That's why I walked away from a multiple six-figure job in finance.
Some people want mega riches. Others don't want to be rich just comfortable. And some people simply don't understand why they want to be rich but they just do. But what if you could only choose between being rich or free. Now that's a topic most people don't think about.
I play tennis mainly at two different locations.
The first location is a public park in the Parkside district of San Francisco. Every Tuesday and Thursday there's Tai Qi from 8:30am – 10am. On Wednesdays, there's Zumba blaring in the background from 10:30am – noon. And every Friday there are beer cans and cigarette butts strewn all over the court, just waiting for players like me to clean them up. The graffitied walls are a nice final touch. It's the price for being free.
The second location is my tennis club. To join requires a main sponsor, four letters of recommendation, plus a one month vetting period during which any member can black ball you for any reason. The club has an initial member fee of $12,000, after which you pay monthly dues of about $225 – $500, depending on consumption. Talk about a big difference playing on rich or free tennis courts.
The courts at the club are pristine. There's no noise pollution except for the occasional excessive grunt. Decal chairs adorn the sidelines along with neatly folded towels next to always full water coolers. After a match, players will often get a drink at the bar, play some dice, and then head to the sauna before showering.
It's obviously much nicer to play at my club than at the public courts. However, I play on the free public courts twice as often. Why is this? Simple. Most people at my club don't have time to play! It struck me that we can work on figuring out how to get rich, but ultimately may have to choose between being rich or free.
Player Profiles: An Analysis Of Being Rich Or Free
In San Francisco, the best time to play tennis is between 10am – 3pm. The morning dew has evaporated by then. The temperature is warmer. And you never have to wait for a court because most people are working. Unfortunately, very few people at my club can play during these times.
Even my wealthiest friend can only play before 9am because he has to be at work by 10:30am. Come on buddy. YOLO! If I was the big boss, with mega bucks, I'd ban meetings before 11am and keep them to no more than 15 minutes.
Here are profiles of four players I recently played tennis with at my club:
1) Top 5 undergrad, Top 3 MBA, entrepreneur, son of a high ranking government official. Age 42. White. 4.0 USTA rating.
2) Big state school undergrad, Top 3 MBA, ex-head of a Private Wealth Management division for a top investment bank, currently a private wealth manager at a smaller shop. Age 52. White. 4.0 USTA rating.
3) Top 3 undergrad, Top 20 MBA, and entrepreneur. Father was head of a private equity business that killed it in the late 90's. Age 46. White. 4.0 USTA rating.
4) Top 3 undergrad, Top 3 MBA, co-founder of a VC that invested early in the likes of Uber, Airbnb, and Slack. Age 44. White. 4.0 USTA rating.
Being Rich Has Advantages But Not Time
Clearly all of these players have outstanding academic and professional resumes. Their kids will have incredible advantages and I don't think any of them will ever have to worry about money. More importantly, they're also humble and friendly people to hang out with. They have the same problems as everybody else when it comes to relationships, hopes and dreams for their children, doing better at work, etc.
Despite them all working way more than 40 hours a week, I'm always suggesting we play at a more reasonable 4:30pm to avoid the after work rush. But I never succeed because nobody can actually get there by 4:30pm! Even if they commit on rare occasion, there's always at least two who arrive 15-30 minutes late. By the time we warm up, we often don't get started until 45 minutes later.
More Freedom For The Middle Class
Here are the player profiles of guys I recently hit with at the public park:
1) Didn't go to college. Works as a wheelchair assistance operator at San Francisco International Airport. Age 43. Filipino. 4.5/5.0 USTA rating.
2) Didn't go to college. Retired at age 52 after working for 20 years as an IT help technician at the largest retail bank on the west coast. Bought a four unit building 25 years ago and lives off the rental income. Drives a 1986 Nissan 240Z. Age 62. Indian. 4.5 USTA rating. We literally played 32 matches last year.
3) Didn't go to college. Works as a cook at a Chinese restaurant. Hooks me up with some free dumplings every time I visit his work. Age 38. Chinese. 5.0 USTA rating.
4) Went to a local state university. Teaches elementary school. Age 39. Half White, half Chinese. 4.5 USTA rating.
Guess when we are always playing? Between 10am – 3pm! None of these players make more than $65,000 a year, yet they get to play during the best time of the day because they are either retired or have a late shift.
Further, seldom is anybody ever late. We are constantly playing for 2 – 3 hours a session because we don't have anywhere urgent to go. Also, notice how all their USTA ratings are higher as well, probably because they get more time to practice.
The Rich Are Always Rushed
At my club, the average playing time is only about 1.15 hours. After rushing to the club from work, the players have to rush home to see their families, attend some work related event, or go to some fundraiser party. It sure seems like the rich are always rushed.
“My wife is going to kill me,” is a common excuse I hear for folks jetting early. Most of the public court players also have families. But, their kids are usually in school while they play. Or, their kids are playing in the playground next door to daddy. By the time they finish, they still have plenty of time to run around with their kids and eat dinner.
Rich Or Free: Which Is A Better Lifestyle?
Would you choose to be rich or free? You can have all the money in the world. But, if you have no free time to spend it, what's the point of being rich? The public court players aren't poor. They just aren't very wealthy. They are middle class. Yet their lifestyles are pretty wonderful if you ask me. The private club players also have nice lives, they are just time constrained due to their jobs.
For those of you who are obsessed about getting rich, think really hard about trying to kill yourself so that one day you can live the lifestyle that everyday, middle class people get to live right now. And for those of you who've already achieved a comfortable level of wealth, what are you really trying to prove?
Making more money when you already have so much more than most people is so meaningless. Take a step back and think about creating more purpose instead.
Here's What Happens When You Get Richer
- You pay a larger percentage of your income to taxes.
- You're accused of not paying your fair share even though you pay way more taxes than the person accusing you of not paying your fair share.
- Rich politicians pandering for votes demonize you while also asking you for campaign contributions on the side.
- You're subject to retroactive taxes voted by people who don't have to pay more taxes.
- The media also demonizes you, even though journalists often come from relatively well to do families, otherwise they wouldn't be able to afford joining a structurally declining industry.
- Expectations of you increase to levels of unreasonableness.
- People start liking you for your money instead of your personality.
- Somebody always wants something from you.
- The demand for your time goes way up.
- You can never play in the middle of the day because you're just too important or too busy.
- It's impossible to drop off or pick up your kids at school, let alone hang out with them after because you're always traveling for work.
- You get so wrapped up in your work that you forsake other relationships and interests.
As a high earning corporate employee for 13 years and then as an unemployed writer for five years, I've seen both sides of the fence. I can say with 100% certainty life is better earning less! Not poverty level less, just enough to have all your needs and some wants covered.
I don't miss the fancy meals or business class trips to Asia because at the end of the day, it was still work. I am totally content eating a $2.60 In N' Out cheeseburger instead of a $80 wagyu steak as well. Further, I couldn't give a baboon's ass about prestige or power. Being the Vice President of a company whose main goal is to get you hooked on a sugary drink isn't very honorable. Running a company that tries to get you to sign up for another 24.99% APR credit card you don't need is filthy.
The best combination is to probably be rich and free. But even that lifestyle is not much better than that of a regular income earning person who is living a purposeful lifestyle. Appreciate what you have right now. Being rich is not an amazing panacea. Being free with the consistent ability to help other people is.
Further Reading
- How The Rich Get Richer
- Lessons From The Rich Who Took Advantage Of Free Government Money
- How To Tell If You’re Rich Even If You Think You Aren’t
- Millennials Will Be The Richest And Happiest Generation Ever
- It Doesn’t Take A Genius To Be Rich Or Run A Country
- When Did Being Rich Become So Evil?
Recommendation
Stay On Top Of Your Finances: The best way to grow your net worth so you can eventually be free is to track your net worth. I've been using Personal Capital's free financial tools and app to optimize my wealth since 2012. It is the best free money management tool on the web.
Just link up all your financial accounts to measure your cash flow, x-ray your portfolio for excessive fees, calculate your retirement income, and more. There's no rewind button in life. Therefore, you need to do your best to optimize the wealth you have now.
Recommendation If You Want To Move On
If you want to leave a job you no longer enjoy, I recommend you negotiate a severance instead of quit. If you negotiate a severance like I did back in 2012, you not only get a severance check, but potentially subsidized healthcare, deferred compensation, and worker training.
When you get laid off, you're also eligible for up to roughly 27 weeks of unemployment benefits. Having a financial runway is huge during your transition period.
Conversely, if you quit your job you get nothing. Check out the book How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye.
It's the only book that teaches you how to negotiate a severance. It was recently updated and expanded thanks to tremendous reader feedback and successful case studies.
Ive been a financial trader since 1998 when I lost my initial $30k stake. I have never looked back. Along the way I have had the odd job, I’ve worked at boutique firms in nice southern California cities, there was a period of 3 years where I worked in my trading firm 5am to 130pm, then worked as a quality control engineer from 230pm to 1030 pm while i lived in my office: pullout couch, doing everything to hide my wardrobe items during the day. I’ve tutored also 50 hours per week while trading the US markets early in the morning. I have failed so many times, and while failing and succeeding, I found freedom.
Im 51 and I have developed a high 120mph serve. In college the fastest I served was 119. That was nearly 30 years ago. I blew out my knee when I was young, dropped out of my first college and became a snowboard instructor, no tennis for years. Later I returned to college with a small tennis scholarship. I know this isn’t in order, but I am not going to edit this for a grade.
I have always been tempted, even sometimes now, to forgo the challenge of facing uncertainty directly and mask it with corporate benefits, a steady salary, and the host of other invisible shackles that provide most with that hint of “what’s is missing?” Everytime I dipped into that pool, I suffocated more each time. Freedom has a lot of gears, but for me, reverse was not one of them.
I am not at all surprised that the most corporate involved individuals are the worst tennis players in the original post. I could not take any position that would force me to play for 1 hour on days I play. In tennis, that is also a recipe for chronic injury. In fact, I choose trading for mobility. It allows me to be in southern california and Las vegas on a bi-weekly schedule, working out on the court on any day I please. In trading, the significant work is done in the early early morning on the left coast, and the rest of the day, generally, is just updating entries and exits, and that can be done anywhere quite simply, accurately, and professionally.
I could not choose a career that would allow me to be less strong than I am, meaning I don’t have time for rest, proper food selection, copious amounts of sun on my skin, lifting the big lifts at least 1x per week at the gym, use of a seasons ski pass to the local mountains (and now with the bi-corporate ski industry consolidation, this pass is good at 1/2 the resorts nearly worldwide, truly the golden age for a skier/ snowboarder).
There is a location where I play tennis in Las Vegas not much unlike the park described about in SFO. In fact, the nationalities, personalities and occupational choices are strikingly similar. In my hometown, I mean where I live, I belong to a non-profit club that caters to professionals. I served on the board as treasurer and president in my 40s, because it’s an important organization for tennis. Nearly everyone plays after 5pm, I get lucky if I can hit with the college players in the afternoons, or find a healthcare guy that has a late shift. But mostly it’s physical training and on court solo practice at home during the week day.
I am in bed by 730pm pst when I am doing things right. Up at 3, no alarm, just excited for the opportunities changing around the world. Sometimes, on Fridays, my professional friends sneak away for a 730 am hit, but to make that I must miss a key part of my day, so I can’t do that without business consequences. This is the only day I really need to choose.
Women have tried to make me more “successful,” but I think what women really want is knowing a guy is tied to a job, a place, without the options of true freedom. Have true freedom and women are quite uneasy. Think about that. I won’t give up my freedom, which I can attest to is probably the most liquid of anyone I know. And, on the flip side, it also has the most uncertainty.
I have had a few trading mentors, well, maybe nearly 100. Some I have directly worked with, some have been authors whom I have dialed up after reading their books, one hired me where I failed, then he fired me. One of the most successful had a lot to say about uncertainty.
I believe this issue is around uncertainty. In order to retain the most value added benefit, it is apparent to me you must be able to operate systematically with your imperfect money and time, while acknowledging the inherent and often times brutal influence of uncertainty. If you can do this, you retain maximum freedom degrees. If you seek success with security/certainty, then it generally comes with the time and thought shackles. Gentlemen, I propose it isn’t just your time that is constrained, but the thoughts you permit yourself to think as well. The guys who have enough bling to play at the towel-chair club yet are stuck at the 4.0 level forever, and likely can’t focus while they play. Shackled. The guy who can show up at the public park, rip a serve, be athletic, tan, happy and full of joy on the court for the performance: free. The second guy is me.
What I got from trading first was time and freedom. I have boomed and busted, and as a result developed a non-bank network of other businessmen for money transfers. There is no interest, and your credit is your word. That’s sure useful, however I actually don’t like the money except for its utility. I’d rather not deal with money, it has strife and struggle and all kinds of evils built into it. Nobody makes money without strife, at some level. Whatever the internet gurus say about money and happiness they are trying to sell you something. No amount of money will ever cover the costs of the pain of the losses, or if you work for a salary, the soul crushing choices you have had and will have to make to continue earning. And you cannot know what soul crushing choices you have made until you become more free. Further, money is manipulated not only by supply/demand forces (as the books tell us) but also significantly by small groups of people with other agendas. But, money is more convenient than barter, faster, more portable and more commonly accepted. So we use it. Having a conscious disdain for it is probably healthy.
So, for me, ironically, money is dead last. I have always had enough. I have always been taken care of. The prior two sentences weren’t always reality but beliefs I have had to embrace during the times when I couldn’t see where the money was. Ironically, they have done a lot to free me and keep me making choices. If money is the most important thing, it has too much power over my thinking. I refuse to relinquish that.
Hello Sam,
What if you are too afraid to get to the freedom. I’ll try to explain, I got into debt and I’ve attempted to accelerate my net worth growth by investing cash into more assets.
But after doing this, by generating new income streams with debt (good debt if I could call it that way)
I got really afraid to let go of my full-time job. I’m not at 20x multiplier as you recommend and I’m thinking if this is the cause or that I feel really insecure by taking debt to work in my favor.
I’m feeling like I’m in this loop and I can’t let go.
How to deal with this kind of fear?
Sure, I wrote a post addressing this fear: Overcoming The “One More Year Syndrome” To Do Something New
You’ll also like: The Fear Of Running Out Of Money In Retirement Is Overblown
Thanks Sam. It’s great to read your thoughts, to ponder what makes life worth living. It is a great problem to have, the freedom to choose the structure of life and the balance that work and other activities take on.
I’m kind of a workaholic, but when I dig deep I think I have created something close to my ideal balance. I love knowledge and learning. I dedicated so many years to my education. I am a medical doctor who has worked hard. I started a side medical business that is highly successful, but I still love being at the bedside and I love giving to patients. I feel useful in this world when I am helping, and caring. And I love teaching the next generation. And I still like to do consulting work from home, in the comfort of my study. I get to use my knowledge and keep my brain challenged.
I created my vision of freedom by living in a beautiful, comfortable home 5 minutes from work, by mountain biking in the woods with my friends to start every day, by traveling to amazing places around the world with my dear spouse a few times each year. And I balance that with a moderate pace of work, teaching a bit, caring for patients a bit, overseeing the team that runs my business a bit, consulting a bit, sharing exercise, meals, and activities with family and friends, and some volunteering in a few gaps.
A side effect of the productive work that I love to do is incredible financial wealth. But that isn’t the goal, that is just the result of doing important work that I care about, that just happens to be highly compensated, that flows from having started a successful company. It seems crazy to feel this way, but it is a bit of a burden to have too much money. I feel the pull of a responsibility to spend time thinking about what charities to donate more money to when I am busy doing a lot of other things.
Multi-millionaire here, NYC, Wall Street, 20 years of hard labor in the gulag… I’m sure Sam knows exactly where I’m coming from. I’ve been lurking around, but this is my first post.
For the record, I’m not one of those masters of the universe types raking in huge 7-figure bonuses year in, year out, but in this business, you don’t have to get that far to do really well. You just have to get a foot in the door, work really really hard, survive the cuts, and be very disciplined. A little luck helps too… I have had some very good windfall years (and a lot of pretty sucky ones too).
I’ve worked excessively hard my entire life (save for a couple of brief lapses in my youth) with the goal of achieving above-average financial success. I did it the only way I could think of, coming from disadvantaged economic circumstances. Raised in a struggling single-parent household, my mother was a wonderful example of dedication, responsibility and hard work, and she taught me to aim high. But I had to figure a lot of things out on my own once I shipped out.
As latch-key kid I would hustle dollars doing everything from washing cars to cutting lawns. In high-school I just about killed myself to get into a top Ivy League school. In college I hit some bumps adapting, but ultimately did well, graduated with honors and landed a series of jobs with big prestigious corporations and financial firms. I’ve changed career paths a couple times, seeking bigger and better opportunities, and reinventing myself to stay sharp.
I’ve achieved many of the things I set out to do: I’m wealthy by the standards of almost anyone (though oddly not by my own… given I know many ultra-high NWers); married to a beautiful, caring and intelligent woman; own luxurious homes, drive nice cars, can shop anywhere without $ concern, respected by my peers, hobnob with the rich and successful and often famous.
But….. I’ve recently decided enough already. The benefits now cease to be as exciting as I get older and more exhausted. I started on my career late, and have worked very hard to try to make up ground, but I’ve probably gone as far as I’m going to go. I’ve given up many evenings, weekends, holidays, etc. I don’t know what its like to not have to check email constantly or not be on the phone with collegues and clients every weekend. Sunday evenings are basically treated like Monday mornings – filled with conference calls.
So what’s taken me so long… I exceeded the million dollar mark at least a decade ago.
For one, I’ve actually enjoyed my career(s). Yes, there have been huge sacrifices, but I love the deal-making, I love being on the winning team, and I love winning. I love that the stakes are huge, I mean really really huge. I love that my role is so crucial – that if I don’t do my job well a crater would open up in the ground and swallow dozens of careers (including mine) and millions of dollars (not mine). I love that many important people in the business world have my number on speed dial. I love that I read about the transactions I’ve worked on in the news papers all the time and that I know all the inside stuff that few people have any idea. I love that if I don’t perform in this utterly ruthless environment, hell will rain down from the sky and I will be terminated with extreme prejudice, but not before being publicly drawn and quartered to send a message to all the other cowering prisoners. I love that I have to bring my A-Game to work each and every day – day in and day out – that there is absolutely no room for failure – ever – no matter how long the odds or how tough the assignment. I love that sometimes I am tasked with moving mountains and accomplishing the impossible – and I somehow manage to do it.
These things have been motivators to me in some way shape or form, all my life. I’ve always seen myself as the underdog, needing to continually prove that I am worthy of a seat at the table. That I have met the test of staying alive in this vicious nightmare for 20-some years is something I’m perversely very proud of. But, as time goes on, the rewards feel diminished, and the adrenaline rush feels more like what it really is…. a huge amount of stress and agravation. I should be spending my remaining time on Earth differently. I’ve mentored and nurtured and trained the next generation, and I feel really good about that. Time for me to get out of the way and move on.
Certainly, the fact that I have F-U money and could walk away has made it easier to deal with, but I’m finding that the walking away part is not quite so simple as I had imagined.
I’ve made the decision, that I will start taking the steps to retire (at least from Wall St). I don’t know what I’ll do for work or if I will work at all. Wife is totally supportive, and the few close friends whom I’ve told are thrilled for me. But, there are some tough choices to be made. We’ve enjoyed a great lifestyle over the years – modest in comparison to our means but nonetheless very pricey given where we live. Transitioning to a zero-income situation at a still reasonably youthful stage is going to mean making some changes. When your life is as fast-paced as ours, you tend to spend a lot of money on conveniences. As we work through looking at our spending, we’re a bit shocked at how much fat there is in our spending and its gotten away from us a bit. Nothing that can’t be corrected – these are very high-class problems – but it is a process.
There is also a psychological component to all this. I grew up in and around urban poverty. My family never quite went hungry, but there were times when we were close to it – frighteningly close. Beans and rice for dinner ever day of the week kind of close. Homeless people sleeping in our vestibule (that my mom would feed and cloth) kind of close. And I saw a lot of things around me like drugs and violent crime that seared into my brain that I never ever want to go back there. A shrink would probably say that I’ve been running from that fear all my life. Giving up a really lushous income simply feels like an insane and irrational act to me. But, I’ve overcome a lot of fears in my life to get where I am and will overcome this one too.
My “problems” are problems most people would love to have. Not expecting sympathy in the least – quite the opposite. I expect to get yelled at for “wasting” so much of my life in the pursuit of more wealth than anyone should need. But that was my choice. And I’m not sure given a chance to do it all over again, that I would do it much differently other than making some better career choices. Just sharing. I discovered FS a few months ago and its been a huge help – lots of good topics raised and many of you provide great role models for how to think about my next life phase.
Have to jump to a conference call now….
What exactly do these ego-driven financial types do? How do they actually deliver value to society commensurate with their compensation?
I’m hoping that the idea is that they are planning for the future, and investing in things that make an appreciable impact on many peoples lives. This requires the ~2x-3x time dedication to information-gathering, cross-validation, and analysis.
The more cyclical side of me thinks that it’s also a fair component of being determined & making use of leverage. This averages similar value to those picking food or paving the streets. Some of those guys work very hard too. And, as your article suggests, they get to live a fine life as well … good.
Being made redundant 4 months ago really has made me appreciate all the time i now have to do whatever i want.
Having no mortgage to pay and a tidy sum invested beside the redundancy money,i feel like i’m finally enjoying life..
At 56 i’m pretty sure i won’t be working a full time job again,and that feeling is so good especially now spring is just round the corner….
“For those of you who are obsessed about getting rich, think really hard about trying to kill yourself so that one day you can live the lifestyle that everyday, middle class people get to live right now.”
This reminds me of the Parable of The Mexican Fisherman and the Investment Banker. It is easy to lose sight of what’s truly important in life. Thanks for always keeping us in check, Sam.
I’m in a profession that could be a lot more lucrative if I was willing to give up my freedom. I set up my own business in a small niche. I dress how I want. Set my own hours. Charge more to people I don’t like as much as the cost of having to see them. I could go work for someone else to get more money and prestige, but I would also lose my time and control over my existence. It does not seem to be a fair trade.
I like this post. It hits on something key for me. I find there are mainly 2 types of people I tend to meet- those who care what other people think and those who don’t. Guess who I’d rather spend time with? The latter. I find those people to be more joyful and fun. I really can’t even stand going to my husband’s holiday party anymore, because it’s full of pretentious people. I cannot engage in a conversation about “the most money I’ve ever spent on a pair of shoes,” without an open look of disdain on my face. I had to stop having lunch with a friend who was obsessed with her children getting into Sidwell among other things…I just don’t want to live the “keeping up with the Joneses” lifestyle, because you’ll always be chasing the life of your richer neighbor. You have to find your own happiness, and I think we all know it’s not material. I actually used to care what people thought, but I went through a rough patch of infertility/IVF, and that’s when I had the clarity to see what was REALLY important in life. I can’t say I miss my former self- in fact, I regret wasting so much time being insecure, but I think I was a product of the environment I was in (a former attorney). I’ve never been happier just being REAL.
I want to be free. I work to create a freedom for me and my family. I do it for the team. Thats why I decided to go into insurance and financial planning. I make money while I sleep and all my new efforts build on what is already in place. I also invest into a tax free retirement, while being involved with my church and life groups, which give meaning to my present.
Hi FinSam!
Hilarious post. Coming from a tennis buff who learnt tennis in his youth and now has no time or decent courts or fellow hitters even for a rally game, I enjoyed this very much. Soon enough we will be using USTA ratings to predict your quality of life. Haha.
‘They have the same problems as everybody else when it comes to relationships, hopes and dreams for their children, doing better at work, etc.’
‘Being free with the consistent ability to help other people is.’
Words of gold that resonated with me.
I am mildly surprised you would still be with your tennis club though given all the freedom you have and the costs involved.
I found this post inspiring, thanks samurai.
(38y/o physician, who works at hard at making sure he has lots of free time)
I think everyone should have two plans – a minimum viable “freedom” plan and a “get rich” plan.
The best way to have both plans running simultaneously is in a marriage – where one partner plays the risky card and one plays it safe. This way you know for sure you will achieve the minimum viable “freedom” plan if the “get rich” plan fails. If the “get rich” plan is a success then of course you’re rich and you can do anything you want with your money and freedom.
I understand that not everyone has this choice, but as we can see from the early retirement community (those who’ve done it in HCOL areas as well as LCOL) double incomes do get you to your goals faster.
This is a huge issue. Chasing prestige.
You mentioned the kids of the tennis club folks having many advantages. But there are disadvantages, mainly expectations placed upon them (your friends included bc they also likely grew up in that environment). It isn’t a setup for a happy life, nothing ever seems good enough.
To answer the title of this article, Too Short said it best ‘I want to be free’
I was looking for some guidance: I am married with 2 young kids. I’m 47, self employed, wife is an attorney. We own 3 homes (primary, rental and a vacation home) $1,150,000 in mortgages combined. Value of all 3 is about $2,700,000. We have $110,000 in a savings account earning 1.05%. No other debt and no other investments(no stocks, bonds or retirement plans) we prefer to save and possibly purchase another rental? When we accumulate enough to purchase. We were curious what your suggestions are. Thanks!
George…I think you need some diversification out of real estate into the stock market. It appears you have 93% of your net worth in real estate. However, you certainly need to keep a nice cushion of cash handy for security and just in case 1 of your 3 properties need a roof, have a flood, etc…you know the deal. So, keep $50k in bank and buy VT (total world market index, 2.32% yield, 60% USA, 40% world) With all due respect I’d be concerned not being liquid enough if need be. Get a HELOC on one of the properties so you can tap that equity just in case.
Hi Jc thanks for response, Investing in the market has been a Desmond for years. I never have the nerve to try it. Furthermore, I save in order to buy more property. What other suggestions do you have?
hey…whatever you are comfortable with, if its another property so be it. but more than 90% of your NW in illiquid real estate is not ideal IMO. VT is diversified among countries and companies..so the risk is spread. You can also buy VNQ which is a publicly traded Real Estate Investment Trust index. If you like Real estate you can invest in this instead of another property, it yields about 4.5% and its liquid so if you need the $ you can sell in one second instead of selling a property and paying the commissions and closing costs. Good luck
I really appreciate your input. I think you are correct. Makes a lot of sense. However I’ve kept away my whole life so it’s tough for me to chose the right options. These you mentioned seem interesting. Thanks again
I also notice that the market is up right now. Maybe waiting for a drop and then getting in? How do you feel about Bitcoin?
Its hard to pull the buy trigger on anything when its been going up recently. Sure, wait for a pull back, but we dont know if market will rally another 10% only to pull back 5%. Thats why buying once a month or once per quarter works well. I agree the US stock market is tough to buy now, but that VNQ REIT ETF is 8% off its highs. Personally I have been buying VWO and VEA two index funds that represent international emerging market and international developed markets. They offer value relative to the US market. Nothing wrong with diversifying in some bitcoin but only with speculative money especially since bitcoin has also rallied 200%. Bitcoin doesn’t pay a dividend so I dont love that. IMO you only need to own 5 stock assets:
VTI, VWO, VEA, VNQ, BND . Simplify your holding and life.
Hi Jc do you also own any real estate? Other thing is how are these funds you like taxed? Because I assume you are not into individual stocks
Yes I own my condo and 2 condo’s above me that I rent out. Although I may combine all 3 soon for a primary residence. I’ve owned other income properties in the past but all needed more attention and more burdensome that I wanted. I sold and took that money and put into VNQ (non taxable account) Most Dividends in VTI are qualified and taxed according to your income bracket but VNQ is approx. 65% taxed at ordinary income rate. The international ETF’s are 50% or so but check vanguard website. Individual stocks are too risky, unless you are playing with speculative money. If your self employed you should start some sort of retirement account where your business can contribute $. This way you can participate in the stock market through a tax advantaged account. But you cant touch until your 59 or so depending on the account. That may be good because in 12 years there is a damn good chance the markets will be higher than they are now, and you wont be tempted to sell before if things get rocky.
Thanks Jc, I’m pretty sure you must have researched vanguard as opposed to other funds? My other concern is 529 plans for the kids. I don’t like it being restricted to only education. Any thoughts?
Vanguard most cost effective. I have no knowledge of 529 plans.
Hi Sam,
This is one of the best posts by you! Indeed, nothing makes life richer than have enough time AND money.
Have you ever had a problem explaining to people what you do with all your free time. It is like they are curious and envious at the same time. How then do you say something that does not make you sound aimless or goal-less?
Great post. I think freedom will make me much happier than riches. Don’t get me wrong, it would be great to be rich, but not at the expense of my freedom. I currently work a lot of hours, plus most hours I spend away from my day job I spend working on my blog. As the years go by, I hope to transition to a point where passive income is enough to support the lifestyle I live now.
Hi Sam,
My mother passed away last year, of cancer. My expenses last year – over $200K, financially. My expenses emotionally – invaluable. My dad is left alone.
Of course, money will buy you a 60″ TV, but never a good movie.
Life is same. Money buys things. Not love, or loved ones.
So, why run after money? Because we must, till a certain “stage in life”, not necessarily a certain “age in life”.
We must have enough.
How much is enough?
Enough that you never have to ask anyone else for money in your life.
Its about pride.
About the belief in self.
I can sleep on floor, eat 2 piece of bread with jelly to survive.
But its not about me.
Can I send my kids to a school they choose and get selected to?
Can I pay for my parent’s cancer treatment, when they cannot afford to?
Can I buy the ticket to Europe for my 14 year old, because all her friends are going?
Thats the kind of freedom I seek.
Financial freedom.
Not for self, but for my loved ones. Now, or in their future.
Freedom is never for self.
Freedom is from attachments, and duties.
Regards,
Curious.
Sam,
I totally hear you. Every once in awhile I look back at what I made straight out of college and have no idea how I lived on such little money (OK, I really do know since I keep a detailed budget, but still…). For some reason we always seem to find a way to spend/invest every dollar we earn, always making us seek more.
My personal goal is to get to the point where I can live a life like you described — free to do whatever I want during the day rather than being strapped to a 10+ hr a day job. I’m still able to make kids’ sports and events today, but sometimes travel gets in the way, which frustrates me to no end. My hope is that I can get to the point where I can support my family while having the freedom to better enjoy life before I’m too old to do so!
This is an excellent post, Sam!
Although I am not wealthy, I can definitively say that I value time and freedom over riches. Also, I am very focussed on the value I get for the money I spend. For example, even I was in the financial position to do so, I doubt I would ever spend 12 grand on a tennis club membership. I bet most of the people at that club are only members so they can tell people about their membership. From my perspective, if there is a free option, I would take that for sure and then use that 12 grand to travel. It’s just about values though.
Furthermore, your list about what happens when you are rich are examples of the reasons I’ve never been that ambitious when it comes to working my way up the corporate ladder–more money or status within an organization is meaningless to me.
I believe a lot of people are wrongly chasing riches/status instead of freedom. I have a lot of friends working in the financial industry that are desperately trying to move up the corporate ladder without having much of a reason to do so. They don’t have logical reasons for their end goals. They don’t know what their day to day will even look like once they get there. They have no vision.
I’ve never reached my magical number. However, my magical number isn’t based off status, it’s based off the lifestyle it could provide. My magical number would allow me to be FI by living off dividends, blogging, and freelancing. The freedom, fulfillment, and day to day life that would accompany that number is the real magic.
I think would be easier to tell people to stop chasing riches once you are already rich. People tend to be followers. In my experience, no one will listen until you’ve done it.
Thanks for sharing the great post :)
What if part of your happiness requires some money?
I live in a decent North NJ neighborhood – 3BR/1BA.
In order to enjoy my passions – I need a bigger house, bigger property, etc, and a bigger house in north nj is going to cost you. You could tell me move somewhere else which isn’t as expensive, but then I will be losing out on many other things (access to restaurants, nyc, culture, etc). Therefore I need to work towards executive director (IB Technology) like you were to achieve the life style I want. If I went on a ‘$65K’ salary – good luck to me ever reaching my goals, and maybe I wouldnt enjoy life now. So I will continue to grind out my 30s to get what I need, else I don’t think it will come.
Some passions/issues:
My property is not enough space or sunlight for the size vegetable garden I want. So I drive 15 minutes away to a community garden plot I can’t get to every day.
I also don’t have a downstairs bathroom as I live in a very old house, so entertaining requires guests to go upstairs, which requires the entire house to be tidy every time someone comes over. We really enjoy entertaining, and it is a shame I can’t even have my immediate family over without having to setup a card table which extends into the living room as my dining room/table can only seat 6 comfortably.
I also have a sizeable wine collection (300ish bottles) – I can’t even store the majority of it at my house.
I also enjoy brewing beer, but I hardly have room for all my equipment/supplies.
Great time vs money post and the tale of two tennis worlds was a great metaphor.
I think the big lesson for people is to try to delay gratification without sacrificing REAL quality of life, so they can have more freedom (time) later.
For everyone the mix of what is important will change but the lesson that freedom and time always win out over money is an important one to always keep in mind.
Ya, I’ve already accelerated the vacation plan this year :). Thanks for the input & keep up the great work on your blog!
This is something I’ve been struggling with currently, so thanks a lot for the post. My situation is a little unusual because I spent my 20’s and half of my 30’s pursuing a career in the theater. I only had part time jobs and lived on as little as I could. I earned my ‘frugal bachelor’s degree’ through work-study ;). I also had a ton of freedom.
But then in my mid 30’s I was weary of trying and not hitting the big time, so I started climbing the ladder in television production. Thanks to my early habits, now at 49 I’m just below my 25x savings rate in investments but slowly dying in a corporate slog. I find myself at a crossroads: If I stick it out for 2 more years I’ll reach FI. But at 49 I’m really not sure I want to give away my time. If I don’t stick it out, I will have to work anyway since I’m in LA/high COL and…I’m not sure what to do. I could scale back to part time, or I could also do something more independent like start my own small production business. But that sounds like a headache in the making too. Ha.
Anyway, it’s a great post to get me thinking, thank you and I’d love to hear your thoughts as some one on the other side :).
Hi Travis! I think it is great that you actually pursued your interest early on in life and that you’re only two years away from financial independence as how you define it.
My advice is to get it out for two more years. But in those two years, take all your vacations, look at all your paid time off and sick days, and use them. My biggest mistake was never using any sick days during my 11 years of my previous firm.
When you know the end is near, it makes the journey of paying that much easier. And of course, if you can negotiate a severance in two years, then you will feel like a major, major winner for walking away from a job you wanted to with money in your pocket.
Good luck!
Matt
I know how you feel, I am ten years away from FI at age 60, my advice to you at your age is to partner up with a like minded(FI) person who will make your journey in life very memorable, as it is experiences not consumables that should be your goals. If you get together with the wrong partner you may never financially recover, spend lots of time with someone before you commit to them to make sure your on the same page.
Try to get to a personal savings rate of 50% ASAP , invest it in a low fee stock index and by the time your forty your there. I put away 50% of my net and my lifestyle has not been hampered one bit it is actually better since I pay myself first, invest the difference, which sets my lifestyle. It is a stress free way to live because the money I have left over is mine to spend how I see fit with no guilt as I have already saved for my future.
Also you don’t need a huge income to do this as I have never made six figures but I will be FI in about ten years, yet friends of mine who make 6-8 times my wage will have to work until they drop to keep up their lifestyle.
Wise words. I believe everything you have written. It’s not so much the need to make big bucks, but the discipline to live within your means.