The basic math behind financial independence is actually not that difficult to understand. The more you save, the quicker you get there regardless of what the stock market does. In other words, controlling what you can control in the form of your savings rate will also be the most impactful that you can do. While not difficult to understand, following this advice year in and year out is incredibly difficult!
The Consumer Price Index (CPI, or CPI-U as the Consumer Price Index for All Urban Consumers is the primary CPI measure used) is something of an enigma to most people. There’s sizable confusion about what it is and what it isn’t, which may be due to the sheer enormity of it (the CPI-U has 393 line items – the Bureau of Labor Statistics, or BLS, is nothing if not thorough). The goal of the CPI-U is not to help consumers understand their own annual inflation rate. No broad-based statistic, government or otherwise, could do that. Instead, the CPI-U is meant to give a much broader, economy-wide measure of inflation.
For those of you not in the investment profession, let me share a little secret: Most of us are not very happy at our jobs. Many people outright hate them, yet the pay is so good that they can’t fathom leaving for something else. To many who sit on trading desks or as an investment manager, F-You Money is a well-known concept. Big egos, a-hole bosses, and dealing with Compliance and Legal are just a few of the constant headaches. Due to the larger than average compensation, the stress and pressure to perform day in and day out and the need to always up your game is tremendous. A question common among these groups is “What’s your number?”
Protecting what you already have is an important, and often overlooked, aspect of building wealth. It’s an unfortunate truth that we live in a litigious society and the target on your back only grows as you earn more wealth and status. That’s why practicing stealth wealth is one of the best strategies around!
Face time, putting in hours, burning the midnight oil. Do any of these matter when trying to achieve a top quartile paycheck? To some extent, putting in face time, especially early in your career, is important. But as you move up the food chain, your job becomes less and less about the hours spent and more and more about the results you achieve. In order to be a top performer, you must do more than just show up. Instead, you must start to find new and creative ways for your firm to add value for its customers. Improving the bottom line will be what advances your career. As you move higher on the corporate ladder, you get paid based on the value you create and not the time you spend in the office.
Great Families often have great fortunes attached to them. Rockefeller, Vanderbilt, and Rothschild are all family names that are well-known to most. However, great fortunes can also be much more stealthy and still be substantial. We don’t need to compare ourselves to the .00001%. Imagine the good that you can do for generations of your family, your community, and causes you care about with a net worth of $10 million or more. I’m a working stiff, so I know that I’ll never be in the same category of the Rockefellers, or even more modern day, the Zuckerbergs or Gates. However, do I think it’s possible to have a net worth of $10 million, $20 million, or more by the time I reach my late 60s or 70s? Absolutely! In fact, I’m planning on it.
As you’ve probably noticed, I’ve been doing a series about the different steps to take at different points in your life to ensure that your family becomes a Great Family. As you move into your 40s and 50s, your life settles down and you begin earning the largest paychecks of your career. However, your obligations, both financial and personal, increase as well. Living your life from a position of strength in your 40s and 50s means building up your F-You fund and hitting your F-You number. Your 20s and 30s were a time to increase your career prospects and get the financial basics taken care of. Now is the time to convert your career earnings into real investment capital and build your fortress on top of that financial foundation.
Much like how the foundation of your home is what holds up the roof and walls, your financial foundation holds the walls and towers of your financial fortress together. From a financial perspective, the goal of your 20s is to build the skills and knowledge necessary to construct your fortress in your 30s and expand your financial kingdom in your 40s and 50s. Without this solid foundation, none of what you hope to accomplish financially will be possible.
Long form writing has seen a bit of a rebirth in the last few years. The difference between long form and short form writing is best illustrated by the difference in a single, local newspaper article and a 10 page New Yorker article. Beyond the different lengths (1,000 words seems to be the accepted cut-off for long form versus short form), the goals of each are different as well. A quick news article is short, sweet, and on point with regards to what happened, where, and how. Long form provides more in-depth explanation that supplies context and perspective on the topic. It allows a reader to engage more with complex subjects and dig below the surface. Both have their place, but the balance between your consumption of long form versus short form writing is important.
We Americans tend to fear and diminish family money. We also confuse it with inherited wealth, two terms that I like to keep separate. “Old money”, “Trust fund baby”, “Rich snob”, “Spoiled rotten”, “Bum. These are all things we’ve heard people with inherited money called. In other parts of the world, particularly European countries, society has no problem with family money and often view it as a source of pride instead of something to belittle. Americans have strong ideals regarding merit and hard work being the source of success. I’m fully on board with that. After all, no one likes seeing a brat with a silver spoon just handed the keys to the castle.