Titles we inevitably work very hard to earn. To legitimize. This is no easy badge to wear. We likely have invested hundreds of hours in our activity of choice to become known as and feel worthy of a title like these. We have achieved a level of mastery above many of our peers or coworkers. We have seen results in our bodies and minds and now trust that the activity is a worthwhile expenditure of our limited resources.
It’s probable you have begun to self-identify as one of the names above. However, the best form of a fitnessy-label comes from the outside. Someone else calls you a Yogi, so you must be one. It’s THAT evident. Or you spend 2 hours per day in a dark weight room, lifting as heavy as you can, wearing your hoodie and taking swigs of the latest fizzy pre-workout beverage. Someone at work happens to notice your arms seem bigger than before and, “You must work out” is given as the justification for the change. Boom. Verified weightlifter/bodybuilder. Everyone can see the product of your labor right in front of them, bulging out from under those puny sleeves, helpless against the power of your blooming new triceps.
But the final confirmation is the sweetest. This is when a member of the elite labels you as one of their own. The woman with the most poise and grace in the whole class calls you a great dancer. The climber who flashes 5.13’s comments that your beta is infallible. The coach says your improvement with thrusters is the best he’s seen all year from anyone and maybe you should help bring beginners up to speed. Someone with the power to induct you into the marbled halls of the elite has claimed you belong.
Like a variation of ancient coming-of-age traditions, you’ve made it. You killed the lion, drank the cow’s blood, wore the gloves full of bullet ants, and are given this identity.
Accept it with caution.
Yes, you have focused your efforts and resources. Yes, you have realized results. Yes, you have been recognized by a community as a valid participant. But are these positives? These are not objectively negative things. However, assuming an identity based on them is something to handle with great caution. The problem I have with weaving your identity into the activity you enjoy is that it’s a petty representation of who you are. As a person, you are a citizen, a family member, an employee (possibly an employer), a friend, a human. Your depth and beauty and power are vast. Almost incomprehensible.
If your identity is decided by your actions, your worth is measured by your results.
Read that again, and slow down. “If your identity is decided by your actions, your worth is measured by your results.” This is not a system you want to be held to. We have the option of allowing these kinds of social structures to dominate us, or we can reject them. Yes, this is actually an extremely common form of worth-measuring in Western cultures. Your results speak for themselves and justify whatever your actions are. In a nutshell, winning dictates truth.
If you get great results from your fitness activity and that’s palpable to the people in your circle of influence, it must be right/worthwhile/good/true. But what happens when your results aren’t quite as good? When you get an injury or have to take time off? Who are you? The indicators are gone. The old gym swag you wore is out of fashion and now makes you stand out in the wrong way. Your kipping pull-ups look more like a fish out of water than an athlete setting a new PR. The people you used to do the activity with have moved away or now go to that new hip facility you don’t even know about. Where is your identity now?
Okay, okay, maybe this is blown out of proportion for many if not most people who exercise. You may not feel like your identity is indeed dictated by your healthy activities and community associated with them. However, the above rule reigns in more than just the fitness kingdom. It is alive and well in virtually every career setting. Let’s make a quick modification to apply to your career success: If your identity is decided by your actions as a professional, your worth is measured by your professional results. “You’re only as good as your last project.” “The proof is in the numbers.” The career world is results-based and has plenty of phrases to summarize that. As it should be. However, your worth, your value, your intrinsic ability to be known and loved and accepted is not results-based. Succumbing to the rule that you are only worth what you can produce is limiting who you are and what you are capable of. You are not a machine designed to meet output projections. At work or in a gym.
Know that whatever you choose to do, however, you leverage your limited resources, you are not the sum of the results you realize. Your life is not one large return on investment calculation. Be the best yogi, crossfitter, dancer, climber, manager, accountant, nurse practitioner, or retail clerk you can be all the while knowing that any label is just representing something you do, it’s not even close to describing who you are.
In the pursuit of any goal, you have to be tenacious to expect progress. Fitness, health, lifestyle changes are all no different. Except where they are.
Chances are good that we all have made more unhealthy choices than healthy ones. We grew up scavenging for candy like starving vultures. Circling the candy dishes, sneaking an extra piece or two and rushing off to devour our most recent kill. We likely begged the adults in our lives to allow us another scoop of ice cream, a milkshake with lunch, a handful of their french fries, or a super mega size sugary fountain drink.
We continue into adulthood with the inclinations intact. We tell ourselves things like, “Gosh, work was tiring this week. Maybe I’ll just indulge a little, not exercise yet, and make some yummy cookies!” We are fully grown people dang-it. We can do whatever we want. If that means eating a bowl of cookie dough while finishing the last 8 episodes of that show we sort of like but can’t stop watching, that’s what we are going to do. Period. You can’t stop me.
So if and when the point comes when we need to decide to turn our health in a positive direction, we have to battle these old ways. To battle anything, you must be fierce. You must not surrender. You must win!
Right?
Maaaaybe not. In my experience, with health-motivated actions anyway, this can actually be a great formula for failure, burnout, and resentment. The problem is we are but human. We DO get tired. We DO get busy with that home renovation project, that big work assignment, those sick kids, etc… And that interrupts our well-crafted plans to become fitness ninjas. So what do we have left as a course of action? Forget all about our plans? Forget all about our other life obligations and be muscly yoga hermits? Neither.
I suggest you have clear, achievable effort-based goals and/or attendance goals that are not easily shaken by other life events. Stating that you will do some kind of Pilates twice a week and cardio once a week is not as sexy sounding as “becoming a size 2” or “having a ripped six pack”. But there is a major difference between the 2 goals. One is based on factors you can control and the other is not. You can decide to participate in an activity which makes a positive impact on your health. You cannot force your stomach to become a particular geometric shape, especially one that looks like an ice cube tray.
Think about that for a minute.
Can you BY SHEER FORCE OF WILL tone your butt? No. You can’t. You can put in the work that “should” make that happen, but in the end, you cannot force results.
In a significant way, we are like farmers. Our bodies are the soil and our efforts are seeds. Our only true course of action is to exert effort in the way we best know how and wait for results. Plant those squats, water with lean protein and rest, and hope a booty will grow.
Don’t settle for lack of activity, for unhealthy diet habits, for a slothful life. Also, don’t settle for an all–or–nothing mentality. Both will fail you. Instead, realize that you will need to adjust your efforts to conform to the other circumstances in your life. Make it to the gym 3 times this week even if you only run on the treadmill for 9 minutes each time. You made it. Then next week when things aren’t on fire, get back to work on your regular routine. You will net the most results over the long haul by showing up and doing something. So do it.
Lately there has been a massive uptick in the popularity of “passive income” related content and strategies. Of course the concept is intriguing but it should be met with healthy amounts of questions and skepticism.
If passive income is so easy, why don’t more people take advantage of it?
If we can “make money while you sleep”, shouldn’t everyone be doing this?
How realistic are the claims being made by these smooth talking, promise-slinging geniuses of all things money?
Is this the way rich people became rich?
If you pay attention and listen between the alluring and ever-hopeful promises of the passive income gurus you may begin to realize that this income isn’t quite as passive as the name implies. Generally people either need large sums of money to generate regular income and/or it takes additional work to generate this income. So…not really passive at all. Quite active actually.
Earning the money needed to investment is active. And a side job called “real estate rental property” is far from passive. Other options include selling a product online, making an online course, selling stock photography, affiliate marketing, YouTube ad revenue, peer to peer lending, vending machines, drop shipping, renting items you already own, crowdfunded real estate, and the list goes on. Do you see the common theme? Startup money + hard work= the possibility of income. To me, that’s just the bones of starting a business.
Startup money + hard work= the possibility of income. To me, that’s just the bones of starting a business.
-truth hurts
So what is actually passive?
If income is to be TRULY passive it needs to require ZERO time or effort on your part. If you want to input extra time to monitor your progress or contribute work to potentially add value, that’s optional. In my mind the best and most passive sources of income have to be from the stock market.
The stock market is a complex, moody beast of a thing but we can choose to make it more or less so. Indexed funds allow us to invest in a low cost and automatically well diversified group of companies or funds without having to get an MBA or understanding a business prospectus statement. But there are people who still love to pick their own stocks and insist they are successful at choosing the ones that net them great passive income.
The experiment:
So to save you the headache and to satisfy my own curiosity I am going to invest in both ways: indexed funds and individual stocks. Not only that, I am choosing to invest specifically in companies and funds that have a track record of paying regular dividends to their investors.
Dividends are a portion of the profit made by the company that they choose to send to their investors. Generally companies that choose to pay dividends make this a regular occurrence. The most common schedule is quarterly payments, but that can vary wildly.
People like to recommend their own way of thinking when it comes to picking “good” stocks. They decide by reading about the company, looking at financial statements, mimicking other investors, or my personal “favorite”: if you “know the product and like it”. PLEASE read into the sarcasm here. That’s my “favorite” strategy because its so completely silly. Whether or not a company makes a product you personally like as 1 lowly consumer really has ZERO bearing on whether it’s a worthwhile investment. (Yes Apple, Tesla, Netflix, Facebook, and others have skyrocketed in value. And yes if you’d invested in them early on that would have been great. But for those of us who are getting started investing and don’t want the kind of risk associated with one stock rising and falling in value, there are other options)
In contrast to this method of choosing companies 1-by-1 I will also be investing in a number of funds that are a massive variety of companies that have a great record of paying their investors regular dividends. The benefit of these kinds of funds over a single company is that they are spreading your money over dozens or hundreds of companies. So if a few losers don’t pay a dividend this quarter, have a terrible year, or go out of business, it doesn’t hurt very badly. In contrast, if you’re expertly chosen gamble on that one company you think is “cool” happens to not work out, there goes your whole investment.
You can probably accomplish your entire goal of a relatively safe and good performing dividend investment with just 1 fund. However, in an effort to be as diverse as possible to prove the point, I will invest in several different funds full of dividend paying companies.
These 2 strategies will likely have some overlap since the handful of companies I pick will likely be included in the big funds in the other half of the investment experiment. So it’s not meant to single them out as good or bad or to judge my ability to pick a winner. It’s more to show the possible swings in performance and risk you accept when picking a small number of companies vs letting a fund do that work for you.
The 2 $1000 bets:
To complete this experiment I am using $2000 total. $1000 will go into the handful of individual stocks that are picked based on popular opinion and their track record for paying dividends reliably in the past. The other $1000 will be invested in a small number of dividend index funds. That’s it. They get to sit and stew and we will watch the rise and fall of their value as well as the actual amount of “passive income” that is generated by each account.
Contender #1: Robinhood
For the individual stock account I am using Robinhood. It is a tremendously popular app for people to use when getting started investing and is geared toward picking individual stocks and monitoring them closely.
You now have a claim to a stock like Apple, Ford, or Facebook. In order to keep this claim to your stock, sign up and join Robinhood using my link.
For the diversified index funds of companies I am using Webull. Webull is not nearly as popular as Robinhood but gives the user a TON of information about their investments. Far more than I ever want or need. But it’s impressive and if you’re wanting that kind of depth in your investment monitoring, Webull is the app for you. It also has a browser-based dashboard that shows a wealth of live updating detail and is guaranteed to help you feel like a stock broker in a movie scene!
Get 2 free stocks when you open and fund your account with Webull through my link:
Stay tuned for updates as the dividends roll in! I will post the breakdown of companies and funds as well as the exact dividends they paid!
Disclaimer: I am not a certified financial planner and hold no formal education or training in the field of investing or personal finances. Any and all information on this site is for entertainment purposes only and is not necessarily applicable to the reader’s personal situation and circumstances.
How can you advance your career in a matter of weeks or months with a mindset change? Especially if you’re a millennial like me? I’ll share my shameful but effective learning process with you to save you the time and trouble!
No this isn’t some silly fru-fru “I believe I can fly” positive self reinforcement B.S. But your mindset is very important and plays a major role in how you progress in your career and how successful you are in general.
I’ve recently experienced a massive shift in my mentality around work and motivation and it’s made a huge impact on my success therein.
My story: I’m in my early 30’s and have been working in the construction management industry for about 8 years. Before that I spent a few years in a retail management position and before that dabbled in sales. I’ve never been terribly successful professionally, until recently when I made this shift in my mentality.
I grew up as one of those kids who is naturally inclined at most things. Good grades, excelling at sports, making friends, etc… all came without much struggle. Being a millennial, whatever proficiency I displayed was always reinforced by participation ribbons, pats on the back and encouraging words. PLUS I grew up in a small town, so there was less competition. I was the “Valedictorian” of my junior high class of 27 students. Not a major accomplishment compared to a normal sized school!
To be honest I never thought about the incessant positive reinforcement we all got growing up but it inevitably shaped the way I thought. That environment reinforced the belief in myself that (you may also share) “you SHOULD be successful at the things you do”…basically always. But that expectation has a very limited lifetime and once you enter the real world of a career, it comes crashing down.
So as I entered the workforce it’s not that I wasn’t adding value or doing well, it’s that I was bringing less to the table that I thought I was. I was expecting a level of proficiency, and the associated rewards only reserved for those with levels of commitment and experience far greater than mine.
But that was a lesson I only learned through shame. Let me tell you that story:
A little over a year ago I got called into the boss’s office. I had been working on construction sites for the last 5 years, so getting an ambiguous meeting scheduled meant only 1 thing: promotion time! I had been doing a great job, was managing construction projects really well, no one had been seriously injured on my projects, they generally finished on time ( I even finished a project 2 weeks early!), and there could be no other real reason for a legitimate meeting except to formally announce that my career was going to the “next level”.
Orrrr so I thought.
I sat down with a smile, and readied myself for the big news. BUT instead of a shower of compliments and a new job title or bloated salary I got vaguely negative feedback. Something about how “I hadn’t arrived yet” and “wasn’t quite there”. Not that I had been doing a bad job, I was actually doing a good job, but it was definitely not “great”. It didn’t make sense to me….I zoned out trying to grasp what was happening….
Finally, the realization set in that this was going nowhere good. And even with clarifying questions I still didn’t really grasp where my performance wasn’t going well or how I could improve. In fact I began to get angry. Really angry. Not only did I not expect this but the least they could do is be direct! What does that even mean to “not arrive yet” or not quite be “there”?! Where the heck is “there”?
I reacted. Poorly.
I told my 2 bosses how hard I’d worked and how intentional I was. That my methods were probably the best way that the job could be done! I explained that this job wasn’t even a good fit for me. We’d talked about that in the past. About how it’s not very well suited to my strengths and they knew that. It was a blur. A frustrated, sweaty, tense, blur. I may have yelled. (Actually if you can’t remember whether or not you yelled, you probably yelled.)
I yelled.
This was a small office. Maybe 10’x15’. We were very close to each other. An arm’s length away. So my yelling was right in their faces.
To this day, to this very moment I can picture their surprised and disappointed facial expressions toward me. I can close my eyes and see them. Finally the meeting ended and I trudged out.
At the time the company needed building maintenance done so I was stuck doing manual labor for weeks afterward. Everyday I climbed up ladders and did roofing repairs. First, sweeping and pressure washing to clean them, then patching obvious holes, repairing and reattaching metal parapet cap material, then finally re-coating the entire roof surface before moving onto the next building and repeating the process. Alone with my thoughts… chewing…grinding…writhing alone on those rooftops with the boss’s feedback swirling around in my head. FURIOUSLY replaying those conversations in my head. Thinking about all the things I could have said. All the rebuttals I should have made.
Resentful roofing face
While roofing, I was passing the time listening to audiobooks. (Using the free Libby app through the public library system, which is awesome by the way) Business books, leadership books, entrepreneurial books, autobiographies of successful people, etc…. Hearing these people tell stories of overcoming their surroundings, becoming masters of their industries and fighting to succeed all started to sink into me.
What made them different from me?
Did they have “conversations” with their superiors like I did? Probably not.
What did they have that I lacked?
Somehow these successful people didn’t wait for their boss to give them some promotion or expect permission to advance. They just found a way. There was no rule book for the paths they took toward success and toward their goals! Obstacles didn’t stop them, they were mere speed bumps to navigate. If they had no contacts: they made contacts. If they didn’t know how to get a product made in a foreign country: they went out and discovered how. If they didn’t know how to sell their product: they worked tirelessly to get it placed in a major department store with untold amounts of creativity.
Basically they didn’t take their circumstances or their external factors of any kind as the final word. They had their goal and every morning they woke up and sprinted toward it no matter what.
Their goal. Their purpose. Their own source of motivation.
Why couldn’t I be driven like that? I had goals. I had a sense of who I was and the kind of person I wanted to be. What was I doing waiting around for someone else to give me what I wanted? Or to present me with the resolution to my goal or current obstacles? Whose fault was it that I was being held back and limited?
“No way!”, I thought. My goals won’t happen if I wait for someone else to make them happen. I need to go out and reel it in myself. I need to be the one to force this goal into existence whatever that means. (Obviously within the boundaries of what is legal and ethical but hey those are really huge and open boundaries) The company I work for and the people there can’t be the thing that I am waiting on to help me and I can’t allow them to slow me down either. The challenges in my work don’t have to be terminal or even huge. I can choose to mow them down one at a time and not look back.
Once that realization hit me fully, I knew I had to take action.
Ultimately this self motivation I was finally discovering had other names that I didn’t like and wasn’t happy with: Accountability. Ownership. Obedience. Discipline. These felt stodgy and limiting before but I had to come to terms with the FACT that they were the only means I had to overcome my doubts and my excuses.
I am accountable for my own success. I am the owner of it. I am the only person who has to make it happen. No one else has that on their radar and they shouldn’t. I am the person responsible for my own future and the discipline it takes to make it a good one.
It was like a door that was locked suddenly swung open. I was unleashed. Okay that sounds cheesy. But seriously, my whole perspective on life literally was changed from that time forward.
Solitude given a dirty roof
After this crazy realization and many roof repairs, I had another opportunity to work more closely with those same bosses that witnessed my feedback tantrum. But because my motivation had shifted so strongly from external factors (like them) to internal factors (like my identity as a highly capable and focused individual) I just put my head down and worked. It was fast, focused, and accurate work. I didn’t care about anything but getting the work done and learning like crazy.
Lets just say they noticed. Big time. They didn’t know “what happened to me” but wanted more of it. (Notice that language even falls into the commonly held belief that “something must have happened” to me like a terminal illness or I suddenly had to support a child etc…an external circumstance forcing a change on me.)
You can make a similar change and tap into a spring of motivation that was otherwise unused! Here’s how:
First you have to stop believing in extrinsic motivation.
Extrinsic Defined: “not part of the essential nature of someone or something; coming or operating from outside”
We blame someone else for not keeping us engaged and motivated. We blame our circumstances for holding us back. We blame our bosses for not recognizing the time and effort we put in. But then we stay in that cage we’ve made out of excuses. We act paralyzed because of those things, not realizing we have the power to create change for ourselves.
You never will have enough extrinsic motivation. Your tank is always only ¼ full and it can only be filled by factors outside of you.
Next we have to change our fuel source from extrinsic to intrinsic. Intrinsic motivation is different because it lives within you and feeds on the stuff YOU give it. It has less and less to do with other people.
You decide what drives you based on your own goals, metrics, and qualities of character.
You decide WHO do you want to be? You are “this kind of person” so you’re driven and motivated in these ways. It’s woven into your identity and is inseparable from your actions.
Example, “I am a hard working person who is driven to be successful and to bring excellence every day.” Now it’s personal. It’s reflective of who you are as a human being. You want to work hard on that project because it is just in your DNA to work hard. To be committed. To take its outcome personally. Yes you don’t know exactly how to do what needs to be done and that’s scary, but “afraid” isn’t in your core identity. The point is, you are staying true to your own integrity who you are choosing to be and what you care about. The only natural result of that is to live in line with that “new” identity. Be that person.
This is exactly the change that happened in me. Unfortunately for me the catalyst was negative feedback and the shame of my horrific reaction ruminated during weeks of manual labor on rooftops….
I want you to be able to recognize this in you now and change it.
Here’s an easy test: If you’re waiting on anything or anyone to become successful…you’re extrinsically motivated. (at least somewhat)
-Me
Here are more qualities of extrinsic motivations:
Focused on your effort
Waiting on someone or something to happen to allow you to be successful
Excuses outside your own choices
Circumstances are responsible for allowing you to progress or holding you down
You aren’t accountable
When you don’t know how to do something you Stop
Before committing you ask: What am I going to get out of this?
More examples of intrinsic motivations:
Focused on your results
Are only held back by your own drive or limits, no one else
You don’t believe in excuses
Circumstances come and go but you keep moving forward
You are accountable
You learn what it takes to continue and don’t stop
Before starting you ask yourself: What value am I bringing to this?
My challenge to you is to sit down for a few minutes and really be honest with yourself.
Where are you?
Are you in the extrinsic camp or the intrinsic camp?
What do you allow to slow yourself down?
What obstacles have you accepted as terminal?
Who are you waiting on to give you the golden ticket to success? If it has been of any value please send it to someone you know who it could also help.
SO many little quips revolve around saving money. I feel like the implication is that they somehow summarize everything you need to know to handle your money well.
But that’s bogus! Money is complicated. Or at least our lives are complicated so the way we choose to deploy our money is also complicated. That’s why I think we need to think with a little more nuance about what saving our money is for and what it can never accomplish.
FIRST: Why saving money is great essential! And a little childish…
Spending everything we make (or more) is a losing proposition. We can never catch up, pay off debt, create a secure financial footing, build wealth, or hope to have the option of retiring from full time work. If that’s the place you’re currently in: no shame and no blame. Not from me, not from yourself, not from anyone else on the internet. Yes it’s an objectively bad habit to be in but shame/blame/built aren’t going to help change things.
So we are left with the next logical step which is to save some portion of our income. I.E. intentionally spending less than we make so we can set it aside. Wisdom. Delayed gratification. All that jazz. But hearing things like “pay yourself first” honestly has only served to cloud my mind in years past. What the heck is that supposed to mean!? (I finally learned that it is just a cryptic way of saying you should save some money before you start spending it on non-essential items)
I used to save money in a wooden and plexiglass kids bank shaped like a dog. His belly was see-through since it was made of plexiglass and you could see the little coins and bills piling up over time. To access them you had to literally disassemble the thing with 9 tiny screws. But that’s what I did countless times! I couldn’t wait to let the money pile up. Having to count it over and over I’d grab a tiny screwdriver and take it apart to get my new total. Then it would get carefully reassembled and put back on the shelf.
Stashing some money in cash or even in a savings account is really not much different than my childish activities 25+ years ago. We know it’s the right thing to do and put some money off to the side. It has no real intent or purpose, but its there and we are doing what we’ve been told is the “right thing”. The problem is that we don’t have much of a grasp on what’s happening overall, which doesn’t allow for intention to be baked into that savings, which limits its power to help us.
We need a general game plan. I’d summarize that as: have an accurate budget, have a plan for debt repayment, and have a plan to grow your wealth. Saving money needs to have a direction into 1 of these 3 buckets or it will be stuck in that aimless, child-like state like my doggy-bank dollars.
SECOND: Saving is a foundation. But only a foundation
Assuming we have a budget, a plan for debt, and a solid vision for a wealth-building future do we just save as hard as possible? Yes and No.
Saving is the first step in the process of wealth building. We have to hang onto money and not let it fly out the door to subscriptions and restaurants and nasty bills. It is the only way we can stop the cycle of living paycheck to paycheck.
We all need a small chunk of money that is a basic buffer while money flows in and out of our accounts so as to avoid bouncing a payment. This can be as little as a few hundred dollars or as much as a few thousand depending on your comfort level, when bills are paid, and how big those bills are. If you want a good buffer, have everything set on autopsy for the 1st of the month and spend a lot on recurring bills you may need $3000-$6000 as a buffer. But if you’re ok with a tighter budget, have bills spread out across the month, and don’t have many large expenses you could probably get away with $500-1000 quite comfortably.
After a buffer, everyone needs an emergency fund. Actually your buffer is the start of your emergency fund because it’s the bare minimum in whatever account(s) you use. In a real emergency it’s likely the money that gets spent first. But over and above this an emergency fund should be set aside in it’s own account, distinctly earmarked for emergencies only. “Emergency” means unpredictable, accidental, or otherwise out of your control. If it IS in your control or can be foreseen that falls into the next category of “sinking funds” but more on that in a minute.
An emergency fund is directly proportional to 2 elements. 1: What comfort level are we after? 2: What are our average monthly expenses? For number 1, this is literally a matter of preference. Part of that preference has to do with how regular income is for the household. The more variable the income, the larger the emergency fund should be. However, most people outside of commision-only jobs are paid fairly regularly. Number 2 is important because the amount of emergency funds we need to set aside depends on how fast it will be used. If you’re a high income/high spending household that’s much different than a single student living at home.
Rules of thumb for emergency funds: Always have at least 1 month of living expenses. Set a baseline goal after that of 3 months worth of living expenses. If your income is wildly variable, bump that baseline goal to 6 months or equal to the average span of your sales/paychecks. Any more than these amounts and you’re probably giving up a lot of wealth-producing potential! Unless you’re saving for a specific upcoming need: a sinking fund.
Third: Saving for a “sinking fund” (aka rainy day)
This area of saving stands to lift the most people out of the evil clutches of consumer debt and I to the glorious paradise of freedom: saving for big purchases. Wait! Stay with me! Don’t turn away because you just threw up in your mouth a little bit like I did thinking about this particular topic! I know it’s repulsive or at least horrifically boring to slowly and methodically save for a premeditated purchase months or years in advance. I get it. But we have to do something new to get a new result.
We have to do something new to get a new result.
-Me…again
If you bought a house and expect the air conditioner to kick the bucket in the near-ish future but don’t save for it, that’s just silly. (This is what my wife and I did by the way, we bought that house. 3 years in and the old thing is still somehow functioning!) Or if the current vehicle is steadily creating more and more bills from the mechanic shop we have to acknowledge that reality with a plan. And plans often take time to come to fruition.
We are responsible for our financial futures so it’s our responsibility to forecast the big expenditures. Making a quick list in a phone app or notepad with the impending biggies for the next 1-3 years can add huge amounts of perspective. With it, we are better able to act in the present. “Can we afford to go on that 2 week cruise” becomes easier to answer if Christmas is around the corner along with a new washing machine.
Keep your list handy and update it often. It’s easy math to figure out how long it will take to save for an upcoming purchase. (The math is easy. The saving is harder!) Let’s say an expense is coming up in about 5 months. It is going to cost around $900. $900/5= $180, so every month from now until the big purchase we need to set aside $180 and not touch it! That can be the hardest part, seeing the funds accumulate and leaving them alone, destined to fulfill their true purpose.
Saving for these bigger expenses can take a lot of the sting out of them plus it saves huge amounts of interest in the long run. If you charged that same $900 on a credit card with a 19% interest rate and only paid $50/month, it would take you almost 2 years to pay it off! (22 months of torture, knowing that giant company is taking your hard earned money just because you didn’t save for it in advance). Worse than that, instead of it costing you exactly $900, it costs over $1067!
So far we’ve established significant security by way of cash savings. (By cash that of course includes and presupposes using a bank and a high interest savings account…not literal paper currency.) But stopping here is why “saving” can be terrible. Stopping at saving and choosing not to invest our money grossly limits our wealth building potential.
CALLING ALL MILLENNIALS: Do not stop here!
Lets review a few stats:
Yes, 58% of millennials have less than $5,000 in savings. That’s not an insignificant sum. But its not massive either. The problem is that saving money is where many of us stop. We think that is the proverbial finish line. To have a lot of cash piled up like Scrooge McDuck means we are secure.
60% of millennials and Gen-Zer’s define financial success as being debt free. Again, in concert with a pile of cash this “feels” like an indicator of success or completion. We want to have zero debt and the foundation of cash at our fingertips. This is not a big enough or accurate enough goal. We need to think bigger!
Millennials have an average net worth of $8000. Here, we start to see a little more into the depths of the problem. Having that cash-heavy plan that is focused on accumulating more in the savings account and paying off all those debts leaves our growth at a snails pace. A net worth of $8000 means we are barely above ZERO. And without investing we are doomed to stay near there. Your wealth accumulation is limited to your earning power if you refuse to invest. (Sources: https://www.businessinsider.com/average-millennial-net-worth-compared-to-other-generations-2019-5)
21% of all millennials on average have invested less than $500. Ever.
Overall, 54% of millennials have invested less than $5,000.
So that’s a total of 75% of “us” that have only parted with between $0-$5000. We are not setting ourselves up for the kind of future we want. (This isn’t the time to discuss income inequality for younger generations as compared to previous generations, but of course that plays a large role. Regardless, the stats show that most younger people are very conservative with their financial planning, detrimentally so). (Source: https://finance.yahoo.com/news/43-millennials-aren-t-investing-090000387.html)
Your wealth accumulation is limited to your earning power if you refuse to invest.
-I’ve got to find someone else to quote. Me again.
Instead, if you take a tiny step into the world of responsible investing through an employer sponsored 401k, a personal Roth IRA, or similar tax advantaged account, your wealth accumulation powers are compounded and multiplied far beyond the amounts you are paid every month. Many of us are too conservative in the wake of 2008-2011. We saw people who were “investors” lose a lot of money and feel determined to be wiser than they were. But think about how vague that is: who are these investors? What were they invested in? How diversified were their investments? How much is a “lot of money”? Did they make that money back over the last decade?
It’s like your first breakup. It hurts, its terrible, its debilitating…for a time. But if we resolve never to be hurt again and thus rule out all relationships with human beings then we also miss out on the beautiful intimacy, joy, growth, and love they very often bring.
Our investments will hurt us a little from time to time but over the long haul they will do so much more good than harm. We need to do a little research, approach things carefully, then break up with “Savings” and marry our newfound love “Investment”, never looking back. Yes this analogy got weird fast, especially because we need to continue to save along the way but you get the point.
One more quick example:
Jill and Betsy are twins. They mirrored each-other’s educational and career paths. Both were hired for identical jobs, have the same costs of living, and the same income. Jill is a traditional millennial and saves $500/month after paying bills, making debt payments and saving for some larger purchases. The money goes directly into her savings account at the bank where she’s had an account for most of her life. “Investing is risky” she tells herself. She can’t afford to risk the hard earned money she makes so she keeps it “safe” in cash. After 30 years, Jill has contributed $180,000 to her savings! Nice work! However, the bank has not appreciated her diligence and the trivial interest rate of 0.1% they offer has only gained her an additional $2,718.
In contrast, Betsy is a non-traditional millennial and reads a few books, listens to some investing podcasts and checks out an interesting new blog called “Abacus Personal Finance”, all finally convincing her that investing is the way to go. She opens a Roth IRA at a brokerage with zero fees and shovels the same $500/mo into an index fund tracking the whole stock market. After 30 years, Betsy has contributed the same $180,000 her sister Jill did. But the results of her investing are astonishing. She has a balance of $1.09 MILLION! What a massive difference! The companies she invested in through her index fund have rewarded her with a cumulative $910,000 in interest!
We cannot afford to stay stuck in our “savings-only” mentality. If we do it will be the worst limiting factor for our financial futures despite an otherwise solid game-plan.
Stick around for more posts in the future on investing and just how easy it can be to get started!
If you want a 1-stop app/website to track all of your accounts including banks, debt, mortgage, investments, and anything else in your financial life, I recommend Personal Capital. It’s 100% free and I’ve been using it since September 2017 and love it. By far the easiest way to track your net worth and all accounts in 1 place. Full transparency: if you start using it with my link below we both get $20. If you don’t use my link neither of us gets $20. Also, it really is free but they will “offer” you their own services or investment recommendations every now and then. They probably have good things to say and overall trustworthy recommendations, but I want to keep it free so I’ve not used any paid services or investments they advertise. Link: https://share.personalcapital.com/x/sLcqkA
Amateur trail runner with a dream of one day completing an ultra-marathon
Driving enthusiast (though, with no current outlets for this)
Rock climber, adventure seeker, fun lover
Passionate about helping people better understand personal finance and investing basics
So why are we here, online together? Conversations kept happening in person about personal finances, investing, budgeting, and general financial planning. Family, friends, and coworkers all were so eager just to talk openly about money for once. We had awesome conversations about saving money, how to invest, teaching kids about money, retirement planning, real estate, and more. It was so refreshing to experience this and it just kept happening!
The wheels in my head started turning….if we are having these productive and enlightening conversations where we all benefit in person, I wonder if people elsewhere would also like to talk. I wonder if they are experiencing a distinct avoidance around money with their friends and family. Maybe they, like us, have questions and don’t really know who to believe for the answers.
So I started a Youtube Channel and Instagram account: Abacus Fitness and Money. The goal was and is to talk about the basics of exercise and money in a way that is non-threatening, simple, and helpful to everyone. But making video content is a ton of work and was taking a lot of time away from the very personal relationships that spurred on the creation of the accounts to start with. In the meantime I kept writing. And writing. Notes about books, helpful tips from podcasts, articles to reference in later conversations, questions I had, ponderings about estate planning, and more! But you can’t post a bunch of words to Youtube or Instagram. Hence, the blog!
This is a place where I hope to add the most value to someone like myself who is prone to reading and writing and wants to engage in real conversations about the topics they are most interested in around personal finances. Being a millennial, much of my writing will be from that perspective but a lot can apply to anyone. Plus if you’re in a unique or different situation we can talk about that too.
This is a safe place to question what we have heard and look to learn more. I do not have all the answers. I want to learn along with you. In the meantime I will share my experience, the good sources of information I’ve found, and anything else that can add value to your life and your pursuit of financial wellness.
Abacus Fitness and Money 