Things About Money That I Wish You Knew
Things I believe you need to know if you want to get your financial act together.
Ever since people found out about my mini-retirement, they were naturally curious as to how one can go about doing the same, especially since I very obviously did not sell off my non-existent start-up for millions, or win the lottery, or obtained a sudden inheritance from a random relative like they do in those classic English novels.
No, it was much more boring than that, involving mostly common sense and lots of cultivated habits. But for me, boring is good.
Boring means anyone can do it.
Now, in case the older Gen X bosses and heads of departments are freaking out, let me clarify that I am not advocating for my peers to all drop out from the workforce. Your work is a large part of who you are and is a gateway for you to contribute meaningfully to society, so it is not something to be shunned or trivialised. The world needs people to make the trains run and to do surgeries and to bake delicious cakes. The world needs YOU, so this is not a call to stop working. (This is why I call it my 'mini-retirement' - I fully expect to be part of the workforce again every now and then).
What I am advocating is having the freedom to do the work you want to do, and to stop treating your work as just a means to pay the bills (because that too would be a sad waste of your potential). The point is not necessarily to retire per se, but to be financially secure, enough that you can choose to stop and do something else, or still continue to work because you want to, and not because you have to.
How? By giving yourself a huge security blanket in the form of a financial safety-net.
In fact, whether you want to work or not is irrelevant. Everybody, in my opinion, should strive for financial independence, even if you never want to retire and fully intend to work till your last, gasping breath.
Being able to fend for yourself without being dependent on a paycheque can only be a good thing, believe me, and it does not in any way prevent you from continuing to bust your butt up the career ladder, if that's what you want.
These guys kept working.
The thing with talking about money is that it is typically a taboo subject. Nobody wants to discuss how much money they have (or don’t have) or how much they’re earning (or not earning), because that’s just really awkward.
The topic also triggers all sorts of emotions, both positive and negative, depending on your beliefs regarding money:
“Money is evil!”
“Money is everything!”
“The rich get richer and the poor get poorer!”
"It's not about the money, money money. We don't need your money, money, money..." etc.
It all depends on your experiences with money - whether you grew up with money or without money, how well your parents handled their finances, what attitudes they passed down to you, whether your friends were poorer or richer than you and how that affected you, and so on.
To make matters worse, very few of us receive adequate education on how to handle our money. We spend years learning calculus and engineering, and we can solve mathematical equations or design bridges with our eyes closed, yet we don't even know the difference between a checking and a savings account. Therefore, whatever misguided notions about money we developed in childhood, we continue to hold well into adulthood.
My Money Experiences
In my case, I grew up in a middle class family. Though we had our share of lean periods when things went bad and money wasn't enough, we never starved. My father was the disciplinarian who made us earn our pocket money (one white hair plucked from his greying head would net us a grand ten cents - pluck ten and that's one buck!) (this was back when one buck was still a big deal and could still get you a bunch of candy). He also instituted an allowance system of $15 a week - if you ran out of money before the week ended, well, sucks to be you. From him, I learned the value and importance of earning your keep, and the effort it takes to do so. My mother, on the other hand, was more carefree about these things, so we'd always run to her for extra money behind our father's back.
Other than that, money matters, especially serious ones, were never discussed within the family. Up till then, I had only encountered cash - I knew nothing about loans, mortgages, or credit cards, and was unaware that the house we lived in was paid for by the bank, or that credit card debt was a thing that existed. I thought my parents paid for our shelter the same way they paid for pizza - with cash (not sure why... did I seriously think pizza and houses fell within the same price range??).
I remained ignorant until I left home to study abroad on my own. By then, I was receiving a scholarship stipend and a steady paycheque from my part-time jobs, and for the first time in my teenage life, I had complete freedom! Yaaaasss! The money was mine, I earned it myself, so I had every right to do whatever I wanted! Yaaaasss!
I quickly discovered that I was absolutely terrible at managing my money. Twice, I ran out of cash and had to sheepishly resort back to my parents, which really hurt my 18-year-old pride at the time. How could I be a legal adult, also an income-earning adult, and still rely on my parents for money???
To recover my dignity, I quickly enrolled in a basic personal finance class that happened to be offered by the university, and that was the start of my education on how to not screw myself up financially. And luckily for me, I got educated just early enough before the credit card companies and banks descended on clueless, gullible college students like me, with their irresistible "low interest", "no-brainer", "practically free" money and plastic cards.
Your story will be different - take the time to reflect on your historical relationship with money. If you haven’t been paying much attention to your finances, or you’re not accustomed to discussing money, this may be a little uncomfortable for you, but the benefit will be immense. After all, money issues are often the main causes of stress, arguments and divorce, so it is definitely worth your time and effort to get this right.
Some questions to ask yourself:
1) What did your parents or guardians teach you about money?
2) As a kid, how did you interact with money? Was there a system (like the one my father instituted), or was it ad-hoc (like my asking my mom for money whenever)?
3) Was your experience with money mostly positive, or mostly negative? Why?
4) How did popular culture influence your views about money? (rap music videos and reality TV shows definitely have a lot of funky messages about money...)
5) Were money issues openly discussed in your family? Why, or why not?
The Fundamental Five
A lot of people are more interested in ‘tactics’ (what stocks do I buy? which bank offers the best rates? …etc), and are eager to find out what do ("how did you automate your savings? what kind of excel sheets do you use? did you invest in the Chinese market, and if yes, how much?"). However, that's like skipping straight to the last chapter of a book - you've missed several key plot twists, and even though you know the ending, you don't really get it.
So instead of telling you what I did, let me first tell you about what I learned that changed my beliefs about money, and set the stage for all the things that I ended up doing to get me where I am today. Like it or not, it is the underlying, often invisible, beliefs you have about money that are holding you back. Not your parents, not your stingy boss, not your stingier company, and not your broke government (even though we all like to think so). It's all you.
When you don't get your fundamentals right.
I've put together five of what I think are super important things to understand about money. These will set you up with the right mindset and the right motivation to put your finances in order. They are:
I’ll be going through each one of the above in this series, so look out for them in the next few months!
Next, I'll talk about why the amount you save matters more than the amount you earn.
[To be updated when the next one in the series appears, subscribe in the box below]
A quick note: if you're expecting some get-rich-quick method that will help you retire next year, I'm afraid you're going to be sorely disappointed. You can stop reading the series right here. Earning your financial independence takes time and effort - it is a long-term game, but a worthwhile one. If there is indeed a magical, instant secret to this, then I'm the wrong person to ask, because I don't know it.
Another quick note: Some of you may misunderstand this as an obscene call to obsess about money. "Jeez, money isn't everything, you know! There are more important things like love, faith, friendship, yadda, yadda, yadda...." Let me clarify that I am not in any way saying money is the ultimate goal. However, some things make up the support systems that determine the quality of your life (for example: good relationships, worthwhile goals, continuous learning... and enough money). Get these things right, and your life will more or less be trouble-free. Get them wrong, and things go downhill really quickly. So I'm not saying let's all make money and get sublimely rich. All I'm saying is: let's learn to manage what little (or tonnes of) money you have and do it well.