The Financial Me Part 1
The Financial Me Part 1
Welcome to my personal blog. I’ll admit, I wrestled with the idea of starting my own blog for almost a year. I love personal finance, but I was intimidated by the large number of PF bloggers who had written about almost every topic related to the subject. What more could I possibly contribute? But as I started to follow more and more bloggers, I realized that everyone is just trying to find their own way towards financial freedom; there is no right or wrong way and there are MANY paths to wealth. My path is unique; just like everyone else’s- and I want to share my journey.
Many personal finance blogs are centered around the FIRE concept. Financial Independence Retire Early. I aspire to the FI but not necessarily the RE, and here’s why- I’m fortunate that I have a career I enjoy. My job as a physician allows me to help others and is financially rewarding. It gives me professional fulfillment, identity, and daily structure. If my calendar is blank, I feel anxious and stressed out. I was off work for 2 weeks once and I couldn’t wait to jump back into work and feel productive. You might call me a workaholic but I think it’s more the feeling of being plugged into the world and contributing to society in a meaningful way. Sure, the day to day grind can be stressful and dealing with difficult people can sometimes make me lose faith in humanity. But overall, I feel like my work is a calling, and I feel privileged to do it. It would be nice to have FU money in the bank and to know I could check out anytime if I wanted, but for now, I plan to stick with my job for the foreseeable future.
I also believe in the abundance mentality. No penny pinching here. I don’t spend wastefully, but at the same time, I don’t keep a budget either. I used to be super frugal but I let lifestyle creep- well, creep up on me- I’m not particularly proud of this. Also, having kids tends to blow up a budget. But instead of spending time and energy cutting and saving, I use that same effort to expand my means. So you won’t find me writing much about frugality or budgeting. Other bloggers already cover that topic well.
At the same time, I subscribe to the scarcity mentality, but in a self created sense. Whenever I had a large amount of liquid cash on hand, I would feel rich, fat, and complacent. I’d actually look for things to buy- things that I clearly did not need. A new iphone? I deserve it. Bigger TV? I work hard so why not. Fancy dinner? Yes please. On the other hand, when money was tight, I would always think 2, 3, 4 times before spending any of it. And even then, I’d only spend on things that I absolutely needed. Rent? Yes. Soap and shampoo? Yes. Beer? Um yes, but only the cheaper kind. Being lean, mean, and hungry keeps me focused and prevents me from squandering my hard earned money. So now, any excess cash gets invested in relatively illiquid assets so I can’t touch it and thereby easily spend it. Again, creating an artificial sense of scarcity helps me keep my spending grounded.
To achieve my financials goals, I try to adopt a “millionaire” mindset. I believe 80% of success is psychological and only 20% is the actual mechanics. The concept of mindset cannot be overemphasized. If you believe, you can achieve.
These are just a few mindsets I embrace:
Set goals: To achieve success, you must have a goal. You can’t get there if you don’t know where you are going. And don’t just set easy goals. Really challenge yourself. Whatever net worth number you envision in your mind currently- double it, triple it, or even add another zero at the end. My personal financial goal is $20 million in net worth by the age of 65.
Learn: To be successful, you must be constantly learning and growing. Curiosity is a key attribute that drives self-learning. I try to consume as many financial books, blogs, articles, podcasts as I can get my hands on, and I try to learn at least two new things each day.
Take massive action: After educating yourself, you have to get up and take massive action. That means getting out of your comfort zone and placing yourself in the path of opportunity. No one ever got rich sitting on the couch watching Netflix. Once I learn enough about something, I just do it.
Here are my financial goals, broken up into stages.
Stage 1: The first million
Net worth $1 million
Stage 2: Financial Independence (FI)
Net worth $5 million
Stage 3: Semi-Retirement
Net worth $10 million
Stage 4: Ultimate goal by age 65: Full retirement
Net worth $20 million
The first $1 million was the hardest to make and took the longest time. This is money that I mostly earned and saved. This also includes investment gains. Almost all of it is in a retirement account. Now, I’m putting that million to work to earn passive income. Picture a million little soldier dollars going to work for me each and every day. As my net worth grows, more of it will progressively come from passive income and investment gains and less of it will come from actual work and savings. Currently I am somewhere between stage 1 and stage 2. Achieving stage 3 is realistic and highly probable. Getting to stage 4 is less likely and I give myself a 50/50 chance. I’ll need to take a bit more risk with my portfolio by allocating some funds to alternative investments like real estate. Based on current trajectory, I’ll probably end up somewhere between stage 3 and stage 4.
Why 20 million dollars? Of course I don’t need that much- I live on a fraction of that amount and will be financially independent and retired long before the goal is reached. I’m not trying to accumulate wealth just for the sake of accumulating wealth. Beyond a certain level of comfort, material things mean little to me. I believe the accumulation of material things just means more work taking care of stuff.
For wealthy people, accumulation ceases to be their primary driver. Instead, the wealthy try to maximize their own potential. For many physicians and other professionals, the schooling and training phase was a time of intense learning and explosive skill expansion. Upon obtaining certification and starting a job, the learning and growth process drops precipitously as the daily grind of work takes over. Ask yourself, after your professional career training, when was the last time you intensely trained to learn a new skill? For most people, the answer is never.
Money serves as a unit to measure growth. Wealthy people are continuously growing, learning, and improving, and net worth serves as an objective measurement, or proxy of that growth. Just like any Fortune 500 company measures growth and value through revenues and profits, an individual can also measure their own personal financial growth through net worth. When I was in residency, my number was $2 million. A few years into practice, that number became $5 million. Now, it is $20 million. My perspective and mindset had changed and grown over time. What I thought was possible before became much grander. Instead of holding a small bucket to accumulate wealth, I got myself a larger bucket. So when I say my ultimate net worth goal is $20 million by age 65, what I really mean is I hope to expand my knowledge and skill by that much in twenty years time. Perhaps at that time, I may need a larger bucket.
Until next time,
Invest In Life