Hey Ho!

Hope you all are safe and well! Welcome to yet another 5-year theme-based post.


Introduction

Recently, I realized that it’s been five years since I started walking the road of Financial Independence (FI). Earlier, I wrote a blog post on the numbers: how my portfolio is faring and where I am at in relation to my FI goal.

Continuing that theme, in this post, I would like to share the top 5 lessons I learned during the last 5 years. These are personal lessons that I learned from my mistakes and the mistakes that I see my closed ones do. Let’s get right into it!


Lesson 1: Don’t be an Occamy πŸ‰

Occamy.
Occamy == Lifestyle. Space you give the monster == What you can afford.

Occamy is a mystical creature in the Harry Potter universe. This is a creature that can shrink or grow to fit any available space. You force that into a teapot, its going to fit in pot. You let it loose in a room, its going to cover the entire room.

Our lifestyle is like an untamed Occamy. Sadly, it seems that, rather than taming it, the Occamy is always allowed to expand to what we can afford.

When we are student, our lifestyle is constrained by what we can afford then. But when we are employed and start making money, we kinda let the lifestyle-occamy-creature loose. For instance,

  • 1-time-eating-out/week becomes 4-time-eating-out/week.
  • 2-pair-of-nice-shoes becomes 7-pair-of-nice- shoes.
  • (other examples that is personally relevant for you).

But, we are not any more happier than when we were students. So obviously letting the creature loose is not very helpful. The best thing to do is rein in the creature and have that inside your control.

I am not saying live like a stingy scrooge, but live like a happy student. Find out whats the Occaminess in your life. My occamy pets have been : Sports Equipment and Tech Gadgets. I am already reining them in.

Rein your Occamy in Folks!


Lesson 2: Don’t confuse speculation with investment πŸ€”

Probably, the biggest mistake I see my friends do. They often conflate speculation with investment. I already talked about this with backing numbers here and here. They will say things like :

  • I will buy low and sell high.
  • I will pick individual stocks.
  • I will try this new fad fancy investment trend that came up.

Unless you are doing these things full time, you are not investing for the future. You are speculating at the present.

I can almost say with certainty that 99% of the readers of this blog are defensive investors. The course of action for defensive investors is simple. When you speculate, you risk yourself putting yourself in the hybrid zone and have sub-standard performance.

Defenvsive vs Enterprising.
My interpretation of Graham’s word (famed investor and Warren Buffet’s Guru). For more details on why I drew this, read this.

Maybe, you still want to speculate. Because you like the intellectual thrill it gives you. Then I recommend allocating a percentage in your monthly-cap. Say 10% or 20%, you are free to speculate with that.

Invest the rest for the future!


Lesson 3: Walk your own road of FI πŸšΆβ€β™€οΈ πŸšΆβ€β™‚οΈ

One that I personally struggled to reconcile for a while. But I am over it now.

Like everything else in life, everybody has their own race to run. Their own road to walk. Your road is unique, strange with its own bumps and hurdles, and fun pit-stops. But we can lose track of this and find ourselves constantly comparing with others on “far” they have walked. Their distance has no real meaning in your own world.

UTMB adds to international race lineup with Thailand ultramarathon -  Canadian Running Magazine
We all have our own races to run.

In context of FI, here is one example of how fell into this trap. Being the logical and numbers-driven nut I am, I would find the average salaries of all my peers (friends from abroad/ friends from here/colleagues), and compare that to mine in absolute numbers. I would find that I fall somewhere in 45th percentile, i.e if I have 100 friends then 55 would be making more money than me. This would drive the younger version of me crazy.

Why can’t I be making as much? Did I undersell myself? Did I take take the right turns in my life? Should I have taken that high-paying job instead?

But, looking at back I realize how foolish this thinking is. Foolish on looking that one metric. I have walked and am walking on my own mountains. And to be honest, reflecting back, I would not trade my own mountains for anything else. Its been a fun ride. Nowadays, I set up own goals that is personally relevant and relentlessly focus only on that.

And, also I have started looking at others, instead of comparing, I try to get inspired. To see how they are pushing themselves in their run and use that as a source of motivation. I don’t compare their race to mine.

And I also try to share my run, help and hopefully inspire others in my own teeny little way (this blog for example).

Run your own race!


Lesson 4: Remove you πŸ‘ˆ from investing

I struggled with this. I am over it. But I still see some of my closed ones struggling with this. It ties with the Point-2 discussed above. But slightly different. Defensive investing, in my opinion, should be like brushing your teeth in morning. Hear me out.

Brushing is equivalent to Defensive investing.
Defensive investing ideally should be like brushing your teeth.

Every morning, you don’t stop to think

  • whether you are going to brush today or not?
  • what brand of toothpaste or toothbrush to use?
  • when will you brush?

Essentially, you have removed yourself from the “brushing-teeth” decision. You are not decision fatigued. You have created a habit and you do it! This gives your the freedom ponder about other important things in your life.

Replicate this for investing. Avoid the investing decision fatigue. Trust me when I tell you investing is as easy as brushing a teeth. Probably even easier. If you can open a regular bank account, you can open an investment account and get this entire thing set up. Then pick an investment habit and stick with it! Let it run on auto-pilot. If interested, I talk about how to practically do this here and here.

Habits do not restrict freedom. They create it.

James CLEAR – ATOMIC HABITS

Lesson 5: FI and Investment are means to an end πŸ›‘ . And not the end πŸ›‘ βœ‹ in itself.

One that I struggled with. And still have to periodically remind myself. Its good to have a north-star on your life on why you are doing things and not get lost with this FI process.

Identify the north start metrics in your life.
Identify the north star metrics in your life.

Why I do this?

The reason I pursue the path of FI and investment, is not because I want to be rich or I want money. But, in my life, I want meaningful work and meaningful relationships.

  • And I want freedom to purse the work and hobbies that excite me. That get my heart pumping.
  • And I want freedom to be around people that I love. To create memories that I can cherish.

FI is an enabler for that freedom.

How I realigned?

When you focus too much on the path, its easy to forget why you are doing this in the first place. And you may get lost. That was the case for the first 3 years when I stared this journey. I was hell-bent on optimizing the FI path that I forgot my meaningful work part. I was miserable.

So, I took a 27% pay-cut. Flew to a new country. And picked a work that I like. I am way happier. I am walking the path slower but importantly I am walking where I want to.

Remember FI is means to an end. And not the end. Remember your north star!


Conclusion

  • Those are the five personal lessons that I learned.
  • What do you, the reader think? Do some of those resonate with you.
  • Maybe, you have your own lessons to share from your own journey. I would be very happy to hear and learn from them. Let me know them in the comment section.
  • Thanks for reading! And good luck folks.

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Until the next time, Ciao!


If you like this,

you might also enjoy these other series of related posts.

Five Lessons from Five years of FI

10 thoughts on “Five Lessons from Five years of FI

  • January 7, 2021 at 10:44
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    As always an enlightening read πŸ”₯ ! I took away a few key points that I need to realign in my journey as well

    Reply
    • January 7, 2021 at 12:47
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      Nandri nanba πŸ™! Yes we all need to look back and realign in our journeys once a while πŸ™‚

      Reply
  • January 8, 2021 at 03:07
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    Though all the points are equally valid, I got resonated with 1 and 3. Yes, we ought to run on our own track. The only person in this world with whom one is competing is one’s yesterday’s self. Thank you Aanda for yet another insightful read!

    Reply
    • January 8, 2021 at 11:02
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      Thanks for the comment Gattu. Yup, agreed 0.1% improvement everyday πŸ’ͺ!

      Reply
  • January 8, 2021 at 12:57
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    Very well written Adi! I personally found it insightful. Keep up the good work.😊

    Reply
    • January 8, 2021 at 13:28
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      Thanks nami πŸ™‚

      Reply
  • January 8, 2021 at 13:17
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    Everyone should read this and realign themselves to their goals. Freedom is more important than money but money is a tool to get Freedom. Good stuff bro πŸ˜„

    Reply
    • January 8, 2021 at 13:30
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      Yup, agreed. You need to find the balance with money and remember that it is a tool.

      Reply
  • January 12, 2021 at 15:33
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    Bro! I am quite surprised. You echoed my thoughts! Nicely put, I might have influenced having read your blogs from day1.

    Some of them, I speculate only for thrill as I have been doing research in computer engineering, I always wanted to see how much research is seeing the light and it is indeed 20 to 30% of my portfolio.

    My FI portfolio, I hardly check it unlike my friends who check their investment account every 5 minutes.

    I can’t believe how strong I resonate the value of freedom than money. Can’t put a price on it.

    Thank you very much for constantly helping out with your thoughts.

    Reply
    • January 12, 2021 at 20:43
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      Thanks for the thoughtful comment Santi. Good to know about your split for speculation.

      Yup, it really does not help check the portfolio often.

      How is your portfolio going on? Are you heavily invested in Stocks or something else πŸ™‚ ? I have a feeling information about FI is much more readily available in USA compared to here in Europe. Also probably easier with the tax sheltered accounts. I am curious on how is your FI journey going πŸ™‚

      Reply

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