The Six Best Personal Finance Lessons From A Guy Who Still Drives a Beat-Up 2008 Toyota Yaris
My tin shed on four wheels symbolizes my entire financial strategy…
Author’s own image — Can you feel my happiness?
A car is paid for with your time. Why trade time for a bunch of metal that’ll drop in value faster than a boat anchor does into the sea?
I feel happy every time my 14-year-old car squeaks when I turn on the engine.
I paid $4,000 in 2018 for this hunk of mental and the blaring sound of my misfiring timing belt (which I will get fixed) is a daily reminder of the bulletproof financial strategy I’ve built.
While most people my age are over-leveraging themselves for big houses they can’t afford (or need) and buying brand new cars to impress people they don’t like, I’ve made myself look poor now to create a rich financial future later.
Here’s why.
Accumulating Assets > Accumulating Liabilities.
My tin shed on four wheels symbolizes my entire financial strategy:
Invest in assets (and) reduce my liabilities.
For my net worth, I can easily afford a better car. But I choose to use any extra cash to invest in assets rather than another liability with cruise control.
Why accumulate assets? Well, because:
Assets put money in my pocket. Liabilities take money out of my pocket.
Assets appreciate over time. Liabilities depreciate over time.
Assets make your life easier. Liabilities make your life harder.
Common examples of assets:
Shares, bonds, index funds
Cryptocurrencies such as Bitcoin or Ethereum
Rental investments
Investing in online courses, books, podcasts, coaching
Common examples of liabilities:
The car you drive
The house you live in
Most material possessions
Source: Accent Investing via Twitter
My dedication to accumulating assets means I’ll never have to worry about my retirement. My boring and lazy strategy also means work will become optional before I turn 50.
The psychological freedom that this financial security provides means I can take more risks in my 20s and 30s.
I’ve started my own six-figure consulting business, hired a subcontractor to help build a digital business and I plan to create a suite of digital assets in the near future (more on this below).
Lesson 1: Spend your life accumulating assets and time is your friend. Spend your life accumulating liabilities and time is your enemy. Like my grandmother use to say, make more friends and fewer enemies.
Photo by Ishan @seefromthesky on Unsplash
Most people don’t understand how to make Wifi money
There is an uncommon asset class that most people don’t leverage: digital businesses and assets.
These include creating e-books, podcasts, templates, checklists, newsletters, and social media accounts you can sell on the internet.
As Naval Ravikant said:
“Code and media are permissionless leverage. They’re the leverage behind the newly rich. You can create software and media that works for you while you sleep.”
Digital assets are great because they:
Are permissionless to acquire. You can leverage the internet to build a portfolio of digital assets. There are no gatekeepers and few barriers to entry.
Come with a limited downside (i.e only time) but unlimited upside (i.e virality). You can’t sell negative e-books or get less than 0 listeners on your podcast. But it only takes one piece of content to go viral to change your life.
Invisible and transportable. Digital assets can be created anonymously and sold while you are sitting on the beach. They are a low-cost, no-inventory, that doesn’t require you to be there in person.
Limitless leverage and infinite monetization. Digital assets can be created once and reproduced a trillion times for $0. Create once, cut many times. One blog post can be a script for a YouTube video, or a Twitter thread, or compiled into an e-book.
Naval Ravikant via Twitter
With digital assets, there is no guarantee you’ll make any money. But there is also no limit to how much money you could make.
Don’t think you can do it? Well…
If you write emails, create PowerPoint presentations or record Zoom meetings in your 9–5 job, you are a creator of digital assets. Congrats.
Now instead of making them for your employer, start making them for yourself.
Lesson 2: If you’re not leveraging the internet to build a portfolio of digital assets (to trade in for financial assets), you’re living in the stone age.
Use your money to maximize this value, not your ego.
Instant gratification is cancer to your personal finances.
Left unchecked, it will grow to infect every part of your life. Not just your bank account. Until you learn the skills to delay satisfying your ego, you’ll never build wealth.
I might drive a sh*t car, but it gives me financial options. Since I have no car repayments, I can use the extra money to start an online business or invest in assets.
Morgan Housel said it best in his book “The Psychology of Money”:
Wealth is created by suppressing what you could buy today in order to have more stuff and more options in the future.
Photo by Morgan Housel on Unsplash
Most people my age who are driving nice cars have become a slave to their debts. Or if the repayments are manageable, they are constantly worried about where they have parked their car or if it will get damaged or stolen.
I value my psychological freedom too much to be worried about an expensive tin can on four wheels.
Remember that:
“Every purchase you make today reduces your options in the future.”
Lesson 3: Use your money to buy your freedom, not stroke your ego.
Be a reasonable Randy, not a rational Robot.
Being in my late 20s, I can afford to invest in riskier products. But the thought of my investments peaking and dropping overnight would give me night terrors.
I choose to invest in overly safe Vanguard Index Funds for the long term. I rarely check the performance and dollar cost average into selected indexes despite what the world is doing.
Rationally, this doesn’t make any sense. I should be investing in riskier asset classes. I have time to recover if it doesn’t go well. But I don’t want to be 100% rational all the time when it comes to my finances.
At the end of the day, I built my personal finance strategy to support the lifestyle I want, not the other way around.
Rational? Probably not.
Reasonable? Definitely.
Lesson 4: Create your investment strategy to enhance your life, not destroy it. The best financial strategy is the one that allows you to sleep at night.
Focus on making more money, not cutting expenses.
One year, I decided to drastically reduce my expenses.
I had about $25,000 a year of living expenses and through a lot of effort and sacrifice, I found a way to cut 10%. I stopped buying coffee and reduced how much I ate out. I saved about $2,500 that year. Not bad.
In 2021, I decided to focus on making more money by monetizing a podcast and diving head first into writing online. I increased my $105,000 income to $140,000. I made $35,000 more last year.
This simple mindset shift taught me that cutting back on my $5 latte or smashed avocado on the weekend is not going to make me rich.
But making more money will. Plus the quality of my lifestyle won’t be impacted.
Lesson 5: Cutting your expenses rapidly hits diminishing returns. Manage your expenses. But spend most of your time and energy making more money.
Money is attracted to ownership.
“You’re not going to get rich renting out your time. You must own equity — a piece of a business — to gain your financial freedom” — Naval Ravikant
When I was an employee in my 9–5, I would have to beg, borrow and steal for a 10% annual raise. And once I got it, I was made to feel like they were doing me a massive favor.
“Job = Just Over Broke” — Robert Kiyosaki
My workload doubled and I had way more responsibilities. When you factored this in, I was losing money.
In 2022, a 10% raise barely covers the rise of inflation and interest rates.
Now that I own my own business, I increased my client rate by 15% and gave myself a 20% raise this quarter.
If your financial trajectory can be dictated by an organization or a bad boss, you’ll never be financially free.
Lesson 6: Wealth is built through ownership, not rent. Become a magnet for money through building equity and ownership in a business.
In conclusion
Don’t let anyone tell you that money isn’t important. Because it is.
But don’t let money dictate your life either.
As Robert Kiyosaki says, “the love of money is the root of all evil. The lack of money is the root of all evil.”
Most people fail to build wealth because they don’t understand the rules of the game. Imagine trying to play basketball without knowing what a double dribble is.
Once you know the rules of the game, you have better odds of winning. And once you won the game, you can choose to stop playing.
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