My Financial Strategy 💰
My current [honest] strategy in a sentence would be “treading water and crossing my fingers that I live until retirement…” which is objectively terrible.
I want to be rich.
If I put on my nerd hat I might say I want to “remove money as a limiting constraint” so when I spend money I don’t have to think about it 🤓.
Yeah…so that’s not revolutionary. Everyone wants to be rich. What am I going to do differently?
Let me start by establishing what I think it means to be rich. A year ago I’d have said, “to be rich is to have a lot of money.” I’ve been thinking about this for some time and now I’d define it in a couple ways…
- High net worth (i.e. to have a lot of money)
- High cash flow
- Income growth
- Loss prevention
It’s worth mentioning that then there are some factors I won’t compromise on, I’ll call them my “uncompromisables.”
- Uncompromisable #1 – Everything must be ethical.
- Uncompromisable #2 – My time in my days is valuable. I will not give up my life to the pursuit of money.
- Uncompromisable #3 – The plan has to be practical within my lifetime. I’m not going to live 200 years, so it can’t take 200 years to get rich.
Blah, blah, blah. Okay, now that we have that established, how am I going to make it happen? What’s my strategy.
Let me start by cluing you into my current “strategy” and how it’s going.
My Current “Strategy“
… is 5 pronged:
- Hold a day job
- Save money
- Spend less
- Try to get raises at work
- Put money into my 401k
I look at this and as a rational human I know within a few minutes (if that) that it’s not going to get me to my dreams. It’s perfectly adequate for keeping me right where I’m at in the socio-economic hierarchy, but that’s about it.
The two most glaring weaknesses are
- There’s no potential for significant upside until retirement and
- It is single point of failure. If I lose my day job, there’s no hedge except to pull from my savings.
🚨 Why didn’t set off any alarm bells before now??? 🚨
I feel like I’m always hearing:
- Put as much money as you can into a retirement account (something, something about roth v pre-tax).
- Don’t do a taxable account until you’ve maxed out your retirement account. There’s no way you could possibly succeed in the short term. Those algorithmic traders on Wall Street are so much smarter than you.
- Holding a job and bringing home the bacon is admirable and that’s enough.
Speaking as someone who’s 10 years into the “real world” I’ll re-iterate, that the above is perfectly acceptable… but it hasn’t gotten me anywhere. It won’t move me forward towards my dreams (at least not before I’m 59 1/2).
Speaking as someone who’s 10 years into the “real world” I’ll re-iterate, that the above is perfectly acceptable… but it hasn’t gotten me anywhere. It won’t move me forward towards my dreams (at least not before I’m 59 1/2).
What am I Going to do About it?
So now I’m using both hemispheres, left and right brain. What are the variables I can manipulate to get myself where I want to be? By my estimation that are 4 categories (keep in mind I’m writing this with an engineering degree, not an MBA):
- Saving
- Spending
- Income
- Investing
With those 4 in mind, what can I do to manipulate them in the long term and the short term?
I spend more time fretting over categorizing my purchases in YNAB than I do thinking about how I’m going to prepare for my financial future. Not good.
Detailing my Current Strategy
My current strategy in a sentence would be “treading water and crossing my fingers that I live until retirement.” My current strategy in a matrix would be…
| x | Investing | Saving | Spending | Income |
| Short Term | none | savings account | ad-hoc | day job |
| Long Term | 401k | 401k | more than today | day job, 401k |
I’m embarrassed. I’m embarrassed that I didn’t do this deep dive earlier and I’m embarrassed that I made a mistake in the first place.
*sigh*
Okay, so what am I going to do about it?
In short, I’m going to…
- Fill the gaps (i.e. increase upside)
- Diversify my strategy so less of my long term success depends on my 401k (i.e. hedge)
- Keep on doing what I’m doing right
Let’s tear it down and start over.
Revised Strategy
Here’s my revised strategy in a matrix…
| x | Investing | Saving | Spending | Income |
| Short Term | taxable investment account | savings buffer | ad-hoc | – day job – taxable investment account – skill creation – content creation |
| Long Term | – 401k – taxable account | – 401k – taxable account | more than today | – day job – 401k – taxable investment account |
Let me elaborate…Here’s a detailed comparison between my previous & revised strategies.
| Category | Term | Prev. Strategy | Rev. Strategy | Comment |
| Investing | short | none | – taxable account | Major gap in prev. strategy. Been afraid to try because it’s not the “right” strategy. I’m determined to try and to learn from trying. I’m betting that that will pay off in more ways than one. |
| Investing | long | – 401k | – 401k – taxable account | Adding additional point of failure. Both depend on stock market, so I’m open to adapting this in the future to further diversify. |
| Saving | short | – savings account | – saving buffer | Invest of maximizing savings, saving enough to be a buffer. “Enough” for me is 1 month’s expenses, but may be different for you. Reducing to just a buffer to limit losses due to inflation. |
| Saving | long | – 401k | – 401k – taxable account | In the long term investing and savings strategy converge. |
| Spending | short | ad-hoc | ad-hoc | Continue managing day to day expenditures using YNAB. Spend less than I take home. |
| Spending | long | more than today | more than today | No plan here except that I expect spending to increase in the future due to inflation and lifestyle inflation. |
| Income | short | day job | – day job – taxable investment account – skill creation – content creation | Adding investing element to short term income. Incorporating skill creation into day to day to increase chance for new income streams in the future. Documenting the process along the way. |
| Income | long | – day job – 401k | – day job – 401k – taxable investment account | Take advantage of compounding interest. Benefit from short term efforts towards additional income streams. |
Revisiting my Strategy
This revised strategy reflects what I think the roadmap to riches looks like. This is a topic that could be 10,000 words, but I’ve done my best to whittle it down to fewer than 1,500.
I’m no Warren Buffett, so I expect there’s something in here I’ll need to change. However, I don’t want my strategy changing every month. So, I intend to stick with this strategy unless I have significant reason to change whether that’s reflecting on it in 3 years or uncovering some confounding limiting belief. Look for me to report on results in the future.
Closing thoughts
Where does this get me?
I still need to sort out the particular tactics for each prong of my strategy, but this exercise alone gets me closer to my dream in 3 major ways
- It increases potential for upside
- It minimizes potential for downside and
- It is the first step in helping me take my pie in the sky dream and pull it into my reality. Looking at what I’ve cobbled together above, I already feel like I’m in more control of my future.
What do you think?
What would you do different? Did you find this helpful? Leave a comment. Let me know what you think 🔰 !
This is part of my Drawing My Dream Map series. For more, follow along here as I work towards my dreams publicly and in real-time.
Personal Priority: Finance
This website (the “Blog”) is created and authored by Michael Columbus and is published and provided for informational and entertainment purposes only. Nothing on this Blog constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. You should not use this Blog to make financial decisions and I highly recommended you seek professional advice from someone who is authorized to provide investment advice.