“Study hard to get good grades, to get into the best college, to land a high-paying job where you will have the job security to work past your 50s.”
I know I am not the only one who heard this over and over … and over growing up. Despite my rebellious teenage years, I know it was well-intentioned. My parents were both immigrants who have lived and worked extremely hard through multiple economic crises and had seen the value of a prestigious college education / stable profession in many of their peers.
That being said, a kid is like an arrow and giving them that advice is like aiming them in the wrong direction. This is not a critique of parenting…I can’t imagine how difficult it is to be a parent, and as far as I am concerned, as long as you don’t raise a serial killer, you have probably done an A+ job.
That being said, that style of thinking makes kids very risk averse from a young age, pushes them into a limited group of professions (Doctors, Engineers, Corporate lawyers) that may not align with their strong suits, and prioritizes things like job stability and W-2 income over strategic risk taking and investing.
The point of this post is to help you think more intentionally about what you are doing and more importantly why you are doing it as you go through your career.
What are you optimizing for?
One question we don’t ask ourselves enough early in our careers / lives is “why.”
Too many decisions we make are dictated by what everyone else is doing. As anyone interested in investing should know, making decisions based on what others are doing can be dangerous. That is not to say you can’t do what others are doing, just that you need your own reason for doing it.
Since college, I have focused on answering the question: “What am I optimizing for.”
Is it some measure of “success” (career advancement, wealth, etc.), work hours / flexibility, impact, or something else?
These are not mutually exclusive, and you do not only need to pick one, but you can only prioritize so many things. My advice is to look out into the future and prioritize a list for yourself.
My top two work criteria are currently:
- Ownership / Impact: I want to create something that makes a difference because I have found immense personal satisfaction from the process in the past and know that will give me the most staying power in the working world
- Work flexibility: At some point in my career I know that ‘life things’ are going to start to take more of a priority, so I want to have ownership / control over when I am working
Once you have this list, it becomes A LOT easier to make decisions and answer your ‘why’.
A perfect example is graduate school. I frequently hear people say they want to go to grad school – but don’t know what they want to go to grad school for. I don’t really understand this dilemma. Randomly going to grad school feels like a waste of time to me and probably doesn’t align with your ‘why’ all that much.
If instead, you pull back to what you are optimizing for, you can better understand whether or not a particular graduate education is the right decision, or if the time/money could be better spent in another way.
And while your priorities may change over the years, I have found that putting a stake in the ground and racing towards it (even if you have to change course several times) is a better strategy than crawling slowly out of fear of not knowing the destination.
I have embraced that my career is going to be non-linear. Heck, half the reason I entered the business world is that I wanted to develop a flexible set of skills that would let me pave my own path. Trying a variety of different things over the course of your life has many benefits:
- You will never be bored (this might be the most important)
- You will have a unique set of experiences that give you a differentiated set of skills from your peers
- You will learn more…faster. I am a firm believer in the Pareto principle. 20% of the effort yields 80% of the results. To ensure you are making the most of your time, you want to maximize the time you spend on the most efficient part of that spectrum vs. spending significant amounts of time on incremental advancement
Being intentional about what you are doing and why is step 1 for me in escaping the work forever to survive mentality. Having your focus on your ‘why’ will ensure you are taking the most impactful steps to achieve your goals.
Escaping the Rat Race
Getting out of the work forever for survival mentality is step 1 in this process.
Step 2 is understanding what it really takes to sustain your lifestyle, and figure out how you can step outside the ‘time-income curve’ to achieve that. Passive income, risk taking, and side hustles are all valuable components of that process.
One of my favorite books on this (where I first understood the term ‘Rat Race’ in this context) is Rich Dad, Poor Dad by Robert Kiyosaki.
I have read this book a couple of times over the years and highly recommend it if you haven’t. The core concept is something you’ll see across personal finance books – invest in income-producing assets to generate investment returns greater than your expenses, but the way the message is told is great.
My takeaways:
- Prioritize cash flow (related post): A big income and a stash of savings are not sufficient for creating and sustaining long-term wealth. You need to buy income-generating assets that will eventually give you a passive income larger than your expenses in order to create sustainable financial independence
- There is a difference between buying assets & liabilities: Many of us continue to purchase liabilities (things that require money from you) and don’t purchase enough income-generating assets (things that will give you money)
- Liabilities: We buy a house to live in (while this can be an asset, it produces no income and the associated property taxes/maintenance are a liability), we buy things that generate credit card debt, we buy cars, etc.
- Assets: We need to be saving and purchasing stocks, bonds, rental properties, etc. And we should focus our investing on the things that we know or that we learn (through classes/books)
- The strategy to generating lasting wealth is to own ‘businesses’, not just work for them
- Our educational system needs to teach financial education: One of the compounding factors to the wealth gap is our woefully insufficient educational system when it comes to the subject of financial literacy. As a result, financial education gets taught in the home, where the advice of parents in different socio-economic classes varies greatly. This book distinguishes between ‘educated’ and ‘wealthy’ in a very interesting way.
- Parental advice has a major impact: This book distinguishes the advice that a highly ‘educated’ parent will give and what a ‘wealthy’ parent might give (obviously not mutually exclusive categories). An educated parent will tell you as a kid you should study hard, get good grades, get into a good college, and land a stable, low-risk job. A wealthy parent may instead give the advice that you should manage the risks you take, own businesses, and invest in income-generating assets early. Obviously being wealthy does not make you predisposed to giving good advice or having the advice to give, but it’s an interesting metaphor for differences in how parents teach their kids about what it takes to succeed
I hope this convinced you to ask yourself ‘why’ more often and I would love to hear what it is you are ‘optimizing’ for.
RWM
