Hello Dear Friend,
Welcome to the Sunday edition of the Things I Wish I Knew Earlier (TIWIKE) Newsletter!
Wishing you and your family a very Merry Christmas in this coming week!
Here are three ideas on wisdom, education & financial freedom for you to ponder over the holidays.
TIWIKE #1: Wisdom is knowing the long-term consequences of your actions and making the right decision to capitalize on this knowledge
Do you remember that early-2000s movie, The Butterfly Effect?
Watching it as a teenager blew my mind. The story follows Evan Treborn, a young man who discovers he has the ability to travel back in time and alter events in his past by reading from his childhood journals. Sounds like a pretty cool skill, right?
It turns out to be disastrous.
Evan goes back in time, makes small changes to solve problems that seem important to him at the time, and the world has changed in massive ways he didn’t foresee when he returns.
The lesson of the movie is that it is far harder to know the downstream results of your decisions than is commonly believed. Everything is connected in non-obvious ways, and we humans are a critical part of everything. So our actions are, directly or indirectly, connected to literally everything else.
This is why we pray for wisdom above all else.
Wisdom is knowing the long-term consequences of your actions and making the right decisions to capitalize on this knowledge.
The deeper you understand the consequences of your choices, the more you can foresee the chain of events that each decision sets in motion, the better you are at aligning the future you want to live in with the actions you take today.
That is the power of wisdom.
TIWIKE #2: “Education is not a subject and does not deal in subjects. It is instead a transfer of a way of life.”-GK Chesterton
How much more seriously would we take our education if we stopped calling it an “education” and started calling it a “transfer of a way of life?”
What if we renamed the Department of Education and instead called it the Department of the Transference of a Way of Life? When we send our kids off to daycare, and later primary school, we are sending them to other people to be taught how to live. Yet how often do we admire the lifestyles of those people?
Mr. Chesterton gives us an insight here on how to gain more wisdom.
If education is a transfer of a way of life, then self-education is the proactive search for a better way of life.
Without this intellectual adventure, you are left to hope that the way of life you were handed by parents and teachers growing up is the best one for you. But if you accept the call toward wisdom, then you can learn from people whose way of life you admire by reading their books, watching their videos, and following them online.
Here’s a framework for devising a plan to educate yourself:
- Decide what sort of way of life you would love to live
- Identify a few people who currently live that way
- If you know them, take them to lunch and ask about all the ways they educated themselves earlier in their lives
- If you don’t know them, maybe you can read their books, watch their videos, or follow them online
- Immerse yourself in learning the details behind how they get to live the way they do
- Begin implementing what you learn in your own life
In this way, you can educate yourself and thereby intentionally transfer the way of life you want to live out of educational resources and into your everyday life.
TIWIKE #3: Financial freedom is when the money generated from the assets you own exceeds the monthly expense required to fund your ideal life style
True financial freedom is the ability to live your ideal lifestyle without working to earn money.
The only way that is possible is if the money generated from the assets you own exceeds the monthly expenses required to fund your ideal lifestyle. This is a concept that is almost absurd to normal people, yet new members of this elite financial class emerge every day. The only way to earn this way of life is by investing money into assets that generate a rate of return.
But how can you invest money you don’t have?
Exactly!
The first step toward financial freedom is figuring out how to earn far more money than you need to live—not your ideal lifestyle but your current acceptable lifestyle. It has always baffled me to see so many classes and educational information on how to invest with so few resources teaching people how to make more money in the first place. I’m a fan of Dave Ramsey and others imploring people to save more money by cutting expenses.
This is the only way to get ahead if you are unwilling to learn new ways of earning more money.
But you can’t save your way to a $1,000,000 net worth on a $75,000/year salary.
Consider the math. Presume it costs you $40,000/year to live your currently acceptable lifestyle (in today’s economy, is that even possible?). Let’s say your after-tax, bring-home pay is $50,000. That gives you $10,000/year in excess income for you to save. At that rate, it’ll take you 100 years.
What if instead you invested the additional $10,000 into books, courses, and educational events to learn new skills?
Let’s say you did this for three years and invested $30,000 to learn a skillset that justifies a $500,000 annual income.
If you are disciplined enough to retain your $40,000 currently acceptable lifestyle and presume a 30% tax rate, then you would be able to save $310,000 each year ($350,000–$40,000). This means even if you don’t invest this money at all and instead just save the cash, you could reach a $1,000,000 net worth in a little over three years. With this approach, you could reach your net worth goal in only six years, a full 94 years faster.
That is the power of investing in self-education.
To achieve true financial freedom, invest time, energy, and attention into self-education to earn more and more wisdom.
The pursuit of wisdom through self-education is the shortest pathway to financial freedom.