I don’t know why. Maybe I was tired, maybe I was over-training, maybe the dog had eaten my homework. Whatever the
excuse reason, I was struggling to keep up with the group.
The thought that popped into my head was….I don’t feel I’m making progress. What if the training does not make me fitter? Maybe I should just stop now and have a good cry?
Fortunately The Escape Artist recognises these thoughts as the random babblings of my Inner Toddler. The advantage of being older than I was is that I have had these thoughts many times before and I know they are bullshit.
I’ve experienced them in many different situations…but particularly in relation to 1) fitness and 2) financial independence.
Let’s start with fitness. Here’s how I knew that those thoughts were wrong. If you do the work, you always get fitter. This is not my opinion, it is bio-chemistry. Bio-chemistry follows the Laws of the Universe…with equations and shit. You do not get to invent your own Laws of the Universe. Not even if you are one of those people that say they have a “slow metabolism” and “big bones”.
Now The Escape Artist loves you…whatever size you may be. But the laws of the universe really do not give a fuck about excuses. You may say that your weight is nothing to do with the Krispy Krap doughnuts and the Alabama Fried Kitten Nuggets that fell into your stomach by accident while you weren’t watching. But if you have been eating that shit, the universe is gonna find out about it and there will be consequences. On the positive side, if you eat right and exercise you will get as fit, slim and buff…that’s just the way it is.
We all know that but theoretical knowledge is never enough on its own. We humans aren’t wired that way. We need to see it and/ or live through it ourselves to really understand and internalise something. I have got fit before so I know what is involved. When I was at college there was nothing to do most of the time so I took up rowing. The training was a shock to the system, like an Army boot camp. For most of my first term, I walked around like a new born foal…with my wobbly legs threatening to give way at any point.
But inevitably, I found that when you start exercising a lot, some funny things happen. Your bones shrink and your metabolism speeds up…a lot. This was not just specific to me. After a year of training, all the other people in my crew had small bones and fast metabolisms as well. It turns out that the laws of the universe applied to them too.
Its the same with financial independence. Getting to FI takes less time than many people think: about 19 years with a 50% savings rate and only about 8 years with a 75% savings rate. But still long enough that there will be times when it feels like you are stuck and not making any progress.
The one thing I promise you is that if you actually do the stuff I talk about on this blog, you’re going to make progress. You start by making baby steps and you end up making enormous leaps and bounds of progress. But it won’t feel like that much of the time. This is partly because we often forget where we started and how much we have achieved. Its partly because progress is rarely smooth and linear: its more like 2 steps forward and one step back. Finally, it also feels like that because we often confuse inputs and outputs when measuring progress.
Here’s how to distinguish between the inputs and the outputs. The inputs are things like cutting spending, putting in effort at work, investing rather than hoarding cash, cutting investment fees etc. These inputs are the building blocks of progress.
The outputs are things like your net worth or income. These outputs are the visible signs of progress. You can’t directly control the outputs – they are affected by lots of things…like market movements and your bosses’ subjective opinion of you. The outputs exhibit volatility – they vary. Often for reasons we don’t really understand. The trick is to keep focusing on optimising your inputs when the outputs don’t seem to be going your way.
For example, in a bear market you will feel like you are getting further from your goal of FI. But this is just your emotions screwing with you. In fact, at lower prices you are getting more shares / units for your new savings every month. Behind the scenes, value is building in your portfolio. Its even more important at times like that not to get discouraged but rather to focus on holding down your spending and putting as much money as you can to work.
Effort is the key input. We are all told at school / by parents to keep working hard consistently and that’s not bad advice. The problem is that we come to believe that we can take a safe little path of exam success, desk job, 40 years being looked after by a benevolent employer and then a gold watch and cruises in our
incontinent golden years. Unfortunately, the reward for effort alone is slavery. But effort combined with some ability, independent thought and the principles of lifehacking will help you rise up the ladder towards the top of any pretty much any field.
We come into the world with all sorts of preconceptions about what is fair. We think its fair that if we work hard on one day, we will get rewarded at the end of that day or at least over a period that makes the link obvious. But it doesn’t always work that way. The lags between good inputs (effort, intelligence) and good outputs (net worth, income) can be long, variable and uncertain.
We tend to gauge progress by the outputs and not by the inputs. As Taleb explains in Fooled By Randomness, we are regularly fooled by the volatility and randomness inherent in all walks of life…but particularly finance and business. It is better to acknowledge volatility than try to assume it away or suppress it. There will be plenty of times when we suffer temporary setbacks but where the underlying trend remains upward and we just need to keep playing the hand we are dealt as best we can.
One of the (many) mistakes I made was too much focus on net worth and short term market movements (over which I had no control) and too little focus on our spending (over which I had direct control). I wasted hours every week screenwatching…following every portfolio price tick up and down when I should have been getting a grip on our spending and stemming the bleeding from my bank account.
Cutting spending is the key to realising that there is no direct relationship between spending and happiness. Once you have internalised that truth, everything falls into place and your progress will start to accelerate. Cutting spending has an effect 25x as powerful as making money investing (at a 4% assumed SWR). Every £1 you cut from your spending reduces the target for enough by £25. Again, this is not my opinion, its arithmetic.
The growth in your net worth will always be back-end loaded due to the maths of compounding. This produces an exponential growth J curve effect. If you look at the illustrative numbers in Dignity, the year one investment income is a puny £189. Twenty years later this has risen by a factor of 80x and our hero is free and FI. Most of the money for my Freedom Fund materialised in the last few years, when the snowball had gathered scale and was careering downhill with awesome power and momentum.
Putting it all together, here’s what this looks like:
Having quit work, I’ve found new challenges that make life fun and interesting. But you have to start again at the bottom and work up. I’ve gone from being one of the organ grinders at work to the monkey in my cycling group. You have to embrace this and suspend your ego. As MMM puts it: to achieve greatness, you must first acknowledge that you suck.
Having persisted through my performance lag a few weeks ago, I had what felt like a huge day of progress last week. The sun was out, spring was in the air, and I was out in beautiful countryside riding with a group of friendly people. Not only was I was able to keep up but instead of grimly hanging on at the back, I was able to relax, chat and my pedals seemed to turn almost effortlessly.
But here’s the thing. The progress was not achieved last week when the sun was out. It was achieved beforehand, during the grim winter months when I pushed on, even when I felt knackered. Last week was only when the benefits became obvious and I realised the snowball had gotten big.
If you are currently on the path to FI and loving it, that’s fantastic. But if you sometimes feel like you are a bit stuck and not making progress, then this article was written for you. Don’t worry, its normal to feel like that sometimes. Just keep focusing on what you can control.
1. No kittens were harmed in the writing of this article
2. You can follow The Escape Artist on Twitter here