You can’t control The Outcome, you can only control The Process (Part 1)

Getting to financial independence is a bit like cycling to Paris or running a marathon.

Other people have done it, so we know that it must be possible.

But it seems like an intimidating distance if you haven’t done it before.

The Outcome is reaching Paris or the finish line.

What is The Process? Well here it’s pretty simple…it’s just left foot, right foot, repeat.

There are two problems with getting rich. First problem: people may want the outcome of being rich but don’t know what The Process is to get there.  That’s an information problem.

Second problem: it’s not easy to stick to The Process of earning more, spending less and investing the difference wisely for 10 – 20 years. That’s a staying power problem.

In many cases people are right to choose a different path. If you hate your job right now, saving for full financial independence is a long term solution to a short term problem.

It takes a few weeks or months to find a new job. It takes a couple of years to retrain and change career. Frugality plus an emergency fund lets you bridge the gap. So instead of working toward retirement, you can work toward your ideal lifestyle. This might involve changing career, working part-time or as a freelancer.

But if you can stick with it, then maybe pursuing full-fat financial independence is for you. The whole 9 yards, with net worth >25x your annual spending. That takes about ~17 years at a 50% saving rate.

Either way, you need a process. Outcomes are the results of processes. Being wealthy is The Outcome. Earning more, spending less and investing wisely make up The Process. Focus on The Process.

When I first set out, I did want to be rich but I mainly wanted not to be broke or homeless. I wanted these things enough to get a job and start taking small steps in the right direction even though financial independence was a million miles away. So I started. We all need to start somewhere: I suggest you start from where you are now.

After I’d paid the mortgage off, I worried less about being homeless. But I carried on saving anyway and the summit of the mountain of financial independence started to come into view. It seemed crazy but I realised it was possible.

There were plenty of struggles along the way but it didn’t feel like deprivation because most of the time I enjoyed The Process:

  • I enjoyed (parts of) my job.  Not always, but enough to keep going. Pros keep going.
  • I enjoyed the promotions (a little) and pay rises (a lot). I enjoyed completing projects (and the drinking afterwards).
  • When I couldn’t bear a job, I moved employer.
  • I enjoyed learning about investing.  I enjoyed reading great books about personal finance. I enjoyed picking stocks and tracking my returns (you don’t have to do this).
  • I enjoyed seeing my salary hit my bank account and paying myself first.
  • I enjoyed the process of going into the bank, over-paying my mortgage and getting a slip of paper with the new (lower) monthly payments.
  • I enjoyed seeing my dividends roll in quarterly
  • I enjoyed updating my net worth spreadsheet once a month. 
  • I used exercise to blow off steam and stay (mostly) sane.

What if you don’t enjoy that stuff now?

I’m glad you asked.  You can learn to enjoy those things. Over time, the things we work for (and eventually get good at) are the things we come to love.

“Do what you love” is for amateurs

“Love what you do” is the mantra for professionals

Seth Godin, The Practice

Imagine 2 different approaches:

  1. focusing on The Outcome
  2. focusing on The Process

Focusing on The Outcome is the conventional approach.   We hear a lot about goals; things like diets, budgets and New Year’s Resolutions. In theory they’re a good idea, but in the real world the failure rate is shocking.

Detailed goal setting is over-rated and mostly a waste of time. By all means have a vision and begin with the end in mind (#2 of The Seven Habits of Highly Effective People). But, after that, focus on The Process.

Scott Adams writes about goals (The Outcome) versus systems (The Process) in How to Fail at Everything and Still Win Big.  He illustrates this with how he and his friend approached girls at high school. 

Scott had a goal-based approach which involved developing a crush from afar on one specific girl and deciding that she was The One.

His friend had a system-based approach which involved action; a process of regularly talking to different girls and seeing what happened.  Do I need to say that his friends approach was much more successful? Yes, I probably do.

If your goal-based approach hasn’t lead you to action then its useless.  A goal based approach involves focusing on far away outcomes.  It often leads to endless analysis, predictions, procrastination and other things that don’t involve doing something useful RIGHT NOW.

You don’t need detailed and specific goals. You need action: a series of baby steps that take you closer to where you want to get to. Left foot, right foot, repeat. This is how The Aggregation of Marginal Gains works.

As Mark Manson explains, a lot of the fear of failure comes from paying too much attention to (the wrong) goals. Popularity, fame and status would be examples of goals that are mostly outside of our control (as well as dubious for other reasons).

Better to focus on your own actions and your process.  For example: take full responsibility for your situation, be decisive, be more honest. These are all process orientated and within your control.

It won’t always be easy. But struggle is an essential part of the process.

Who you are is defined by what you’re willing to struggle for.

People who enjoy the struggles of a gym are the ones that have chiseled abs and can bench-press a small house. People who enjoy long workweeks and the politics of the corporate ladder are the ones who fly to the top of it. People who enjoy the stresses and uncertainties of the starving artist lifestyle are ultimately the ones who live and make it.

This is not about willpower or grit.  This is not another admonishment of “no pain, no gain”. This is the most simple and basic component of life: our struggles determine our successes.

Mark Manson

Maybe we need a certain amount of struggle?

Whether or not we need it, we will get it. We will all be tested by life. It will often be two steps forward, one step backwards.

Investing is a game where you can’t control your outcome, you can only control your process. It’s fine to have “the number” (a goal for your net worth).  But we can’t control the market (despite what people may be saying on Reddit). Better to maintain equanimity and detach from The Outcome. Obsessively checking your portfolio value shows too much emphasis on The Outcome, not enough on The Process.

The last few weeks have been full of distraction, speculation and financial market gossip. Frankie is having a whale of a time in the casino. What could possibly go wrong??

They don’t ring a bell at the top of the market but a major market crash is coming. Are you strapped in correctly?

What to do? Focus on The Process. Do you have a one page plan which covers:

  • How much emergency fund do you need?
  • What are your financial priorities?
  • What is your target asset allocation?
  • How do you keep things simple and avoid portfolio “pick ‘n mix” syndrome?
  • What will you do if when the stock market falls by 25% – 50%?
  • What is your split between mortgage paydown and investing?
  • Into which fund(s) and which tax buckets (pension v ISA v unsheltered) will your monthly savings go?

There is something very calming about knowing that we have done our best and fixed the things that are within our control. After that, we can be at peace even though we can’t eliminate luck.

Life is about the journey not just the destination. And remember that roller coaster rides are meant to be enjoyed.


The Escape Manual is explained * here *


13 comments

  1. Very good summary, I am guilty of most of these, especially the strategy with girls!

    The job question is particularly interesting, they pay me just enough to save some on a single income after bills, but even at 50% savings rate, starting at 38 the path to FIRE is a long and depressing one to consider. 55 is probably a good early retirement, but honestly with increasingly declining physical health I’m thinking just live now. Maybe I need to move to something that is more enjoyable, then again maybe a couple more years to facilitate switching from renting to buying would help overall. It would trap me into working for a very long time however.

    I’d live in a van now if I didn’t have to turn out for work everyday, chicken and egg. Can’t save enthusiastically in a house, can’t live cheaply in a van and realistically hold it together for an office job. Although, being ‘retired’ is the “when I get that I’ll be happy” thing, and I’m starting to suspect it might not make much difference…

    Must read again and digest all of the linked articles tomorrow.

    1. I live in a van and work in an office

      1. I am intrigued by this.

        My main worries are living in a small town and parking up, once you’re on the police radar (with fans, solar etc it must be pretty obvious) would it just because a constant source of stress and frustration, having to move around and hide? Also I was planning daily gym visits for health and cleanliness but this last year has shown anything can happen in that regard.

        With tax, insurance, petrol, fuel etc increased, plus the outlay for a depreciating liability, I’m not sure the maths compared to home ownership make sense, but I am extremely interested to hear from someone who has made it work?

        1. Thanks TEA, I used if before to sublet a room. Think I’m too old and too much of an autist to (and clearly not willing to sacrifice enough lol) to share again. I would need a house bigger than I can afford to comfortably let a room too.

          I’m aware I have an ‘excuse’ for everything here, it’s been being mulled over for 18 months now…

  2. Great advice as usual. Do you mean ‘spend’ less rather than ‘save’ less though:

    “Either way, you need a process. Outcomes are the results of processes. Being wealthy is The Outcome. Earning more, saving less and investing wisely make up The Process. Focus on The Process.”

    1. thank you – consider yourself hired 😉

  3. I also paid off my mortgage early and then sent the money to my retirement fund. My belief is that people want the things associated with being rich and not understanding the mechanics of getting rich. The fault lies with glamourizing the 0.01% of the fabulously rich, so people look at cars, jewelry, etc without knowing how the “Millionaire Next Door” made it.

    1. Best thing that I did was get rid of my TV 13 or so years ago. TV is the thief of time and it costs you money and is bad for your mindset.

      I treated my career as both a technical/professional quest and a money begging game. Now 15 years in I’m at the sort if 25x level.
      When I hear of peers who are in different positions i can’t help but feel a deep sense of Schadenfreude.

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