If You Won the Lottery Tomorrow…

It's always interesting listening to skeptics of early retirement. In my offline life I often avoid talking early retirement because it freaks people out and induces that eye-rolling look.

It seems impossible to your average, not-very-Moose-like individual who bury themselves into a monster mortgage, car payments, property taxes, hockey fees, and a job to "earn" a 2 week vacation once a year.

People are even more skeptical about the idea of living from a passive income. It's like they know the Amway flogger will fail, or that it's not "real" retirement if you spend your day running around selling flavoured water and dish soap. That's just a new job. But no job at all? It's just not possible in today's economic environment.

The more astute observer will ask two main questions:

  • What would you do all day? and
  • How will you handle a market downturn?

Let's tackle the first one...

What Do Early Retirees Do?

This question is loaded with heaps of social guilt and pressure. In our society our minds have been twisted since birth that we owe it to everyone to perform labour for others. Idle hands are the devil's playground our forefathers have said.

You must work now, study for work purposes only, work some more, take a short vacation here and there, work overtime, and after forty or more years of sweat and toil, the government will finally allow you to exist a few years in retirement with a social hand out. Most likely because you're too old to be a good worker.

Even our tax system is structured to suffocate labourers. People with jobs get taxed at rates ranging from 20% to 60% or more. Someone living from investments, or a business owner, often pays half the tax or less. Yet it is still conventional wisdom to find a good, stable job.

On every popular TV show the characters work all the time and identify themselves with their jobs: the always-shouting lawyers on Suits, sexy doctors and interns on Grey's Anatomy, scientists on The Big Bang Theory, cops on True Detective, actors on Entourage, and the list goes on. It's work-centric entertainment.

Society has ingrained in us that we deserve to work all the time, the harder we work the better person we are. And we are not just Daren; we are Daren the *insert a certain government job*.

It's almost always the first thing we do when we meet someone; work dominates our conversations and our thoughts. Ask them what they do. Everyone knows what's meant by that question.

Doing Nothing

What if you answer that question with a word? Nothing.

Well that's impossible. Then you are judged as a nobody. You must be lazy, or one of those leaches the Conservatives whine about and Liberals fawn over, pity, and pamper.

How can you do nothing all day? You will certainly become an alcoholic, drug user, or perverted necro-manga porn addict with all that free time.

Truth is that no one naturally does nothing, our brains are not wired to do nothing.

If you doubt me, try sitting down on a chair, set a 10 minute timer on your phone, and think about nothing. You will quickly find it's impossible to do nothing. Even for just 10 minutes. You will think about worries, you will think about the things you could or should otherwise be doing in that 10 minutes, you will worry more about those thoughts, you will think about the time, you will think about what you are going to do when 10 minutes is up, you will think about how many minutes are left, etc.

Our brains are designed to be naturally creative, active, and thoughtful; they're not designed to spend 8 or 10 hours a day slogging through an uninspiring job.

That's why I—and probably you—have never been at a job for more than a few years before a form of boredom sets in. You still do the work, you're still productive, but your brain is running in a type of "standby mode" most of the time. Natural inspiration is lacking.

True Freedom

There's a better answer to the question: only what I want to do.

Wouldn't life be genuine and deeply fulfilling if you only did the things you truly wanted to do? If you want to build a house, you build a house. If you want to take some university classes for the sole purpose of learning something new, you take those classes. Let's say you want to learn a new language, you just go to a language school. If you want to write a book, you sit down and write.

Today, if you love poetry for example, you have little chance of devoting yourself to that passion. At a young age, mom and your school guidance counselor remind you that poets don't make money. So you reluctantly go to college for a career degree, find a job, and live miserably as an inspiring poet. Poetry feels so far away, you almost begin to resent it. If someone else is a successful poet, you might even jealously scorn them only because you can't do the same. Or you might envy them and become more depressed.

You could substitute poetry for just about any passion. Did you ever notice that all the fun things in life, the things we actually want to do, the things our brains naturally aspire to, all apparently make no money? They are all "unacceptable" labour choices; they're relegated to mere hobbies.

If you're an early retiree, you could be an author, a poet, a musician, a tinkerer, a creator, a traveler, a learner, a giver, an adventurer, a builder, an artist, an athlete, a chef, a truly great parent, a mentor, or anything else you want to be or do.

Being an early retiree is like winning the lottery. You don't have to do anything you don't want to do because of financial obligations. You are free to do the things you naturally aspire to do. I'm betting that's not working a job forty hours a week.

Early retirement is the opportunity for true, individual freedom.

Part 2 talks about market downturns...

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If Warren Buffett Was A Millennial…

If Warren Buffett had an ounce of typical Millennial in him, he sure as hell wouldn't be a billionaire and the most successful investor on earth.

Why? Because Warren Buffett takes risks. Warren Buffett is okay with losing money every now and then. Warren Buffett made a conscious effort to surround himself with smart people. Warren Buffett didn't walk around with his hand out, waiting for every "deserved" opportunity to fall in his lap. And Warren Buffett invested with his head, not his heart.

Millennial Issues

I'm a Millennial myself and I'm confused by my own generation when it comes to these ideas. As this blog's readership continues to expand, I get more emails and people tend to ask me things about investing as if I were some sort of expert. (I'm not—there's a difference between enthusiasm and expertise).

I love a great email question, blog comment, or in-person conversation! I'm not going to tell you how to invest, or what decision to make, but sometimes it helps to toss ideas out there and share thoughts on different subjects. Hopefully it starts your cognitive motor, gets you into gear, and you make a prudent decision on your own. Often I learn as much as you do from these interactions.

One thing that I'm noticing from my own generation is this insane aversion to what made Warren Buffett so successful. I see Millennials in a total investment freeze because they can't decide between a Balanced or Assertive spud portfolio; as if it's going to make a difference on their $5,000 investment account.

They ask if Bitcoin should be part of their portfolio (everyone else is doing it). They're afraid to invest at all-time highs (stocks could crash). The humming and hawing about pot stocks (it's going to be legal).

If you're 25 years old and have impressively avoided spending every last nickel on phone data, avocados, and gasoline to get to a pipeline protest, it is time to use your head and take a damn plunge on something half-smart.

Make a decision, take a risk, possibly lose some money, learn from smart people, and carve out your own future instead of expecting the government or your mom to look after you. Yes, it's alright to lose some money; as long as you learn from every mistake and get progressively better, loss can be a good thing.

Say you're starting out and invest every last dollar to your name on stocks. Who cares if the market drops 50%? We're probably talking about a couple thousand bucks anyways. It makes no difference in the long run. You just save a little more aggressively, buy that loss back, and keep digging. Simply learn to make a decision and learn from your mistakes.

Just learning these are great skills: opening a brokerage account, putting in buy and sell limit orders for ETFs, seeing your account go up and on good months and down on bad ones. It's all fun and games.

That's right, investing is a big game. It's an important one, sure. But it's still a game. It involves strategy, risks, perpetual learning, and the occasional mistake. It's much better to learn the game with $10,000 at 23 years old than $500,000 when you're fifty and only have a few years left before traditional retirement.

It's also much better to learn money management on your own while you're young than to depend on an old suit to hold your hand for 1% or more each year. There's nothing wrong with paying a smart gal for some advice, but don't overpay just because you are scared to do something yourself. Self-directed investing and personal finance knowledge are valuable; even just 1% is a large chunk of money to pay for advice if you have a $2 million portfolio.

Chances are if you learn a few things with a couple grand in your early twenties, you will have a lot more money when you are fifty. Maybe you won't need to work for the man when you're fifty. Maybe the spoon-fed and shaky government old age handout scheme is irrelevant to your well-being in your senior years. Isn't that a crazy idea!

The Buffetts of the World

The world is full of Warren Buffetts that dominated the generations before ours. Buffett is just an example. You've got Charlie Munger of Berkshire, Jeff Bezos of Amazon, the nerdy guys from Google, Bill Gates, Jimmy Pattison, etc. The list of these self-made billionaires goes on.

These older generations can teach us Millennials a few things, if we're willing to learn and act.

Warren Buffett left his mom's basement in Omaha and moved to New York to find a great mentor in Ben Graham—the father of value investing. He then folded an investment partnership that made him multi-millionaire in his thirties, instead taking a chance on the insurance business. He wisely saw an opportunity to capitalize on insurance float money for free investment funding and better tax efficiency than was available to him otherwise.

Charlie Munger left Omaha, joined the military, went to law school, became a real estate investor, and committed himself to perpetual learning. This eventually made him a stock investing billionaire and one of the smartest guys on the planet. Charlie is rich because he understands human nature better than nearly anyone. (Listen to him on Youtube).

Jeff Bezos left a lucrative Wall Street tech job to start a company from his garage that sold books online. This little venture is Amazon, one of the most diverse web companies in the world. He takes calculated chances every day on tech gadgets, sales promotion schemes, shipping innovation, and so on.

Bill Gates left Harvard to start a tiny little programming company. Thanks to a little programming talent, a few bold risks, and a lot of legal prowess, deal after deal resulted in what is Microsoft today. Thanks pretty much to creating that little licensing agreement box that you click "I Agree" on every time you install some software, Gates turned Microsoft into a software giant which earns billions in profits each year.

Look at everyone that's successful and you will find the same patterns. They take risks; they accept the idea of loss; they learn from every mistake; they think independently; and most important they spot and pursue opportunities.

If you see an opportunity, think through the possibilities, be objective, and, if things line up, formulate a plan and commit to the plunge! It's easier to take these opportunities if you still live at home, have saved some money, and are young and have a long timeline.

Comments & Questions

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Comments containing links or "trolling" will not be posted. Comments with profane language or those which reveal personal information will be edited by moderator.