A Letter To My Younger Self: Three Key Lessons For Building Wealth

Lessons for building wealth

In the first twenty or so years of my life, I didn’t come across many wealthy people.

I suppose that’s not entirely surprising considering we lived in a working-class neighbourhood and had about £5 left over after covering our family’s basic necessities every month.

Is that the best you've got?!?

Our family, facing down our expenses every month

That kind of upbringing, however, is probably the biggest reason why I was always fascinated with building wealth. And when I did come across someone who “had it made”, I’ve always wondered – do they know something I don’t?

Is there some secret knowledge that separates the haves from the have-nots?

Unfortunately, this was way before widespread internet and certainly before Google, so I couldn’t just look up the answer online. And the only advice on building wealth I was able to get by asking around was along the lines of “Get good grades kid” or “Work hard” or “Save money”.

Not entirely unhelpful – but certainly not a complete recipe for becoming a millionaire.

The other day I happened to be in a  bit of a retrospective mood and so I asked myself: If I had a chance to go back in time and give my younger self advice on building wealth, what would it be?

If you are reading this blog, chances are you already know there are no shortcuts in life. That being said, here are the things I wish I knew when I was starting out.

Not only they would make my journey faster – but they would also make it much more enjoyable.

Lesson #1: Saving Money Won’t Make You Rich

When I was 17, I managed to save up 5k working a minimum wage summer job. By the end of August, I had both the money AND a great plan – I was going to buy a car.

Not just any car, mind you. This car:

Acura Integra Type R

Acura TSX Type R: the stuff my teenage dreams were made of

Being a good immigrant son, I told my parents what I was going to do. Unsurprisingly, they weren’t too happy.

Five grand for a car?!? That’s madness! Save the money instead!

We are a pretty consensual family, so I listened. We struck a deal where I got to use my dad’s car – and the money stayed in my bank account.

The only problem with that setup? Even though I saved the five grand, I didn’t do anything useful with it.

I didn’t use the money to start a business.  I didn’t put it as a down payment on my first rental property (imagine getting started in property at 17!). Hell, I didn’t even plonk it down into the stock market.

Instead, the money sat in my bank account for years earning something like 3% interest (yes, rates were that high back then).

But hey – what did I know? As long as I’m saving money, I’m on the path to success, right?

WRONG.

More than two decades later, this is the one decision I’m still kicking myself for. I deprived myself of something I really wanted – and got nothing in return.

Let’s not lie to ourselves – saving money by forgoing consumption is tough. But if you don’t put that money to work, you may as well treat yourself.

You won’t get rich – but at least you’ll have some fun along the way.

Lesson #2: When It Comes To Building Wealth, Action Beats Perfection

One of my best friends immigrated five years before I did. Back then, you certainly wouldn’t pick his family out of a line-up as someone who’ll strike it big. His dad was working as a handyman and his mom juggled various jobs in a beauty salon.

What they did have, however, was a real propensity for action. Whenever I was over at their house, they were always working. Evenings, weekends, holidays – they were always up to something.

Soon, they saved up enough money to buy a small house. They promptly rented most of the rooms out – this was house hacking twenty years before the term was even invented. Soon enough, they bought another place.

Rinse, repeat, keep working. Less than a decade later, they owned a handful of apartment buildings with over thirty rental units. It wasn’t easy or glamorous – but they hustled and bustled until they made it happen.

I, on the other hand, was always somewhere on the other side of the spectrum.

I first learned about stocks in 1999 – but didn’t invest until 2004. And it took me over four years to buy our first property – even though I had the down payment saved up a lot earlier.

There was always something else to learn, another aspect to research, another property to see.

The lesson here? Hard work is important – but avoiding perfection is crucial.

Far too often we get in the way of our own success by agonizing over every single decision.

Real estate or index funds? Commodities or cash? What about futures?

Which investment platform to use? What index funds to choose? What side hustle to pick up?

Months and years go by, and we are still in the same place, trying to figure out the best way to get started.

Kind of like that fellow who knows a thousand ways to make love but doesn’t know any women.

In the meantime, someone with a propensity to action will have tried five things, failed at three – but made so much progress with the other two that she is now light years ahead of where she started.

If I was to do it all over again, I would tell myself to just get going.  Keep experimenting, don’t be afraid to fail – and if you do, move on quickly.

At some point, you are guaranteed to stumble upon something that works, at which point you can scale your way to success.

Lesson #3: Looking Can Be As Good As Touching

One of the biggest rocks people throw at deferred savings plans (i.e. UK workplace pensions or US 401(k) plans) is the fact that you can’t touch the money for a long period of time.

“What’s the point of having money if I can’t access it?” they say.

I can certainly see where they are coming from. When my wife and I first discovered UK workplace pension plans, we asked the same question. Fortunately, the ability to triple our money on the spot was too attractive to pass up.

Building wealth with pensions

Now that I’m on the other side of the road, with a couple hundred grand saved up in our pensions, I can see that this argument misses the point entirely.

Sure, we can’t access the money. However, stashing a good amount of money in your retirement accounts has two massive benefits:

First, you get to sleep well at night – because your retirement is sorted. Knowing that you don’t need to contribute another penny and will still continue building wealth is invaluable in itself.

Second, you can spend more money – because you don’t need to save as much.

Take a look at the chart below. Say you are 25 and want to have 500k in your retirement pot by the time you hit 55.

There are two ways you can get there.

Two options to build wealth

Option one is to start now and invest 500/month for ten years. Over that period of time, you will have chucked in sixty grand.

Then you get to peace out and let your investments do the work for the next two decades.

Option two is to ignore the inevitable and spend that 500/month on whatever your heart desires.

Then you wake up in your mid-thirties, realize you are screwed your retirement isn’t looking so great, and start pedaling away, furiously making up for the lost time.

Still want to have that 500k in your pension pot? That will be 830/month – for twenty years.

That’s right: you need to put away 66% more money – for twice as long.

Just to get to the same number.

Keeping It Simple

None of this stuff is groundbreaking. And yet, I think it’s fair to say that of the three lessons above, I kind of mucked up the first two. I’m sure I’m not the only one.

Well, at least I got the third one right (kind of).

There’s no argument that building wealth is hard. Don’t make it even harder on yourself by repeating my mistakes.

Not only you will get there faster, but you will also have more fun along the way.

Happy investing!

About Banker On FIRE

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Banker On FIRE is a London-based M&A (mergers and acquisitions) investment banker.  I am passionate about capital markets, behavioural economics, financial independence and living the best life possible.

Find out more about me and this blog here.

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16 Comments

    • I think quite common with immigrant families in general and quite frustrating, isn’t it?

      The reality is, if you aren’t used to putting your money to work in the stock market or real estate, it will take you a bit of time to get comfortable with the idea (and the associated risk).

  1. You are a great writer, BoF, and I always enjoy your articles. I also smiled happy learning you are an immigrant family, and your family must be so proud of you. I am fascinated by people from various backgrounds and cultures and I appreciate the value of diversity and of people together. We can all learn from and embrace each other’s perspectives. May I ask where is your original homeland? I can’t wait to retire so I can visit all over the world!!

    • Thanks for the kind words Shana.

      Without getting into too much detail, let’s just say I was born in one of those infamous countries on the emerging market frontier. Famous for having perennial promise and yet never living up to it.

      After a while, my parents got fed up with the corruption and upped sticks for a better life elsewhere.

      Not sure how proud my family is of me – the way it works with most immigrants is the parents simply don’t tell you 🙂

  2. When It Comes To Building Wealth, Action Beats Perfection – this is spot on. Action beats perfection most of the time elsewhere as well –

    • That’s right. Going out on the playing field beats an armchair warrior any day of the week.

  3. I’m a saver – which definitely helps, but its only part of the equation.

    I’m also a perfectionist and overly cautious – which definitely held me back on investing. And although not wrong, I ended up ‘investing’ most of our savings in mortgage overpayments. Definitely sub optimal during the bull market over the last decade.

    This could just as easily be the letter I’d write to my younger self as well.

    • I’ll take paying off the mortgage vs sitting on cash in my bank account any time.

      Funny how just getting stuck into things over long periods of times tends to leave you way ahead of the game. Can’t go back in time but will definitely try to imprint these lessons on my kids!

  4. *Sigh*. Until about 5 years ago or so, I was one of those savers, plugging away some money every month. Checking out all the cash ISAs/savings accounts, trying to get the maximum return- awful though it was. I really think that saving v investing lesson needs to be learnt as easy as possible- otherwise the only way you can get to your million- is by earning nearly all of it.

    • Indeed. And by the time you finally get there (if you actually do as it’s a tall task!) you’ll find out the value of that million has been decimated by inflation.

      Sure wish I grasped this earlier.

  5. Point 2 is a great one and not often pointed out. Actually committing to a plan or strategy is superior to spending 3x as long deliberating them.
    Thanks and great post!

    • Thanks J.

      Some people get it naturally. Others (myself included) have a tendency to hesitate.

      Good to be self-aware in that regard as you can correct in the other direction.

  6. I stupidly rebelled against my immigrant folks’ advice and ended up spending and in debt, before I finally came to my senses and remembered what they taught me.The only thing I did worthy of any note in my 20s was sign up to the company pension scheme, otherwise I truly would be up sh*t creek without a paddle in terms of my retirement savings!

    • You’ve clearly done me one better 🙂 Though frankly I wish I had spent (some of) the money instead of socking it away with no benefit.

  7. This is a great post – I’m definitely having a bit of a binge on your blog this evening! I keep finding that you’re consistently producing value and it’s great :). One of the things I really like in this post is that it’s very clear advice – as a younger person I can take these as actionable steps to improve my financial future! Thanks for writing it

    • Thank you.

      The alternative approach to the above is to imagine what my 60-year-old self would tell me today if he was to travel back in time a few decades. Perhaps an idea for another post!

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