Note: This post was first published in May 2020 and updated in August 2021
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.
After all, we lived in a working-class neighborhood and had about £5 left over after covering our family’s basic necessities every month.
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 better (and certainly more concrete) 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 five grand working a 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 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 real estate at 17!).
Hell, I didn’t even plonk it down into the magic money machine.
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?
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. To be candid, I don’t even know where that five grand went in the end.
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. To say their English was underwhelming would be a compliment.
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 – and 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 way over 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 action beats perfection.
Far too often we get in the way of our own success by agonizing over every single decision.
Which investment platform to use? What index funds to choose? What side hustles 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.
I’ve been much better at this over the past ten years.
That being said, I do wonder what things would have been like in a parallel universe, where I didn’t sit on my hands for nearly as long.
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:
Now that I’m on the other side of the road, with half a million or so saved up in our pension plans, 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.
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.
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.
Thank you for reading – and happy investing!
About Banker On Fire
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Banker On FIRE is an M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.
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