How The Money Game Changes With Time

Money game

One of the toughest things about investment banking is that the job changes all the time.

The technical skills that make an amazing analyst or associate do not necessarily translate into the ability to quarterback a complex M&A or equity deal at the VP level.

At the same time, many VPs and directors who shine at process management and execution really struggle when it comes to origination, effectively capping out their career progression.

Those who manage to navigate the transition end up rising all the way to the top.  Say hello to the corner office, hefty bonuses, and cushy board seats once you get tired of the grind.

This constant need to adapt and elevate your game draws many parallels with the process of building wealth.  Sure, there are some fundamental concepts that apply throughout.

Spend less than you make, invest the difference, let your investments compound for as long as possible.

That being said, you still need to calibrate your approach.  The strategies that work when you are twenty-five no longer apply when you are nearing retirement – and vice versa.

In today’s post, let’s explore how the money game changes as you go through the various stages of life.

Financial Adolescence:  Teens To Mid-20s

Apparently, Warren Buffett bought his first stock when he was 11.

Good for him – but in reality, not everyone is early to the party like that.  Which is just as fine, because your late teens and early 20s is when you lay the foundation for your financial future.

And if there’s one thing you need to know about foundations, it’s that you don’t want to skimp on them.

Good grades are important at this stage, not least because they determine the kind of university you’ll be able to get into, which subsequently goes a long way in defining your ability to choose a lucrative career path.

Good skills, however, are even more important.  I’m sure it’s great to graduate with a degree in the psychology of fashion, but good luck making the big bucks with that one.

Instead, you’ve got to follow the money.  Computer science, finance, medicine, engineering – you get the gist.

However, what’s most important at this stage is establishing good habits – because is your habits that will define your ability to monetize both your grades and your skills.

Health is the most important one, because it gives you energy, confidence, and optimism – the defining characteristics of most successful people.  No wonder there’s a direct correlation between health and wealth.

From a financial perspective, this is when you need to put your head down and get all the basics in place.

Keeping to a budget.  Understanding the magical power of the stock market.  Getting up to speed on the basics of real estate investing.

And if you have an extra dose of ambition, perhaps even mapping out the path to your first million.

The great thing about this age is that absolute numbers don’t really matter.

It’s much better to choose a career that pays $30k today but gives you a path to making $300k than to be stuck in a job where you make $50k but have very limited upside.

Equally, if you are disciplined enough to save 10% while making $30k a year, you will definitely be able to save 10% (and much, much more) when making $300k.

The biggest danger of being in your early 20s is letting your impatience get the best of you while you make all these strategic, long-term decisions.

But put your willpower to good use and you won’t regret it.

Additional reading:  How To Build Wealth In Your 20s

Early (Financial) Adulthood:  Late 20s to Mid-30s

Phew.  You somehow managed to navigate those choppy waters of financial adolescence – and have some fun along the way.

It’s time to start getting rich.

Provided you’ve done all the right things earlier on, your career is about to go into third gear.

If you haven’t, don’t despair.  There’s still enough time to go back to school, switch to a more lucrative industry/career track, or even try entrepreneurship.

What you’ve got to remember, however, is that all of the above are long-term investments of time and money.  They often take a decade or longer to pay dividends.

Chances are, you’ll be in your late 30s or early 40s by the time your efforts bear real fruit.  Thus, choose wisely and once you’ve picked a path, stay in the game for as long as possible.

Ditto for property investing.  It’s a great way to get rich, but not an overnight one.

That being said, buying a great investment property in your 20s can be one of the best money moves you will ever make.

My wife and I first became landlords when I was 29 (she was 26), putting down $70k on a one-bedroom flat.  Since then, the property generated infinite returns , becoming the first building block in a seven-figure property portfolio .

If there’s ever a time to go risk on, this is it.

Finally, there are two big non-financial decisions, which will nonetheless have a tremendous impact on your ability to get rich.

The first one is choosing the person you will marry.

Make the right decision, and you can expect your net worth to be 77 percent higher than if you were to stay single.

The second one is choosing where you will live.

Moving around in your 20s is easy and a lot of fun.  Doing so later in life inevitably carries a bunch of monetary and non-monetary costs, including the loss of an established professional network and uprooting your entire family.

In other words, there’s lots going on – and you haven’t even got kids yet.

Additional reading:  How To Build Wealth In Your 30s

Financial Consolidation:  Thirty-Five to Fifty

This is it.  The high time.  Things get really fun – but also really hectic at the same time.

With young kids, aging parents, a busy spouse, and a successful career, expect life to go into absolute overdrive.

Days blend into weeks.  Months turn into years.  Life becomes a fast-moving kaleidoscope that goes from Christmas to Christmas in a blink of an eye.

But that’s okay – because you are prepared for it.  You’ve laid a foundation of good habits, financial and otherwise, that help you keep things under control.

Your emergency fund lets you ride out any short-term volatility.  Your investments are fully automated, requiring zero willpower and attention.

Your rental properties churn out healthy cash flow every month (aren’t you glad you bought that first property way back when?)

By now, you’ve mastered navigating the workplace dynamics.  You know all about what it really takes  to get paid well, and appreciate the utmost importance of finding a champion .

The other big decisions you will make here will primarily relate to kids.

How many will you have?

Will you send them to a private school?

Will your spouse keep working or stay at home?

More importantly, will you take a conscious step back to spend more time with them?

Yes, it’s counterintuitive to dial back just when things are finally firing on all cylinders.  However, with a decent enough financial cushion, it may well become a possibility to let go of the gas just a bit.

Yes, it will lengthen your journey.  But it will also make it much more enjoyable.

Additional Reading:  Pedal To The Metal:  How To Build Wealth In Your 40s

The Golden Years:  Fifty And Beyond

By this point in time, you will probably find yourself in one of two camps.

Some folks will be pretty much set, owing to a combination of hard work, good planning, and a healthy dose of luck.

That doesn’t necessarily mean being retired.  However, it does mean having a solid plan that takes you all the way to retirement – or at least to the point where work becomes optional.

From a financial perspective, the biggest adjustment you may need to make here is around risk appetite and asset allocation.

Now that you’ve made your money and retirement is coming ever closer, the focus shifts from wealth accumulation to wealth preservation.  Dial back that equity exposure.  Perhaps sprinkle in some bonds.  And just let it ride.

Congrats – you’ve won the money game.  Time to kick back and enjoy the fruits of your labour.

Others may not be so fortunate, but there’s no need to beat yourself up over it.

There’s still a lot of time ahead – and chances are you are not starting from scratch either.

The kids are either out or about to be out of the house, drastically reducing your expenses.

Your mortgage is probably paid off – or at least under control.

You are probably making decent money at work.

Unlike those annoying millennials, you’ve got a good handle on what your state pension will look like.

And to top it all off, those tax breaks on your workplace pension are pretty much free money at this point.  You get to keep all of the upside without necessarily locking your money in for more than just a few years.

You haven’t won the game – yet.  But you certainly haven’t lost it – and there’s still a lot of time on the clock.

Additional Reading:  Never Too Late: How To Build Wealth In Your 50s

As always, 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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25 thoughts on “How The Money Game Changes With Time”

  1. Hitting all the key points as usual BoF.

    And career permitting, if you’ve got your financial foundations in place by the time you have young kids, taking your foot off the gas and coasting in the slow lane can make for a very enjoyable journey.

    1. 100%

      As a matter of fact, I happen to know someone who did just that and is living it up in sunny Spain while we are sloshing through rainy London!

  2. I suppose another aspect of hitting your 40s with most things done right is you can take those risks knowing you have a good safety net to fall back on.

    Sometimes a change is as good as the rest and being forced to spend your life in a high paying but ultimately unfulfilling job, or unable to take the chance on something that might ultimately be more rewarding is not a good place to be.

  3. Good point about the pension lock-in becoming less and less onerous once you are approaching your fifties. 40% tax benefit + employer contribution, and you can take 25% immediately and the rest when in a lower tax bracket.

    Happy days!

    1. Indeed. To me that’s one of the most underrated / underappreciated advantages of getting closer to retirement age.

  4. How confident are you about the advice regarding absolute salary in your 20’s?
    Strictly anecdotal, but those in my circle who took immediately well paying, but ultimately capped, work as IT contractors and tube drivers have done better than the doctors and designers.
    The dr’s now earn almost twice as much as the rest of us but are buying their homes almost 15 years later (and had to leave London to do so) and are paying a dam sight more in tax.
    Throw in the additional pension contributions we gained and it’s not looking so rosy for the larger yet delayed salaries.
    Maybe I am looking at too small a sample but should like know what you think.

      1. Would also say private equity, venture capital, technology (but front office roles, i.e. product development etc)

    1. Depends on what the upside is I suppose?

      I would think worth taking 25k job that sees you to 250k a year. Even if it takes 10 years, you’re probably better off than having taken a 75k job right off the bat

      But if that 25k job only takes you to 100k, clearly taking 75k right away is the optimal move.

      I realise I’m probably the outlier but going down the IB route worked out very well for me, notwithstanding a few yearly years of lower-paid employment + the two years I spent getting an MBA

  5. This post is reminiscent of Ray Dalio’s idea in Principles where he talks about the 3 phases of life:
    1. You’re still growing and learning from others.
    2. You’re working hard and others are dependent on you.
    3. You’ve created independence on others and they no longer depend on you.

    This journey parallels how much money you’ve got / what age you are at I feel like. And as your life evolves, your money situation / life situation and mission evolves, and how you deal with it evolves as well.

    Luck permitting though, hopefully I get some sick alpha and can reach the financial state of “Golden Years And Beyond” sooner than later!

    1. Bridgewater is totally a cult but everyone can learn a thing or two from Dalio!

      Love his idea of radical transparency btw, but don’t see it working in practice (whether in corporate or personal life)

  6. Or you can simply say enough is enough of the rat race around 40ish and Coast FI your way to retirement!

    PS this is brilliant writing right here “Days blend into weeks. Months turn into years. Life becomes a fast-moving kaleidoscope that goes from Christmas to Christmas in a blink of an eye.”

    1. Thanks AR. That’s certainly how I’ve been feeling over the past few years, though I sometimes manage to catch Easter as well.

      The passage of time just seems to accelerate every year…

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  8. I’m curious to hear your thoughts on investment returns. I think I’m slightly older than you, at 44. But after such strong investment returns in the stock market, real estate market, etc, I’m really beginning to question why grind so hard at a day job at all.

    Although I don’t have a day job, I decided to focus more on generating online revenue during the pandemic b/c there were less things to do and we are stuck at home. But I’ve found myself thinking, Why bother a lot lately.

    Lose 10% in the market.. online/active income isn’t going to do much to buffer. Make 10% in Tesla stock this week, online/active income isn’t going to make much a difference.

    Are you feeling this way? Is anybody else feeling this way?


    1. Hi Sam. I understand how you feel. But the difference between market returns and online/active earnings is that the latter are always positive! Maybe week to week or month to month these earnings may be tiny compared to changes in net worth from investments, but over multi year terms always-positive earnings add up.

      I guess if you are at the point where earnings are << long term market returns, then it is a different matter.

      1. True. Hopefully so is passive investment income. But after such a massive bull market since 2009, surely, people have saved up massive reserve gains where they are starting to question what is the point of working so hard.

        So I’m curious from BoF’s perspective as someone in his 40s with likely millions invested.

      2. I’m kind of in that boat, where investment returns are sometimes > my earnings.

        That being said, I disaggregate the two so haven’t really lost my motivation as the returns have grown. It’s more about the desire to take my foot off the gas a little bit now that we’ve got a somewhat meaningful net worth.

    2. I’ve been generally feeling that way as our net worth grew.

      That being said, I always disaggregate my returns and focus on employment income which I try to grow 10-20% every year.

      Investment income to me goes into a separate “mental” pot, even though there are years when it exceeds my employment income.

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    1. My mindset is more around capital preservation as opposed to accumulation.

      Can’t be doing all the heavy lifting for the kids!

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