The biggest asset we have in life is time. We trade time to buy everything else. If we had everything, we would be spending time as we pleased. But most of us have not thought clearly about how much money we would need to make living on our own terms a possibility and what kinds of trade-offs we would need to make. Instead, many of us have chosen to take a somewhat dishonest, impractical, and fearful approach to finances.
Recently, I had the pleasure of interviewing Walter Guillioli
. Walter is one of those few brave people who have had the courage to take the reins of their life. Walter carefully and smartly worked to save enough to live off the savings and then quit a well-paying job at 40 to live his life. Here’s Walter’s advice for people looking to do the same:
- Track and understand your annual expenses with a tool like Quicken or Mint.
- Save as much as you can and invest in index funds. Don’t worry about timing the market (it doesn’t work) or about having the perfect portfolio. Start investing in a broad index fund like Vanguard’s VTSAX and get a bit more sophisticated later. Learn more here.
- Make a list of things that truly bring you happiness and contrast that with your spending.
- Avoid “lifestyle inflation.” And don’t try to keep up with your neighbors. Nothing will be ever enough.
- Read these books: Little Book of Common Sense Investing, Simple Path to Wealth, Your Money or Your Life, Four Pillars of Investing.
- Read these blogs: Mr. Money Mustache, Mad Fientist
- Listen to the ChooseFI podcast.
- If you are married, make sure that everyone is onboard.
- Have savings targets and automate everything around it so that you pay yourself first.
Read the entire interview here
The strategy of investing nearly all your money in low-expense index funds is remarkably easy and good. For instance, over 15-year horizons, over 90% of the financial professionals cannot beat the market
. If you want to be conservative, invest some of your money in indexed bonds. But don’t keep a lot of your money in the bank. Leaving a lot of the money in the bank is like a tax on lazy people. Don’t pay it.
Much of the credit for popularizing the sage advice about index fund investing goes to John Bogle
. Bogle founded Vanguard, a company with over $5.3T in management today and crucially a company that is owned by its customers—so the incentives are aligned.
Get some of John’s wisdom in his own words—here’s a link
to the commencement speech he gave to the MBA Graduates of the McDonough School of Business in 2007. For more, read the book by him that Walter has linked to.
I wish you clarity about your finances so that you can make good decisions about how to spend your time!