Quick snippets from our morning read on Monday, 04th January 2021
Today’s morning read feeds into the idea of the “Future Self”. Check out our 4th edition of the newsletter to better understand this idea.
What do you want your future to look like? Here is the article by Joseph Wells.
Visions for the Next Decade
Decades are precious. Most of us don’t get more than nine, if we’re lucky. Reflecting on the last ten years, I have a lot to be proud of. But I also left a lot on the table.
As Amos Tversky once said, “You waste years by not being able to waste hours.”
So my recommendation is to sit down and waste a few hours. Or go for a walk. Do it alone or with your partner. Spend most of the time in silence, thinking about how you want the next ten years to play out.
Come up with a few major themes. Write them down. Then work backwards.
Break your ten-year plan into one-year pieces. Break your one-year pieces into quarterly steps. Finally, break your quarterly steps into weekly (and possibly daily) actions you need to take to move toward the end you want to accomplish
I’m going to walk through some of my ten-year visions for two reasons:
- If you’re not sure where to start, it’s helpful to see somebody else do it.
- Putting my visions on paper in a public place helps to hold me accountable.
More Consistency
This vision lays the groundwork for everything that follows.
My uncle recently told me about a presentation he gave to a group of high school students. He gave them a simple path to becoming a millionaire.
- Start mowing lawns at 14 years old.
- Mow 20 lawns at $25 each for 12 weeks per year.
- Save all the money ($6,000 per year).
I didn’t understand the importance of compounding and consistency at 18. Even if I did, I probably wouldn’t have taken advantage of it.
With the advantage of youth comes the disadvantage of stupidity.
After spending the last ten years learning about compounding and consistency, and spending the last few years seeing it in action, it’s a top priority for my next decade visions.
More Fitness
Ten-year vision: I will be in the top 1% of 37 year old men (excluding professional athletes).
This is a subjective goal. There’s not a good way for me to measure my fitness in relation to the entire population. But here’s the subjective way I plan to measure my subjective vision:
- When I’m standing against the fence at my kid’s little league game, do I look younger than all the other dads?
- Am I proud to take my shirt off at the beach?
One-year pieces: In January of every year, I’ll take measurements across the following metrics:
- One rep max on bench, squat, and deadlift.
- Max reps for push-ups and pull-ups.
The goal is to be better every year than I was the year before.
Quarterly steps: I will revisit my workout plan once per quarter. Consistency is key for achieving progress, so changing a workout plan more than quarterly is counterproductive. But every three months, I’ll figure out where I need to adjust my workout plan to adapt for weaknesses and plateaus.
Weekly actions: I will exercise five to six times per week, as outlined by my workout plan.
More Risks
I recently had a conversation with a friend who recommended taking big risks with ten percent of your net worth. He’s more than a decade older than me and has done well financially, so I’m following his lead.
My risky investments currently make up about ten percent of my net worth, but that’s purely coincidence. In the next decade, I’m going to develop a consistent pipeline of risky opportunities to systematize my risk taking.
I define risky investments as those with higher upside potential but also the possibility of losing most or all of my money. Some examples of risky investments include individual stocks, starting a business, investing in someone else’s early stage business, peer to peer lending, cryptocurrencies, or many other things.
Taking big risks is the only way to increase your net worth a large amount in a short period of time. The ten percent method has a couple benefits:
- You can never lose more than ten percent of your net worth. In other words, no investment would be fatal.
- Even if you lose the full ten percent, you’ll walk away learning valuable lessons to apply to future investments. It’s almost like paying for an MBA without the lost time and wages.
Ten-year vision: Consistently take financial risks that account for ten percent of my net worth.
More Money
Ten-year vision: This is the decade in which I’ll become financially independent. I’m targeting a net worth of $2 million by age 37, but I understand that net worth targets are largely dictated by market returns.
While $2 million is the goal, the bigger focus is building a good process. I’ll be happy with any result as long as I execute properly, since the final number is partially out of my control.
One-year pieces: A major component of hitting my ten-year net worth target is generating passive income. By the end of the decade, I’m targeting $5,000 per month in passive income.
I think $5,000 per month is a low goal for a ten-year vision. But I understand that passive income growth may not be linear. I could go from $3,000 per month in year eight to $8,000 per month in year 11. By leaving myself some room to overshoot the goal, I prevent myself from deploying capital prematurely and missing subsequent larger opportunities.
More Philanthropy
In 2018, I donated $1,000 to my high school library program. That was basically the only charitable thing I did last decade.
I didn’t donate a single dollar in 2019.
I don’t want to tie my giving to my income. I want to build a system that continues giving after I stop making money and long after I’m gone.
The way I view philanthropy is that it’s better on the back end. Let me explain.
I could donate $5,000 per year for the next ten years for a total of $50,000 donated. Or I could invest $5,000 per year for the next ten years.
That $5,000 annual investment would turn into roughly $69,000 by year ten (assuming seven percent annual returns). So in the tenth year, I could donate nearly 40 percent more than if I had donated every year.
Or I could start donating $2,760 per year after year ten, which is four percent of $69,000. Assuming 7 percent annual interest, I could keep donating $2,760 per year, and my $69,000 would continue growing by about 3 percent annually.
In the next decade, I’ll lay out the specific actions to execute the giving phase of my perpetual giving machine. I envision targeted giving that may take the form of scholarships or grants awarded through an application process.
The giving will be very specifically directed to achieve specific goals and solve specific problems. Financial independence will give me more time to focus on the specifics of my perpetual giving machine.
More Readers
In keeping with the plan to hit financial independence this decade, I want meaningful work I can do when I get there.
In the past year, I’ve built a small audience by writing consistently, learning about email lists, search engine optimization, and what makes online writing attractive.
If I can continue this trajectory over ten years, my progress will compound to an audience I can leverage in many ways.
Ten-year vision: By the end of the decade, I plan to have an email list with at least 50,000 recipients.
One-year pieces: I’ll evaluate my progress at the end of every year to determine if I’m making the progress I need to make. If so, I’ll double down on what I’m doing. If not, I’ll experiment with other methods.
My quarterly steps and weekly actions are subject to change based on my annual reviews.
This is the summarized version of this very insightful article, read the full version here
And as always, if you enjoyed this, check out the rest of our daily snippets, curated daily, right here on The Red Notebook.
