Working More Than Necessary

This post will only be applicable to those who don’t absolutely love their jobs. That should be around half of the readers (1). You may, therefore, skip this one if you are totally satisfied at work.

Not long ago, I quit my first real “adult” job, because I wasn’t happy there.

After having been there for more than 2 and a half year, I was realizing that the hamster wheel wasn’t getting any more enjoyable, and if I was ever going to become as “happy” as my co-workers, I would have to become a lot less happy myself.

For the past year and a half, I had been on this minimalism journey too, where I would carefully evaluate everything I did financially, judging it by how happy it made me.

In which ways did I spend money, that didn’t make my life happier or better?

In which ways did my spending actually create stress and worries?

I still haven’t perfected the optimal lifestyle yet – where every dollar I spend is completely worth it – but I sure have come a long way since the beginning.

By way of this thinking, it suddenly occurred to me, how a big percentage of my monthly paycheck was beginning to end up in my bank account, untouched, because my expenses were radically decreasing. I was putting aside more than half of my salary for many consecutive months, and it dawned on me that I was doing much more work than I needed to, in a job that I did not like at all!

So I decided to quit .

Now, I’ve switched to a part-time position, as a personal trainer, which is actually much more enjoyable than my last job, and I earn just about enough to cover my monthly expenses.

This new job doesn’t come with the same amount of social status and approval from my parents in law, but that is just something I/they will have to get over.

The best part is that I’ve now gotten the time to work on stuff, that I actually love. I have a ton of projects that I would like to start working on, just because I want to, and whatever they end up paying me is pretty irrelevant.

As an example, this blog post is probably going to earn me a very small amount of money over it’s lifetime, with the Google ad I put in it. However, that should be regarded as an added bonus, as I would have written it no matter what the earning potential was.

The main point is, that I am now doing exactly the amount real “work” that I need to. Not more.

This strategy frees up a lot of time to do exactly what I feel like, and I may even think this could be the smartest decision, in terms of earning money, in case one of my passion projects end up a success.

So far I am happy with my decision to not work more than necessary.

To get a first class life, you need to start living a first class life… Or what?

The headline above is aimed to describe an ideology that sometimes is able to threaten the confidence I have in the frugal lifestyle that I lead.

I recently heard the world-renowned strength coach Charles Poliquin say something to this effect, on the Tim Ferriss podcast, and he gave the example of his airplane travelling between the seminars he gives all over the world. He explained, that he always makes it a point to fly first class, to ensure that he gets a good night’s sleep on the plane, so he can show up refreshed for the seminars and give a first class performance, which ultimately results in repeat business with the customer. And it makes total sense, right?

To my ears though, what he was actually saying, was that the first class tickets were an investment that generated a long term positive return – and that you can’t really argue with.

But I think we should be careful not to oversimplify this idea, unless we want some impressionable people to get hurt from the advice.

Say I, as a young man, who is just getting started with life, goes out and takes an expensive loan to buy a Lamborghini, with the thought in mind that it will raise my overall standard of living. Maybe this expensive sports car can enhance my social status, which will allow me to establish relationships to rich people, who has business opportunities that I can capitalize on, and thereby be able to pay back the car. Is this a possibility? Probably! But what you may also call this, is “betting on dumb luck”, and I think that it may even slightly resemble some other popular self-help concepts such as The Law of Attraction and The Secret.

But I know a guy, who one day decided to start living the good life, had no basis for it, and suddenly had all the best things in the world flowing towards him”. This is called the survivorship bias. You probably also know a lot of other people who went bankrupt because they tried to jump 10 steps ahead in the game, without being particularly calculated about it – those examples we tend to forget.

You see, there is no luck involved in the case of the strength coach I mentioned before. He will hop on an air plane, check in to a hotel, give his lecture and go home again. All steps throughout the process are already known from the beginning. The first class tickets are just a way of optimizing this process (you may even define it as improving upon the value chain that is the product he delivers).

In the case of the Lamborghini, we are just optimizing or even amplifying uncertainty, instead of a known process, and that can only result in extreme outcomes – most likely a negative one.

I think the key lesson here, is that we should learn to be more calculated than just taking mindless head-dives into economic uncertainty. We should even be aware, that a luxurious lifestyle can hurt us sometimes. For example: the marketing genius Seth Godin talks about how he had to stop wearing expensive suits early in his carrier, because it resonated badly with the type of people he was trying to establish partnerships with.

In short, the better we are at anticipating the future, the more success we can expect. But hoping is never a strategy.

If you carefully estimate that a 1000-dollar suit is going to a give you a great return on the investment within the near future, then by all means, go ahead and buy it. But if reality says, that a 200-dollar model will get the same job done, I think only a fool would count on the law of attraction to do any other magic than just hollowing out one’s bank account.

The examples of the strength coach and the Lamborghini are opposite extremes of a spectrum, but we should always be careful not to lean too much towards the latter.

 

Thank you for reading

Max

Personal Income in the 21th Century

I think the whole landscape of personal income has been completely revolutionized over the past 5-10 years, and I don’t think reality has caught up to the average person yet.

Here is why:

Recently, a colleague of mine announced that she was leaving her position at the company, and all of our colleagues got severely surprised. Leaving her job seemed liked such a bold, and even irresponsible move to some of them – primarily because she didn’t have a concrete alternative job offer. This, in itself, speaks to the fact, that people has not yet realized how insanely fragile and temporary regular jobs has gotten today, however, they are still living in accordance with the belief from the 50’s, that you should work in the same factory all of your life.

Innovation and technology are now eating up regular jobs day by day, piece by piece – and faster than ever. This means, from now on and in the future, the job of the humans will be to do some optimization and modifications of whatever the robots are doing, put a human touch on a process, and then get out of there as quickly as possible. A much greater sense of volatility in the job market is to be expected, and only more so as time goes on.

The very great news is I don’t think our options for providing for ourselves are worse now than before – quite the contrary – as long as we manage to adapt. We will just have to accept the fact that the income of our lifetime will be coming in from many more streams than before, and that requires us to take a greater deal of responsibility for ourselves.

The ways in which the average person can now generate income has exploded via endless services that have sprung up on the internet recently, and there is a seriously broad catalogue of income streams to choose from. Of course, one can still take a job and see how long that will last. But now, you can also drive your own car for money, rent out your apartment, write a blog and use Adsense, take care of a pet, work as a mechanical turk, fill out surveys, buy stocks on your computer, sell your old crap or sell any service you like for 5$ a piece or do a quick bid on a gig on one of the many “gig-sites” there are out there. These are just the options I can mention off the top of my head. I’m sure there is a million others ways out there.

The message is that any dummy can make money without a boss now. All you need is to start, experiment and see what works best for you.

To be completely honest, it is very difficult to make a satisfying living on the internet, without embarking on a crazy entrepreneurial adventure. But what I am saying is, that it is now within everyone’s reach to ensure, that they don’t die from starvation, while not being at the mercy of a boss in a big company. We have so much more solutions to the same problem today.

This is where the responsibility for our own fate comes in. Now, more so than ever, we need to make sure, that we cut expenses, avoid bad (or any) debt, and handle our personal finances conservatively. This is how we can know that the new world of personal income will sustain us. We cannot finance crazy investments any longer, like grandiose house purchases or uneconomical cars. Items like that should only be bought when there is no longer a shred of a doubt about our ability to afford them.

The 21st century promises an exciting time ahead, where jobs, income, and entrepreneurship is much more democratized, decentralized and on our terms. But nothing will neither be given out for free any longer. We will be completely responsible for every cent that we earn, and that is both freeing, motivating and scary as hell. Financial success will be even more available to the person who is willing to work hard in the 21st century. And it will be accomplished in many new and exciting ways, that we still can’t even imagine yet.

 

//Max

Your Money Under Control with the Champagne Tower Analogy

In becoming a better minimalist and living more intentionally, I have realized that we humans need rules and system in place to ease the daily burden of decision making.
We should spend less money on unnecessary stuff, and direct our energy towards the more meaningful parts of life. However, society and TV-commercials have a tendency to persuade us to do otherwise, and their influence is exactly what we need to resist – with daily rules in place to help us live better lives.

Life can be chaotic and frustrating sometimes, but personal finances is actually an area where we can be in control. So setting up guidelines for how we manage and spend our money can be extremely liberating and ultimately a good business decision.

The problem is, most people spend their money according to their gut feeling. They’ll say: “I think I deserve to go shopping and buy some new sneakers” or “I haven’t treated myself in a while – therefore I should”. Meanwhile, they’ll go out and do these things, without feeling completely confident, that now actually is the time to treat themselves. They are not necessarily sure that their gut feeling is correct. But oh well, they have done this a 100 times before, and always managed to pay the rent the next month somehow – so what the heck!

I say this is a non-optimal way to act, and for 3 reasons:

– Firstly, this way of thinking comes with a decisional cost. You have to make the decision, whether or not you “deserve” a treat every time you buy something. And as we know, decisions are a finite resource and should be conserved when possible.

– Secondly, there is always a build-in guilt component to basing your buying decisions on “deserving it”. Since you are more likely to buy something on impulse, when you are your weakest, you are also more likely to feel guilty about your choices afterwards. 

– And thirdly, in this context, most of us (me included) have a propensity to spend a little more than we should, because we tend to lose track of our long term goals when we find ourselves in a shopping mall.

So we obliviously need another way of thinking about this. And I like to use the Champagne Tower Analogy.

It works like this:

In a champagne tower, the second layer of glasses won’t see a drop of champagne before the first is completely full.

I call it “extreme prioritization”, because the second layer of priority is completely ignored until the first level has been fully attended to.

Now think about your monthly expenses in terms of extreme prioritization.

First, you make sure that you can feed yourself in the coming month, when you get your paycheck. Not until you have money for food, do you have money for anything else!

Afterwards, you might think about how you can put a roof over your head.

Not until you have money for a place to live, do you have money for anything else.

And so on….

I assume you already do something like this unconsciously, but my suggestion is to KEEP GOING! Until the very end.

Keep adding to your list until you have all of your priorities listed.

Maybe include some things you are saving up for, or loans you would like to get paid off quickly.

Make sure to prioritize everything in its correct order, so you will always fill up the most important champagne glass first.

Whatever “spills over from the champagne tower”, you may buy jeans or booze for.

Unless you have made jeans a priority in the tower itself of course.

I have personally set it up so that everything that is left after my champagne tower has been filled, will be split up into 3 equal amounts: Vacation, Invest, Have fun.

The Have fun part is for going out and buy my jeans.

This completely eliminates all feelings of doubt of when I might deserve to treat myself. I know exactly what I deserve, because all the important stuff has already been taken care of.

One more tip: I have opened up a lot accounts in my bank to make this system work for me. I get the feeling that my bank finds it annoying, but they have accepted it.

I think though, you could easily get this system to work with a single bank account a spreadsheet.

Hope you guys found this to be helpful. Have a nice day!

Minimalism, Step 1 – Functionality

Welcome to the first post in my mini series about Minimalism.

I have decided to write about it in depth, as it has come to affect my life in a great way recently. Minimalism has enhanced everything that I do, so I therefore thought I would pass on some of the love and tips I have discovered within it.

Læs mere Minimalism, Step 1 – Functionality