Taking Charge Of Your Financial Future

The Irish Dark Ages last for approximately 400 years (!) – from approximately a century before the birth of Christ until approximately 300 years after that. It was an astoundingly poor period in which twenty generations of Irishmen failed to improve their lot in life, meaning that a young boy born in Ireland in 300 A.D. could honestly say, “My life is no better than that of my great, great, great, great, great, great, great, great, great, great, great, great, great, great, great, great, great grandfather.”

As motivation, it is important to remember that the world truly owes you nothing. If you want something, you will have to take charge of it right now, and there is no moment fully in your control but the present. You can’t delude yourself into thinking there is a self-propelling aspect to success—i.e. you can’t develop an inner monologue, “In ten years, this will all work out” unless that monologue is coupled with present action aimed at getting you there.

Taking charge of your life involves making three decisions at regular intervals:

  1. You either produce or you don’t.
  2. You either consume all (or more) of what you produce, or you don’t.
  3. You either put the surplus to work or you don’t.

That’s it. That is the formula for financial prosperity. Everything else about finances you encounter is a strategy for maximizing one of those three things. And if you aren’t doing those things, you will stagnate financially and your reality will become your own version of the Irish Dark Age.

You have to work and make money. You have to spend less than you make. Then, you have to do something intelligent with the surplus that remains. Most of this blog is dedicated to that third element.

I get a kick out of people who are criticized for underperforming the S&P 500 over a given period of time. Sure, if you’re dramatically underperforming, a re-evaluation of your strategy may be in order. But for most people, the point isn’t, “Am I surpassing this rabbit that everyone else talks about quickly enough?” Instead, the inquiry is: “Am I actually compiling assets that will sustain wealth to purchase food, cars, homes, school tuitions, and eventual retirement expenditures?”

The advantage of successfully executing upon the “do something intelligent with the surplus” element is that it reduces the pressure of what you need to get out of the first element (your own labor production). If you entered 2018 with 2,500 shares of Coca-Cola on behalf of your household, that is $3,900 in dividends and $5,200 in total economic profit being generated without any labor commitment on your part because you are collecting a small share of selling beverages to the world.

If you earn $30 per hour, that ownership stake represents approximately 130 hours of labor that you don’t have to do, but yet, you deservedly receive this benefit because you have chosen to save rather than spend and you have subjected yourself to the business performance (for good or ill) of the companies in which you choose to invest.

In some years, the U.S. savings rate is at or near zero. It has never crossed 10% of savings for a sustained period of time in modern memory. When there is no savings, the pressures of stagnation become immense because it strains your entire life outcome on your labor. Messages of frugality are generally unfashionable but are immensely more useful than the alternative of biding your time day in and day out without advancement.