The six best personal finance lessons from a guy who still drives a battered 2008 Toyota Yaris

The six best personal finance lessons from a guy who still drives a battered 2008 Toyota Yaris

My sheet metal shed on four wheels symbolizes my entire financial strategy…

Author Image — Can You Feel My Happiness?

A car pays for itself with your time. Why trade time for a pile of metal that will lose value faster than a ship’s anchor in the sea? —Tim Denning

I feel happy every time my 14 year old car squeaks when I turn on the engine.

I paid $4,000 in 2018 for this piece of mind, and the deafening sound of my failed timing belt (which I will get fixed) is a daily reminder of the rock-solid financial strategy I have in place.

While most people my age go into over-indebtedness for big houses they can’t afford (or don’t need) and buy new cars to impress people they don’t like, I pretended to be poor now to create a rich financial future later.

Here’s why.

Accumulation of assets > Accumulation of liabilities.

My sheet metal shed on four wheels symbolizes my entire financial strategy:

Invest in assets (and) reduce my debts.

For my net worth, I can easily afford a better car. But I choose to use any extra money to invest in assets rather than another passive with cruise control.

Why accumulate assets? Well, because:

  • Assets put money in my pocket. The passive takes money out of my pocket.
  • Assets appreciate over time. Liabilities depreciate over time.
  • Assets make your life easier. Responsibilities complicate your life.

Common examples of assets:

  • Stocks, bonds, index funds
  • Cryptocurrencies such as Bitcoin or Ethereum
  • Rental investments
  • Invest in online courses, books, podcasts, coaching

Common passive examples:

  • The car you drive
  • The house you live in
  • Most material goods
Source: Focus Invest via Twitter

My willingness to accumulate assets means I never have to worry about my retirement. My boring and lazy strategy also means that work will become optional before I turn 50.

The psychological freedom that this financial security provides allows me to take more risks in my twenties and thirties.

I started my own six-figure consulting business, hired a contractor to help build a digital business, and plan to build a suite of digital assets in the near future (more details below).

Lesson 1: Spend your life accumulating assets and time is your friend. Spend your life racking up debt and time is your enemy. As my grandmother used to say, make more friends and fewer enemies.

Photo by Ishan @seefromthesky on Unsplash

Most People Don’t Understand How To Make Money With Wi-Fi

There is an uncommon asset class that most people don’t mine: businesses and digital assets.

These include creating e-books, podcasts, templates, checklists, newsletters, and social media accounts that you can sell on the internet.

As Naval Ravikant said:

“Code and media are permissionless levers. They are the lever behind the new rich. You can create software and media that work for you while you sleep.

Digital assets are great because they:

  • Are without authorization to acquire. You can leverage the internet to create a portfolio of digital assets. There are no guards and few barriers to entry.
  • Come with a limited inconvenience (i.e. only time) but unlimited benefit (i.e. virality). You cannot sell negative e-books or get less than 0 listeners on your podcast. But it only takes one piece of content to go viral and change your life.
  • Invisible and portable. Digital assets can be created anonymously and sold while you’re sitting on the beach. They’re inexpensive, inventory-free, and don’t require you to be there in person.
  • Unlimited leverage and infinite monetization. Digital assets can be created once and replicated a trillion times for $0. Create once, cut many times. A blog post can be a script for a YouTube video, or a Twitter feed, or compiled into an eBook.
Naval Ravikant by Twitter

With digital assets, there is no guarantee that you will make money. But there is also no limit to the amount of money you could win.

You don’t think you can do it? Good…

If you write emails, create PowerPoint presentations, or record Zoom meetings in your 9-to-5 job, you’re a digital asset builder. Congratulation.

Now, instead of making them for your employer, start making them for yourself.

Lesson 2: If you’re not using the internet to build a portfolio of digital assets (to trade for financial assets), you’re living in the Stone Age.

Use your money to maximize this value, not your ego.

Instant gratification is a cancer for your personal finances.

Left unchecked, it will grow to infect every part of your life. Not just your bank account. Until you learn the skills to delay ego satisfaction, you will never create wealth.

I could drive a shitty car, but it gives me financial options. Since I don’t have car reimbursement, I can use the extra money to start an online business or invest in assets.

Morgan Housel said it best in his book “The Psychology of Money”:

Wealth is created by removing what you could buy today in order to have more stuff and more options in the future.

Photo by Morgan Housel on Unsplash

Most people my age who drive nice cars have become debt slaves. Or if refunds are manageable, they constantly worry about where they parked their car or if it will be damaged or stolen.

I value my psychological freedom too much to worry about an expensive tin can on four wheels.

Do not forget that :

“Every purchase you make today reduces your options in the future.”

– (Source).

Lesson 3: Use your money to buy your freedom, not to stroke your ego.

Be a reasonable Randy, not a rational robot.

Being in my late twenties, I can afford to invest in riskier products. But the thought of my investments rising and falling overnight would give me night terrors.

I choose to invest for the long term in overly safe Vanguard index funds. I rarely check performance and average dollar cost in selected indices despite what the world is doing.

Rationally, this makes no sense. I should invest in riskier asset classes. I have time to recover if things are not going well. But I don’t want to be 100% rational all the time when it comes to my finances.

Simpsons GIF via GIPHY

Ultimately, I’ve built my personal finance strategy to support the lifestyle I want, not the other way around.

Rational? Probably not.

Within reason? Absolutely.

Lesson 4: Create your investment strategy to improve your life, not destroy it. The best financial strategy is one that lets you sleep at night.

Focus on making more money, not cutting expenses.

One year, I decided to drastically reduce my expenses.

I had about $25,000 a year in living expenses and through a lot of effort and sacrifice I found a way to cut 10%. I stopped buying coffee and reduced the amount of food I ate. I saved about $2,500 that year. Not bad.

In 2021, I decided to focus on making more money by monetizing a podcast and diving headfirst into writing online. I increased my income from $105,000 to $140,000. I made $35,000 more last year.

This simple change in mindset taught me that cutting my $5 latte or my smashed avocado on the weekend won’t make me rich.

But earning more money will. Also, the quality of my lifestyle will not be affected.

Lesson 5: Reducing your expenses quickly leads to diminishing returns. Manage your expenses. But spend most of your time and energy earning more money.

Money is attracted to property.

“You’re not going to get rich renting out your time. You must own equity – part of a business – to earn your financial freedom” – Naval Ravikant

When I was employed in my 9–5, I had to beg, borrow and steal for a 10% annual raise. And once I got it, I felt like they were doing me a huge favor.

“Work = Jjust Osee Broke”—Robert Kiyosaki

My workload doubled and I had a lot more responsibilities. When you factored that in, I was losing money.

In 2022, a 10% increase barely covers the rise in inflation and interest rates.

Now that I own my own business, I increased my client rate by 15% and gave myself a 20% raise trimester.

If your financial trajectory can be dictated by a bad organization or boss, you will never be financially free.

Source: Tim Stoddart on Twitter

Lesson 6: Wealth is built by owning, not renting. Become a magnet for money through equity building and business ownership.

In conclusion

Don’t let anyone tell you that money isn’t important. Because it is.

But don’t let money rule your life either.

As Robert Kiyosaki says, “The love of money is the root of all evil. Lack of money is the root of all evil.

Most people fail to build wealth because they don’t understand the rules of the game. Imagine trying to play basketball without knowing what a double dribble is.

Once you know the rules of the game, you have a better chance of winning. And once you’ve won the game, you can choose to stop playing.

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