As I’m building this site, most of the posts cover dry topics like investing, using a Stealth IRA or executing a backdoor Roth IRA. While it’s important for you to get the facts so you can make good decisions, it’s going to be harder for you to actually execute these strategies. Chances are high that a lot of people will read these words, decide they’re good strategies for somebody else and then keep on living their current lifestyle.
Why is it so difficult to achieve financial independence?
If you want to achieve financial independence, you’ve got to really want it.
You’ve got to really, really want it.
I recently finished reading How to Get Rich by Felix Dennis while on a beach vacation. It’s a wonderful account of making millions of dollars by the man behind The Week and Maxim magazine. He said it best:
How to Get Rich is an “anti-self-improvement” book—because it admits openly that the chances of anyone reading it and then becoming rich are minuscule. The vast majority of you are far too nice. And comfortable. And sensible.
He’s talking about YOU dear readers. You’re far too nice, comfortable and sensible to reach financial independence.
They are missing the combination of willingness to delay gratification, interest in learning about finance and desire to develop the budgeting skills required to save enough of their income to build wealth.
They lack the passion of Patrick Henry to “Give Me Liberty or Give Me Death.”
This is hardly surprising. You’ve got to decide whether you’re “in” or “out” when it comes to financial independence. There is no middle path.
It’s much more comfortable to continue along as everyone else is doing. The world is set up to support your choice to continue as everyone else is doing.
The only way to be different IS TO BE DIFFERENT.
You have to really want it
How much time do you spend thinking about financial independence? Is it a passing thought or do you think about it every day? If you’re not thinking about financial independence once a day, you’re never going to achieve it. This isn’t a set it and forget it plan.
You’ve got to be focused on the numbers every single day.
Let me tell you about one lawyer I spoke with the other day. He told me that the only money he could really save was his annual bonus. Everything else got used up during the year because living in a big city is expensive.
That guy is not going to be financially independent any time soon.
Contrast him with Thoughts of an Anonymous Lawyer, a junior partner at a big firm who blogged about financial independence for seven years before quitting with nearly $2,000,000 in the bank.
Which lawyer do you think is traveling around Southeast Asia right now?
How to get rich
If financial independence is appealing to you – and it should be even if you want to continue practicing law – you need to get a handle on a few things:
- Believe in Yourself. You can do this. You have the resources to pay off your student loans and reach financial independence. You have a JD that can be put to good use and even the lowest paid in the field tend to make at least the average US salary. I won’t pretend that it’s the same road for a public interest lawyer and a Biglaw associate, but 80% of financial independence can be achieved by lowering your cost of living anyway, so it’s certainly within reach of anyone with a JD.
- Learning Takes Time. It’s impossible to absorb all the information you need to know about budgeting, investing, retirement accounts, etc. in 1-2 months. Even a year is aggressive. You’ve got to give yourself permission to learn over time and be open minded about new strategies and tactics (because there is no right way to do it, that’s why they call it personal finance, it’s both PERSONAL and FINANCE). Incorporate the learning into your weekly or monthly life and you’ll find success over time.
- Delay, Delay, Delay. There are going to be some sacrifices. I have a couple of suggestions. One way to look at the world is that you own everything. Imagine that everything in the world is yours. The catch? Other people are holding it in storage for you. For a small (or large) fee, they’ll retrieve it from storage and hand it to you. Deceptively simple, but it might help refocus your attention away from feeling deprived. My second suggestion is to simply delay purchases. When you want to buy something, put it on a list, and revisit the list in two weeks. Chances are high that you’ll have less desire for the purchase in two weeks. Still want it after two weeks? Wait another month. Studies have shown that we appreciate things we wait for, so even if this is an eventual purchase, you’re actually increasing the feelings of happiness you’ll receive when you make the purchase by delaying your gratification.
- Change your Mindset. Too often people are focused on a scarcity mindset. This site isn’t about scarcity. It’s not about reducing your expenses to zero to save 100% of your income. Instead, we embrace an abundance mindset (remember just a few second ago when we were talking about you owning everything?). Again, I’ll turn to Felix Dennis who nailed it:
So this is the first lesson in the power of focus. Keep your eye on the ball if you wish to get rich. And do not forget which ball. It’s the one marked “The Money is Here.”
- It’s Not the Idea; It’s the Execution. Ideas are a dime a dozen. Facebook? Google? Uber? None of those companies had a good idea. It had all been done before. MySpace? AltaVista? Hailo? Those are the same companies that didn’t execute on the idea. Do you think simply having the idea to become financially independent is enough? No. the idea is worthless on its own. You’ve got to execute. You have to set up the financial systems. You have to capture every reimbursable expense. And those systems take time, understanding and patience to put in place. It’s not a 1 day task. But that’s okay, because you’re not a 1 day reader, right?
- Get Sick of Practicing Law. I meet countless lawyers who hate practicing law (and many who enjoy it). And while I’m in the enjoyment camp, I’m absolutely baffled by the people who “hate” the practice of law, yet live by themselves in fancy apartments, owe tons of money in student loans and just generally seem to have a great disconnect between their feelings and actions. Talk about cognitive dissonance! If you really hate practicing law, then get out. This couldn’t be more true for Biglaw lawyers blessed with an incredibly high salary. If you’re going to make over $1,000,000 in your first five years of practicing law, you have a lot of flexibility on getting out of the game with a fantastic financial foundation. So if you really hate practicing law, act like you hate it!
- Debt is Not Something You Live With. Student loans, car payments and mortgages are not something you live with for 30 years. At least not if you want financial independence. Let’s face it, your debt is an emergency. It’s not something that you “work on” and “figure out”. It’s a giant monster trying to kill you – or worse, get you comfortable with indentured servitude. If you treat debt as a normal and ordinary course of doing business, you’re in for a long ride. This means that even your student loan debt at 3% interest is a problem (refinancing student loans isn’t enough, you still have to make the actual payments). You have to keep working to make the monthly payments. Now, we can argue all day long about whether it’s better to pay off the 3% to get the guaranteed return vs investing in the stock market, but the point is that if you aren’t building up a taxable investment account that could wipe away the debt at any moment, you’re playing the sucker’s game and miles away from achieving financial independence.
Saving is not an option
We treat our savings as a mandatory part of life. How do we do it? By choosing an artificially low income that gets sent to us each month. Everything else goes to Vanguard. That goes for retirement accounts as well. Not maxing them out is not an option.
It wasn’t always like this though. I had a good solid two years floundering about, feeling like an imposter in Biglaw, wondering what my next move would be and thinking I needed to hoard cash to give me options. During those times, I focused on paying down debt in lieu of retirement savings, but made some fundamental human psychology mistakes like thinking I was winning by making $2,000 monthly dents to my student loans (to be fair, since private loan refinancing didn’t exist, I was also paying well over a grand in interest each month). This site is certainly aimed at helping the new kids on the block understand the long term play.
Joshua Holt is a practicing private equity M&A lawyer and the creator of Biglaw Investor. Josh couldn’t find a place where lawyers were talking about money, so he created it himself. He convinces the student loan refinancing companies to give you cashback bonuses for refinancing your student loans and looks forward to you discovering how easy it is to track your net worth with a free tool like Personal Capital.