While most people focus on hitting financial benchmarks, increasing the quality of their friends and moving up in the game of life… to do so requires a lot of losses. It would be great to be Money Mayweather. Undefeated. But… What you don’t see are all of the “losses” he takes outside of the ring: sacrificing family time, training at insane hours every single day, film study, self study, etc. Since everyone will take losses we’ll attempt to outline 1) how to deal with said losses and 2) how to avoid “life changing losses”.
Small Scale “Losses”
These losses deserve to be in quotes because a small loss is generally part of learning a new skill. It can also be a loss attributed to temporary bad luck and a quick cost benefit analysis.
$3 Cab Fare Ripoff: Anyone who has spent some time in foreign countries has gotten burned for a few dollars at least once (okay, more like 10+ times). The amount is always negligible. Instead of getting *emotional* over the event, you have to take the loss and move on. Reiteration…. “Take the L”.
Eventually you will have a few trusted cab drivers and it won’t happen anymore. There is no point in arguing over the $2.75 gringo surcharge. The negative energy generated by getting upset over the “gringo tax” just ain’t worth it. Never will be worth it.
While you *should* be allergic to getting scammed. $3 is not an amount worth fighting over. It is not worth the headache. Use this as motivation to find a good driver and a good set of acquaintances in the future.
Head Turn Rejections: These rejections are now hilarious. For one reason or another, the girl looks at you and burns you within 0.17 seconds to increase her self esteem. You know the answer. *Genuine* laughter and onto the next.
The funny part about dating is that once you reach a certain level of value… none of these head turn rejections impact you. They also don’t register as you become desensitized to any rejection in general. Naturally, these types of losses are also *most common* with lower value men since they give off a push-over vibe. In the rare instances that it does happen, simply “take the L” and laugh.
The Awesome Feeling of “No”: If you want to take your first baby step towards success… Desensitize yourself to the word “No”. Why? You are going to hear this a lot if you work in *any* form of sales.
Every single time you hear the word “No” you’re one step closer to hearing the word “Yes”. In fact, we’ll go further than that. If you’re not hearing the word “No” on a daily basis, you are not improving. Take out your iPhone and set up a daily calendar notification.
“I must get someone to say no to me at least once today”
Eventually you won’t need the notification, but the point is clear… If you’re not getting the word “No” on a daily basis… How can you possibly improve? It is not possible. Even if you’re much older and have a long list of clients, you should still spend at least *part* of your day building up future clients. This is a great way to see if someone is full of it as well. If someone has *not* failed at anything they are, with certainty, not good at anything.
Embarrassing Learning Curve: You should already know what we’re going to write here… Look no further than old posts here or our previous design! When you start something brand new you’re going to suck! This is all part of a big learning process and you should be okay with being embarrassed *at least* once every three months. Unlike the “awesome feeling of no”, embarrassment is usually a feeling of recognized incompetency.
The learning curve is always the same: Incompetent -> Knowledge of being Incompetent -> Basic Competency -> Unconscious Competency -> Third Party acknowledgement of talents. When you recognize you’re incompetent you usually feel embarrassed and it is your job to push through to basic competency.
This will keep you humble in real life. When you are willing to be seen in a state of incompetence it is going to be very difficult to let your ego and narcissism get to you over the long-term.
Physical Losses: How many time should you train until failure? We believe once a month is adequate to avoid injury. One day every single month you should train until physical failure to understand that you are not invincible. Physically.
They are several ways to do this: 1) lose in fight – boxing, wrestling, MMA, 2) train in the weight room until exhaustion – unable to do a single rep, 3) take up an individual sport and get crushed – tennis, golf etc.
We are sure there are many other examples (feel free to add them) but you should push your body physically to recognize that 1) you are human and 2) there are always people better than you – physically. Similar to learning something new and suffering embarrassment, recognition of physical limitations is also a humbling experience.
Concluding Remarks: This piece is short and sweet. The readers of our blog are self motivated and don’t need a drill sergeant yelling at them to “get off their butts”. Instead after skimming the five items above it would be smart to do a quick check to see if you’re lacking anywhere:
1) Are you easily angered by meaningless $2-3 events? If so, start practicing basic emotional control.
2) Are you easily rattled when a girl turns you down? If you’re over 22 years old… You have either lived a privileged life (need to fail at something life changing) or you need to talk to at least 100 girls.
3) Are you upset by the word “No”? Get some form of sales experience… Starting… Yesterday!
4) Have you embarrassed yourself in the last three month? Either you are completely desensitized and realize you are human or you are unwilling to learn new things. Get out of the comfort zone.
5) When is the last time you pushed your body to the limit? No that is not meant to be a cooky motivational question. It means when is the last time you realized you’re not an amazing physical specimen? Get out there and find someone better than you and realize there is always room to improve.
Medium Scale Losses
Now we’re onto the good stuff. After many years of living you’ll find that *everyone* suffers medium scale losses. These hurt *a lot* and we believe they are unavoidable. We are going to try and outline some basic ones and how to limit the potential loss… But the reality is that everyone is going to slip up. Get ready to “take the L”.
Business Taxes: When you start making money off of your business, the pain you feel when you pay Uncle Sam is going to be immense. Incredibly so… is an understatement. The worst part? We’ll go ahead and wager that you’ll eventually make a tax mistake.
Form an S-corp not an LLC. Honestly… practically everyone is going to go through the same growing pains. They form an LLC because it is the easiest way to get your first business up and running… Then… the pain comes. You realize you paid 15% (or more!) in taxes – self employment tax buddy! If you generate $200K in income per year… That is $30,000 USD for nothing. You are paying an extra $30,000 for public services you don’t use and meals for prisoners (no joke). If you have kids… we will go ahead and bet that you’ll send them to private school instead of the horrific public school system!
While we have highlighted the importance of an S-corp twice, here are some basic house keeping tips: 1) Once you clear ~$75-150K in income, get an accountant, 2) Keep every single receipt for your business, everything from that dinner bill to your cellphone bill… keep it *all*, 3) take 2-3 days out of the beginning of the year and read up on tax code changes. No exceptions to any of these three rules.
Personal Taxes: If all of your income comes from a W-2… There is not much you can do. We would say your best bet is to avoid *exchange taxes*. Any time you move a large sum of money there is a high probability that someone is going to take a cut. As an older mentor once said “Stay in the flow of money and you’ll get rich”. It is true. When large sums of money change hands, someone is usually picking up a fee.
The easiest example here is any sort of rollover. Lets say you roll over money from one investment account to another. If one is pre-tax and the new one is post-tax… Make sure you look up the rules on *timing*. If you start your career in New York city and move to Texas… Wait until you officially live in Texas before moving the assets. Simplistically, if you move a 401K into a Roth, you are going to pay *both* state and federal taxes. Texas has *NO* state tax! This means you should not roll over a single cent until you are officially in Texas. ~7-9% in taxes saved! (this may or may not have happened to one of our authors)
The Wrong Hire: Wall Street recruiting usually consists of ~5-7 rounds of interviews, if you thought recruiting was brutal… Wait until you are on the other end of the table! If you hire the wrong person it is going to cost you *at least* $100K. That is not an exaggeration. Now you know why everyone is so intense and risk averse.
Why does it cost so much? Think about it. If it takes 1 month to find a new hire that is lost time. Lost time is lost revenue. In a competitive industry like Wall Street an extra recruiting headache is worth *at least* $20-30K/month to you. In addition, you have to train the person. It takes six months to train a new hire! Even if the new hire is experienced, the training period is still ~6 months.
Lets add this up. $25K search cost + ~6 months of training (assuming base salary of $120K) = $85K
That is just the tip of the iceberg! Lets add on the additional cost of firing a new hire… After 6 months, you have to use political capital to fire them and you look like a poor decision maker! This is a hit to your reputation that is more costly than the $85K!
How do you avoid this at all costs? The answer is you probably won’t. But. Here are a few tips to improve your hiring practices: 1) create an examination – make the examination extremely specific to what *you* want. If the person naturally thinks similar to you, it will save you a lot of headache; 2) have at least two junior people and two senior people give their opinion as well. Listen to them. Your team is going to see if you have any biases towards the candidate; 3) look for tenure. If someone does not move to a new position every year, chances are they are serious about the profession and your current opening.
Loss of a Close Friend: Successful people have an extremely small set of people that they truly trust. This is for good reason. There are very few people worth calling friends and they are less than 1/1,000,000. You are going to make at least 3-5 incorrect judgements with regards to character.
Some more bad news. If you have over 10 “friends” that you truly trust… We will bet every single penny that *at least* two of them are not really friends. You just haven’t given them an opportunity to show their true colors.
Once you get burned once, you need to move on. There is no way to mend the situation. Instead of harboring anger towards the person, you can be tolerant if you run into them in the future, but do not trust them with anything.
“Fool me once, shame on you; fool me twice, shame on me.”
Under no circumstances do you give them a chance to fool you again. Let them live with the shame of being an untrustworthy individual. Move on.
Serious Physical Injury: By the time you reach the age of ~30 you will likely suffer from *at least* one physical injury. Hopefully it is not as painful as Mike’s skin battle. But. Something will likely happen.
When you get hit by the event: broken leg, tendon tear, freak accident, sickness… Do not ignore the injury, embrace it. There is a big difference. If you can ignore the injury it is not an injury. It is simply pain.
Take note of the injury and immediately go to the hospital if it is something clear (broken bone, tendon tear etc.). Then do your own research. If you go through the process of personal research you are taking action and you are embracing the injury. Do not sacrifice your body (health is always the most important part of life).
Once you go through several hours of personal research you will likely find some “out of the box” cures for your ailments. Try them. You will reap the rewards of being in tune with your body as you can will sense your body responding in either a positive or negative fashion! Now you’re much more educated on a new health topic and you have improved your recovery time.
Concluding Remarks: Medium scale losses are painful and unavoidable. Accept that you are not perfect starting right now and you will be well prepared for the pain. Why is it unavoidable? Read between the lines. All of these medium scale problems are due to *missing details*. We really need to emphasize that point. You will make medium scale mistakes due to *missing details*.
You incorrectly lift. You incorrectly judge a person’s character by avoiding details. You breeze through an important piece of the interview process. You focus too much on revenue generation and forget to look at the structure of your business…. It happens. Any time you are *growing* at extremely rapid rates, you’re going to make at least one painful mistake. This is 100% normal. Most smart people pay *too much attention* to detail and miss the most important aspects. Better to take the painful medium scale losses here and there (in exchange for growth) and avoid the catastrophes.
Life Changing Losses
Now we’re onto the more serious items. Avoiding life changing losses. There are very few things that can ruin your life, but if you make the wrong choice it’s going to take years to recoup the losses.
Choosing the Wrong Spouse: We have beaten this into the heads of every single one of our readers. Never get legally married. If you want to have kids… Fine. If you are truly “in love” great. Just don’t involve the government. <– noticing a trend?!
Instead of expanding on this point… you can have a good laugh here and we can move on since we have explained this 100s of times.
Taking on Too Much Debt: Debt is not something you should mess with until you’re able to take the pain of leverage working *against* you. It is that simple. Overloading yourself with debt is a sure fire way to kill your financial future. Debt should have a *significant* return (as explained in our guide to college).
There is nothing worse than the horror stories of 2008. Investment banking associates took their 2007 bonuses… levered up aggressively… and saw a crushing 35% correction that wiped out their net worth AND took their income to zero (fired!). If you are going to lever up… Be smart about it!
Here is a good way to see how much leverage you can take
50% of your monthly passive investments = to monthly Debt payment.
We realize that this is an incredibly risk averse way to think about debt but if you’re taking debt seriously (you should) it is going to yield significant returns for you over the next 10 years. If you have $4,000 a month in passive income then you can lever up to $2,000. This means you have $24,000 a year or $600,000 worth of leverage to play with (value of ~2-3 homes and assumes 4% interest).
All of the doomsday prophets are going to jump in and say “what if your passive income goes down 75%!”… Honestly this is unlikely. Even if there is a 50% correction and your passive income declines by 50%… You’re going to find ways to generate income. Even during the “great recession” top tier talent still found employment.
The Wrong Business Partner: We wish we could elaborate more here but it would give away too many personal details. We will say this. *Do not do business with anyone you would not trust with all of your money. Every single cent.*
If you are going to work in an actual business environment with someone (more cut-throat than anything else in the world) you better trust that person with your life. If you choose the wrong person you will lose hundreds of thousands of dollars *or more*.
Earlier we noted that 10 friends is already overkill. When it comes to business partners? Maybe two. Maximum three. The rest are guys you will “work with” but never *trust with*.
Not Taking Care of Your Health: This is the only thing more important than money and relationships. Health. Health is everything. While we primarily focus on money and social relationships (it’s more fun and our “passion”), you cannot have either if you are unhealthy. Unlike the other items we’re going to give a quick three step process to improve your health.
Step 1) Eliminate all stress. We strongly suggest practicing stoicism. As a commenter noted, here’s a great definition:
“Focus on doing your best and delivering on your full potential. If you do that, all stress is irrational, because you’re doing the best you can possibly do.”
If you are reading this blog you are more likely than not an actual winner. That is not meant to be motivational garbage that poor people read. It is reality. Our writing style is extremely direct, to the point and downright… Brutal. The only type of people who respect this form of prose… Are winners. Why? They are okay with hearing the truth because it is better than being kissed with a lie (main stream media).
Winners do have one issue though… Obsession with perfection. This can severely damage your health which is why it is our number one step to healthy living. Do your best but realize you cannot do *more* than your best. This will take 5 years to master. If you can mentally practice stoicism for five years we guarantee you’ll be *much* happier than you were in your early 20s.
***Pro-Tip: If you work on Wall Street. Find the managing director who is happy (looks his age or younger). Not the psychotic managing director who looks 10 years older than he is and still worries about the pastel coloring (No one is dying bro!)***
Step 2) Diet awareness. Not diet obsession. The difference between the health freaks who look terrible and the health freaks who look great is simple. Balance and stress (another trend).
The best way to create good habits that are repeatable and healthy is to shop when you are *full*. This is counter intuitive. Most people buy things when they feel terrible which leads to poor meal decisions (search for filling items, hence why most people eat carbohydrates when under stress). Instead you want to set aside 1 hour per week where you go health shopping. Buy all the items you need at Whole Foods in one fell swoop and do so on a *full* stomach. Buy absolutely nothing that comes in a cardboard box.
Step 3) Two blood tests a year. One blood test is going to go to the doctor and the other one you’re going to read yourself. Again. If you are physically fit you are going to be in tune with your body. Your journal will also give you an idea of any lifestyle changes. This is going to help you 1) catch any negative diseases early and 2) prevent you from worrying about temporary spikes in specific vitamins.
Concluding Remarks: Notice something specific here… You are not able to “take the L” for any of these four events. There is no reason to ruin your life by: 1) choosing a spouse and involving the government, 2) taking on too much debt, 3) going into business with the wrong person or 4) ignoring your health (ie: your life).
Finally, you may have noticed an annoying phrase in this post: “Take the L”. We did this for a reason. This is a *great* way to make this a fun game for you if you’re a young person. Any time you try something new and your *actual* friend sees you strike out… jokingly tell each other “Take the L”. Eventually people around you are going to realize you think it’s a big joke and it actually *improves* the environment (we’re talking about simple social situations like a dive bar – typical scene in your early 20s).
By popular demand here are the action steps:
– Do not sweat small items. Getting hustled out of $3-5 is not going to impact your life at all.
– You should have no emotional change if you’re rejected by a girl (age 23+)
– You should enjoy the feeling of the word “No”. It means you’re trying to improve in a new area. (Age 24+)
– Do something that makes you feel embarrassed even as you become older and more successful
– Push yourself to physical failure every single month
– Be prepared to take medium scale losses. Accept this as fact and please re-read the section above! Finally, if you were wondering why there was no post this weekend you can thank the government one more time!
– Never pay more taxes than you should
– Have *multiple* people interview *any* new hire. Your reputation is on the line. The money is secondary.
– By 30 you will likely suffer a real physical injury. Train so you’re prepared for real physical pain down the line.
– Under no circumstances do you take a life changing loss: 1) choosing a spouse and involving the government, 2) taking on too much debt, 3) going into business with the wrong person or 4) ignoring your health (ie: your life).