Making transitions in life is probably one of the most under-rated skills. Similar to any high speed sport, the need to change speeds, directions and “run the game at your pace” is a critical skill. This occurs in life as well as we move from cranking long and hard hours to saving/investing to spending as much as we like. It isn’t easy to make transitions because it requires you to learn a new “mental model” or whatever the self-help gurus are calling it these days. Any successful person you meet will talk about numerous big and life changing transitions they have made. We’ll run through this in chronological order.
Shotgun Approach: When you’re extremely young, it is not clear where your skills are. While a few lucky people are born as a child “prodigy”, the vast majority are born with a set of skills that range from 1 standard deviation below to one standard deviation above. The key is to shot-gun approach and try everything you can. After shot gun approaching your life, you’ll find a handful of things where you’re good at the task. The best example is in the physical realm (which is why we will always be interested in sports!). If you find that you’re not very ambidextrous, you’ll probably move into sports like golf and tennis and away from sports like basketball and soccer which require both sides of your body to be used frequently. On the other hand if you find out that this performance difference is immense (for some reason one arm/limb has significant strength), you may end up as a field goal kicker or shot put thrower. Either way, as you learn each and every nuance of how your body works, you’ll decrease the list to select few.
Accepting Reality: This is typically the first failure in making a smooth transition. Many people do not bother to accept the reality of their skillset. If someone would make an excellent tennis player but then focuses on volleyball because they enjoy the sport more… this will typically lead to a disappointing result. Now to be clear, we’re assuming the person is attempting to win and not doing this as a hobby. Since accepting reality now refers to making money, we can apply this to your soft skills. If you’re unable to be a solid software developer/coder, it does not make sense to enter this field today just because it is “making money now”. Instead if you find that sales comes easy to you… it’s time to focus on that segment. Sure a top tier engineer may out earn you, but it’s better than being a bottom barrel engineer and earning less than you would as a top tier sales professional. We’ve seen this mistake many times. We still get the same questions “which career to choose” and the answer is always the same… the one that you will be best at. If you’re going to be one of the best at it, we place the chances of making no money at around 0.0001%. Unless you decide to be a social worker.
Competition Now Goes Up! Assuming you’ve done the first two big steps, you’re now in the big leagues. Competing against other rational people who were able to analyze their own abilities and choose the correct path. Now here is the kicker… The big problems typically begin around this age 18-22. We’ll put a band around it since some of you won’t even bother going to college because you’re already making money! *The Big Problems Are*: 1) getting into a financially responsible situation, 2) avoiding the complete death of your personality, 3) giving up control, 4) sending the elevator back down and 5) re-learning how to spend liberally.
1) Financial Responsibility: This is a big one. It is not possible to know how you’ll react when you start making a good amount of money. This is different for everyone. If you grew up lower middle class and make $100K/year out of the gate… This is going to be a big dopamine rush. We don’t know how you’ll react but most people get a big surge in confidence and… Irresponsible spending and investing. We rarely talk about saving/frugality here because it isn’t the best way to get rich but one thing we can recommend is “learning” how to deal with the large amount of income (large is relative to what you were previously earning).
Interestingly, this happens all of the time from age 20 to age 60. Even if you’re in your 40s… You may get a big one-time windfall and the exact same thing would occur (potential to lose it all through irresponsible spending and poor investments). For those that have made it, you’ll notice that your “friends” or anyone who knows you’re rich will “assume you will foot their bills”. This is how regular people operate. You shouldn’t allow for this and more importantly, if you find yourself doing it … that is an enormous burning Red Flag. People always say “If I had $XXX I would…” this is because they have no idea how much more responsibility they will have. As you move up the chain, it is harder and harder to lay low.
Since you’ll be taking the financially responsible route we continue to recommend Personal Capital. The Company offers *free* software tools that will keep you honest in terms of spending, net-worth growth and portfolio diversification.
2) Maintaining a Personality: This is a topic that is avoided by many: Elephant in the room. For anyone who has at least a decade of work experience (Career and Business owner only), they will recognize that many people give up everything for the all mighty paycheck. They may be incredibly deadly at the negotiation table… But they don’t have much else left after that. Many are trapped in dead-end relationships (marriage or otherwise). Many are out of shape with health problems that will take well over a year to solve. Many live a life of quiet desperation.
We hope that many of our readers already see this (a few years into work or otherwise). If so this is probably the most important pitfall to avoid. We think this life transition is more important than money because a bad investment or two (losing tens of thousands for example, or even a few hundred thousand) can be recuperated. Fixing a bland life that wasn’t living cannot be fixed. We can’t get our time back so there is no way to “undo” the hours of slogging away and living a repetitive life.
Most won’t like this part but we think the easiest way to prevent “personality death” is to spend the first five years (at least) with the following basic rules: 1) stay single, 2) stay out of debt and 3) spend at least two nights a week outside of your work/professional circle. Steps one and three are the hardest. Most are not comfortable with meeting new people on the fly and it is quite easy to get complacent with a normal relationship. The standard path which suggests: 1) college, 2) good career, 3) work hard and meet significant other, 4) locked into a relationship by 30 at latest, 5) kids and 6) death. It seems that this path is so engrained that even financially savvy people fall into the same trap… do the opposite. The best way to avoid it is to follow the outline we gave and watch as your friends and colleagues fall into this death spiral. Once you see how their lives change you’ll have a good grasp of when/if you want to live a more predictable life. *Hint, keep in contact with a few women during your college days to get a good glimpse of what is to come. Generally they will get married much earlier*
If people do not like this outline then we’ll make it easier. Unless you’ve already done everything you would like (personal basis) there is no reason to get trapped in the standard path. Once you’ve done/accomplished everything you wanted to do, feel free to take a look at a more predictable and stable life. For those that are skeptical still, for good measure… Look at the higher ups at your organization (if you have a job/career) and ask if you’d actually want their life. We know what you’re thinking already: No.
3) Giving Up Control: This is where the big money is made. While technology allows us to build massive businesses/organizations with a single person… eventually your time will become incredibly constrained. If you’ve made it to this part of the transition game, you’ve already made it. You’re making good money, you’ve avoided the standard path traps and on top of all this… your personality hasn’t been beaten down by corporate policies (you got out just in time!).
Here you’re going to have to release control of all the items that don’t generate large sums of money. If you can’t do this you’ll be forced to work long hours with nothing to show for it (flat income line). As you can probably tell, this is an important topic to us at this point and has occupied 20%+ of our thoughts lately. There is no real easy solution except for outsourcing the lowest skilled task and moving from there. Experienced people will likely laugh and say it is easy but we haven’t cracked this code yet. Our strategy has been slow and painful (as evidenced by the difficulty in updating this blog). If anyone has suggestions we’re outlining our leverage plan as follows: 1) outsourced admin for the most basic tasks – product returns, payment issues, organizing calendars, etc., 2) new email address to separate important people from less important people and 3) new accountant. While basic at first, this has already opened up several hours per week. The key now is finding a way to maximize those free hours and eventually hiring another employee for conferences/industry updates so the calendar automatically fills itself in.
Pausing here for a second, one item that is probably overlooked here is “separating important from unimportant people”. This may sound rude but it is the reality. It will also happen to you as well. Many of your contacts will fall off the map after making bad life decisions and on the flip side many people will likely reach a new level of success (a good thing). If more and more of your friends seem to succeed it is inevitable for you in the near-future. Ideally, a few will pass you as proof that it is possible and you can succeed in time and drop an email later to catch up once the amount of value you add is roughly equal.
4) Sending the Elevator Back Down: We’ve clearly done this in the form of a blog. As a basic way of giving back to strangers we’d suggest something that is break-even to slightly profitable. The reason is psychological: people don’t take free content seriously. We proved this many times in the past and as long as you over-deliver relative to the measly cost you’re charging you’re helping more people than a free product (no one reads free e-books). This is no different than giving a child something for free versus making him earn it by working for it. Even if it is the exact same product, the product that required work is taken seriously and appreciated (the one that was given for free is treated like trash).
Now starting a basic blog is definitely not the only solution. There are millions of other ways which include: 1) charity work, 2) teaching and 3) the extreme example of adopting kids. The point is that you’ll get a lot out of sending the elevator back down. Even if it seems like something you would never do, we’d suggest you try even for selfish reasons. Many benefits include: learning to communicate better, being forced to understand all the concepts better since you must pass on the information and increased empathy as you watch someone go through the struggles you once had in the past. Of these three the last one is probably the most valuable as you realize there are many people who have to work even harder than you do for the same result, seeing it in front of your own eyes will help you in your personal life.
5) Re-learning How to Spend: Once all of these items are complete you’re essentially “done”. There isn’t much for you to prove and there is limited upside to making the numbers on the screen go higher (net-worth). So you’re now in a new position where you evaluate where your life is going to go over the next 30 years or so. If you want a family… If you want more free time… If you want a dream house/car… so on and so forth. We can’t really answer this one and we’ve already spilled the beans on where we think we are (around three or four – financially independent but not willing to go entirely off the gas yet). The good news is that the end is clearly in sight so it’s at least time to prepare.
A few ideas we have worked with include: 1) ratcheting up spending every other month to find which activities generate the most “utility”, 2) organizing all cash flow items into a single umbrella and automating the deposits and 3) increasing travel to the handful of places that appear “livable” long-term. By doing these three things (and talking to successful people that are 50-60 years old) we think the preparation is largely complete. Note: successful to us is not necessarily successful to other people. We define success as 1) happy, 2) financially independent, 3) growing income and 4) solid social skills.
Summary Stages of Life: Essentially there are several big stages in life and each stage of the “game” offers a different problem that has to be solved. The big stages are: 1) disorder of knowing nothing about your skills, 2) specialization in the correct task that offers the best return, 3) giving up control of basic tasks that you “could” do (learned from step 1) to scale, 4) this leads to accumulation of knowledge, money and status, 4) combining these items you’ll now have a money printing machine to free up *time* which you will never exchange for money again and finally, 5) you begin giving back at a reasonable rate while figuring out how to maximize your happiness. While it appears easy, we’d say there are less than 0.1% that get through this mess. Even the financially rich fail in many of these steps.
On that note, with a basic and clear warning about following the masses… We’ll host our next full fledged Q&A on February 10 at 3pm EST.
For the newer readers… if you’re interested in learning more about making money, staying in shape and doing so without choking off your personality… You’ll probably like Efficiency, Get Rich Without Giving Up Your Life. The benefits include: 1) How to get into the top 10% physically with one hour a day of exercise; 2) How to eat correctly to be in the top 10%; 3) How to figure out what type of intelligence you have; 4) How to use this type of intelligence to choose a career and the *right* company: Wall Street, Technology or Sales; 5) How to start an online business and sell (the basics and all you need to start); 6) Clear outline of how to create and start an online product business with correct copywriting; 7) How to go into affiliate marketing if someone wants to take a stab at the competitive space; 8) Overview of how affiliate marketing operates and how to do it, 9) How to do all of this and maintain a normal social life (avoid choking off your personality). As a bonus you can read a success story by Clicking Here.