The more I learn about money, the more I believe there’s no best way to manage money. There’s what’s suitable for you and there’s what’s suitable for me.
(The Growth Hacker in me wanted to title this one: “10 Golden Rules Every Young Millionaire MUST Follow,” but I told him to fuck off.)
As in any subject though, it pays to consider multiple perspectives. In this article, I’ll be sharing money principles which have worked for me over the past 14 years. Note: I’m not a retired millionaire or anything — just someone who’s managed to find life satisfaction in his thirties.
Have a read, and consider if these principles might be useful for you too.
For context, here’s my personal situation. So you understand where I’m coming from.
I’m 37 this year. I work a full-time job (which is challenging but I love) for 45-50 hours/week. In terms of position, you could call me a “Senior Manager.”
I paid off my student loan before I turned 32. The only financial commitment I have is my home loan. (I drive a second-hand car which I paid for in cash.) I’m blessed enough to not have any other expensive health or family-related commitments.
My wife works full time and has a good income too. We’re planning for kids soon.
We’re financially stable, but far from financial independence or early retirement. At the current rate (projecting kids), I can retire by 55. If that sounds reasonable to you, here are my money principles:
1. Keep Expenses as Low as Reasonably Possible
I’ve learned to not want much. If you’re not very particular, Malaysia is an economical place to live. So apart from my apartment — which is middle-class comfortable, not luxurious — I don’t have any other big recurring expenses.
In terms of food, I would be satisfied eating at your regular mamak most days (though I’ve learned not to for health reasons, and am blessed to have married a brilliant cook).
That being said, “as low as reasonably possible” doesn’t mean aiming to save money on everything.
So while you’ll find me driving an old MyVi, I’ll also happily treat my wife to some fine dining, buy friends a round of drinks, or get a nice guitar for myself.
Ramit Sethi said it best:
“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.”
2. Be Excellent at Work
Managing expenses (linked to desires) is one part of the picture. Increasing income (linked to work) is the other important one.
Sensationalized articles might suggest that everyone needs to quit their job and start a business to earn good money. But the more I learn, the more I think entrepreneurship isn’t for everyone.
There’s much that can be found in a “traditional” career path.
All the major income increases in my life have happened via internal promotions. I’ve tripled my salary before. I’ve also doubled it within a year.
You don’t have to play politics or be an asshole to get ahead. What you do need is to be excellent at your work, and have great communication skills. I’m also always looking to build meaningful relationships.
I believe in working for passion — as long as you take a practical approach, and not the oversimplified BS that everything will be perfect just because you’re passionate about something.
Truth: if you love your work, you’ll likely (no guarantees) be better at it than everyone else who’s meh about their job. Even when you fail, you can learn faster and bounce back.
Use these advantages to make more money — whether it’s your day job, side hustle, or your own business.
3. Have Enough Emergency Funds
Emergency funds are one of those things everyone talks about, but are still underrated.
It’s not so much the funds themselves. It’s the peace of mind you get from knowing you’re secure financially. This allows you to make better money decisions, and take calculated risks to earn more money (e.g. quitting your job for a better one, starting a business, or investing in a high-risk-high-return asset).
I keep my emergency funds in my fully-flexi home loan account — meaning I’m still “earning” good interest on them.
Aim for 6-12 months worth of living expenses. If that sounds too daunting, just aim for improvement every month.
4. Protect the Downside
Unexpected health issues can even doom the best financial plans.
So make sure you’re insured. Make sure you have a will to take care of your family in case anything bad happens.
Most of us focus on the upside in life, and rightfully so. We want to play aggressive offense because that’s where the fun is. But without defense, you risk not even reaching the end.
5. Invest Responsibly
With a good income and low expenses, what do I actually do with my money?
Here’s the fun part: I try to invest and give away (Principle 8) as much as reasonably possible. I’ve got a full article on how I invest here, but here’s a summary:
- Never borrow money to invest
- Invest most funds in SAFE assets (protect the downside). Most of my money is tied up in Malaysian EPF retirement funds. My aim is to not touch them till I retire.
- Allocate a bit to high-risk-high-return assets. This is my investment in Bitcoin and crypto — the asset class I understand the most. It has paid off handsomely.
- A simple analogy for how I invest is a barbell (inspired by Nassim Taleb). Lots of safe stuff on one side, not much in the middle, and a chunk in high-risk-high-return assets.
- Invest for retirement, decades away. I’m not looking to cash my money out anytime soon. This allows me to ignore short-term price movements. I didn’t sell when Bitcoin crashed from 20K to 3K in 2018. I won’t sell if it crashes from 40K to 6K in 2021.
Warren Buffett once said about investing:
“Our favorite holding period is forever.”
6. Automate as Much as Possible
When I was in my mid-twenties, I was a control freak over my money. I would spend downtime at work filling up complex spreadsheets tracking my investments, savings and expenses.
As you can imagine, it took up a lot of time. Though I didn’t mind because I found it fun.
As I got older with more responsibilities, the time I could spend on manual tracking disappeared. Nowadays, sometimes I find myself paying credit card bills late. The 25-year-old me would be dismayed.
I’ve turned to technology to help. I now use robo-advisors to invest and apps to track my expenses. I try to keep 100% of my transactions online, and make use of automatic deductions.
There’s a time factor in everything we do that often gets ignored. The author Annie Dillard once wrote:
“How we spend our days is, of course, how we spend our lives.”
Automating money tasks allows me to focus precious time on people and things I love.
7. Have Fun — You’ll Be Good at What You Enjoy
Yes, I’m still the finance geek who once built compounding spreadsheets for fun. But I’ve learned a good life is where you focus on what you really enjoy and try eliminate (or outsource) the rest.
In recent years, my money “fun” has been less about squeezing money and more about growing money.
I’ve given up keeping up with the best deals, and aiming to collect the maximum number of credit card points. I’ve stopped agonizing over tiny expenses.
My dream isn’t to be the guy who gets the best discounts on everything anymore. My dream is to be the guy who tips everyone generously.
Focusing on things I enjoy has led me down a rabbit hole of adventure. Somewhere along the way, the hours I spent trying to juice loyalty reward points shifted to studying and experiencing the fascinating world of cryptocurrencies.
Today, I work full-time in crypto. The more I learn, the more it continues to fascinate me. It pays the bills too. I can afford to tip more now.
8. Optimize for Meaning
What good is all the money in the world if it doesn’t bring value to your life? As much as I like seeing the dollar value of my investments go up, money itself is just a tool.
Whether that tool makes your life better depends on how you use it.
I’ve found these to be the most meaningful things to do with money:
- Saving and investing — creating financial security for my family
- Buying time: outsourcing tasks I hate to do myself (e.g. housework)
- Investing in my passions: books, music, sports
- Buying presents (and meals) for family and friends
- Giving to charity. Giving to support and help others
My financial advisers have asked me to consider the amount of giving (~26% of my gross salary), as it looks high.
But based on the amount of joy it brings — I hope I can earn more so I can give more.
9. Keep Learning
Life is a continuous journey of learning. To stop growing is to die.
I read from a variety of sources — primarily blogs, online publications and FinTwit. Much of what I learned about money, I learned from free websites. I’m also trying to read more books, as they get to a level of depth you won’t find online.
(Nothing against video and podcasts for learning, but I’ve found reading to be significantly faster.)
How I manage my money today is very different to five years ago. I expect it’ll change further over the next five years.
Can’t wait to see what I discover.
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