Preface by J. L. Moneyseed: When I thought to myself, “if I could have any other Financial Independence blogger do a guest post for my site, who would it be?” I really didn’t have to look very far, as I had been chatting it up with Mr. 1500 on Twitter for the past month or two now. He’s like the future version of myself. Him and his wife are both hysterical, and strive for what so many people will never really understand: Early retirement.
They may be pretty new on the Personal Finance blog-scene, but they are in no way newcomers to understanding how money works. Their out-of-the-box thinking is going to secure their rightful place as early retirees at the ripe old age of 43… No, I didn’t say 63. I said 43. Most people are just warming up in their early 40s, but the 1500s will be able to take a step back from the Rat Race and really live the life they deserve.
Now, open your minds (and hearts) to Mr. 1500 from 1500days.com himself:
I’m frequently asked about my investing moves and how I manage my portfolio, but there isn’t really much to say. At heart, I’ve always been a “buy and hold” guy. I put money in investments and then sit on them. At the beginning of every year, I set my 401(k) contributions at 75%. At that rate, it quickly maxes out and I don’t have to worry about it anymore.
Now that I share my finances with the world, I keep a tight record of all things financial. In the past, I wasn’t as diligent. I would enter my investment balances every January 1st. I’d make a couple entries during the year when something interesting happened and that was about it. I didn’t think much about it.
A couple weeks ago, I was going over some old records and discovered something that nearly made me fall out of my chair. I started 2012 with $391,000 and ended with $586,000, for a gain of $195,000. About $75,000 of this was from new contributions, so after accounting for that, my portfolio appreciated by more than $120,000. For the first time in my life, my earnings from investing surpassed the net income from my job.
I was amazed and have some quick thoughts about it before I get to the bigger lesson.
- This didn’t happen overnight. I’ve been in the workforce now for about 15 years, consistently saving that entire time.
- 2012 was a very good year for the markets, with the S&P 500 returning almost 16%. It’s much easier to go fast when you have a strong tailwind.
1920 hours or 8?
The really cool and important point is this: In 2012, I worked at my day job 1920 hours. Contrast that to the 8 hours I spent working on my portfolio. At least 7 of these were random checks of Mint to see how things were going. My money was working very, very hard for me.
I believe that Joe Average plans to spend 40 hours per week or a couple thousand hours per year working at his 9-5 until he hits the ripe old age of 62 or 67 or maybe even 70 if he is a bad saver and social security isn’t around in its present form. It is a way of thinking that the populace buys into that is sold to them with fear tactics from the mainstream financial media. Our consumer culture, encouraging people to buy, buy, buy, certainly isn’t helping either. However, it doesn’t have to be this way.
Go grab a dollar and look at it. What do you think of when you see George Washington or the Loon? I’m encouraging you right now to start thinking about that dollar in a different way. Every dollar has potential. Don’t think of it in terms of what it can do for you today; think about what it can do for you in a decade. If you spend that dollar on something, it is gone forever. However, put that dollar to work and just like rabbits or Tribbles, it will make more dollars. Put enough of them to work and in time, you will have a big pile of dollars making new piles of dollars. When those dollars produce enough new ones to account for your expenses, you are free. If you work from that point on, it is because you choose to.
When I discovered what my portfolio had done, I was so excited, I jumped out of my chair and told Mrs. 1500 about it. After discussing it for a while, she said something which I thought framed the situation perfectly:
Would your rather work for your money or have your money work for you?
I’ll take the latter any day of the week.
For me, it all comes down to freedom. I don’t have enough money to last for the rest of my life, so I have to give up almost 2000 hours every year to a job. However, it won’t be that way forever. I can almost hear my dollar pile getting bigger as I type. Soon, very soon, those little dollars are going to be doing all of the work. And I won’t have to.