My first 5 years of my 20s was an easy life. I always think that if you have a job and go to work everyday, pay the bills and I am comfortable for the rest of my life. However, life is not a constant, but a variable. Many things happened to me that made me realize that money was the sole reason for most of those troubles. I was not lucky at that time to see clearly how the world operates. Until one day, I found out investing and it has changed me since then. This article will introduce you to the beginning of my investing journey and how I want to see myself in the next 5 years. You can have a quick look on this page for my introduction.
Why Investing?
When talking about investing, we usually think about investors like Warren Buffet, Peter Lynch, Ray Dalio, and so on. They are successful investors with a tremendous amount of wealth (wealth != money). They make money simply by investing their money, to make even more money. How come these people make so much money and their wealth seems to grow even bigger day by day. On the other hand, we have ordinary people who always find themselves in a corner when it comes to money.
This has always bothered me since my early 20s. Everybody wants to be rich and wealthy, but only a small portion can make it. And why is everyone so obsessed with money and being rich? I have spent my early 20s not paying attention to finance and investing, and now everything I think of is about finance and how to become wealthy like one of the legendary investors. There are many ways that you can become rich and wealthy, but for ordinary people, for me, it’s a simple answer – INVESTING.
The beginning of FIRE
What is FIRE? FIRE is a short-form of Financial Independence Retirement Early. This term has become popular in many years (when I know about it 2 years ago, it has already been quite popular). FIRE has 2 parts
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Financial Independence
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Retirement Early
For me, Retirement Early is really not something I want for the time being but it’s something that I could consider in the future, at least when I am mid-30ish.
So, Financial Independence and why Investing has to do anything with it.
I don’t remember much about when I started my research on FIRE, but there are things that I know that have impacted my life a lot and made me the person I am today. Here are some of the events:
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Raiz app – micro-investing app for beginners. I started my investment journey because of this app. The first day of my investment was on 24/11/2020. It was a completely new experience. I was introduced to a whole new world of finance. It was scary at the beginning but now it has become part of my life, and a habit. Nothing better than a feeling of seeing your investment growing daily (oh well, sometimes it goes down in value). You don’t have to choose the same app as me but as long as you have an app and start investing, it’s when your life will be in a better place.
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Discover cryptocurrency through CoinSpot. It’s a crypto platform based in Australia and is recommended for most beginners because of its user-friendly interface. After some time, I realize that I can move to a better platform like Binance to have different options like staking and other earn products. If you like crypto then welcome, but make sure you have a stomach for it.
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The discovery of 2 subreddits – r/fiaustralia and r/AusFinance. The information provided by these 2 subreddits is extremely valuable. I started my journey by going through posts and helpful links, and I still come back to these posts to remind myself of the information (or any update), and also to keep track of my goal is to be in the future. Knowledge in finance and investing is valuable, and you should start looking into it if you have not yet.
It has been a wild journey since I started investing. I find myself deeper into the finance world and still learning every day. The only reason I want to become FI is that I want to live a comfortable life and have more freedom of what I want to do and am willing to do. Imagine working 9 to 5 every day for the rest of your life is not something that I can imagine. I always find myself in a corner, choosing between doing what I like and doing what I need to survive every day. Society has created the environment that way so that every one of us has to go to work to survive, to make money, to pay for bills and necessities. I find it boring to repeat those every day. I want to choose to work whenever I want, choose what I want to work on, and don’t worry about thinking about making money to survive. Everything can be solved by having more money but life does not work that way. Even working so much of your life, you still find yourself in a deeper hole if you don’t have financial literacy. The important question is that you need to understand how money works. You can only achieve Financial Independence when you are no longer depending on money, and instead, money works for you. And the only that money can work for you is by saving and investing properly. Those famous investors got rich by doing literally one thing, Investing. They don’t create things or innovate new technologies (well if you can do that, you can be rich as well), but simply by investing their money in different assets. And asset is valuable as they can generate money for you. So, investing = rich, sounds simple enough but is it that simple?
Investing, the path to FI
Before going deep into Financial Independence, we need to understand why we need to invest and why cash is not as valuable then we think. There are a couple of reasons and this is only a few that you need to understand, there are countless reasons why a piece of paper called money is worthless.
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Fear of investing – people fear what they don’t know. People heard a lot of news on channels that investing is risky, the stock market goes down and up. We got war, we got Covid, and everything crashed. Then you got emotional, you want to cash out, and never come back because they lost money. Now that is a classic example of someone who is not able to control their emotions and lose money. Here is a quote from Warren Buffet “The stock market is a device for transferring money from the impatient to the patient.” My advice is that if you need to learn more before investing to understand the nature of the stock market or any kind of market. Only then, put your money in.
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Inflation, a quote from the First chapter on the Passive Investing website. ”Each year the Reserve Bank of Australia releases more money into circulation. But because the total combined amount of money has the same value, each dollar is now worthless to make up for the extra dollars in circulation. This devaluing of the dollar is called inflation.”
Most people when it comes to investing, think that they can generate a return of 100%, 200%, or even more in a short period of time. Certain events like GME, AMC, or Doge hype have created this illusion to the general public that they are easy money. But, you have to understand the nature of a market. Stock goes up because the demand is higher than the supply, and vice versa. It is not rocket science but people have this misconception in their head that stock only goes up. And this is dangerous because it is a wrong mindset. If money is so easily made, everyone becomes millionaires already. Social media play a major part in this as well. DO NOT TAKE INVESTMENT ADVICE FROM ANYONE, ESPECIALLY FROM SOCIAL MEDIA. Even when I write this blog as a way to have my knowledge stored, and for public use, it should be taken seriously but as a guide for your learning journey. Knowledge is a thing but through time, it can become obsolete. That’s why you need to keep yourself updated every day and don’t let others influence your mindset or decisions.
The journey only starts with a correct mindset. And it is really simple. Investing is not a 100m race. It’s a marathon. People jump to the stock market and run as fast as they can, just to realize the goal is far ahead and they cannot keep up anymore. On the other hand, by keeping a slow pace approach, adjusting your breathing, and running consistently throughout your journey, you may find yourself reaching the goal faster than you think. There is a concept that everyone should know “Compounding Interest”. Albert Einstein has said that “Compound interest is the eighth wonder of the world”, and they are still true till today. What is Compound Interest and why it is so important? Here is the definition I select from an article from Forbes;
Compound interest is when the interest you earn on a balance in a savings or investing account is reinvested, earning you more interest
It applies to everything that you can re-invest like stock, crypto (staking…), saving accounts, and so on. You need to understand this so you can understand why it takes time for an investment to grow. See this calculation on moneysmart website, play around with it and you will understand why. It grows slowly at the start but the compounding interest kicks in after a certain time, and that’s when you can see your investment grows exponentially. The recommending time horizon for investing normally is 5 years. And to me this is just a bare minimum, you should aim for 10-20 years if you can. But for myself, I have a goal and I need to achieve it, which will be explained later on this blog.
The above mentioned, is the fundamental, the basic that one should understand when stepping into the FI journey. Only with a correct mindset and enough knowledge, you can stay strong and long until you reach your goal. However, with that being said, you will also have doubts about yourself. You might say what if I don’t have the quality to do it, or what if I don’t have enough patience to see my end goal. In that case, it is all about your Motivations and thinking about your future.
Motivations
I will demonstrate this by using my own examples as a way to see if you can see yourself in me.
My parents come from a low-middle-class income. They make enough to let me have a comfortable life and allow me to be who I am today. My mom has a food stall and sells food to labor workers who can only afford to buy low food prices only. My dad is an employee in a government (he’s retired now). Incomes are good but it requires lots of hard-working, especially my mom since she used to work 7 days a week without a break, then had to do other chores in the house as well. I used to help her with the food stall and I know it is not an easy job, and it’s something most people nowadays do not want to have as a job. But to my family, it was our job.
Reflecting back on those memories, I understand why hard work does not mean more money, it means you exchange for a bit of extra money that you are currently doing. Having more money does not mean you can become richer. It’s only when your money can generate more money and you do not need to do anything extra to achieve it, you know you have successfully become wealthy and rich. I used to have this mindset that I need to work extra, work more hours to earn a little bit more, and put it in my savings account, and I can guarantee my future. I realized that it was just a foolish idea, and I have changed since then.
You can earn interest on your saving account but it cannot generate enough money to overcome the 2-3% inflation rate per year. You think you have more money because of the interest until one day you realize you run out of your cash in the account because the price for everything has grown even more compared to the interest rate. It was only at the end of 2020, I truly understood that I have wasted half my youth by not knowing about finance. At that point in time, I have come to a full conclusion that everyone has always been in this simulation, controlled by people who from the above, and I need a way out. And investing is the way to go, but it was challenging at the beginning when there were so many questions. Having a list of motivations for yourself can be a boost in your mentality:
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I don’t want to repeat the same history of my family by working most of my life.
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I don’t want to do the job related to physical work as I understand you need to work hard, and also it is not something I enjoy doing.
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I don’t want to think about money most of my time and use my time wisely for other activities like traveling, doing freelance jobs, and more.
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I want to choose what and when I want to work, without worrying if I make enough to cover my monthly expense.
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I want to spend more time with my family as I am away from them at the moment.
This list has helped through last year and I will keep updating my motivation list more in the future. Nonetheless, this is already good enough for me for the next 5 years, and I have set a goal for myself in the next 5 years and I want to achieve it. Even if it might not be possible to reach the goal, I still go as far as I can to finish this goal. Without a goal, you will not have a mindset to focus and have a commitment. So, what is it that I want to achieve for my Financial Independence goal in the next 5 years?
Vision in the next 5 years
It is really simple. I prefer simplicity so I challenge myself to achieve $1 Million in assets by the year 2025. I will be 30 years old by that time. If you ask me why in such a short timeframe, it is just something that I think I need to do. Even with investing, 5 years are not enough to let the money grow. And I have wasted lots of my time until now when I am 26. Those times that I missed would have been the best time for my investment journey (for compounding to work), but I lost it. For that reason, I make an impossible goal for myself as a punishment, and I need to work extra hard for the next 4-5 years of my life to achieve that. It will require a lot of planning, knowledge improvement, self-studying, and lots of self-motivations. There is a phrase that you should be familiar with:
“The first $1 Million is the hardest”
And I took it personally. And when I got my mind on it, I will work toward it. I don’t know what the future lies ahead but I am sure that my life will be more interesting and challenging. And it’s how life should be. Investing might not be for everyone, but for me, it is another way that my life can become better not just for me, but for my family as well. If this blog helps you on your journey, congratulation to you. If not, then just let it be.
In the next 5 years, I will come back once again and see how much I have grown or developed since this blog was public. Have a great day to all of you who read this blog.
Disclosure
Any information described here is my own personal opinion, and should not take as financial advice.