follow your dreams

Simple Living Through Capital

Philip Brewer — Thu, 19 Jul 2012 10:24:15 +0000

There are a lot of ways to live simply. Frugality is one. Self-sufficiency is another. My personal favorite is living simply through capital.

The modern roots of "simple living through capital" run straight back to the classic of simple living, Your Money or Your Life. (See also: Book Review: Your Money or Your Life, one of my first posts here at Wise Bread.)

There's a lot in that book, but here's one key idea — you can achieve financial independence by investing money so as to produce an income stream that matches your expense stream.

It's a powerful idea, but it has a couple of downsides.

One disadvantage of simple living through capital is that it takes so much capital, especially now that interest rates (and investment returns in general) are so low. It can easily take a lifetime to accumulate that much capital. In fact, standard retirement planning advice no longer calls for accumulating that much capital — the assumption is that you can spend down your capital, as long as you spend it down gradually enough that you'll die before it's all gone.

The more fundamental disadvantage is that the whole vision of financial independence through a large capital-based income stream is really a false goal. Your real goal is live your life according to your values.

A life worth living is almost surely going to involve some sort of work, even if it's not highly paid work. Even a modest amount of work — even if it's not highly paid — completely changes the calculations with regard to financial independence. Every thousand dollars a year that you can earn reduces the amount of capital that you need to set aside by at least 20 to 25 thousand dollars.

(In exactly the same way, of course, each thousand dollars a year that you don't need to spend because you're living frugally also reduces the amount of capital you need to set aside by 20 to 25 thousand dollars.)

The advocates of this capital-based version of financial independence point out that having a large capital-based income stream certainly doesn't prevent you from working. Rather, it frees you to do whatever sort of work calls you, regardless of whether it pays enough to support you.

I agree whole-heartedly. I just want to extend that vision, by observing that it's not a case of either/or. You're not 100% trapped until your investment income matches your spending and 100% free afterwards. Even a rather modest capital-based income stream begins to free you. Capital that generates just a few percent of your annual expenses can make it possible to take a job that's more interesting than a better paid one.

In your struggle to live life according to your own values, income from capital is a powerful tool. That's true long before your investment income is high enough that you don't need to work at all.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Quarterlife Crisis! What is It?

Vibha Dhawan — Fri, 10 Sep 2010 12:00:06 +0000

Your mid-twenties or early-thirties is usually when you have the desire to define yourself, set yourself apart from the rest. It is an age of utter confusion and internal turmoil, an age where you constantly contemplate what roads to take and who to travel with. Is it really true? Does something like a quarterlife crisis really exist? Maybe.

I recently came across the lyrics of the song "Twentysomething" by Jamie Cullum, and I was completely startled when I first read it. How is it possible to express a state of utter confusion with such accuracy? As the songs title suggests, a person going through a quarterlife crisis should be able to relate very deeply to the lyrics. What is so different and unique about being 20-something, and why have we not heard about this before? Does it only relate to the modern generation?

It's an age when we achieve complete freedom to our lives for the first time: financially and psychologically. With technology advancing at the speed of light, the physical distance of the world has been minimized, offering infinite opportunities. Suddenly, after following rules and guidelines for over two decades, we are set free to define ourselves and choose our paths. All the generic milestones have been accomplished, and the universe is our playground. We can define ourselves the way we want, achieve success to the limits we desire, and indulge in life to the extent our morals allow. There is no one to instruct us, no one to lead us anymore. It's like following a guide to the summit and then being left alone. Not only do we not know where to go now, we question why we are here in the first place.

For some, this is the most exhilarating period of their lives. They can finally pursue their passions and do what they've always wanted to do. For others, it is when they realize that the job they are in is nothing like they had imagined. They took the first job they were offered after graduation to pay off their loans without ever foreseeing the unhappiness this could cause.

And the misery begins. You dislike your job, stop looking forward to socializing with friends and colleagues, stop enjoying the things you used to enjoy, and life suddenly seems colorless and dreary. You have nothing to look forward to, nothing that makes your eyes sparkle or your tummy tingle, and you ask yourself: What happened to the excitement in life, the desire to fly and touch the sky?

OK, so things may not be the greatest right now, and life may not seem very appetizing, but there is always something you can do to get back on track, overcome the anxiety, and march towards the path of true happiness.

Know that you are not alone!

Though it may seem so, be assured that you are not alone. There are hundreds or even thousands of fellow 20-somethings out there who have no idea what to do with their lives. Though all your friends may be settling down, buying houses, and getting married, don't be afraid that you'll be left behind if you don't jump onto their boat. Everyone is different and life is not a race. It's the journey that matters. You need to ensure that yours encompasses what your heart really desires. Don't live in fear. Don't be like the bird who never risked flapping her wings but longed every minute of her life to touch the sky.

Discover yourself

Whether this involves going on a short vacation or taking extended time off to travel the world or volunteer on the other side of the globe — do it! It will help you spend some time alone and give you an opportunity to know yourself better. Don't take the world's criticism to heart; you are not wasting time or being irresponsible. To be truly happy, you need to be at peace with yourself. You simply have to find your passion in life, though be aware that it will evolve, grow, and change with you over time. Doing a nine-to-five job that you already hate will only cause additional distress, lack of motivation, and ultimately depress you.

Though finding your passion is a time-consuming process, finding the thing that makes you jump out of bed every morning and look forward to your day is the key to happiness. You've simply got to love what you do to live a fulfilled life. Can you imagine a life where every day is a mystery, something you can't wait to solve or simply indulge in?

Try something new

You'll never know what you like if you don't venture out of your bubble and expose yourself to the world. Try different things and keep an eye on yourself. What did you enjoy? Was there something you were skeptical about or something that made you nervous? What made your eyes sparkle or what makes you look back and smile? Explore the world. You'll be surprised at what you discover in the process. You might share a smile or laugh until your eyes tear up, you might make everlasting friends or maybe even enjoy something you never thought you would. Step out of the safety net and dare yourself.

Don't jump into changing careers just yet

Sometimes, there is a tendency to hop back into school to get a different career. Maybe this one you will love. Maybe this education will not disappoint you. Try to see the vicious circle you may be repeating. Every 20-something longs for their college days. The carefree life, the fearless attitude, and being with friends again can be quiet alluring.

Ensure that you are going back to school for the right reasons. I personally believe that after obtaining a degree from college, changing careers may be easier than one thinks. Though additional education will be required for specialized fields, you may be able to get some experience in the new career as an intern or a volunteer with your current qualifications, giving you an opportunity to see how it is before you make a commitment.

A quarterlife crisis is just another phase of life, like the teenage years that have passed and the mid-life crisis that's to come. How you go through this phase is partially influenced by past choices, and decisions made here will greatly affect your life to follow. The harder you work to learn about yourself now, the easier you will float through the next phase of your life.

So buckle up and take control, experiment and make mistakes, and finally steer your life in the direction that truly makes you happy.

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Guest Post Blurb:

This is a guest post by Vibha Dhawan. Vibha enjoys writing about life, from questioning the bases of our existence to wondering why we feel the way we do. She's fascinated by little things in life. It doesn't take much to make her smile. Read more by Vibha:

This article is from Vibha Dhawan of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Money Can Destroy Your Dreams

Henri Junttila — Thu, 09 Sep 2010 12:00:12 +0000

Some people say that money is evil, while others think money is everything. I don't agree with either side. Money is just a tool, and what you do with it is up to you.

Money can control you or it can free you. It can improve your life or it can make your life miserable. By being aware of how money can affect you, you have already taken the first step.

More and more people all around the world are waking up to how important it is to follow their passion. Now, this doesn't mean you have to quit your job or do anything rash. It simply means that you begin, in whatever way you can, to follow your passion.

Money can be an obstacle when it comes to going after your dreams. Maybe you believe that you don't have enough money, or maybe you believe that doing what you love cannot put food on your table.

And maybe you're right. Maybe you cannot make a living by doing what you love right now, but should that stop you from doing it? I believe there's a reason why we're drawn to certain things.

There's something wrong with the planet today, and we're the only ones who can change it. That change starts within each and every one of us. As Gandhi said, we have to overcome our fears and be the change we want to see.

How Money Almost Destroyed My Dreams

For a long time, money stopped me from going after what I truly enjoyed. You see, I was a professional poker player for five years. I loved it in the beginning, but after a few years, my interest started to wane. I didn't want to quit, because it was the only way I knew how to make a living, so I kept going, and it kept eating away at my soul.

Finally, in early 2009, I got sick and tired of not being completely passionate about what I do. I started building websites, and in late 2009, I started my primary blog which, to this day, I love writing.

Writing is one of my passions, and so is helping other people break free from their shackles. It almost didn't happen because of my fear of not having enough money, and my belief that I couldn't make a living doing what I love.

Pursuing Your Passion

I was able to do what I love by being frugal. I minimized my expenses, had some savings in the bank, and jumped into doing what excited me.

Money can be a scary thing. I recommend that you avoid making rash decisions, but there comes a point where you have to say enough is enough. You can't be a slave to money for the rest of your life. There will never come a time when the stars will align and everything will be perfect.

The truth of the matter is that you do not need as much money as you think you need to follow your passion. If you're stuck in a job you hate, but need the paycheck, you can still start doing what you love. If you keep doing what you love, in whatever small way possible, you will eventually reach a point where you can cut back on the hours you work or leave your job permanently.

I'm sure a lot of excuses pop up as you read this, but in the end, you have to ask yourself what you really want to do with your life. What really matters to you? What are you waiting for?

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Guest Post Blurb:

This is a guest post by Henri Junttila. Read more by Henri at his blog, The Wake Up Cloud:

This article is from Henri Junttila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

4 Deadly Mistakes You Must Avoid When Pursuing Your Dreams

Henri Junttila — Fri, 12 Mar 2010 15:00:01 +0000

In my last post I wrote about how you can find your passion, but today I want to focus on the mistakes people make while going after their dreams. If you can identify with any of these mistakes, you might want to get it corrected as fast as possible. It will help you get back on track to moving towards making your dreams a reality instead of moving away from them.

We often get stuck in arbitrary things. We make excuses. We try to find shortcuts, and we try to do all these things that in the end only prevent us from reaching our goals. If you're really serious about pursuing your dreams and making them real, then you may want to read on...

1. Stopping at Uncomfortable

When you start something new, it will be scary. If you are serious about finding, following, and making your passion(s) and dream(s) a reality, you will have to deal with fear. You will have to accept that being uncomfortable means growing as a human being and making progress towards your goals.

I'm not talking about being physically uncomfortable, such as sitting on your leg until it falls asleep. I am talking about being emotionally uncomfortable. Being afraid to take the next step because you don't know what lies behind the next turn. Your journey will be unique, so you will have to learn how to deal with this yourself.

Look at it as driving a car: you know your destination (most times), but you can't see beyond the next bend. You still know where you're going, but you just can't see it.

2. Looking for Shortcuts

A lot of people are looking for shortcuts. They are looking for that one thing that will make them catapult to the front of the line and eliminate years off their learning curve. I'm sorry to say this, but it doesn't work that way. If you want to create your dream life and live out your passion(s), you will first have to find your passion and then take action to make it happen. (If you love gardening and want to teach other people how to do it, for example, that's excellent, and you can make a living doing that if you really want to.)

Remember, there's always room for those that are willing to go the extra mile. Stop looking for shortcuts and start using what you have. There are no magic bullets out there that will do it all for you. You will have to learn. You will have to work hard and you will have to make mistakes and learn from them.

3. Waiting for Perfection

I'm so guilty of this one. I used to be the worst perfectionist. I still am to a certain degree, but I'm more aware of it now. I am able to let things be imperfect without going crazy.

You don't have to wait for the stars to align or for someone to give you permission to go after your dreams. Most people blame their circumstances for not allowing them to make their dreams a reality. This is a big mistake. If you want to live your dream life, do what you love and change the world, you will have to take matters into your own hands and make a change.

You can always start somewhere. Don't worry about not knowing what to do. All you have to learn is what to do next. (Maybe you need to start a blog. Do a simple Google search for that, and you'll find plenty of tutorials. Maybe you will even fail at blogging and learn that you like something else instead.) It's all a part of the process. Successful people didn't become successful overnight, although that is what it usually looks like. They often failed over and over again until they found what worked for them.

4. Failing to Listen to Your Heart

Your heart knows things. Your mind...not so much. Your mind worries, it analyzes, it judges, and it does all those things that can easily take over your life. Now, I'm not saying that the mind is bad, it's just a tool, but it has become a bad thing in most people's lives because it has taken over. Many refer to this as the Ego, the Id or whatever you like to call it.

Your heart, on the other hand, will let you know when you're on the right path. You will feel good when you're following your passion. You will feel awesome when you're heading in the right direction, and you will feel blissed out when you realize that you have a whole guidance system inside of you that is perfect for you. (But remember, you also have to understand your emotions, because your heart may be trying to tell you something and you may be blocking it with fear or a surface emotion.)

If you want to pursue your dreams, start by finding your passion, then thinking about how you can make it real, and then taking action. It's really that simple. If you want to slow yourself down, then go ahead and pick one of the deadly mistakes above.

But know this: you are here for a reason. You are here to have a positive impact on this planet. You know that thing that you feel in your heart that you've always wanted to do? I'm here to tell you that you can do it, if you really want to. So what are you waiting for?

Guest Post Blurb:

This is a guest post by Henri Junttila, a freelance blogger, who also writes about self improvement ideas for conscious people on his blog. Read more by Henri at The Wake Up Cloud:

This article is from Henri Junttila of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Find Your Passion

Philip Brewer — Wed, 02 Dec 2009 18:00:02 +0000

I always knew what I wanted to do. What I wanted to do changed over time, and at any particular time I wanted to do more than one thing — and sometimes I wasn't sure if any particular thing that I wanted to do would turn out to be satisfying or remunerative. But there were always things I wanted to do. It turns out that this is not universal.

Some people really don't know what they want to do. Since I always did, I'm not sure that I'm really the person to ask about how to figure out one's passion in life. But when I talked recently about ways to arrange your life so you can follow your passion, more than one person asked in the comments about how to find your passion. I did some thinking about it, and decided that maybe I had an idea or two after all.

Editing too early

I used to think that the main reason people couldn't figure out what they wanted to do was not because they didn't have any ideas, but rather that they had ideas, but figured they were impractical. The things they wanted to do (playing video games, snowboarding, going backpacking) seemed to offer no hope of making a living.

In fact, of course, there are people making a living doing each of those things. There are admittedly few professional video game players, but there are plenty of jobs testing video games, as well as jobs designing them, coding them, writing the stories, and drawing the art. Likewise snowboarding and hiking support very few as professionals, but do offer opportunities for guides, instructors, writers, and so on.

There are many ways to follow any passion. If the problem is time, maybe you can start small and make incremental progress. If the problem is money, maybe you can barter for access to the expensive stuff you can't afford. If the problem is complexity, maybe you can follow a few narrow side branches now and work your way toward the main branch. The key is simply that you shouldn't assume your passion is impractical without giving some real thought to all the many ways you might follow it.

If this is what you're doing, the solution is easy: brainstorm. Make lists of things you want to do without editing. Don't paralyze yourself by trying to figure out your one true calling in life, just write down two or three dozen things that you want to do. Start with easy stuff. Maybe you want to visit your family or scuba dive off Grand Cayman or learn pottery. Then broaden your thinking: What do you do when you have control over your own schedule? What list of activities for the day makes you jump out of bed? If you had enough money that you didn't need to work, how would you choose to spend your time?

Go for quantity — this stuff is the raw material of what you want to do with your life. Get a day or two of distance from the list, then go through it and categorize the ideas. Some are just things you want to do once. Some will likely be things that you don't really want to do at all. But among the others are likely things that you have a passion for, even if you haven't realized it yet.

At some point, think about what you do that's of value to other people. That's important in two ways. First, it's something you might be able to get paid to do. Second, something that's important to others has a greater chance of being deeply satisfying.

What if your passion really is impractical?

Some passions are fundamentally impossible. We don't know how to go faster than the speed of light or backwards in time.

Other passions are simply beyond our capabilities. Most of us will never play major league baseball, no matter how strong our passion. I would argue, though, that this is simply a matter of being too specific. If playing baseball is truly your passion, then play baseball without worrying about what league you get to.

Most passions, though, are totally doable, they simply aren't adequately remunerative, which brings us back to where we started, choosing between a dream job or a day job.

What if you have no passions?

As I say, I used to assume that everybody had a passion. I eventually figured out that really wasn't true: Some people really can't think of anything they want to do. These people are often unhappy. In fact, they're often miserable.

Often the cause-and-effect goes the other way around. People who are severely depressed are unable to think of anything that would make them happy, but the underlying problem is a matter of brain chemistry, not lack of passions. Treat the depression and they will find their passions again.

For people who aren't clinically depressed, but simply can't think of anything they want to do, I'm not sure I have much help to offer except to suggest an incremental approach. Think about which aspects of your life are most satisfying and do more of that and less of the other stuff. On a smaller scale, do the same in each area of your life. Which parts of your job are most satisfying and which are boring or annoying? What would your job look like if you did more of the former and less of the latter? Could you talk to your boss about restructuring your job to look like that? I talk some about that in a post called find work worth doing and then I talk about other aspects of it in a post called how to get a job — learn the secret from a bad movie. (Both of those posts got some good comments, too.)

It's perfectly normal for your passion to change over time. The days of having just one career are almost as far gone as the days of having just one job — and that's okay. A couple years ago, several of the Wise Bread writers (including me) did a group post called what is your dream job. I talk about how my dream job changed from programming to writing.

There are a few other posts on Wise Bread on finding your passion. Here are the ones I could find:

I'd be really interested to hear from readers who had to struggle to find their passion. If you're one of the people who couldn't think of what they wanted to do, but then eventually figured it out, please comment below on how you did it.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Can You Afford to Follow Your Dreams? Can You Afford NOT to?

Sarah Winfrey — Tue, 20 Mar 2007 17:26:08 +0000

This is where I was going to write a lot of pretty things about having priorities and about how money can't be everything or else you'll die sad. In the last couple of days, though, these ideas have become very personal. So, instead of my pretty thoughts, here's my story.

This semester, Dave began studying to teach Jr. High/High School math. It seemed like a decent career move at the time because, while he has several degrees, he's not particularly marketable outside of a narrow niche and he doesn't want to work in that niche. Teaching picks up on many of his natural gifts and also pays the rent. It's transferrable, so we could eventually move, and it could eventually provide enough financially that I could stay home with our children...when we have them (since daycare costs are off the map, at least in our area). Really, having Dave get credentialed to teach makes perfect sense.

However, as he got into his studies, it became pretty clear that teaching math is not what he really wants to do. For one thing, he likes ideas. He'd much rather discuss those with students than how to do math problems. But also, his studying was keeping him from pursuing his dreams. While he doesn't want to work in the usual niche for his degree, he has come up with a way to use what he's learned to teach and interact with others, and not have to take the path traditional for someone with his education. To do this, though, involves lots of networking and even more time and energy for things to get off the ground. He has several openings for his ideas, but we haven't felt like we've had the leeway to pursue them, as we have felt like paying off our school debt is a major priority.

Let me add that one of my dreams is for this business to take off for Dave. It would allow him to do many of the things that I find most attractive in him.

So, this weekend, we decided to give up pursuing the "sure thing" career for him so that he can use his time to develop the speaking/seminars/consulting business he's always wanted.

In the end, the decision hinged on what we want to be able to say at the end of our lives. When I'm dying I don't think I'll care much about the size of my house (or even if I owned one), the make and model of my car, or even how nicely I was able to dress my children. I'll care a lot more about who I am and who Dave is, who we helped each other become and how we got there. I'll care about what we tried just because we loved it and how many times we were able to bankrupt ourselves traveling (that's the only thing I'd ever totally and completely bankrupt myself for, but that's another post). I'll care about whether or not we took the risks our dreams required, whether we were willing to put it all on the line for something we believed in. When I looked at it that way, I couldn't bear to walk the safe road just for the sake of safety any longer.

Lest you think I'm just a sentimental idealist, we also realized (how practical of us!) that the relative value of the financial security we were pursuing wasn't very high. Even if we paid off all of our debt more rapidly than we could possibly imagine, we wouldn't be satisfied. We would be more secure, but not happy. The money that we could then accumulate (when we were not longer using it to pay off debt) could not buy us our dreams, nor the years spent not pursuing them. For us, that price was simply not worth paying.

The truth is that we're not quite throwing it all on the line here. We didn't just throw ourselves on the mercy of anyone who will help. We have a plan, and that plan includes (and even focuses on) our finances. With my job and his jobs, we will be fine financially. We may not pay off our debt early, but we'll make our monthly payments on time. We may not buy a home or have a kid for a few more years, but I'm not convinced I'm ready for that anyway. We will probably be living on a tighter budget than most of our friends, but that's a sacrifice we're willing to make. We're willing to be less successful financially to be more successful as whole human beings.

Is all of this scary? Sure. In fact, even yesterday and today I found myself thinking, "Did we really do that? What were we thinking? Can we take it back?" But I won't take it back. Pursuing dreams is something I believe in, even when it means taking a hit or entering uncertainty financially.

For you, what trumps financial success?

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This article is from Sarah Winfrey of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: