Welcome 2021! In lieu of a New Year’s Resolution I want to spend time to reflect on the course my life has taken and explore how I could’ve handled situations better. Over the next few weeks I’ll go over one mistake I made each of the past five years that hurt my career or other aspects of my life. I’ll describe what led me to the incident, how it affected me in the short term, and how it impacted me in the long run.
Posts in this series:
- 2016: I Kept My Return to Game Development a Secret
- 2017: I Almost Started a Sports Bar (and Put My Friend in Financial Trouble)
- 2018: I Let Personal Finance YouTube Channels Take Over My Life
- 2019: I Overcommitted
- 2020: I Failed to Be an Ally in a Pivotal Moment
Most people here understand that this is an engineer’s blog but I should probably include this disclaimer anyway: nothing in this post constitutes financial or investing advice.
The YouTube algorithm acts in strange ways. At the beginning of 2018 I was on a steady diet of daily videos from game developers Chris DeLeon and Tim Ruswick. Although most of their videos were focused on game development, some them dealt with more general self-improvement topics. YouTube picked up on that fact, and my recommendation feed began to include to channels covering psychology, fitness, and eventually personal finance.
That summer I ran into this video:
In previous years I kept my spending low, but that was pretty much the limit of my financial literacy. Back then it didn’t make much of a difference since my income was small compared to other engineers and I used most of my income to pay off student loans. But once I got a huge raise I kept my money in a checking account instead of using it as a tool to grow my wealth.
Things finally clicked when I watched Ryan Scribner’s video. Instead of relying on employment alone, I can use my wealth to generate income. If I can cover my living costs with passive income, any excess gains could be used to help other people. I had a new goal in life: turn my net worth into a perpetual money making machine.
Over the next two years I learned the fundamentals of investing. Buy low, sell high. Focus on the long term. Understand the power of compounding interest. Don’t buy out of fear of missing out and don’t sell when the market crashes. Invest in a diverse set of assets. I built a portfolio with these principles in mind.
I’d be lying if I said that was the entire story.
I sought every opportunity to get more mileage from my money. I subscribed to multiple YouTube channels discussing dividend stocks. Other channels I binged talked about other ways of making money, like buying real estate or starting a business. Everyone advertised their favorite investing services, and I signed up for all of them. I was even convinced I should go full circle and start my own YouTube channel to regurgitate everything I learned from these videos. I wanted to do it all.
Sure, I did some of these things and made a positive return, but that’s not the point. Money wasn’t the resource I needed to optimize. Time was.
First let’s talk about these money-making initiatives to relation to each other. Every strategy required a sizable time commitment. To invest in individual stocks I would need to read SEC filings to see if a given company was worth investing in. To get into affiliate marketing, I would need to take time to create content and master social media to attract an audience. Instead of focusing on a single strategy, I dabbled into all of them at once, causing them to cannibalize each other. After a point I was watching so many videos and conducting other kinds of research I didn’t have time left to take action.
It wasn’t like I had an abundance of free time to begin with either. Remember how I said something caused me to quit game development? This was it. Maybe it was because I came out of a stressful situation with game development and got quick wins from personal finance, but I dropped out of the former entirely and went all-in on the latter. The thing is, anyone could become an expert in making money but only I can embark on my creative endeavors. I made the wrong sacrifice.
Here’s the kicker: the S&P 500 index increased significantly since I started all of this, while most of my investments have remained flat. This means I would’ve made more money if I just adopted a passive investing strategy. The only reason to invest extra time is to take a shot at beating the market, and that’s not a even guaranteed outcome.
Financial literacy was an area I was deficient in, and I overcompensated by taking away from other aspects of my life. Instead of trying to become an instant expert, I should’ve nailed down the fundamentals first. I should’ve created an environment for myself where I can learn at my own pace, not allow my life to be all about finance.