Become (Financially) Unbreakable
There is a lot of shitty advice out there. I expect it on social media, but I’m starting to see more shitty advice in traditional media channels which makes me think we are not too far from a recession. Ignoring the 2-month recession during COVID, the last real recession was the Great Recession in 2007 that lasted for a year and a half. It’s been almost 20 years since we’ve truly been in a recession and people under 40 haven’t experienced one in their working years. Said more simply – most of these social media stars and traditional media “experts” aren’t old enough to know a tough economic climate and how to create an unbreakable personal finance position.
What makes me qualified? Not much except I was an entrepreneur early in my career and the whole thing burned down during the Great Recession. What I spent years building up came crashing down in less than 6 months because as difficult as it is to scale, it’s 10x harder to scale down. It was a huge hit to my ego and a bigger hit to my finances. However, what I learned coming out of that experience is to be financially unbreakable. That’s my credential – I’ve lived it.
To me, being financially unbreakable is creating a personal finance foundation that best positions us to take advantage of rising markets, but protect us against falling markets and the unfortunate events that life is going to throw at us (health issues, home repairs, etc.). The position, by design, may not ever beat the market in up years, but is set up to beat the market over long periods of time by protecting as best as possible against the down years. Being financially unbreakable isn’t hard, but it takes patience, consistency and a shit-ton of ignoring bad advice. I won’t pretend to believe anyone is 100% unbreakable, but there are ways to build your personal finances that put you in a position to weather almost any financial storm.
Build the Foundation
No matter what anyone tells you there is a tried-and-true way to become financially unbreakable and it starts with building a strong foundation. This isn’t the sexy stuff you hear about on social media or even on TV because no one gets rich on the financial equivalent of blocking and tackling, but this is what protects you when shit hits the fan. It’s all simple, but hard to execute.
Step 1 – spend less money than you make. This is the golden rule in becoming unbreakable and sounds easy, but trust me, it’s hard to execute. I’ve been tracking my spending, weekly, for the past 10 years and find it really helpful to keep me accountable. I’m not suggesting it’s for everyone, but find something that works for you. It’s also hard to battle lifestyle creep when you get pay raises, but that’s often where you lose control. Even creating a baseline and checking yourself a couple times of year is worth the time investment. This is too important to skip over because it sounds like a lot of work. No shit. It is a lot of work, but it’s worth every minute. I’ll say it one more time – spend less money than you make.
Step 2 – Pay off high interest debt and stay (consumer) debt free. This means you shouldn’t be carrying credit card debt or getting a loan on your car. You can carry education debt, mortgages, business debt ect. If the asset that you bought with the debt is delivering more value than the interest payments. If you don’t know what that means, you probably shouldn’t be taking on the debt. Don’t come at me on car debt. I understand that sometimes you need a car and you don’t have the money to buy one, but if that’s the case you should figure out a plan to pay that off as fast as you can. A car has no appreciable value. Once you get out of consumer debt, use step 1 to stay out of high interest / consumer debt going forward.
Step 3 – Build an emergency fund IN CASH for a rainy day. Everyone has an opinion on how much money to put in this cash fund, but I recommend no less than 6 months of critical expenses and potentially even more. I define critical expenses as anything you’d absolutely need to buy if you didn’t have a job / money coming in (rent/mortgage, food, utilities, etc.). I also recommend having this cash in a separate bank account that you only look at 2x a year so you forget you have it. You shouldn’t be using this for any other reason except if you have an emergency (no – that last minute vacation is NOT an emergency). Also, don’t let anyone convince you to put this anywhere other than a cash bank account (high yield savings account is preferred).
Simple? Yes. Hard to execute? Hell yes. It’s tempting to dip into that emergency fund when you want to travel OR put a little toward that hot stock because your friend is making bank on it. That’s the mentality that’s going to make you poor and keep you poor. You need to set aside that fund for emergencies only and figure out how to fund that stock pick with something else (and not a credit card / margin loan)!
Once you create a strong foundation you will put yourself in a position to start building toward retirement and taking some risks to accelerate your wealth. You should absolutely review this foundation regularly to make sure you are tracking to your goals. For example, if you start getting raises at work because you are kicking ass you’ll also have to start putting more in your emergency fund. You’ll also want to make sure you aren’t spending more than your raise and definitely not building up consumer debt. It’s probably worth doing a thorough review every 6 months or at least annually.
Cheers to the start of being financially unbreakable.
