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Tuesday, November 4, 2014

A YOLO Dilemma

You are fresh grad out of college, raring to go after your dream career, earning your very first corporate paycheck and now you want to YOLO away at some Lalaland, spending the money on the many things you’ve dreamed about since you’re a kid.

Sports car, romantic dinner, a beautiful partner, around the world travel and the list goes on.

I was in the very same shoes as these people, always thinking about YOLO-ing and living my life to the fullest every single day without planning for tomorrow.


While to a certain extent that is applaudable, synchronizing YOLO activities and planning for your life would be a step better that would ensure you have fun not only today but for tomorrow and beyond. This is what I called YWLF = You Will Live Forever.

As someone who have been through such experience previously, I can understand how difficult it is to get started. I hope by sharing my top 3 YOLO Dilemmas this could change your life too for the better:

YOLO Dilemma 1: Delay Gratification

The issue is whether or not to delay gratification (Click Here) of things you desire in life – now or later. So a classic example is if you only have $500 today and you really want a new Iphone, you can either buy the phone and satisfy your desire or invest the money, let it grow and compound for the next couple of years.

I have also previously written a post on the importance of saving from young and how compounding will make you rich over time. Some people may argue that today is what you should be focusing at and what comes tomorrow will be dealt tomorrow. The key here is to balance between the needs and wants. In my opinion, it is best not to spend a lot of your money on wants, especially on the earlier days of your life, since you would be required to play a higher catch-up in the later part of your life.

For my own situation, I saved aggressively for couple of years when I was younger and managed to reach my first milestone of $250K when I hit 28 years old. Contrary to the belief, I still had many fun, travel and laughter in my life while doing so.

Below is an example of how 3 fellow classmates have performed by investing at different intervals of their lives.

The key here is to save as early as possible as you can see how Susan outpaces Bill at age 65 even though she puts in lesser money than Bill. This is where the magic of compounding is taking effect.



YOLO Dilemma 2: How much should I have in my savings?

The more you have in your piggy bank the better it is for you.

Nah, I’m just kidding. Depending on your individual situation, it is best that you gauge how much are you capable to save based on your income and family environment.

I have previously written a post about how much capital should one have at different checkpoints of their lives and the answer is it really depends (Click Here). So, if you are not sure how much to aim, always aim as high as possible.

For your easy reference, here’s a rough guide below that you can use.

For example, if you are currently closer to 35 years old and are earning $100,000/annum, you should at least have $100,000 x 1.5 = $150,000 in your savings. This is not a fixed and hard rule to how much you need to save, but it’s a guide you can refer to.



YOLO Dilemma 3 – Timing the market

“The best time to start investing was 20 years ago. The second best time to start investing is now”
I remember when I started my investing journey, I was hyped to trying to beat the system by timing in and out of the market.

Fellow investors who have done the same would attest to how difficult it can be to do so.

This is a dilemma that many people will encounter at some point of their lives.

Studies have shown that a person who is fully invested in the market most of the times beat those who repeatedly time the market. It makes sense as these group of people might miss the recession but also subsequently miss the run up when it happens.

It appears that the solution to this is much easier to solve than we imagined: Be invested at all times and focus on the business.

Based on the historical data from S&P from 1993 to 2013, at any point in time you have missed more than 30 of the best days and your return would have been negative. So maybe you could pulled it off one time by being lucky, but consistently you are better off being invested fully in the market.



Think about this. We want to YOLO today but we want to do it tomorrow and beyond. Plan your life and you can YOLO till you end up in a bucket one day.

What about you? Are there other YOLO Dilemma that you have encountered as an investor?

12 comments:

  1. Hi B,

    I will probably only achieve half of what you had at the age of 28. With a lesser starting pay, I've really learnt to live a very simple lifestyle. On top of that, I had to study part time and pay for my uni fees all by myself.

    A YOLO lifestyle seems like a fun thing to do. All of us been through that stage to want to start working and spend on the things we like. But somewhere along the way we realised the need to delay gratification for a better tomorrow. Even with a lesser pay, it's still possible to have a 6 figure savings by the age of 30. In fact I believe more than 80% of us will be able to do that. Its whether we want or not.

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    1. Hi SGYI

      I think you are one of the best role model amongst our young retail professional/investor out there.

      Not only do you understand between what you need and want, but also having to start from scratch, having to pay your own tuition, improve your human assets and rising through your professional job. I think you are a good role model for all the young students out there.

      Your post on saving 75% to reach a 6 figure by the age of 30 is commendable. They are indeed achievable, as you would have shown by the time you hit 30. I am looking forward to the time you hit those milestone.

      Keep the good work up.

      Delete
  2. Hi B,

    250K by age 28 is truly impressive. I wished i had a ferocious savings appetite when I was younger. Nonetheless, I hope I can still catch up before i kick the bucket one day. :)

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    1. Hi SRSI

      Ferocious savings along with riding along the bull run definitely helps those figures. I am sure with your vast knowledge you would pick great stocks to invest in and when that time comes, it'll be faster than you know before you hit those dreamable figures.

      Delete
  3. Hi B,

    Pretty prolific with your writing lately. ;p

    Because IOLO, I want to have more of the control of the thing that matters most to me: Time

    Therefore no dilemma because to do that, I probably need to achieve FI and that's done through savings and investing.

    I find it psychologically difficult to be fully invested. Likely that with no bullets, I will not be able to sleep well when a big bear comes. ;p

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    1. Hi 15hww

      Thanks!! Appears I am able to somewhat squeeze time between juggling for couple of things in between. Maybe its because class if finishing which is why time is rather open these days for me :D

      I think you've set the objective right from the start to achieve a 15 hour work week and therefore are willing to set stricter goal to achieving it. You also track expenses really to the detail which must have helped you achieve your budget right nicely.

      Regarding the fully invested part, I think it is mentioning about being invested on the market, but not about being fully invested in terms of quantum. A proper split of funds is necessary to remain successful and to go further beyond.

      Delete
  4. Usually in our 20s we're learning, 30s we're earnings, and 40s we're owning. But most people in their 20s have it in reverse. They want to own everything. I can understand their point of view. They worked hard and can now have the finances to reward themselves.

    I always believe that if you do what people aren't willing to do today then later on you can do what people only dream of doing. So I'm delaying gratification to hopefully reap the rewards later on.

    Great post, thanks for sharing!

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    1. Hi Henry

      You hit every nail right there.

      Teenagers want to achieve and own everything with the money that they do not have. So what they do is reverse delay gratification and by the time they get older it gets out of hand.

      Thanks for your additional input.

      Delete
  5. Hi B,

    I have friends telling me that one might have an accident in the near future so it is best to spend it while he can. They don't want to live forever.. that's the concept of YOLO - to enjoy life. It's indeed a difficult situation and social media portraying lavish lifestyles of peers is not helping.

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    1. Hi jes

      I rather have fun with all those traveling like yours (hehe) and live till 70 than to live meaninglessly for 100 years. Nah its not just the traveling but I hv to mention that because turkey sounds so fun :)

      Delete
  6. Hi B,

    I don't remember did you mentioned when did you get interested and investing in the young age of 26? You are an inspiration to me!!! Thank you.

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    1. Hi David

      I think churning out to make money working hard for you runs in my blood. My dad is an investor as well so I think thats where the inspiration comes from.

      I was not successful at first but I started proper investing at the age of 25. Mistakes after mistakes but thankfully I benefited most from it.

      Thanks for your kind words.

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