Been a while since I made an update on the blog. Nope! I didn't go for an exotic vacation in Madagascar and got cut off from civilisation for many months. I'm still here, more focused than ever. I have been reading and learning nonstop and trading 24/7, I really didn't have the time to write and keep the blog going. But I will try again.
Can you believe that it's now 2022? Me, neither! How time flies. If you blink, it will be NYE 2022. In 2021, many peoples lives have changed dramatically. For others, nothing has changed much, like they still live in the world of Covid. I have moved on from Covid, I don't give a crap about it.
One of my main reasons, why I could no longer fit a time for writing in this blog was that I fell deep into the crypto rabbit hole. You see, when you start with Bitcoin then touch Ethereum - you will slide deeper and deeper into the core of the space without you knowing it. The Crypto Markets is now a decade old, and to understand the present, I had to research what had happened in the past. I was in for a treat. I would like to believe that I am now able to catch up on the significance of this experiment and why it makes sense. It took me months to reach the level of understanding I have today. I developed zits burning my midnight candles reading one more Digest from 2019 and had to fight sleepiness at work due to a measly 4-hour sleep. Doesn't matter, if I find something interesting, I'll be all over it.
There are many things that I do and don't believe. I always view myself as Lawful Good but in the depths of my soul, I am not. I tilt towards Chaotic Good/Neutral. My journey of understanding the space made me piece together the chaotic beliefs that I care about like an unveiling curtain at the centre stage signalling the start of an epic show.
When I started this blog, I was influenced by the principles of FIRE. These principles are simple, it doesn't require complex mathematical formulae rather common sense. For example, increasing your savings rate - what's difficult about this concept? Nothing really. Save more than you spend. If this is so hard for you, then you have bigger fish to fry. But people, are just too lazy to think, conversely, critically think. The herd will have this cashflow, earn > spend > save > repeat. And then they realise, why they feel poorer despite the abundance of things they managed to accumulate or the subscriptions they could afford to pay. Imagine having a car, a house, a new bike, a variety of gadgets, the latest phone, a plethora of streaming subs, a few vacation, lux dinners; yet, too afraid to check your balance on the banking app because there's too little in it. And to maintain, this lifestyle, you end up clocking more shifts.
Now imagine flipping your cashflow - earn > save > spend > repeat. This forces you to live off what's left after saving. Actually, let's pause here. Why do we even save? The goal of saving varies from person to person. I used to view it as a tool to achieve early retirement without the need to wait for my pensionable age at 68. Early retirement, say 50 years old is a very powerful motivator. Today, I view saving as just a number on my screen, and like a video game, the goal is to level up not remain stagnant, to compound returns so number on the screen gets bigger and bigger. Don't get confused here. For you, saving may mean something completely different, wedding, new house, car, college education. It could be anything. It is therefore your task, to know how to get there and how fast. For example, if you need 1 million pesos for your wedding in 2 years, what are you going to do today to get there? If you think you need 2million dollars to live a comfortable retirement at 55, you'll have to employ a completely different strategy.
On a high level where you want to save in preparation for an early retirement whilst maintaining your current lifestyle, the growth on your savings must be equal to or out-pace inflation rate. Simply, inflation is the decline of the purchasing power of your money over time. You can buy so much more with your £1000 10 years ago versus today, and conversely, we can afford very little with out £1000 today in the next few years.
Given that the UK Inflation rate is projected to grow 5-6% this year, to offset, we must find a way to beat it. How?
1) Salary Increase to match inflation. But the salary increase amongst NHS staff for 2021 was only 3% (laughable) whereas Blackrock employees salary rose 8%. Not only did NHS staff get 3% increase, our NI will rise 1.25% too. Now, you get an idea, why to maintain our current lifestyle, we need to do extra bank shifts or fight for promotion or have a second job. If not, we need drastic changes in our lives e.g. sell the car, downgrade a house, cut back on eat-outs, cut on vacations, delay having kids, etc.
2) INVEST. It's never been easier to do this now. Risky, yes. But now you know that holding cash is riskier and a surer way of losing money via inflation.
If a 5% inflation doesn't really bother you for now then jokes on you. Enter the elephant in the room, the expansion of the Central Banks balance sheet aka Quantitative Easing. The CAGR (annual growth) of central bankers' balance sheet since 2008 is 15%. If we are to use this as benchmark, then we should out-pace 15% to match this currency debasement. You see, as central banks expand their balance sheet, the base currency is debased and therefore, the purchasing power will decline. Again, we feel poorer.
I should just stop here for now.
Will post Part 2 -
11 Secrets to Financial Success - Anton Kreil
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Rule of 72 by @10KDiver
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Nick Huber's Twitter thread on business and life in general. The longest thread I've ever come across with on Twitter.
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