Barefoot Investor: Life exams are the biggest test we face
AS dozens of students across the country sit down to do their final exams this week, it’s important to remember the three really important tests in life and learn how to ace them, writes the Barefoot Investor.
Barefoot Investor
Don't miss out on the headlines from Barefoot Investor. Followed categories will be added to My News.
YEARS ago, when I was cramming for my final VCE exams, I went to see my doctor.
I confessed to the old quack that I was stressed — wound up like a lacker band — and was having trouble sleeping.
He just started chuckling, and then pulled out his prescription pad. “You need sleeping pills”, he said matter-of-factly.
Now, in hindsight, that was very bad advice.
AUSSIES ADMIT LYING TO PARTNERS ABOUT FINANCES
HOW TO INCREASE SAVINGS QUICKLY
Those pills were like horse tranquilisers — the first time I took one, I woke up 10 hours later with my face superglued to my textbook by my own drool.
To counteract the fogginess I started scoffing No-Doz caffeine tablets (one down from speed, one up from Red Bull) — seriously, my final year of school was like Charlie Sheen’s final season of Two and a Half Men.
Still, the good doctor gave me some wise advice that I’ve never forgotten: “These high school exams aren’t nearly as important as you think. You’ll have much bigger ones in the future”.
The doc was dead right.
It was only as I got older that I realised the really important exams —‒ the ones that will change your life forever — don’t have a date, a time, or a room number.
(And because of that, most people not only don’t study for them ... they snooze through them, again and again.)
And given students across the country are sitting down to do their final exams this week, I thought I’d take you through them.
The first life exam is finding a career you enjoy, the second is to choose to become financially secure, and the third is to invest in your family and friends.
You’ll sit these three exams over the next decade (and beyond) — here’s how to ace them.
YOUR CAREER
The average Aussie teenager will have 17 different jobs, and five careers, in their lifetime, according to the Foundation for Young Australians.
Fair dinkum!
My first job out of uni was working on building sites with a joker called “Wolfy” ... who would (unsuccessfully) wolf-whistle at women who walked by. (True story: the day the Australian Stock Exchange called to tell me I’d secured a graduate position, I thought it was old Wolfy playing a trick on me, so I told them to bugger off.)
Anyway, while it’s very important to sidestep the working wolves, you don’t want to keep changing career like Australia changes prime ministers. Otherwise, you’ll never make a dent in the universe.
The smartest method I’ve found to think about such an overwhelming topic (what do I want to be when I grow up?) is to set aside an afternoon and do a thinking exercise that author Arun Abey calls ‘the three circles’:
“What am I deeply interested in?”
“How can I work, over many years, to become truly great at it?”
“How can I make enough money from doing it?”
Your killer career is found at the intersection of these three circles.
YOUR FINANCIAL SECURITY
There are trophy degrees that will guarantee you a good income: medicine, engineering, finance, law.
However, there’s no guarantee you’ll turn that good income into long-term wealth, and it’s certainly no guarantee that you won’t end up being completely disengaged with your job — as 70 per cent of Australians apparently are, according to Gallup research.
Yet committing to being financially strong —‒no matter what level your income — will change the course of your life.
You’ll sit some form of this exam many times over your life — it starts the moment you get the letter from your bank saying “congratulations, here’s your credit card!”, or when your employer automatically enrols you into their default high-fee super fund.
The solution is to tell the bank you don’t do credit cards and to tell your boss to put your super into a low-cost super fund you’ve chosen yourself — then tick the “high growth option” and let compound interest work its magic.
I like to think of compound interest like I do surfing — you put in a bit of effort paddling at the start, but when you catch a giant wave it carries you along without any effort, which means that, instead of mucking around in the slushy waves later on in life, you get to lean back enjoy the ride.
YOUR FAMILY AND FRIENDS
I’m totally unqualified to offer this advice, but I’ll give it anyway.
When you’re a teenager you think your friends will be around forever, because they always have been.
However, unless you make a point of investing time in your friends, they’ll slowly drop away.
What does this have to do with money? Nothing. But it has everything to do with your long-term happiness.
Wellbeing studies show that the happiest people are those with strong social bonds, so investing in your relationships, (especially your family) has the biggest pay-off of all.
So there you have it. Sit these three exams and you may not receive a certificate in the mail or attend a fancy ceremony when you “pass” them, but the pay-off is real, because you won’t be one of those people who aces their ATAR exam and then snoozes through the exams that really matter — and wake up 30 years from now and realise they’ve received an F.
Tread Your Own Path!
Q&A
TIME TO CHANGE IS NOW
BEC ASKS: We are what many would consider “high income earners”, earning $255,000 a year — and yet we are completely out of control.
Our five years of DINK (Double Income No Kids) lifestyle came to a halt when we had three kids in two years, and we are now floundering month to month.
I am struggling to change my shopping habits (expensive everything), and we have a large dream house we started building before our unplanned children arrived.
What can we do?
BAREFOOT REPLIES: I was reading a magazine profile the other day on Johnny Depp.
Instead of buying his smokes himself, he has his assistant do it and gets them to scribble out the health warnings and horrific pictures of blackened lungs with a biro, so he doesn’t have to think about the health consequences — so far it’s working out well for him.
If you’re on a high enough income, you can apply Johnny’s smoke experiment to your money.
You’d be surprised how many couples I meet who are in your situation and do just that.
As long as the money keeps flowing, you’ll be able to smoke through your prime earning years, but it will catch up with you eventually — it always does — the damage you’re doing to your finances isn’t hit or miss.
The black shadows, the worries that wake you up in the middle of the night — and cause you to tap out a confessional email to me ‒— won’t go away.
Eventually they’ll consume you.
My inbox is full of people who are 20 years down the road you’re on.
They’re in their 50s and have suddenly been ricocheted into reality by a divorce, disease or retrenchment.
They’re left bitter and twisted, and scared that they now can’t live any other way.
So right now you’ve got a choice — it’s not too late.
What you’re doing isn’t working, you’ve admitted that yourself.
For the sake of your family — and to be good role models for your kids — it’s time to start doing something that will work.
This week I want you to have your first Date Night and set up your buckets, then start moving through the Barefoot steps together.
They’ll work for you, just as they’ve worked for thousands of couples (many on far less income than you).
The steps work every single time — not because there’s any magic, but because they’re based on good old-fashioned common sense.
Email me next week after your Date Night and let me know how you go.
If you’ve got a burning money question, visit barefootinvestor.com
and #ASKBAREFOOT
The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need (HarperCollins) RRP $29.99. Available now in all good bookstores and online.
The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice.
Originally published as Barefoot Investor: Life exams are the biggest test we face
Why all that glitters is not gold
The price of gold may be on the rise but it’s not quite as shiny as it seems. When it comes to long-term gain, it pays to follow the golden rule — only invest in things that regularly put money back in your pocket, writes the Barefoot Investor.
Don’t get high on the short-term sugar hit
Despite the COVID crisis, money questions have been flooding in from readers about how to buy and trade stocks, or even gold. Maybe it’s down to raiding super, or the government stimulus, but the key to financial control is first to get out of debt, writes the Barefoot Investor.