make money now versus make money later
OK, think fast: two jobs. One pays $50,000 this year; it will have a steady raise keeping pace with inflation (more or less) for the next 20 years, but there will be no spectacular bumps up. The other job pays $15,000 this year. In 10 years it might give you the experience to make $100,000 per year – or, if you haven’t done that well, it might pay you $15,000.
What do you do?
I would argue this is at the core of your personality for many reasons. If I told you that I would give you $5 straight out, or we could flip a coin and heads you’d get $10 or tails you’d get $0, what would you choose? Investing works the same way: conventional thinking tells us that index fund investing is the way to go. You can’t beat the market! Hang in there – there has never been a 15 year period where the market didn’t go up! Be average – hope for the swelling tide to lift you along with the rest of humanity! Bet on the sure thing – take the $5!
So what does that tell you? Do you want to make money now or make money later? Would you take a job for free today with the promise of making more tomorrow? Or do you want cash in hand, thank you very much? Honestly, both are legitimate arguments. I’ve turned down two jobs in investment banking because they were bonus-based compensation and I knew that even though they might be worth 150% of what I was making from contracting, they also might be worth 70% of what I was making. You know what? That’s weak thinking.
Risk taking is fundamental for wealth building. I’m sure Warren Buffet would argue that he doesn’t take any risks: he studies exhaustively and then invests without concern because he’s done his homework. My grandfather did awfully well (until 2000) in the stock market, too, although he certainly didn’t have access to the type of research that WB does. It’s possible to take some measured risks and achieve success as long as your definition of success doesn’t mean being the wealthiest man (or woman) in the world.
I want to make money in the future. I’ve set up my lifestyle to make money in the future. I claim to want money in the present so I can retire now, but I spend a lot of time talking about making it now and coasting along on a decent contracting income without building my investments aggressively or a business or even my own knowledge (which deteriorates every day).
Here is the question: what’s the main thing you need to do? Invest better? Build a business? Or just continue to slowly build income and plow your increasing income – through maintaining your standard of living and putting the excess into savings – into slowly building wealth? One of my favorite reads is Get Rich Slowly, but do I want to get rich slowly? Depends on how slowly you mean…