What caught my eye this week.

I have a stuffed hamper’s worth of links below to help get you through the Christmas break. However I struggled with how to introduce what’s probably our last post of the year.

Covid? Too miserable, interminable, unresolved, and depressing.

Brexit? Ditto, with knobs on.

Even recapping this bonkers year is a hard task for an investment blog.

In March we stared into the abyss. In a rare show of animation The Accumulator charged into the fray, urging “Do not sell!” from the ramparts of our passive investing HQ like some calculator-wielding William Wallace. I even sensed an opportunity, but hindsight and global indices back at their highs are deceiving and make such calls look smarter than the hunches they were at the time. This year confounded, and confounded again.

As I was mulling all this over, I was also moderating the comments on TA’s Financial Origin story from Tuesday and I realised they are the best way to end 2020. More than 70 readers have now shared their financial journeys – and in some cases report they’ve already reached financial independence.

The stories make for a heartening read. Please consider adding yours.

Keep on keeping on

More than a few of the stories give Monevator a nod, among other blogs, as playing a part in their success. Talk about an early Christmas present! It’s great to hear we’ve helped nudge a few lives in the right direction.

Indeed thank goodness for the much-maligned Internet. Some of us have spent most of this year alone. But it’s rarely felt that way to me, partly because this blog reaches a vast audience – approaching three-quarters of a million individuals over the course of a year.

Monevator has at heart a simple message and a design that needs updating, but it still finds a readership. Hopefully we’ll all spend less time in front of our screens in 2021 – but do continue to make some time for us!

Until then have the best Christmas you can in the miserable circumstances. Maybe phone a lonely friend?

I continue to think that (again, like Brexit) the true toll of the virus and the countermeasures will be counted over decades, not months. But when it comes to the upfront impact, the worst is nearly behind us.

The global economy could well roar in 2021. Stay with it!

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It’s not normal to care about finances as much as we do. As a Monevator reader, you pay unusually close attention to your financial affairs. You’ve probably put a great deal of thought into building a wealth-generation engine that’s designed to secure the future for you and your family.

That’s not standard behaviour. The average bear doesn’t really care.

So what happened to you? What put you on the financial path you’re on now?

• A shock to the system?
• Your upbringing?
• Complete luck?

What makes you different?

In my case I wasn’t different at all. Until the eve of the Great Recession, I was much like everybody else – a free-spending, live-for-the-moment, zero-savings kind of a guy.

I had no pension. I had an interest-only mortgage I wasn’t paying off. I had a ridiculous car that ate money.

I was dimly aware that something wasn’t right. Neither with the world, nor with my world.

One day a financially savvy acquaintance of mine said:

“The party is over.”

“This is a party?” I replied.

Reality dawned on T.S.H.T.F. Day at work in October 2008.

Plugs were pulled. Projects terminated. I was in a meeting with our main client when they got a call to turn off the taps.

We stopped hiring. We let people go. My inbox started to fill up with CVs from ridiculously overqualified people looking for refuge.

It was like the second act of a horror movie. We’d all been camping by the side of a beautiful lake. Now night had fallen and some maniac was taking a meat-cleaver to my compadres.

The world hasn’t been the same since, and neither have I.

Born again

My new religion was to save like Grandma.

Ditch that car. Pay off that mortgage. Slash outgoings. Crank up the pension. Learn about the stock market.

Like a balloonist heading for a mountain, I chucked the sandbags of my old lifestyle overboard.

Fewer people were needed in the post-2008 recession world. There weren’t other jobs to go to.

I needed to become one of the ‘invaluable ones’.

• Flexible like a yogi.
• Better value than Lidl.
• As diplomatic as a pair of breeding pandas.
• Harder working than, well, my competition.

I changed my clothes, I changed my hair, I changed my attitude.

I wasn’t getting any younger and digital disruption was spreading through my industry like ash dieback1. It was adapt or die time.

I used the early hours of the morning to learn new skills. I did online courses. I force-fed myself audiobooks on key topics. I took up a side hustle that helped me learn more about digital media. (Hello Monevator!) The last one also helped further my investing education.

A line-manager said, “If this place goes down, you’ll be one of the last ones left who has to switch off the lights.”

More was needed:

• 2008 taught me the sky can fall in very fast.
• Time felt short in a declining industry.
• Redundancies hit the company like waves, throwing people overboard.

My thirties were peeling off the calendar and there was a scrum at the door for upper management. Not everyone was going to get in.

I had childhood memories of an earlier recession – the early 1980s in the north-east. I was left with an afterburn image of a friend’s dad, on the scrapheap in his mid-forties.

Plus a reverse role-model in an old boss. Once brilliant and at the heart of everything. He’d grown complacent. He’d become expensive. He refused to learn new tricks. He didn’t think it could happen to him until it did.

Others were plain unlucky:

• Edged out in political battles.
• Not enough allies at the decisive moment.
• Skills unrecognised by senior management. 
• Simply cheaper to dispense with.

I met plenty of former high-flyers who couldn’t gain purchase at their old level anymore. 

Escape velocity

Financial independence was the answer. It wouldn’t matter if I was knocked off the three-dimensional corporate chessboard if I was playing a different game.

If I moved hard and fast enough then I could afford to be unlucky, ill, or old – the kind of hand that gets dealt to ‘other people’.

You can boil the shockingly simple math behind early retirement down to:

A high savings rate + index trackers + time

The other 90% of the story is mindset.2

Without money to burn, the only way you’re going to achieve financial independence in a decade or so is by giving things up.

Here’s what I haven’t missed:

• Believing that money equals happiness.
• Tying self-worth to money.
• High-status items: big house, flashy car, exotic holidays, big-boys toys. Anything where you’re paying over the odds to join the club.
• Sky-high expectations: the notion that your job should be high-paying and fulfilling, you should regularly score promotions, your family life should be perfect, you should feel happy and confident most of the time.
• Taking setbacks personally. It’s not the setback that defines you, it’s how you respond.
• Resentment, envy, revenge, and self-pity.

The mental side is an ongoing battle for me, but the more progress I make, the healthier and more resilient I feel. Whoever came up with the dictum that ‘Happiness = Reality minus Expectations’ is a genius.

I did it my way. What about you?

My journey began on the eve of a global financial crisis. The shock changed me for life.

The biggest revelation I had was that once I was on the right path, the financial side could mostly take care of itself.

The vast majority of the effort needed lay in developing the mental toolkit to survive at work and improve well-being, while waiting for my financial independence day.

But what about you? How did you find your way here?

I love to hear about Monevator readers’ financial-life experiences and motivations, so please let us know in the comments whatever you’re happy to share.

Take it steady,

The Accumulator

P.S. I enjoyed the Swiss Cheese mental model that The Investor linked to in Weekend Reading.

The idea is to prevent disaster by shielding behind multiple layers of defence. The framework also shows how threats can defeat a system by sailing clean through holes that are carelessly aligned rather than mutually covered.

Here’s my Swiss Cheese Defence for my journey to FI:

1. A virulent disease of ash trees. It is caused by a fungus, Hymenoscyphus fraxineus. [↩]
2. Assuming you’re not among the top 2% or so of earners. [↩]

What caught my eye this week.

Let’s be honest, if there was ever a year for spending foolishly on ephemeral nonsense at Christmas, it’s 2020.

Traditionally this is the time of the year when we at Monevator flag up some good money and investing related books to buy for Christmas.

The idea is you give the gift of financial savviness to a special person in your life, instead of a pair of socks.

After that, who knows?

Maybe in ten years they’ll come over to tell you they’ve achieved financial independence like my co-blogger The Accumulator did a few months ago.

Buy yourself something nice

However all that seems rather worthy this particular December.

Scurrying through the plague-lands, masked-up and fearfully visiting aged relatives – or younger potential carriers – for a few festive days that seem destined to spike the infection rate, just ahead of the Great British Brexit belly flop…

Who wouldn’t want to indulge instead?

So if you want to treat yourself to the latest Apple Watch, a bottle of Chanel No 5, or an inflatable french maid, you get a pass this year.

Just don’t go into debt to do it!

Best money and investing books for Christmas

Still with us on the straight and narrow? Then here’s a few old and new books to consider giving this Christmas.

The Psychology of Money

We’ve been reading and linking to Morgan Housel’s articles for a decade so we knew his first book would be a classic. If you’ve ever wondered why some people do dumb stuff with money – while others effortlessly make great decisions – then this is a must-read. Better yet, give it to one of the former. You might just turn them into one of the latter.

Investing Demystified

The second edition of Lars Kroijer’s guide to passive investing in tracker funds came out on 2017, and it’s still winning lots of fans. A frequent contributor to Monevator over the years, ex-hedge fund manager Kroijer convincingly explains why most of us don’t have an edge in the markets – and then explains why that doesn’t matter when you invest in global index funds and risk-free bonds.

The Man Who Solved The Market

Gregory Zuckerman’s diligent journalism pulls back the curtain (a bit) on Renaissance Capital, the most mysterious market-smashing hedge fund of all-time. The book got good reviews and was short-listed for several awards, but I was disappointed to be honest. I didn’t expect revelatory investing secrets, but I’d hoped for more than a catalogue of job hirings and firings. Okay, that’s too harsh, and as I say, others raved. Consider it for that investing nerd in your life.

More Money than God

I think this older book (2011) is a better primer on hedge funds. Sebastian Malby mostly devotes each chapter to a different fund’s time in the sun, so no particular characters outstay their welcome. It’s a good way to understand how – fleetingly – various people have found ways to achieve truly outsized returns from investing.

Smarter Investing

Even this third edition is pretty old now (2013) but Tim Hale’s Smarter Investing is still my co-blogger’s top recommendation for passive investors. He even reviewed it on Monevator, so take a gander at that if you want to learn more before buying for your mum, dad, great Aunt, or wayward nephew. (Controversy alert: the book didn’t click for me. But then I long ago went rogue!)

You Can Be A Stock Market Genius

Despite being published 20 years ago, Joel Greenblatt’s primer on how he got annualized returns of 50% is still my best recommendation for that naughty active investor in your life. Almost everything specific in this book is out-of-date, and it’s more relevant for the American market, too. Doesn’t matter. What this book might just give a reader is the right mindset to beat the market. (Still a long shot, of course!)

The Snowball

Another oldie (2009), I’ve given this book to a couple of people who couldn’t care less about investing but were curious about Warren Buffett. To my astonishment, they enjoyed most of its 832 pages. Buffett himself didn’t, apparently, which is probably an endorsement, if you believe biographies should be warts and all.

The Art of Execution

I’ve read several dozen money and investing books over the years, so this idiosyncratic list could go on indefinitely. Few stick in the mind though. Lee Freeman-Shor’s survey of how some of the world’s best investors managed their portfolios is a rare exception. Only the other day I heard a clued-up investing pundit complain there are no books that talk about when to sell shares. Well, this overlooked classic does, and much else. Still, it’s one for committed stock pickers only.

Reading through the list, I see they’re mostly devoted to investing rather than personal finance. Maybe I’m forgetting something obvious, but it feels like a long time since a primer like Your Money or Your Life made waves.

Perhaps that’s what the second Monevator book should be all about? (For those who have kindly inquired, the first was 95% finished a year ago. The delays since have been mostly down to me. We now hope to have it out in the first half of 2021…)

Finally if you’ve had enough of money and the markets for now, check out Bill Gates’ top five books of 2020.

Have a great weekend, and see you next week for our final posts of year.

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