This is the first part of a two-part series on how harnessing the incredible power of optimism can allow you to break through mental barriers to become financially free and also generally enjoy life.
Over the course of the last six or so years, as I’ve been fighting to become financially free, I’ve realized that I’m an eternal optimist.
In fact, I don’t think one can ever become financially free if they’re not an optimist.
First Starting Out
I remember when I first started saving and investing – this was way back when I was still worth a negative amount of money – I became pretty excited about where things were going.
A few months into things, I started telling friends and family about my concepts and future plans. I told people around me in a fairly matter-of-fact manner that I’d be financially free by the time I turned 40. I was starting to save aggressively, and a few calculations told me it was inevitable.
That’s a key word here: inevitable. I knew that my plan would work out. I knew that it was inevitable.
In fact, I was able to visualize a future me enjoying all of the rewards that the me of then was working so hard to attain. I could close my eyes and see this future me waking up when he wanted, doing what he wanted, and generally living outside the normal bounds of everyday life.
I don’t think there’s any other way to approach goals, plans, or dreams in life. You have to visualize the end result. You have to know that it’s going to work out. No matter what anyone says, you’re going to get there.
Well, I still remember a few people close to me didn’t really buy into what I was doing. (It later turned out that these same people resented me for succeeding.)
They thought I was silly. After all, why would anyone believe the Jason that had managed to dig a hole of debt would somehow miraculously be in a position to stop working decades before anyone else? And do it in a little over 10 years? Not possible.
Well, it was possible. And it happened.
Ironically, I’m today able to look back on when Today interviewed me about my plans to become free by 40.
I remember first seeing that interview on television, thinking that one day my “today” would be a day when I’d be financially free, and I’d be able to look back on yesteryear’s Today interview to see just how great it all turned out.
Maybe that’s the optimist in me. Either way, that day is today.
So if you watch the interview, they have a personal finance expert come on to kind of play devil’s advocate. At one point, she actually states, “He could cross the road and something could happen.” This was one of her arguments (really) against the idea of giving up full-time work at a young age.
This kind of pessimistic viewpoint is one of the most silly arguments against becoming financially free that I can possibly think of.
If I were to actually cross the road and get hit by a car or something and get injured, what position do you think I’d rather be in:
- I’m financially free, with no concerns about being away from a job for an extended period of time. I have hundreds of thousands of dollars as a backstop to cover any injuries above and beyond what medical insurance would cover, which is especially helpful if a company were to let me go, potentially allowing coverage to temporarily relapse.
- I’m not financially free. I’m in a financial position like everyone else. I have barely enough cash in the bank to cover three months’ worth of expenses and any substantial time away from the job would put me in a serious financial bind.
Moreover, if crossing the road were to result in my death, which position do you think I’d rather be in:
- I’m financially free. I was able to, up until that moment in time, live out a lifelong dream. I spent months (years?) of my life doing whatever I want while I was still in peak form across the board. Instead of waiting until I was in my 60s to really live life completely on my terms, at which point my body and mind are no longer in peak form, I was able to experience absolute freedom at a young age. The only thought that would be going through my mind as that car was right about to hit me is that I at least got to experience life on my terms.
- I’m not financially free. I’m crossing the road to come back to work after a lunch break that wasn’t long enough to really enjoy my food or the weather. I didn’t get to experience a lifelong dream at all. Instead, I can only imagine what life must be like for people that don’t have to spend so much time at a workplace they dislike so much that if money were to all of the sudden land in their lap, they’d quit immediately. I’m thinking about quotas, back-stabbing co-workers, customer surveys, projects I don’t have enough time or resources for, workplace drama and rumors, and wishing I could be free from it all right as the car hits me.
The choices here are obvious.
Look, nobody knows when they’re going to die. And I can’t completely mitigate against the chances of something happening to me when I cross the road.
But wouldn’t you want to know what the other side was like if something were to happen to you? Wouldn’t you want to be in the best financial position possible if you were to be injured? Wouldn’t you want to live life on your terms before something bad happens?
Optimism Versus Pessimism
This line of thought where something bad might happen to you, so you shouldn’t even try to reach for incredible heights, is pessimism at its finest.
Pessimism makes it easy to not even try – and then feel good about yourself when you don’t accomplish anything. You rationalize a lack of effort upfront by playing mental gymnastics and making it seem like it’s more likely than it really is that something won’t work out, thus validating your end position.
But pessimists still fail because optimists like myself are usually right.
See, the world tends to move onward and upward over the long run. When you’re an optimist, like me, you get to see your viewpoint manifest itself through progress and success far more often than a pessimist will see doom and gloom manifest itself.
Sure, there is strife in the world. There is occasional war. People still starve worldwide every day. There is crime.
Humans are far from a perfect species.
However, the world today is still far better than it was even 20 years ago, let alone 100 years ago. The optimists have largely won over the last century, and I find it likely that they’ll continue to win over the next 100 years.
Let’s let Warren Buffett tell it like it really is (via Berkshire Hathaway Inc.’s (BRK.B) 2015 annual letter to shareholders):
America’s population is growing about .8% per year (.5% from births minus deaths and .3% from net migration). Thus 2% of overall growth produces about 1.2% of per capita growth. That may not sound impressive. But in a single generation of, say, 25 years, that rate of growth leads to a gain of 34.4% in real GDP per capita. (Compounding’s effects produce the excess over the percentage that would result by simply multiplying 25 x 1.2%.) In turn, that 34.4% gain will produce a staggering $19,000 increase in real GDP per capita for the next generation. Were that to be distributed equally, the gain would be $76,000 annually for a family of four. Today’s politicians need not shed tears for tomorrow’s children.
Indeed, most of today’s children are doing well. All families in my upper middle-class neighborhood regularly enjoy a living standard better than that achieved by John D. Rockefeller Sr. at the time of my birth. His unparalleled fortune couldn’t buy what we now take for granted, whether the field is – to name just a few – transportation, entertainment, communication or medical services. Rockefeller certainly had power and fame; he could not, however, live as well as my neighbors now do.
Though the pie to be shared by the next generation will be far larger than today’s, how it will be divided will remain fiercely contentious. Just as is now the case, there will be struggles for the increased output of goods and services between those people in their productive years and retirees, between the healthy and the infirm, between the inheritors and the Horatio Algers, between investors and workers and, in particular, between those with talents that are valued highly by the marketplace and the equally decent hard-working Americans who lack the skills the market prizes. Clashes of that sort have forever been with us – and will forever continue. Congress will be the battlefield; money and votes will be the weapons. Lobbying will remain a growth industry.
The good news, however, is that even members of the “losing” sides will almost certainly enjoy – as they should – far more goods and services in the future than they have in the past. The quality of their increased bounty will also dramatically improve. Nothing rivals the market system in producing what people want – nor, even more so, in delivering what people don’t yet know they want. My parents, when young, could not envision a television set, nor did I, in my 50s, think I needed a personal computer. Both products, once people saw what they could do, quickly revolutionized their lives. I now spend ten hours a week playing bridge online. And, as I write this letter, “search” is invaluable to me. (I’m not ready for Tinder, however.)
For 240 years it’s been a terrible mistake to bet against America, and now is no time to start. America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored and perhaps made more generous. And, yes, America’s kids will live far better than their parents did.
Well said, Mr. Buffett.
And not only are optimists right far more often than pessimists but optimists get to actually enjoy the rewards!
I mean, the rewards for an optimist are much greater than the rewards a pessimist could ever hope for.
If you’re a pessimist, you’re not going anywhere. You may see the result of a self-fulfilling prophecy, but then what? What kind of life is that? While pessimists may be right some of the time, there is no reward. Is war a “told-you-so” moment to celebrate? Is being stuck at work because you just “couldn’t save and invest like that other guy” really something to brag about?
Look, I’ve seen my fair share of dark days. But those that give into complete darkness receive no empathy from me. I kept moving toward the light, letting optimism be my guide. And I now get to partake in almost endless sunshine.
You can be a pessimist. And perhaps you’ll be right here and there. Even a broken clock is right twice a day. But what reward comes with that?
Meanwhile, optimists see their belief in the world around them manifest itself through progress, success, change, and enrichment. It’s happened, is happening, and will continue to happen. Humanity’s thirst for progress is unstoppable over the long run. Our ability to create change knows no bounds. I have no doubt that the world will be a much better place 100 years from now.
I know which side of the aisle I stand on.
What about you? Do you believe in the power of optimism? Do you visualize yourself making your dreams come true?
Full disclosure: I have no position in any aforementioned stocks.
Thanks for reading.
Image courtesy of: Stuart Miles at FreeDigitalPhotos.net.