My goal right out of college was to build a large enough capital base that allowed me to live and work where and when I wanted. I didn’t know the mechanics on how this would work or what kind of capital levels I would need at that time. But I knew it was possible if I kept my costs low and invested everything I could make straight back into the market.
At that time my wife and I were pretty much living in poverty. Sure, we both had college degrees and are earning power was about to explode, but living five years in the worst part of town in the jankiest apartment money could afford taught us a lot about keeping our costs low.
At that time we were probably making $15,000-20,000 per year and still putting money away for a rainy day. We tried to save $50 bucks per paycheck, which was a lot back then considering the after-tax earnings we were making was around $300/week — with the majority of that going into fixed and variable costs to keep us alive.
The biggest expense we had was an apartment that cost $6,000/year. I remember thinking if we could only eliminate our $500/month in rent expenses we wouldn’t have to work our crappy jobs and could try to build a business that is more lucrative. I almost ended up buying a four bedroom house with plans to rent out three of the bedrooms to my friends to eliminate all of my housing expense — this was before I learned that “house hacking” was a thing.
Cars were another huge expense. My wife and I both had old cars that broke down — A LOT. It was extremely stressful driving anywhere over 30 miles as the probability of our car breaking down and costing us >$500 for a fix and tow was pretty high. $500 was an entire weeks worth of work pre-tax, a major expense.
Living basically paycheck to paycheck to paycheck forced us to eat a lot of beans and rice, take minimal vacations where the car could go, and eliminated almost all non-discretionary income. It also taught me a few important lessons:
I learned how to live on an extremely cheap budget. We were the masters at living poor. Despite our income levels putting us into the “poverty” tax bracket we still managed to save and invest money every month. It wasn’t a lot but it taught us a great habit when our earnings power exploded.
We learned how to hustle. I had multiple side-hustles when I was poor. Gumball machines. Selling junk on eBay. A weekly flea market store. Buying clothes/merch in bulk and re-selling them to my friends. Every incremental dollar matters when you are barely scrapping by. Learning to hustle became who I was. That skill went with me into my now “professional” life.
Every dollar saved is a dollar you don’t have to earn again. At some point in life you don’t need to make anymore money. I didn’t know how much money that was when I was a 20 year-old kid, but I knew eventually if I had enough saved I wouldn’t have to scrap and hustle my way through life. I never wanted to live in poverty again so my entire focus after landing a high paying professional goal was to save every dollar that I could to get that money to work for me.
The most important lesson living in poverty taught me was that you don’t need money to be happy. Some of the best days in my life were spent in my two bed-room shit apartment with my poor friends who were living paycheck to paycheck. Some of the worst days in my life in corporate America pulling a high six-figure income.
I knew money would never buy me happiness. A 1,000 square foot home vs a 10,000 square foot home will provide very little in terms of incremental happiness — if none at all. A $120,000 sports car and a $10,000 regular car provide the same level of incremental happiness over the long-term.
What money would buy me is my freedom. I knew if I grinded and hustled my way through corporate America I would be set in 5-7 years. Every incremental dollar I made would go to building my capital base needed to exit corporate America and never look back.
When you live like the average American but pull a high income you can save and invest a significant amount of life changing capital every month. As Ian Cassel recently stated:
Build your capital base. Keep your fixed cost low. And live cheaply so your money will go far. Always stay curious and learn. The opportunity for a life outside of the rat race is worth more than whatever the Jones’ are buying.
Now a word from our sponsor…
Make Winning Trades With vigtec
You can't make winning trading or investing decisions without premium analytics and real-time data. Get both with vigtec. Dominate the markets now.
Join thousands of traders and investors from 30+ countries who use vigtec’s premium stock market tools, real-time market data, and data-driven analytics to invest and trade with an unprecedented edge.
Stop guessing and start winning. Download the app for free and get started.
Update on Top Idea: I recently just posted an update on one of the top ideas I wrote up recently. TLDR, this company was recently awarded a significant amount of cash from a lawsuit. I did not have this lawsuit in my valuation as I thought it was unlikely to go through. What was interesting is the stock traded down on this news (probably just due to the market selloff). Pricing has gotten significantly better and this company should make a significant amount of money going into 2022. I am very bullish and have made it a major position in my portfolio.
Steel Dynamics Update: "We remain confident that macroeconomic and market conditions are in place to support strong domestic steel demand in 2021 and beyond," said Millett. "We continue to see strong steel demand coupled with extremely low customer steel inventories throughout the supply chain. The automotive sector continues to be strong, despite the electronic chip shortage, and other sectors such as construction, equipment and transportation remain solid. Order entry activity continues to be robust across our businesses, and when coupled with low inventory, supports strong steel selling values. We believe this momentum will continue throughout the year and that our third quarter 2021 earnings could represent another record performance. Based on solid domestic steel fundamentals and customer confidence, we continue to be positive regarding North American steel market dynamics. This constructive environment coupled with our strategic growth initiatives provide firm drivers for our further growth in the coming years.”
My Take: The steel market is on fire and it doesn’t appear to be slowing down anytime soon. This is constructive for the company mentioned in the bullet point above as their business is directly correlated to steel prices. With inventories still low and steel at record levels met coal producers should generate a significant amount of free cash flow. My thesis on the met and steel space continues to play out and I am excited to see what happens through the remainder of the year.