“Am I at, or can I get to, profitability on the money I have?...(If so) Go raise “opportunistic money” from your existing investors at a good or great price.”
If you’re profitable and believe that your customers will continue investing in you, you should think long and hard about raising more capital as “the answer.”
Raising more capital is sometimes the answer, and it’s an investor’s job to convince you that raising capital is always the answer.
That statement made me feel uncomfortable. Isn't it exactly this type of attitude that creates financial bubbles in the first place?
Without a plan, or even a good reason, for that money how does it contribute to making your business more profitable or resilient to the vagaries of your market? In the short term it'll keep you afloat but that isn't going to be a big consolation when the money does run out. Stock piling cash in exchange for huge amounts of equity seems totally irresponsible.
> Bottom line: In almost all of the cases above, my advice is to build a war chest of capital so that you can deploy it in the down market.
What I think he is saying is that in a downturn things can get tough if you don't have enough cash to get through it, and it will be harder to raise more money if you need it. But, in a down turn everything also gets a lot cheaper so if you do have the cash then then you can really capitalize on this and emerge from it as the leader in your sector.
Yeah, I can definitely see the argument for having a war chest. Building it by exchanging a chunk of your equity for it in the hope that on the other side of the storm (what is that old fable about economists correctly predicting 11 of the last 7 down turns?) you can make that back and then some feels a little too much of a gamble. You'd have to be incredibly lucky to get the timing right.
Building a war chest by maximising profitability and minimising costs I could definitely understand.
Big companies often waste too much shareholder money buying back stocks when prices are high. It serves them better in the long run to raise money they don’t need when their stock price is high, so when the market and stock price takes a downturn, they have more capital to allocate for their business while also buying back less expensive stock, rewarding investors doubly once the market picks up again.
Shoring up the balance sheet with additional equity capital to protect against a short-term drop in revenue isn't a bubbly strategy. It's just good corporate finance.
I think you answered your own question in 2 consecutive sentences:
> Without a plan, or even a good reason, for that money how does it contribute to making your business more profitable or resilient to the vagaries of your market? In the short term it'll keep you afloat but that isn't going to be a big consolation when the money does run out.
To a large extent, Amazon got lucky by raising a ton of money right before the market crashed, giving the company the cushion it needed to ride out the turmoil of the early 2000s.
Isn't there an element of survivor balance there though? It worked for amazon but how many dozens of companies raised heavily and still failed to "capture the flag" on the other side?
It doesn’t matter - if you’re the founder of a company and you were able to convince investors (equity) or banks (debt) that your money losing venture can eventually make money, why not continue taking money from them? If the venture fails, your investors and/or bank loses money and you go out there and either start another business or get a job.
On the other hand, if it’s your own money, don’t get caught up in the sunk cost fallacy.
Unless you mean a specific market, it's older than pretty much any state in existence. Medieval European cities had stock markets.
And that's assuming something like ancient Greece, didn't have a stock market, because that's possible, and if true it's older than every religion in existence today.
And keep in mind that ancient Greece had an interstate cheque clearing system, shared ownership of companies, inheritance laws for dealing with such things, ... you know the sort of thing you'd expect a state to have in order to support a stock market.
Lastly, we have no real idea what financial infrastructure ancient Egypt had, except of course, we do know it allowed for "international" (between partners under different governments) trade with both trading partners ~800km apart, while hiring intermediaries for passing along the goods. We just have no idea how it worked. If it happened to have a stock market, that makes the stock market roughly the age of stonehenge.
No, the Great Depression lasted 10 years, from 1929 to 1939 officially (and, for instance, the djia took until the 1950s to recover to the bull market levels that preceded the Great Depression).
Student loan debt usually can't be discharged through bankruptcy so it's unlikely to cause some kind of panic sell-off even if the loans being made are low quality. The debt will continue to be a noose around the neck of consumer spending power. Indentured servitude 2.0.
Today's businesses rely, directly or indirectly, on consumer spending power. If its decline hasn't been correctly worked into the present-value-of-future-dividends (aka price) and the market corrects, the magnitude would have no difficulty rivaling or exceeding previous recessions.
As long as the people getting richer keep consuming enough to offset the reduced consumption of those getting poorer, it could work out. We just have to ignore the part where 20% of the population enjoys life while 80% go through the grind to provide for the 20%.
That's cool ... except of course the point of lending to these students is that they'll pay back installments.
Now let's take the banks side, for a second. What happens in banks ? Well they lend money from the Fed (only the big ones) or from other banks (more likely) and lend it out. In return they get an income stream. They lend out X, every month X/100 comes back in, for, say, 110 months.
Now what is bankruptcy ? Bankruptcy of your customer means the income stream stops, and you get a "lump sum" repayment. So that means, for example, that in month 20 of the above loan, you get 60% X, and no more income stream. That's bad, of course. (63% is a nice "global average" rule of thumb figure of what you'll get back, obviously in practice it varies and the "quality of the debt", to a large extent, is how much you can expect to get back in bankruptcy)
In the case of a student loan, you get nothing. No lump sum is coming forth, and obviously the income stream stops. But you've still got the loan. So that means that you fantasize that every month you make an extra loan which covers the monthly payment for that month. Now let's assume it takes 2 years for your customer to get out of bankruptcy, to the point they can start to repay ("global average" is 1.6 years).
In practice student loans are extremely bad quality debt, which is why we have this arrangement in the first place. When the customer goes bankrupt, as discussed, they pay back nothing, and it takes students, in practice, more than 1.6 years to start paying anything back. This is why we have this indentured servitude rule in the first place.
So ... how does this affect banks ? Well of course, given the above, that's easy to see, at minimum for the first 1.6 years after increased student loan bankruptcies, they're screwed. In practice, more, and this will cascade: more student loan bankruptcies will force economy-wide tightening, which will cause people to get fired, which will result in student loan bankruptcies. And then we loaned out 1.5 trillion dollars like that.
So, assuming the Fed can just mass-stimulate the economy whenever it wants, it's actually kind of OK, for a while. But ... wait ... at what point can they stop stimulating ? Well ... oh ... never.
(you might argue at that last point : "not true", if the economic performance exceeds student loan interest rates for long enough (way longer than that 1.6 years from above), then it stops. How much is that ? 7.81 percent. How long is that ? Essentially it often boils down to double how much they're behind. When was the last time the economy did that well ? The 1950s, and ... even then, only for 3 years ... not for long enough given how far behind the average "indentured servant" is)
So we can at least now understand that we ought to get mad at the people who allowed this deal in the first place. The banks ... cannot reasonably behave any different from what they're doing.
"In the Black Swan, non-financial event category we could list Russia, North Korea, China, Pakistan, Iran, domestic political unrest and the Mueller investigation as market busters."
Instead of Black Swans aren't these more like grey swans? Their shade can be discussed of course, some might be lighter than others.
As joshgel said, a black swan isn't a rare event. We can model rare events.
A black swan is an event that is by definition unimaginable. Sometimes a baked in assumption being flipped on its head creates huge effects that change everything.
If you can name it, you can give it a probability and account for it in your models. Those aren't black swans.
I find it interesting that much of this advice can be somewhat applied to safeguarding personal assets (including skillset and personal skill marketability) in preparing for a down market.
Many of these safeguards are recommended for individual investors. Diversity of portfolio is always important, but even more-so when a bull market has been on a sustained tear. Being at least somewhat invested in the well-funded can help offset. (YMMV but that's been my experience)
Overall it's prudent for Jason to send this to his folks. At the very least it makes them aware of the possibility, if they aren't already, of a down market and puts that thought in the forefront.
This has been always a question I always asks myself on a personal level. I was still in school during the recession and graduated when the economy was picking up so I did not experience the impact of the recession first hand. Now that I am older, I am always worried how I can survive with my family through the next dep/recession. Is saving up the best way to protect myself? Are there things I can do now to increase the chances of having income during a downturn?
In my opinion, yes saving is always a great step to take! I'd also examine any risky stocks/bets you may have and put 10-20% into bonds. I was burned by the 2000's recession right out of high school.
I’m asking the exact same question. If we expect to find ourselves in a long financial winter, what can we do?
Specifically, I’m considering buying a house and renting out my current house right now...to buy or not to buy. Leveraging up is great until house prices drop by 30%. Then again, the previous recession was specifically a housing crunch, so perhaps the next recession won’t create the same housing drop.
No one on this thread knows the future, but it’s hard having lived through a very long bull market to anticipate the results of what looks to be a pretty severe bear market.
Hussman Funds is calling for negative total returns on the S&P500 for the next 10 years, which feels like a very long time.
I'm on the same boat. I have debating for the longest time if I should buy a house and everyone keeps on telling me that interests rates are going up so now is the time. But buying a house will pretty much wipe out all my savings and if I ever lose my job during a downturn, foreclosure is almost imminent.
In many states foreclosure takes a "long" time. Making partial payments can prolong the process too. Research foreclosure laws in your state. After the housing burst there was a flood of delinquent mortgage payers. The banks didn't want to hold empty houses and were slow to go to foreclosure. Not to mention the courts were/would be swamped with them. Perhaps include these factors in your risk analysis too.
As far as the house you live in, if you don’t plan on moving, why do you care about the value of your house? For me, getting a house with a fix rate loan was a no brainer. Rent where I was staying from 2012-2016 went up by $500 and it’s gone up another $300 since then - and I’m neither on the west coast or live in NYC.
Owning a house as a primary residence is a great inflation hedge. Besides, apartments can kick you out within a matter of weeks if you don’t pay. Banks really don’t want to foreclose on a house - especially during a downturn. You have a lot more leeway on not paying your mortgage than your rent.
Q2 GDP growth was 4.1%, don't listen to heavily to the outlier nay-sayers. They've been predicting negative returns for the next ten years since the S&P was tracked
Not saying you should assume the market is going to crash asap and panic, but long-term thinking requires you to prepare for the inevitable downturn the best you reasonably can.
Let's not forget how rosy things looked before 07/08
Be wary of Hussman. He has been on the wrong side for at least 20 years. Eventually he may be correct but you will have missed many opportunities to grow your wealth.
The key is to buy during a downturn and save during a boom. It's far easier to negotiate a discount if the person selling it to you doesn't have anyone else in the store. You make way more money on the market if you buy when there is blood in the street than if you get in when unemployment is at a ten year low.
The rest is the same advice you get everywhere: It's expensive not to exercise. It's expensive to own a car. Biking to work solves both those problems. Don't overspend on depreciating assets until you don't need to work for the rest of your life. Don't underspend on your education. Don't waste time fretting the small stuff, focus on maximizing income. Be tax efficient. Don't buy overheated assets. In the short term it always looks like it will be the end if you don't get in _right now_. Things always correct.
A significant portion of the population can’t save up for a 20% downpayment in good times, I doubt it’s a realistic expectation for many. The whole thing keeps churning because of FHA (taxpayer funded) lending.
True, but we are talking about a single person, not the population at large. You can personally change your behavior and save up a 20% down payment. You can probably save to a 100% down payment - if the market collapses at the right time (unlikely) in 10 years of living cheaply. Of course you forgo a lot of other things: I personally would rather have the toys now vs a paid for house in 10 years. YMMV, your goals are not mine. If you want to tour the world on a 6 star cruise ship for 30 years staring at age 50, you can save up enough money to do that if you live cheaply enough from age 20 on. (I can't help you live that long though, average lifespan is just under 80, and you could die in an accident at age 49.5 just before you retire)
A mortgage guarantee is normally good for a non-trivial amount of time. If you're really worried about this you could string them along "until you find something".
A stock/bonds portfolio is good to have, but I find that having enough money in the bank, and some actual cash, buys real peace of mind. My advice, try to figure out how long it would take you to get back on your feet if something went wrong (lose your job, your company, your health) and try to save up enough to tide you over for that time.
Don't forget about insurance. If you lose your health long term insurance is the cheapest way to deal with that. Likewise if you have loved ones who depend on your income life insurance is the cheapest way to ensure they can live without you. Unemployment insurance covers losing a job in some cases (but if you work for yourself check the rules). Your government might provide some of this.
Also consider your real needs vs luxury. You have to pay rent, and food. The cheapest phone and internet plan is probably part of your getting a new job. Nearly everything else is optional. You can cut your expenses greatly, walk to the library (free) and read a book for entertainment. Cook your own meals.
Most people have an event in their life that puts them out of work for a year. It isn't a big deal so long as you can cover the basics.
Because of both some dumb life choices earlier and some deliberate prioritizing of short term goals currently, my liquid savings that I could use to weather a long term job loss is nil and because of other priorities, I don’t realistically see myself having six months worth of living expenses in liquid savings for at least 5 years.
I was a developer during the first recession between 2000-2002, but most of our customers were utility companies so we weren’t really affected.
During the second downturn in 2008-2011, what I noticed is that the people in technology who were having a hard time finding a job were managers, and software developers who were not at the top of their game - weren’t focused on knowing the most in demand technologies. Companies had all of the power so they didn’t have to settle for people who had only 70% of the required skill.
My suggestion? Of course save, but also keep a strong network of people in the industry, keep relationships with local trusted recruiters, look at job boards and see what in demand skills are and focus on getting really good at those. If it means changing companies, do it.
The other issue because of our backwards health care system in the US where your health care is tied to your employer and the ACA is always under attack is health insurance. During the last downturn a lot of companies were only hiring contractors. While you think you can always using COBRA to keep insurance on your last job, if that company goes out of business, COBRA is no longer an object.
My wife and I optimized for that. She has a very secure government job with family benefits.
Side note: if you want to hedge your bets - save for a rainy day and save for retirement. If you’re in the US, a conservatively invested Roth IRA is ideal. There are no penalties for withdrawing the principal from a Roth IRA but if you don’t need it, you can let it grow tax free.
I think the safer your job/situation is, and the less debt you have, the less you need to protect your assets in case a downturn happens. I have a government job in France, which is basically the safest situation on Earth, I'm supposed to have a pension when I retire, and even if my salary was divided by 2 I could still pay off my debt (mortgage), so I'm all in on stocks and couldn't care less about bear markets. But if I lived in the US, with a very unstable job, in a small company, no pension, no national health insurance system, I'd load on cash and bonds like crazy (I mean, even during bull markets) and learn how to live frugally in the case of a recession.
What worked for me was saving and not caring what other people had.
- My car was fine, I didn't need a new one every 3-5 years. I drove it for 15 years before I bought another used one.
- I bought the least expensive house on the most expensive street I could afford.
- I never tried to compete with neighbors or colleagues (keeping up with the Jones's).
- Only went out to eat on special occasions and bagged a lunch to work everyday.
- Always paid special attention to my bills and costs so I was aware of my spending and could trim waste where necessary.
- Consistently looked for better employment opportunities where I was able to triple my salary in about 6 years (invest in yourself, stay relevant).
- Held off on starting a family until I was 32.
-Invested through a 401k, etc.
There was an element of luck since my wife was a great saver and low maintenance. We also had no health issues or unfortunate life events. If you live responsibly (within your means) and build that safety net, you will be fine. Try to stay out of what I call bad debt, like Credit Cards, Car loans, Lines of Credit, etc.
I'm not sure that I have any viable advice for you.
But I was in school at the same time as well. I had to leave because the money dried up. (I was reliant on government and bank loans, and couldn't for the life of me find a part-time job that would take me on at the time)
I ended up having to leave school halfway through my second year, give up my apartment, leave the city and move home a few hours outside of the city to a small, small town. The bits of available labour out there dried up as well. I thankfully had a family member in Calgary and moved there with the promise of a construction job.
When I arrived, the job never materialized. Fortunately the town was fairly insulated against the recession due to the oil sands boom up in Fort McMurray (well before the fire) and I was able to find a job working in audio/visual boutique sales. I made a subsistence there, though I was miserable and my time there was largely feels like a waste. The oil sands workers on their off-time would spend loads of money in the city, so it kept sales flowing. I'll skip the rest of the story, because it's tedious.
It seems like the advice everyone else has is good. I get concerned about the same thing sometimes. If the city dried up, would I have to leave my girlfriend to find work elsewhere? Would I have to put my career on pause again?
I quit my job to try my hand at startups in 2007 and of course failed miserably. When 2008 hit, I didn't have a lot of money. I watched with a lot of surprise as stocks hit huge returns out of the ballpark since then. Nowadays, I don't buy a lot of stocks. I just hoard cash waiting until the next crash. Then I'll start hunting for bargains and hopefully ride the next recovery up.
As someone else in this thread has noted, save during boom times, buy during bust times.
"I see no reason why Wells Fargo as a company — from both an investor standpoint and a moral standpoint going forward — is in any way inferior to the other big banks with which it competes"
"Venture Capitalists decide not to make capital calls to their Limited Partners, sometimes as a courtesy, other times the result of a directive. They know their LPs have been heavily impacted by the market collapse and don’t want to stress them more."
It's interesting that when it comes to financing insiders, obligations seem to be a lot softer and more negotiable. Margin calls and capital calls. Interbank trading, where long term loans to customers are funded by daily loans to banks.
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[ 2.1 ms ] story [ 108 ms ] threadTime in the market beats timing the market.
We've have 2 corrections the past 5 years. We even had one in the beginning of this year.
https://www.investopedia.com/terms/c/correction.asp
What you may be referring to is a recession, which is different from a correction.
“Am I at, or can I get to, profitability on the money I have?...(If so) Go raise “opportunistic money” from your existing investors at a good or great price.”
If you’re profitable and believe that your customers will continue investing in you, you should think long and hard about raising more capital as “the answer.”
Raising more capital is sometimes the answer, and it’s an investor’s job to convince you that raising capital is always the answer.
Without a plan, or even a good reason, for that money how does it contribute to making your business more profitable or resilient to the vagaries of your market? In the short term it'll keep you afloat but that isn't going to be a big consolation when the money does run out. Stock piling cash in exchange for huge amounts of equity seems totally irresponsible.
What I think he is saying is that in a downturn things can get tough if you don't have enough cash to get through it, and it will be harder to raise more money if you need it. But, in a down turn everything also gets a lot cheaper so if you do have the cash then then you can really capitalize on this and emerge from it as the leader in your sector.
Building a war chest by maximising profitability and minimising costs I could definitely understand.
Perhaps I just don't have the guts for it though.
I think you answered your own question in 2 consecutive sentences:
> Without a plan, or even a good reason, for that money how does it contribute to making your business more profitable or resilient to the vagaries of your market? In the short term it'll keep you afloat but that isn't going to be a big consolation when the money does run out.
Emphasis added.
https://www.vox.com/new-money/2017/4/5/15190650/amazon-jeff-...
On the other hand, if it’s your own money, don’t get caught up in the sunk cost fallacy.
Based on recent crashes yes, but has that always been true?
And that's assuming something like ancient Greece, didn't have a stock market, because that's possible, and if true it's older than every religion in existence today.
And keep in mind that ancient Greece had an interstate cheque clearing system, shared ownership of companies, inheritance laws for dealing with such things, ... you know the sort of thing you'd expect a state to have in order to support a stock market.
Lastly, we have no real idea what financial infrastructure ancient Egypt had, except of course, we do know it allowed for "international" (between partners under different governments) trade with both trading partners ~800km apart, while hiring intermediaries for passing along the goods. We just have no idea how it worked. If it happened to have a stock market, that makes the stock market roughly the age of stonehenge.
The nikkei is about 1/3 of what it used to be almost 30 years on.
Now let's take the banks side, for a second. What happens in banks ? Well they lend money from the Fed (only the big ones) or from other banks (more likely) and lend it out. In return they get an income stream. They lend out X, every month X/100 comes back in, for, say, 110 months.
Now what is bankruptcy ? Bankruptcy of your customer means the income stream stops, and you get a "lump sum" repayment. So that means, for example, that in month 20 of the above loan, you get 60% X, and no more income stream. That's bad, of course. (63% is a nice "global average" rule of thumb figure of what you'll get back, obviously in practice it varies and the "quality of the debt", to a large extent, is how much you can expect to get back in bankruptcy)
In the case of a student loan, you get nothing. No lump sum is coming forth, and obviously the income stream stops. But you've still got the loan. So that means that you fantasize that every month you make an extra loan which covers the monthly payment for that month. Now let's assume it takes 2 years for your customer to get out of bankruptcy, to the point they can start to repay ("global average" is 1.6 years).
In practice student loans are extremely bad quality debt, which is why we have this arrangement in the first place. When the customer goes bankrupt, as discussed, they pay back nothing, and it takes students, in practice, more than 1.6 years to start paying anything back. This is why we have this indentured servitude rule in the first place.
So ... how does this affect banks ? Well of course, given the above, that's easy to see, at minimum for the first 1.6 years after increased student loan bankruptcies, they're screwed. In practice, more, and this will cascade: more student loan bankruptcies will force economy-wide tightening, which will cause people to get fired, which will result in student loan bankruptcies. And then we loaned out 1.5 trillion dollars like that.
So, assuming the Fed can just mass-stimulate the economy whenever it wants, it's actually kind of OK, for a while. But ... wait ... at what point can they stop stimulating ? Well ... oh ... never.
(you might argue at that last point : "not true", if the economic performance exceeds student loan interest rates for long enough (way longer than that 1.6 years from above), then it stops. How much is that ? 7.81 percent. How long is that ? Essentially it often boils down to double how much they're behind. When was the last time the economy did that well ? The 1950s, and ... even then, only for 3 years ... not for long enough given how far behind the average "indentured servant" is)
So we can at least now understand that we ought to get mad at the people who allowed this deal in the first place. The banks ... cannot reasonably behave any different from what they're doing.
It's someone who wants to extract money from your wallet. Run away!
Instead of Black Swans aren't these more like grey swans? Their shade can be discussed of course, some might be lighter than others.
A black swan is an event that is by definition unimaginable. Sometimes a baked in assumption being flipped on its head creates huge effects that change everything.
If you can name it, you can give it a probability and account for it in your models. Those aren't black swans.
Many of these safeguards are recommended for individual investors. Diversity of portfolio is always important, but even more-so when a bull market has been on a sustained tear. Being at least somewhat invested in the well-funded can help offset. (YMMV but that's been my experience)
Overall it's prudent for Jason to send this to his folks. At the very least it makes them aware of the possibility, if they aren't already, of a down market and puts that thought in the forefront.
Specifically, I’m considering buying a house and renting out my current house right now...to buy or not to buy. Leveraging up is great until house prices drop by 30%. Then again, the previous recession was specifically a housing crunch, so perhaps the next recession won’t create the same housing drop.
No one on this thread knows the future, but it’s hard having lived through a very long bull market to anticipate the results of what looks to be a pretty severe bear market.
Hussman Funds is calling for negative total returns on the S&P500 for the next 10 years, which feels like a very long time.
Owning a house as a primary residence is a great inflation hedge. Besides, apartments can kick you out within a matter of weeks if you don’t pay. Banks really don’t want to foreclose on a house - especially during a downturn. You have a lot more leeway on not paying your mortgage than your rent.
Not saying you should assume the market is going to crash asap and panic, but long-term thinking requires you to prepare for the inevitable downturn the best you reasonably can.
Let's not forget how rosy things looked before 07/08
The rest is the same advice you get everywhere: It's expensive not to exercise. It's expensive to own a car. Biking to work solves both those problems. Don't overspend on depreciating assets until you don't need to work for the rest of your life. Don't underspend on your education. Don't waste time fretting the small stuff, focus on maximizing income. Be tax efficient. Don't buy overheated assets. In the short term it always looks like it will be the end if you don't get in _right now_. Things always correct.
Also consider your real needs vs luxury. You have to pay rent, and food. The cheapest phone and internet plan is probably part of your getting a new job. Nearly everything else is optional. You can cut your expenses greatly, walk to the library (free) and read a book for entertainment. Cook your own meals.
Most people have an event in their life that puts them out of work for a year. It isn't a big deal so long as you can cover the basics.
I was a developer during the first recession between 2000-2002, but most of our customers were utility companies so we weren’t really affected.
During the second downturn in 2008-2011, what I noticed is that the people in technology who were having a hard time finding a job were managers, and software developers who were not at the top of their game - weren’t focused on knowing the most in demand technologies. Companies had all of the power so they didn’t have to settle for people who had only 70% of the required skill.
My suggestion? Of course save, but also keep a strong network of people in the industry, keep relationships with local trusted recruiters, look at job boards and see what in demand skills are and focus on getting really good at those. If it means changing companies, do it.
The other issue because of our backwards health care system in the US where your health care is tied to your employer and the ACA is always under attack is health insurance. During the last downturn a lot of companies were only hiring contractors. While you think you can always using COBRA to keep insurance on your last job, if that company goes out of business, COBRA is no longer an object.
My wife and I optimized for that. She has a very secure government job with family benefits.
Side note: if you want to hedge your bets - save for a rainy day and save for retirement. If you’re in the US, a conservatively invested Roth IRA is ideal. There are no penalties for withdrawing the principal from a Roth IRA but if you don’t need it, you can let it grow tax free.
- My car was fine, I didn't need a new one every 3-5 years. I drove it for 15 years before I bought another used one.
- I bought the least expensive house on the most expensive street I could afford.
- I never tried to compete with neighbors or colleagues (keeping up with the Jones's).
- Only went out to eat on special occasions and bagged a lunch to work everyday.
- Always paid special attention to my bills and costs so I was aware of my spending and could trim waste where necessary.
- Consistently looked for better employment opportunities where I was able to triple my salary in about 6 years (invest in yourself, stay relevant).
- Held off on starting a family until I was 32.
-Invested through a 401k, etc.
There was an element of luck since my wife was a great saver and low maintenance. We also had no health issues or unfortunate life events. If you live responsibly (within your means) and build that safety net, you will be fine. Try to stay out of what I call bad debt, like Credit Cards, Car loans, Lines of Credit, etc.
But I was in school at the same time as well. I had to leave because the money dried up. (I was reliant on government and bank loans, and couldn't for the life of me find a part-time job that would take me on at the time)
I ended up having to leave school halfway through my second year, give up my apartment, leave the city and move home a few hours outside of the city to a small, small town. The bits of available labour out there dried up as well. I thankfully had a family member in Calgary and moved there with the promise of a construction job.
When I arrived, the job never materialized. Fortunately the town was fairly insulated against the recession due to the oil sands boom up in Fort McMurray (well before the fire) and I was able to find a job working in audio/visual boutique sales. I made a subsistence there, though I was miserable and my time there was largely feels like a waste. The oil sands workers on their off-time would spend loads of money in the city, so it kept sales flowing. I'll skip the rest of the story, because it's tedious.
It seems like the advice everyone else has is good. I get concerned about the same thing sometimes. If the city dried up, would I have to leave my girlfriend to find work elsewhere? Would I have to put my career on pause again?
As someone else in this thread has noted, save during boom times, buy during bust times.
--Buffett
"Venture Capitalists decide not to make capital calls to their Limited Partners, sometimes as a courtesy, other times the result of a directive. They know their LPs have been heavily impacted by the market collapse and don’t want to stress them more."
It's interesting that when it comes to financing insiders, obligations seem to be a lot softer and more negotiable. Margin calls and capital calls. Interbank trading, where long term loans to customers are funded by daily loans to banks.