“For all of the most important things, the timing always sucks. Waiting for a good time to quit your job? The stars will never align and the traffic lights of life will never all be green at the same time. The universe doesn’t conspire against you, but it doesn’t go out of its way to line up the pins either. Conditions are never perfect. “Someday” is a disease that will take your dreams to the grave with you. Pro and con lists are just as bad. If it’s important to you and you want to do it “eventually,” just do it and correct course along the way.” — Tim Ferriss
Risk more than others think is safe and dream more than others think is practical. I’m convinced I read that in a book once but either way its spot on. Too many people I know, encounter on a daily basis or even pass by here in Philadelphia have stopped dreaming, taking risks and pursuing their lifelong passions. Need I remind you that the same thing is going on in other cities around America, across our international waters and throughout the entire world.
The back and forth grind of solely trading time for money at work has beat the living daydreams, goals and desires out of too many peoples souls. At least for a whopping 90–95% of people that is.
Awhile back, family and friends of mine asked me why I partook in the enormous risk of starting a business at the end of 2015 in addition to working full-time in financial services. In societies eyes, doing this at the “young” age of 22 seemed as if it were a huge risk. There’s this prevailing narrative that entrepreneurs are risk-takers of the highest order, that we put everything on the line to manifest our businesses into existence through sheer force of will, but, as with most of the myths of the business and startup world, I’ve always thought this was bullshit. Pardon my French, however, it’s true.
People throw around the world risk or risky all of the time yet I don’t believe they rationally understand what it truly means. According to our good friend Merriam Webster, risk has 4 separate definitions:
1: possibility of loss or injury : peril
2: someone or something that creates or suggests a hazard
3: the chance of loss or the perils to the subject matter of an insurance contract; also : the degree of probability of such loss b : a person or thing that is a specified hazard to an insurer c : an insurance hazard from a specified cause or source war risk
4: the chance that an investment (such as a stock or commodity) will lose value
That’s certainly a lot, isn’t it? Sure, I have a risk-taking personality (just ask my parents or friends what I was like at 19 and 20). But for most people, starting a business isn’t much of a risk. I mean, honestly, at 17 or 18 years old did you really understand what you were signing off on as far as going to college for four years. Tell me what your plan was to pay off your principal as well as the interest accruing every year at 5%, 6% or soon to be 9% interest. More likely than not you didn’t have a plan…
If you come from a background where you don’t have your parents’ couch as a fallback, or if you have a medical condition that makes it tough to leave an employer-sponsored health plan, then sure you’re probably taking a real risk by starting something out of nothing.
However, the vast majority of the time someone gives me this spiel about businesses & startups being risky and they’re not talking about those kinds of stories. They’re talking about well-off, well-educated kids who’ve bought into the rah-rah and hype around startups, or who’ve been conditioned to believe that every career path outside the 4 or 5 most common is a feat of uncharted waters.
What Am I Actually Risking?
Money? Sure, I’m making less than I could be, but it’s a bit rich to complain about your salary when you’re the one who sets it. And if the company doesn’t make it, the story of its failure likely involves my moving on to a higher-paying job. All business, self-made entrepreneurs and the top 5–10% of men & women clearly understand the success and wealth principles it takes to get to where they want to be in the long term. They’ve made the sacrifices and have been patient enough to see it play out ten fold.
My career? It’s hard to come up with any scenario where this journey ends with my career worse off than if I hadn’t taken it. Besides, having a failed business or startup on your resume is practically a badge of honor in today’s economy. Any rational hiring manager would appreciate that sweat equity.
Embarrassment? I guess it would be a little embarrassing if the business or company doesn’t make it. But I probably did something more embarrassing my junior or senior year of college when I got drunk at a party or after a rugby win. If you aren’t willing to risk a little embarrassment, you’re never going to do much of anything.
Now Here’s What Risk Is In 2017
Pension plans are no longer the norm, and popular strategies to generate cash flow in retirement, namely the 4% withdrawal strategy and required minimum distributions (RMDs) at seventy and a half from IRA and 401(k) plans, have been called out for being incapable of generating reliable lifetime retirement income in today’s world of low interest rates, increasing market volatility and longer life spans.
It is estimated that over 34 million mass affluent investors between the ages of 35 and 70 years old are at risk of running out of savings during retirement, which would result in tremendous strain for themselves and their families. These investors, with over $11 trillion in savings, need a more dependable strategy to transition these savings to sustainable lifetime income.
A recent survey from GoBankingRates.com finds more than half of Americans have less than $10,000 saved for retirement, with one in three having nothing saved. The National Institute on Retirement Security estimates the nation’s retirement savings gap is between $6.8 and $14 trillion.
Research from Fidelity says a couple that retired in 2015, both aged 65, can expect to spend an estimated $245,000 on healthcare throughout retirement. Once you hit age 65, roughly the average retirement age, your odds of living for another decade or two is quite high. Men age 65 today have a 78% chance of living another 10 years, while women have an 85% chance, according to research from JPMorgan. I’ll save the discussion on macronutrients and micronutrients for another day.
Recent findings from the LIMRA Secure Retirement Institute reveal that millennials who start their careers with $30,000 in student loan debt could have $325,000 less in retirement savings compared to debt-free peers. This is a fairly typical debt load for student debt. In 2015, the average student loan debt totaled $33,000, compared to just $10,000 in 1990.
I’m reminded of a quote from Mickey Mantle, “It’s unbelievable how much you don’t know about the game you’ve been playing all your life.”
It’s unbelievable how much people don’t know about an object they’ve been trying to acquire all their life. Standard & Poor’s conducted interviews with over 150,000 adults in more than 140 countries to gauge global financial literacy. The results are painful! Only 33% of adults worldwide are able to correctly answer at least 3 out of 4 financial concepts involving risk diversification, inflation, numeracy, and compound interest. That means around 3.5 billion adults globally, most of them in developing economies, lack an understanding of basic financial concepts. Needless to say, this is why I decided to get into the financial services industry and help to educate the masses.
According to Financial Engines, an independent investment advisor (IA), one quarter of employees are not saving enough money to receive their employer’s 401(k) match. On average, those employees are missing out on an extra $1,336 a year, or a little less than an extra $25 a week. Overall, Americans are losing an estimated $24 billion every year in matching contributions. Who doesn’t love free money?
I could go on and on with more statistics I’ve uncovered the past 2–3 years yet I’d be wise to stop here. The point is very clear we need to do much more!
Entrepreneurs pursue their dreams with other people’s money, and even failing would still leave us better off than if we’d never started. Morally there’s nothing wrong with this approach as long as you’re doing it ethically and with proper values. So stop giving me, your friends running businesses, or anyone else you know credit for risk-taking. There’s nothing risky about it. Relying on someone else to fund your dreams, create wealth and prosper in today’s economy just isn’t my cup of tea. I’d hope it isn’t yours either.
As always, thank you for reading!
My Very Best,