The reasons behind One Million
In this post, I would like to talk about the reasons behind aiming to archive a one million investment portfolio. Is it a reasonable goal? Is it worth the sacrifice? Why one million if we could be financially free having less?
If you read my previous post “paying yourself first- how long it takes to become millionaire?”, you already know the answer to the first question. It is reasonable for those that start soon enough and develop the correct discipline thanks to the power of compounding. Sadly, a big majority of people only bother about investing when they are too close to their retirement age and don’t have enough time to build a consistent investment portfolio, leaving an undesirable feeling of regret in their minds. The positive view is that it is never too late to learn, improve our financial condition, and transfer this knowledge to your children, who will have what you would like to have – time!
What about the sacrifice? I am surprised when I talk to a non-FIRE mindset people about the topic of investing. Some of them see it as an action of sacrifice. A percentage of people will save some money, just to spend it straight away with the latest cool looking iPhone ‘3000 S Plus Golden version with 10 thousand million Gigabytes’, that will run out of space anyway in two years, leaving you with a piece of garbage to be replaced for the newest model of ‘20 thousand million Gigabytes’. That’s the time when you need to spend another lump sum of your savings if you still want to look like a cool dude. This behavioural circle is beneficial for businesses and global economies, but not so much for people’s financial stability, except for those that understand this concept and instead of buying phones will invest and buy Apple shares and become a business owner.
Let’s go back to the original question; Is really investing a sacrifice? Or is it just an intelligent way to grow our wealth through humanity behaviour (or stupidity)?
Why one million if we could be financially free having less?
We certainly can be financially independent with less money depending on our expenses and lifestyle, but we also need to think about how long we will be able to be financially free for, and whether inflation will throw us a curve on the way. In other words, a person earning a monthly passive income of 1500€ may be financially free today but maybe not in 5 or 10 years if completely forgets about investing and increasing cash flow.
Then is when the one million common target comes, giving you an extra pillow of cash to invest and defeat inflation over time. We are loads of us out there trying to archive this goal. Some people have it simply as a reference number, others just want to be tagged as millionaires, and perhaps others want to become sophisticated investors in their countries to be able to invest in better rewarding opportunities.
Although one million seems a lot of money at first glance, it may not even be enough as a retirement pillow. How much purchase power will have a million in the future? The power of compounding also applies to inflation. If we consider an average inflation rate of 2%, a product that costs 10€ today will double its price in 35 years. Which means that one million today will be worth a half by my retirement age. Would I be able to be financially free owning half a million today? To be honest, this is the first time I am asking this question to myself. There are tons of things I could do with half a million that are popping in my mind right now, and I think it is worth a whole new blog post to find it out.
My three reasons
It is a long-term challenge
That may don’t sound like a reason for some, but it does for me. I love challenges and difficult roads with tough obstacles. I am pretty sure that some of you have noticed I sometimes write in Spanglish rather than English, hehe. Wouldn’t it be easier for me to just write this blog in Spanish? It would, but it wouldn’t be as challenging and rewarding as it is in English. As Ryan Holiday explains in his book “The obstacle is the way”:
Turning adversity to advantage is a very powerful emotional weapon
The beauty of this reason is the process involved in it, as learning new concepts, developing new skills and overcoming ups and downs. This is what shapes us and makes us a unique as a human being.
Reaching the first million is difficult and challenging. It is the period when we make mistakes, lose some money or don’t take the best decisions. It is after that million when we carry a considerable amount of experience, know better what we are doing, and best of all, the compounding effect is so huge that making more millions it is a piece of cake.
This reason that seems so simple and uncreative adds a ‘little’ purpose to my life.
Provide financial education and stability for future generations
Could you imagine how the world would look today if we wouldn’t transfer knowledge between generations? We would still sleep in caves and use spears for hunting to get food for our families. There wouldn’t be cars, planes, laptops, smartphones, there would just be a bunch of monkeys stuck in a circle and dancing and shouting UGA CHAKA!
Theoretically, education systems and schools are responsible for transferring knowledge and wisdom between generations, sadly, primary and secondary schools fail to provide a good level of financial education, leaving it as a parent’s responsibility. I would like to learn as much as possible to provide for my future children the best I can. So, it may be time to clear my head and begin thinking about being a bit more responsible than I currently am.
Donate to a non-profitable organization and volunteering
I know, I don’t need to hold a million in order to donate money, that’s true. The thing is, as a financial freedom seeker, I don’t donate as much as I would like to, because I unconsciously know that the more money I can save at the end of the month, the quickest I will reach financial freedom. That makes me feel a bit selfish and egocentric sometimes, and that’s why I told to myself that once I reach a million, I will donate more money than now, at least 10% of my annual returns.
I would also feel marvellous if I could create my own charity or be able to move for a longer period to an underdeveloped country for volunteering. Once we reach financial freedom, we can do whatever we want to, can’t we? So, that’s an experience I would go for.
On the way to the seven figures, I would love to donate a 25% stake of any possible future blog income (if it would ever happen). I would also like to donate any income that this blog could make for the whole 2019. Although, I don’t really expect any, as I am not very fan of spending money on Google Ads or Facebook at all.
I am still not a hundred per cent sure where I will donate this money to, I don’t want to spend much time thinking about something that may never happen, but most likely I will choose The Bill Gates and Melinda foundation.
Thanks everybody for reading!
Now, I would love to hear from you! What are your main reasons for investing? Why do you do it? What goals do you aim for?
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