Throughout this article - which I hope will be a quick read - you'll explore the ideas that guided my financial decisions. I've had more wrongs than rights, maybe I can help you avoid some of the wrongs.
God, how I wish someone had told me this when I was 18.
Where I am coming from
Back in the day when I worked as an independent engineer, I could not take my salary for granted. Some months I could go to any restaurant without looking at the price; other months, I had to count every penny for a snack.
Things established a bit when I joined a full-time corporate job, but what was the first things I did after I got my driver's license? Yeah, that's right! Bought a brand new car. At the time, I could barely afford it and it left me with almost no savings.
Don't get me wrong, I knew exactly what I was doing, even though I did - again, life is not a spreadsheet. Looking back? I would do the same. I love cars, I wanted one, and I had worked for years to save enough for a good down payment, so I went and bought it.
Proof that I'm not near to the perfection, and neither are you. We all do the best working with what we have, and what I try to do is shape my financial life so I can have peace of mind.
Pre-read
If you haven't read my earlier posts, start there. This one pulls it all together, plus a few things that didn't fit anywhere else. Hover each title to see what it's about.
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What money actually is?
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Assets vs. liabilities: who feeds who?
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Emergency fund: how much is enough?
Disclaimers
Before we go any further, four things you should know:
- Life is not a spreadsheet. Numbers help, sure, but real life has people in it, and some of the best things you'll ever pay for look terrible on paper. The car is my proof.
- Raul Sena says it's hard to talk about investing with someone who lives on less than R$ 4,500 a month in Brazil. If that's you, take what's useful and skip the rest. You're already doing the hard part.
- This is not financial or investment advice. It's just my experience so far. Check what applies to you, and talk to a professional before you move real money.
- I might change my mind about almost everything here. When I do, I'll come back and update this post.
Your biggest investment is you
Before any fund, stock or bond, invest in yourself. Buy the course. Do the bachelor's, the MBA, whatever. Learn how to communicate, how to lead a team, how to explain your ideas. Anything that makes you more valuable counts.
I honestly believe this is the best interest rate you'll ever get. Let's do the math: a 10% return on R$ 20,000 is R$ 2,000 a year. A course that helps you land a 10% raise on a R$ 6,000 salary? That's R$ 7,200 more, every single year.
Keep investing your money too, of course. But when you're starting out, your skills are the bigger lever. And take care of your health. It's part of the deal.
The biggest villain: lifestyle inflation
Lifestyle inflation (aumento do padrão de vida) is when your spending grows every time your income does. You get a raise, so you move to a nicer apartment, upgrade the car, eat out more. A year later, you're left with the same amount at the end of the month as before. Yeah, you got a raise and nothing changed.
For me, this is the biggest enemy of building wealth, mostly because it's so easy not to notice.
Same raises. The only difference is how much of each raise you spend.
Don't get me wrong, raises are meant to improve your life. Just let your lifestyle grow a bit slower than your income.
Done is better than perfect
Nobody starts with the perfect plan. I sure didn't. Start with a simple one and fix it as you go. One month of saving in an imperfect way is worth more than a year of researching the best option.
Time in the market beats timing the market
In engineering, time to market is how fast you ship. In investing it's the other way around: what matters is time in the market, how long your money stays invested.
Nobody can predict the best day to buy. Not me, not you, not anyone who's paid to try. Starting early and staying invested works better. Look at this: saving R$ 500 a month from age 25 beats saving R$ 1,000 a month from age 35. The early start wins, even though the late one puts in more money.
Starting at 25 ends with about R$ 750,000. Starting at 35 with double the monthly amount ends with about R$ 593,000, even though you put in R$ 60,000 more.
KISS
KISS means Keep It Simple, Stupid. I'm borrowing it from engineering, and it works great for money too.
If you're not a finance expert, a trader or a Wall Street guy, I highly recommend keeping things as simple as you can. In Brazil, that usually means fixed income (renda fixa), some dollarization (keeping part of your money in dollars) and other conservative investments.
And if you can't explain where the return comes from, don't buy it yet.
Stay small enough long enough
Staysmallenoughlongenoughandyou'llbebigenoughsoonenough.
Keep your costs low, keep your plan simple and give it time. It sounds boring, I know.
It is not about how much you earn
It's about how much you keep.
Marina earns more than three times as much. Caio keeps three times as much.
A high income doesn't help if you spend all of it. I've had months where I could eat anywhere I wanted, and months where a snack was a decision. Income alone never told me how I was really doing.
Zoom in or zoom out?
Should you obsess over every cent spent on coffee, or only look at the big picture? My take: it depends.
If you can stay inside the monthly limit you set for your credit card, I don't care what's inside it, as long as you stay within the limit. If you can't, you need the detailed view. Track the coffee, the delivery, the subscriptions, everything, until the month stops surprising you. Then zoom out again.
Playing the expert?
The reality is that personal finance is... personal. Every practice has to fit a person's habits, lifestyle and so on.
siempre quise ser ricopero nunca para comprarme un Rolexni una Ferrari
sino para ir al gimnasio a las tres de la tardeo sentarme dos horas en un caféy pedir lo que quiero, sin mirar el precio
también para asegurarme de que los míosnunca tengan que preocuparse por la plata
para levantarme un miércolesy estar tranquilo, sin que nadie me apure