What would you do differently at age 20 knowing what you know now?
I love asking people this question, because although in hindsight ‘we’re always going to be right’, I still feel other twenty something year olds can learn so much from other people’s choices.
So of course, when I met Francisco from Brazil, a Goldman Sachs investment banker who has travelled the world, has assets in many different countries and who’s quitting his job in February/March to finally do what he wants, I had to ask him that question. And he answered a lot of other questions too. 😛
This post is over 3,000 words long, and has some life changing answers. If you really don’t have much time you can check out the takeaways at the bottom of the post. But really, I recommend going back to it when you have time and reading it entirely.
So if you want some golden nuggets of wisdom… here we go!
How old are you, what do you do, where are you from, where are you living?
I am 36 years old, originally from Brazil. I work in Private Wealth Management, currently in the Netherlands but spent the bulk of my career between NY and Geneva.
The juicy bits
Your journey – Did you go to university? Where? What did you study?
I did my bachelors in Brazil, in Business Administration. Later I did my MBA at Columbia in NY. After my Bachelors I worked in Management Consulting (throughout and right after University, as in Brazil it is very common to work full time during Uni).
Where did you go from there?
Soon after graduation I started working on International Projects and never went back to Brazil. During this time I worked in Projects in Spain, UK, Italy, Australia, New Zealand, Angola and Mozambique. After my MBA I went into Investment Banking and eventually migrated to Private Wealth Management within the same bank, Goldman Sachs. During this time I lived mostly in the US and Switzerland, and more recently in Amsterdam.
How did you get to where you are now?
For my whole life (until very recently) I just followed the typical rat race: working 100 hour weeks in a job I hate, getting paid well but spending most of it on superficial futile stuff and shiny toys, and not really pausing much to question my values or beliefs. If I had to sum up my professional career, I would honestly say I was mostly pretty miserable. But when you’re in the middle of it, it is very difficult to see what is really going on. There’s a saying I love from Upton Sinclair:
“You can’t expect a man to understand something, when his salary depends upon him NOT understanding it”.
I think this saying applies particularly well to banking, being that it is an industry that I believe adds no value to society. Banks create nothing, all they do is move assets from one place to another, making the wealthiest people in the planet wealthier, and making huge money in the process. I don’t want this to sound like a Socialist discord, after all that would be extremely hypocritical seeing that I have obtained all my wealth from working in banking. But trust me when I say that the only way to survive in banking is to never stop, reflect and ask the tough questions… the ones that do, often end up quitting. And that’s where I am right now.
When I could no longer avoid asking myself the questions and started revisiting my priorities, it quickly became very clear that my first step should be to leave the banking industry and never look back, which is particularly difficult in your mid-thirties as I am now at the highest salary level I’ve ever been.
So this is the ethical/moral reasons for my decision to retire early and it explains a little where I am right now as far as my mindset goes. Financially speaking, I wish I could say I had been meticulously planning for early retirement and I have now finally achieved it. But that’s not true, the truth is much less exciting I’m afraid… I just kinda stumbled upon it. Recently I did some research on the 4% rule for retirement, ran some numbers, realized that there’s a lot more weight to the ‘Annual living cost’ side of the equation than to the “net worth” part of the equation, and realized that as long as I was willing to live on a certain level of income, I could pull the trigger. So I did!
What would you have done differently at 20, knowing what you know now? Would you go to university? What would you study?
If I could go back in time, I would have done most of it differently! First of all, I would no doubt, 100% sure, NOT have gone to University (oh wow!). It was the biggest waste of time and money of my life. And now you might be thinking: “well that’s easy to say now, after you’ve already made the money with jobs you would not have gotten without the degrees”. Yes, it is true that I would not have had the specific jobs I did, had I not gone to Uni.
So the question that should precede “should I go to university?” is “what kind of job do I want?”. And had I had any choice, I would NOT choose a career in banking, consulting, business management, or anything that involves sitting in front of an excel spreadsheet and PowerPoint slides 16 hours a day, and reporting to a boss that will very likely be less intelligent than you.
Yes, I know, and now you’re saying:
“How the hell would I know what kind of job I want, I have no experience in any kind of job!”.
Ok, so overall I would say this: if you know for sure you want to be in a very technical profession that will only allow you to practice if you have some sort of license (in those I would only include: Medicine, Law and Engineering), then by all means go and get a degree.
If you want anything other than those 3, or if you’re unsure, don’t go to university! Of course that doesn’t mean go sit on your butt all day and wait for some miracle opportunity to fall on your lap. To try and illustrate my point, let’s take Business Administration for example. If you ask 100 people who have gone to business school (BA, Masters, whatever) if they have learned anything that had any practical application in their professional life, I guarantee 90 will answer “No”. The other 10 will lie because they’re ashamed of all that time and money they put into it, but the honest answer would be a resounding “NO” from all 100.
Now if you take that exact amount of money and time and put it towards starting a business, and FAIL, you’ll be financially in the same place as you’d be after Uni (no money, or full of debt). But the learning will have had been a million times that of what any Uni can teach you. It’s true that it’s easier to get a student loan than a loan for a start-up… but it can be done, just do the research.
What I’m trying to say is that, end of the day, all that matters are the skills you learn. Knowledge is the only thing no one will ever take from you. And I believe we’re all much better in teaching ourselves than we are in absorbing skills from a dusted Uni professor. Of course university will give you credentials, so you need to think long and hard if the job you want, the job you’ll love, really requires credentials.
I am certain that a lot of people reading this will still say they want to go into certain careers, such as banking. There’s a certain appeal to those jobs, mostly because of bad Hollywood movies (all lies) but also because of the good salaries (true). But the reality is that all the skills that I have learned in banking are completely not transferable to anything else, If I were to start a business now I would need to start from scratch and teach myself a whole new skill set. So it was a very bad investment of time. And although I made decent money, when you’re in that sort of environment you end up spending way too much, because you’re expected to keep up with your peers and their shiny toys.
And if you think you could be the exception, make all the money but continue living frugally in order to retire soon… trust me, it doesn’t work like that. The Wall Street life consumes you, no matter how emotionally stable you deem yourself to be. You can’t walk around the Financial District with cheap suits, you can’t live far otherwise you’ll have to commute for hours (on top of the 16 hour days) so you’ll end up paying ridiculously expensive rent, anyway… lifestyle inflation is, in my opinion, inevitable if you go into the high paying careers. But more importantly, you’re giving away an insane amount of your time and health and learning skills that will probably not help you in the future.
That was a very long rant, so I’ll try to be concise in the wrap-up: if I could go back to my 20s, I would first and foremost dedicate a lot of time to trying to figure out what is it that I really want to work with (a good exercise is to ask yourself: if you won 1 billion dollars today but had to keep working, what would you do?), and focus on teaching myself the skills required to be the best I can be in that particular job. A few examples are: Digital marketing, programming, teaching languages, trader, broker, scuba diving instructor, fulfilment services, blog writer, machine Learning/AI specialist, innovation consultant, vacation rental property manager (I particularly like this one), alternative medicine practitioner, personal trainer, and the list goes on and on.
What do you regret?
Many things, and nothing at the same time. Each decision has made me the into the person I am today, the good ones but especially the bad ones. Each mistake has made me stronger and wiser, so I am much more grateful for the mistakes than for the successes. Now with the philosophical gibberish over, I can share with you the advice I give my little sister (I have a 9 year old sister) and the life I envision for her.
Unless she wants to be a doctor (which I will fully support) or a lawyer (which I will strongly advise against), I will insist she does not go to university, instead I will help her travel as much as possible, get acquainted with people and cultures different than her own, and use that time and experience to get acquainted with different “career” paths. Above all, try to find something that
1) would make her happy, but also
2) add something positive to the world (or at the very least neutral, as banking for example I believe adds exclusively negatively to the world, same for lawyers, and unfortunately in same cases even doctors).
And lastly, although this might not sound very important, I consider it essential:
3) be your own boss.
Anyone reading Financially Mint, and FIRE in general, is more financially savvy and intelligent than the average person. So there’s a very high probability that you’ll be smarter than ANY boss you have. The frustration, you cannot imagine. So be our own boss and you’ll progress several fold faster than if you were reporting to anyone, no matter how bright you think your current boss is.
When young, would you emphasise more on making money or finding your passion?
Finding your passion, hands down. The whole “Compounding interest’ story is very compelling and, of course, very true, but it might install a certain urgency in some people that I believe is unwarranted. Yes, the earlier you invest, the earlier you can retire. But it makes no sense to trade good years (years in which you’re working with something you love) for miserable years (in which you’re working just for the sake of money). Yeah, maybe it’ll take you 3-4 more years to retire if you focus on finding your passion, instead of rushing into the rat race. I happen to think that this delay is absolutely worth it.
What can other people in their 20s learn from your experience? How should they start investing?
ETFs/Index funds above all! First most important thing is the concept of “paying yourself first”, meaning, whenever you get paid (say the 1st of every month), you put a certain amount towards savings/investing. Then you figure out a way to live out of the remaining. This is the most delicate part as there is a lot of room for “rationalizing” a lot of spending, we can easily convince ourselves that we “need” that certain purchase. But frugality goes well beyond the sole purpose of savings, I now see it as a philosophy of life that symbolises many other life choices: respecting the environment, caring about society, not caring about trends, not having the latest iPhone, not buying into consumerism propaganda, etc.
For someone starting early, if you run the numbers you’ll realize that if you can manage to find a good quality of life with a low level of income (absolutely doable), you’ll soon realize that you don’t really need to be making all that much money. And that ties perfectly to my comments around finding your passions rather than focusing on making money…mostly because it can be fairly easy to achieve financial independence if you can construct a life that you enjoy at a low spending rate.
1) build a life you love at a low level of expenditure (drop all the futile s*** you think you need… easier said than done, so put the effort into changing your mindset here).
2) pay yourself first, same day as you get paid, preferably.
3) read about investing, but if you don’t feel like putting in much time and you feel comfortable with the advice of someone who spent several years as a Goldman Sachs banker: invest exclusively in ETFs/Index Funds, all else is supplementary and ultimately a waste of time.
PS: I can get into a lot of details when it comes to investment options. Let me know what you’d like to hear more here.
How should they educate themselves financially?
I personally am not at all a fan of Tony Robins, but the dude did do a pretty good job at compiling information from the brightest minds in the investment worlds, so I would start reading “Money: Master the game”. I think for those who are really new to this, it might be worth reading “Rich Dad, Poor Dad”, it’s a 15 minute read anyways.
Before going deep into investment strategy, I would spend some time on a few blogs, namely Mr Money Mustache, The Mad Fientist, and Financially Mint of course 😉! That will build a very strong foundation. The next optional steps would be reading “Your Money or Your Life”, “The Simple Path to Wealth”, and for those who really like the nitty gritty of the financial markets, go straight to “The Intelligent Investor” (best book on financial market by far).
But more importantly, just be prepared to really revisit your priorities, to do a lot of reflection, to be deemed “awkward” by your family and friends, and to start a journey of never ending self-development. One thing is guaranteed: it will all be worth it and when your friends are gloating about their big houses and flashy cars and posh clothes, but in reality are drowning in debt and stuck in a job they hate with no perspective of change before they’re 65… you’ll be in a beach somewhere in your 30’s, spending as much time as you want with your loved ones and wondering how the hell can someone submit themselves to a life with no perspective of financial freedom. (oh wow!)
Tell us where you are planting your flags: residence, business, real estate, etc.
My last day of work here in the Netherlands is the 29th of March. After that I will go to Brazil to spend some time with family, then the US to spend some time with friends, then I’ll travel around for a bit, and after all that I will try to decide where I want to establish a residence! At this point I am still undecided, which is a good feeling to be honest, no pressure. My citizenship flags are Italy and Brazil, I then have the bulk of my investments in the US (Brokerage account and real estate, around 60% of my net worth), simply because I still think the US has by far the most stable economy presently.
I don’t see that changing any time soon, but if anything changes, I should have no trouble transferring my investments somewhere else. The remainder of my investments are in Brazil, real estate mainly and some in the Treasury. I recently liquidated all investments I had in Europe, both EU and UK, because I believe the whole Brexit ordeal brings a level of uncertainty to the table that I am simply not willing to deal with.
The flag that I am most concerned with right now is one that most people on their path to FI shouldn’t worry so much about, but becomes increasingly important as FI is approached: Tax residency. This is a profoundly complex subject and we could spend several podcast episodes or blog posts talking about, but in summary: your tax residency is not necessarily the country of physical residency (it can be, but not necessarily). It is basically the country where you will pay your taxes in.
There’s always an option to be a perpetual traveller and not be a tax resident anywhere, but that doesn’t mean you don’t pay taxes anywhere. After a pretty ridiculous amount of time studying, researching, consulting accountants, lawyers, friends, former clients, you name it… I have come to the simple hard truth that there’s no way to completely avoid taxes. Zero tax is only a reality if you derive all your income from a country such as Dubai or Bahamas (zero tax countries), and you live there. But such a setup has its downsides, namely the old “all eggs in one basket” kind of scenario.
I personally like diversifying my investments, and the best returns will be in countries that charge taxes to some extent (ie: USA). So in my case, I will always pay US taxes on income derived from US assets, and Brazil taxes on income derived from Brazil assets. But there are certain structures that allow for very little tax to be paid (I will be paying around 10.5% average tax on my investments, which I consider pretty darn good, especially compared to the 52% I currently pay on my Dutch salary).
The important thing to note here is that if for whatever reason I decided that I wanted to retire somewhere in Europe, say the UK or Spain for example, I simply would not be able to retire now, I’d need to accumulate quite a lot more before pulling the trigger. Not just because of higher costs of living, but mostly because of the Income Tax I would need to pay on my US and Brazil investments. So in my case, the best choice would be either Brazil or Central America, I’ll send you a note once I decide 😉
Conclusion by Financially Mint
Honestly… wow. No words.
By reading this mini manifesto by Francisco, we have learnt A LOT of things. Here is a little list:
University is not always the right choice (and can many times be a waste of money and time)
Banking is not like in the bad Hollywood movies and you’re not bringing anything positive to the world
Before asking yourself ‘Should I go to university?, Ask yourself ‘What kind of job do I want?‘
At the end of the day, all that matters are the skills that you learn
It’s very easy to fall into the trap of lifestyle inflation when working in banking
It makes no sense to trade good years (when you’re working on something you love) for miserable years (when you’re working for the sake of money)
When young, focus on finding your passion and not making money (check out: Master these 4 Financial Pillars and You Can Do Whatever You Want in Life)
Learn to build a life you love at a low level of expenditure
Your tax residency is not necessarily the country of physical residency (check out: Flag Theory: Tax Strategies to Keep More of Your Money)
Honestly, there is nothing much I can add to Francisco’s very impressive and detailed answers. All I can say is read it, apply it to your life and share it to a friend in need. Bit by bit, we’re helping people understand that there is another way to do things.