Lessons from 2020, improve your decision-making, wealth-building 101, and doing less but better
Happy new year. I love this time of year, especially the week between Christmas and New Year’s Eve, which lends itself so well to reflection and planning. 2020 was obviously a crazy year, with the Coronavirus turning the world upside-down and forcing us to rethink many areas of our lives.
The media narrative may have been all doom and gloom, but it was a fantastic year for me personally as I became a Dad to a beautiful son. Parenthood is an intensely rewarding (and exhausting) life-change I am fully embracing, and the laughter in our house has been almost non-stop since he was born. I realise that the past year was extremely challenging for many people, and I am aware of how lucky I am.
But one of humanity’s greatest strengths is our ability to adapt in response to adversity. Necessity is the mother of invention, as the saying goes. The issues posed by the events of 2020 have changed how we live our lives and brought a few things into sharp relief. Particularly striking is the accelerated shift to a digital-first world. This has been a long time coming.
I wrote my undergrad dissertation way back in 1998 on how the internet would herald a shift to online communities and a digital culture that bypassed national borders. We’re not fully there yet, but we’re well on the way. According to a study by digital communications company, Twilio, the shift to remote work and e-commerce during 2020 has sped up the digital transformation process by six years. That journey is a one-way ticket, and life will increasingly happen online in the coming years.
Lessons from 2020
Challenges and changes are learning opportunities. I feel like I grew a lot in 2020. Not just by becoming a parent; I studied for a coaching qualification, started mentoring undergrad business students, began writing online, and launched my website and this newsletter. I also did a decent amount of self-directed learning around SEO and digital marketing strategy.
The lessons I learned in 2020 that will influence how I approach 2021 are:
Time is precious. As a parent, I no longer have the luxury of being on my own schedule. My time is organised around my son’s needs, and I have to take what I can get when it comes to finding moments for myself and working on my own goals. What I used to accomplish in a day can now take a week or more. This forces me to make tough decisions so I can prioritise hard and focus on the essentials. I simply don’t have the time for anything else.
You don’t need much to be happy. I have spent much of the last ten months at home under lockdown rules with limited opportunity to do simple things I have always taken for granted, like meeting up with friends or going out to eat. But I have still had a great time. I am blessed to live with the people I love the most in our home with a garden, well-stocked bookshelves, and a fabulous farm shop just around the corner. It turns out I don’t need much else. I realise I am privileged in this regard, and I am incredibly grateful for my circumstances.
Family is super-important. Hunkering down in a bubble with my wife and young son has been a wonderful way to start family life. I know a few other new parents who have also said the same. Being able to spend so much dedicated time together as a family in these precious first few months has been really special. I need to remind myself to prioritise family time if other areas of my life start to take over as the year progresses.
Experiences and variety are powerful and invigorating. Though I have enjoyed the last few months of uninterrupted home life, I have still missed having opportunities to go out and do different things. Mainly because I want my son to experience as much of the world as possible, but also because even for a homebody like me, the world feels a bit small when every day is spent at home.
Experience and variety stimulate curiosity and provide inspiration. Seeing the world through a child’s eyes is fascinating; I can see how excited my boy gets when he has new experiences, so I want him to have more. I am keen to get out and about and have more shared family experiences once things open back up later this year.
Annual reviews and resolutions
The lessons from last year bring me to my plans for 2021. I used to love making new year’s resolutions, but I find I don’t need to these days. Because I review and set goals regularly, I don’t need to wait until the start of a new calendar year to put plans in motion. Instead, something I like to do is to reflect and review the previous year. I can use what I learn from this to inform what I want to focus on or eliminate in my life going forward.
The ever-excellent Tim Ferriss has a simple framework for conducting an annual personal review, which is worth a look if you are interested in trying this yourself.
Though I am not making any specific resolutions, I am using a single word as a lens to focus my energy this year, and that word is focus. As I said earlier, time is a resource of which I have precious little. This year I would like to crystallise a solid business idea and develop a fully-formed business plan around it. Along with my family, this will be my priority for the year, and I will need to focus and eliminate a lot of distractions to achieve it. Wish me luck.
How to Make Better Decisions
Last month I wrote about a self-coaching technique you can use to identify and overcome personal biases so that you can make better decisions. Human nature makes all but the most hyper-rational among us poor decision-makers. This exercise will help you take a more rigorous approach to navigating dilemmas so you can reliably identify what is important and choose the best course of action. You can read it here.
Last year I regularly wrote about personal finance and investing in this newsletter. It was never my intention to do so, but the market conditions caused by the economic shutdowns due to the Coronavirus created a few investment opportunities that meant the markets were very much on my mind.
I thought it might be useful to start this year with a short, basic primer on how to start building wealth from scratch. Here are some pointers for anyone at the beginning of their journey or who wants to build a nest egg:
Don’t try to save and pay off debt at the same time. Pay off any high-interest debt before you start saving; it will save you money in the long-run. If you have a debt that incurs 10% annual interest, paying that off immediately gives you a guaranteed 10% yield, risk-free. If you have an outstanding credit card balance you can’t pay off immediately, get a second card that offers you a 0% APR deal. Transfer the balance from your original card to it so you are not paying interest on the debt.
Once your debts are cleared, the best next steps to take are:
Set up a direct debit to automatically transfer 5-10% of your paycheck into a separate savings account from the current account you use for day-to-day expenses. Out of sight, out of mind is a good rule of thumb for managing your money. 5-10% is a small enough amount that you won’t miss it, which makes it a painless way to save, but transfer more if you can afford it to build your savings as quickly as possible. Don’t carry the card for this account about with you. That way, you won’t be able to spend your savings and can let them accumulate.
Invest your savings. This is the key to wealth-building. There are lots of different investments you can make. I’m not qualified to tell you where should put your money, so I won’t. Different assets suit different people depending on their timing, goals, circumstances, and appetite for risk. It is up to you to do your research and work out where the best place to put your money is. Personally, I like the stock market. I invest for the long-term, and historically it returns ~ 7% annually. Plus, I enjoy playing the game. I don’t follow the news, but following the markets keeps me in touch with the trends happening in the world.
The earlier you invest your money, the better. This is because investments allow you to benefit from compounding returns that accumulate over time. If that historical 7% stock market trend continues, every £1 you invest in the stock market at 30 will be worth £14 when you’re 65. But every £1 you invest at 25 would be worth £22 at 65, so starting to invest five years earlier can make a big difference. Such is the power of compound interest, which Albert Einstein called the eighth wonder of the world.
And the golden rule: Spend less than you earn so you can build a cash cushion to cover unexpected expenses and avoid accumulating debts.
Book of the month: Essentialism
Essentialism is all about focusing on what is truly important then ruthlessly de-prioritising everything else so you can make your highest contribution towards the things that really matter. The underlying principle of essentialism is “less but better.” In this book, Greg McKeown lays out a lifestyle manifesto for eliminating distractions and unimportant demands, not to get more things done but to get the right things done. He outlines practical ways to do this in your personal and professional life, and offers guiding principles to help the reader build a mental framework for approaching their life with an essentialist mindset.
This is a fantastic, easy to read book that takes a different approach to typical productivity advice. Rather than teaching you how to do more, it can help you accomplish what really matters by doing less instead. It reminds me a lot of James Clear’s Atomic Habits. Both books complement one another well, and reading them back to back might allow you to get more out of both titles.
If you find yourself stretched thinly by too many competing demands, or you struggle to find time to make progress on the things you really care about, I dare say this book is essential reading.
If you are looking for further suggestions for your 2021 reading list, I recently updated my book reviews page with some new recommendations. You can browse them here.
In keeping with my 2021 theme of focus, I have been musing on this quote:
“If I had more time, I would have written a shorter letter.”
It has been attributed to many people over the years, most famously – and probably apocryphally – to Mark Twain. There is no linear relationship between effort and output. Quality is much harder to consistently achieve than quantity. Indeed, the process of removing unnecessary clutter and refining something so it can serve its intended purpose as elegantly as possible is some of the most challenging work of all.
Until next month,