73: Pitfalls Series: When You Don’t Invest in Yourself

We’ve all heard the importance of investing in ourselves. Whether it’s investing in an executive coach, in the right clothes, or in your personal development, Dustin and Danielle have covered the gamut in past episodes. But on today’s episode of Worth It, they’re taking a different angle. In the Pitfall Series, they’ve been talking about the pitfalls of investing in the wrong arena and in the wrong advisory team, but today they’re talking about the pitfalls of not investing in yourself (and your future).

Instead of talking about coaches or employees or “traditional” self investments, Dustin and Danielle are talking about investing in a backup life bank so you can take care of yourself and your loved ones, not just now but in the future.

WHAT YOU’LL LEARN

[03:15] The importance of counterintuitive thoughts in life and investing

[05:04] What inversion means and how it can be a great skill

[07:03] What inversion has to do with escape pods

[07:32] How to figure out the bare bones of your income

[09:03] What your back-up ‘life bank’ and trapezes have in common

[11:08] The 4 ways to start building your ‘life bank’ today

[13:17] The formula to figure out how much you need in your ‘life bank’

 

INVERSION AND PLANNING FOR THE OPPOSITE

Charles Munger, Warren Buffett’s right-hand man, once said:

“Invert, always invert: Turn a situation or problem upside down. Look at it backward. What happens if all our plans go wrong? Where don't we want to go, and how do you get there? Instead of looking for success, make a list of how to fail instead - through sloth, envy, resentment, self-pity, entitlement, all the mental habits of self-defeat. Avoid these qualities and you will succeed. Tell me where I'm going to die, that is, so I don't go there.”

But what does that have to do with investing in yourself?

In the podcast, Dustin and Danielle break it down by explaining that investing in yourself isn’t about just planning for (and investing in) things you want to improve. It’s also about planning for (and investing in) things that could go sideways. This means getting disability and life insurance and saving up a “life bank” fund that allows you to keep the lights on and your business afloat should you fall ill or, worst case scenario, die.

Nobody really likes to think about their mortality and the risks of illness, but the reality is that not planning for the worst means you’re not investing in yourself. So Dustin and Danielle are breaking down what it means to “invert” your self investments… and start planning for your life.

STEPS TO BUILDING UP YOUR LIFE BANK

This short-and-sweet episode offers up some actionable advice if you want to invest yourself — your future self. In it, Dustin and Danielle recommend that you:

Get disability and life insurance. This protects you and your business, as well as your family so everyone is covered if something should happen to you. Determine your minimum level of living. What do you need to live? This doesn’t include fancy dinners out, vacations to the UK, or that splurge buy you have every few months. This is what you need to eat, sleep, and live. This may take some cutting out of your normal budget, so Dustin and Danielle recommend taking that time. Do the math. To figure out how much you need to invest in your life — what Dustin and Danielle call your “life bank,” you can multiply your yearly minimum level of living and multiply it by 25. That’s the gross amount you need in liquid investments. They call this the Rule of 25.    

For example, let’s say you’ve figured out that you need $50,000/year. That formula is $50,000 x 25, which equals $1.25 mil in invested assets. But why do you need so much? Listen to the episode to find out.

4. Invest in a balanced portfolio. Of course, to get to that x25 number, you’ll need to do more than save. You’ll also need to diversify that money in different investments that can get you compound interest — and leave it in there. This “back up life bank,” or BULB as they call it, isn’t like your emergency fund. Instead, it’s about investing in a long life and your future.

Want to hear more about how to get this “life bank” and how it can help you invest in yourself, your future, and your family? Check out the episode and, of course, share it in a friend so they can invest in themselves, too.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED The Rule of 25, Episode 63 All Hail the Counterfactual by Barry Ritholtz Inversion: The Critical Skill No One Taught You by James Clear The Toujours Planning Quiz — Are we a good fit for your financial planning needs? Our FREE go-to financial and life planning resources

 

CONNECT WITH DANIELLE AND DUSTIN Ask Your Questions On Facebook On Twitter

We’ve all heard the importance of investing in ourselves. Whether it’s investing in an executive coach, in the right clothes, or in your personal development, Dustin and Danielle have covered the gamut in past episodes. But on today’s episode of Worth It, they’re taking a different angle. In the Pitfall Series, they’ve been talking about the pitfalls of investing in the wrong arena and in the wrong advisory team, but today they’re talking about the pitfalls of not investing in yourself (and your future).

Instead of talking about coaches or employees or “traditional” self investments, Dustin and Danielle are talking about investing in a backup life bank so you can take care of yourself and your loved ones, not just now but in the future.

WHAT YOU’LL LEARN

[03:15] The importance of counterintuitive thoughts in life and investing

[05:04] What inversion means and how it can be a great skill

[07:03] What inversion has to do with escape pods

[07:32] How to figure out the bare bones of your income

[09:03] What your back-up ‘life bank’ and trapezes have in common

[11:08] The 4 ways to start building your ‘life bank’ today

[13:17] The formula to figure out how much you need in your ‘life bank’

 

INVERSION AND PLANNING FOR THE OPPOSITE

Charles Munger, Warren Buffett’s right-hand man, once said:

“Invert, always invert: Turn a situation or problem upside down. Look at it backward. What happens if all our plans go wrong? Where don't we want to go, and how do you get there? Instead of looking for success, make a list of how to fail instead - through sloth, envy, resentment, self-pity, entitlement, all the mental habits of self-defeat. Avoid these qualities and you will succeed. Tell me where I'm going to die, that is, so I don't go there.”

But what does that have to do with investing in yourself?

In the podcast, Dustin and Danielle break it down by explaining that investing in yourself isn’t about just planning for (and investing in) things you want to improve. It’s also about planning for (and investing in) things that could go sideways. This means getting disability and life insurance and saving up a “life bank” fund that allows you to keep the lights on and your business afloat should you fall ill or, worst case scenario, die.

Nobody really likes to think about their mortality and the risks of illness, but the reality is that not planning for the worst means you’re not investing in yourself. So Dustin and Danielle are breaking down what it means to “invert” your self investments… and start planning for your life.

STEPS TO BUILDING UP YOUR LIFE BANK

This short-and-sweet episode offers up some actionable advice if you want to invest yourself — your future self. In it, Dustin and Danielle recommend that you:

Get disability and life insurance. This protects you and your business, as well as your family so everyone is covered if something should happen to you. Determine your minimum level of living. What do you need to live? This doesn’t include fancy dinners out, vacations to the UK, or that splurge buy you have every few months. This is what you need to eat, sleep, and live. This may take some cutting out of your normal budget, so Dustin and Danielle recommend taking that time. Do the math. To figure out how much you need to invest in your life — what Dustin and Danielle call your “life bank,” you can multiply your yearly minimum level of living and multiply it by 25. That’s the gross amount you need in liquid investments. They call this the Rule of 25.    

For example, let’s say you’ve figured out that you need $50,000/year. That formula is $50,000 x 25, which equals $1.25 mil in invested assets. But why do you need so much? Listen to the episode to find out.

4. Invest in a balanced portfolio. Of course, to get to that x25 number, you’ll need to do more than save. You’ll also need to diversify that money in different investments that can get you compound interest — and leave it in there. This “back up life bank,” or BULB as they call it, isn’t like your emergency fund. Instead, it’s about investing in a long life and your future.

Want to hear more about how to get this “life bank” and how it can help you invest in yourself, your future, and your family? Check out the episode and, of course, share it in a friend so they can invest in themselves, too.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

RESOURCES & PEOPLE MENTIONED The Rule of 25, Episode 63 All Hail the Counterfactual by Barry Ritholtz Inversion: The Critical Skill No One Taught You by James Clear The Toujours Planning Quiz — Are we a good fit for your financial planning needs? Our FREE go-to financial and life planning resources

 

CONNECT WITH DANIELLE AND DUSTIN Ask Your Questions On Facebook On Twitter