We all want a brighter future, and we also want to enjoy the present. How do you balance the two desires?  My mistake was thinking that I could work really hard and not play at all for a few years, in exchange for a future of all play after the few years of work.  I learned that it’s impossible and extremely unwise to invest 100% into the future because then you have nothing left to help you through the present, and if you don’t make it past the present then there’s no future for you to speak of.

In 2014 I invested 100% of my cash into long term investments. The idea was that as long as I earned enough to pay for my monthly living expenses, I wouldn’t have to sell any long term investments. Therefore,  I could take risks and invest in stocks that could widely fluctuate in the short term because I wouldn’t cash out in the short term.

Here are the problems that I ran into with this strategy.

First: Unexpected expenses will kill your plan.  For me, the unexpected expense was medical: my family got seriously ill, and I had to start sending money back home to support them while they were out of a job, and the medical expenses flew up into the sky. As a result, I had to start selling my stocks to pay for those unplanned expenses, and I had the misfortune of having to sell at a 15% loss on average.  I bought Google at $600 and sold for $500. I bought Amazon at $400 and sold for $300.  Looking at 2019 prices, Google is now $1100 and Amazon is $1600.  I had 20 shares of each so because of unexpected medical expenses, I lost $22,000 on Google and $32,000 on Amazon for a total loss of $54,000 because of my poor decision to have no cash reserves and invest 100% into the future while having an income that forced me to live paycheck to paycheck because I was doing a startup and maximizing the value of the equity by not taking a big salary.

Second: You miss out on opportunities that you don’t expect having when you don’t have the cash to take advantage of those opportunities.  For example, around 2015, certain housing markets reached a special mortgage to rent ratio where if you had a 25% downpayment for an investment home, the rent would more than cover the cost of the mortgage and maintenance.  It was an opportunity to buy essentially a free house in a good neighborhood.

The financial terms for theses are liquidity and opportunity cost.  Cash is king.  Health and energy in the present is powerful. Invest in the present so that you can make it to the future.

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