AG 026 The Escape Artist

Alain Guillot Show | Personal Finance and Entrepreneurship

http://www.alainguillot.com/the-escape-artist/

Barney, The Escape Artist, is a blogger based in England.

The name of the blog came from the classic movie The Great Escape which plays every Christmas in England.

His blog is about helping people get out of the financial prison camp in which many of us end up.

If you are working on a job you don’t like or if you are in debt, you are in a prison-like situation.

Breaking out of prison requires slow deliberate work which can have a huge payoff.

Although not poor, during his childhood Barney developed some anxiety about money. His parents bought the biggest house they could afford. Shortly after the purchase interest rates went up in England to 17%. This series of events put Barney’s parents under a lot of stress.

Barney decided he didn’t want that kind of life for himself, he chose a career which would pay him well and he decided not to climb escalator of lifestyle inflation.

He tried to get a job as an investment banker, but because he wasn’t able to find a job in that field, he went into accounting. Barney wanted to send signals to his future employer that he was serious about earning money.

Barney’s view on education is that education is an investment and he wanted a return for his money. Not to be critical, but some careers don’t offer many job opportunities, the return on investment is minimal and they can be considered a 3 year study holiday.

Education in England, as in Canada, is partly subsidized by the government. Students don’t go into massive student debt to get an education. In the United States, some students can be harmed for the rest of their lives with the huge student debt they incur.

After graduation, Barney decided to live in a low-income neighborhood as opposed to a higher level neighborhood that he could afford.

In addition, Barney walked or cycled to work to save money. According to Barney, cars are money incinerating units. People living in big cities don’t need a car. Having a car can be a big hurdle in the journey to financial freedom.

The best way to get around in London is by bicycle, and you get the added benefit of getting in better shape.

Barney climbed the professional ladder, he worked in mergers and acquisitions, and he got paid to learn how to value stocks.

He started applying the lessons he learned at work in his personal life.

If people would apply the same amount of care and attention to their personal finance as they do to the work they do for their employer, everyone would be much better physically, emotionally, and financially.

Barney himself gave his best energy, time, mental focus to his employer, but he had a plan. He was slowly putting some money away. He knew he would not be in his job forever, so he wanted to give his best and he wanted to take out the most.

Money is power. The money that you hang on to, it gives you freedom, it gives you choices.

When Barney was about 32 years old his wife got pregnant with their second child. It was a family decision that she would stay at home to take care of the kids and Barney was the sole breadwinner. At this same time, he started working at a job he hated. At this moment he felt in prison, in prison because of the added responsibility of a new child while not having another job option at the moment.

The initial plan was to slash the spending to the minimum. Finally, Barney found another job in which he was feeling better, but he continued saving because once he cut down on spending money, he realized he didn’t miss any of the stuff he cut off from his regular spending. The more he saved, the more his scape fund grew and the more felt he was on the path of financial security.

At that time, the concept of financial independence was not a common concept. This was before Mr. Money Mustache, before Early Retirement Extreme, so Barney was exploring new territory with no guidance from anyone else.

Some of the unnecessary spending that Barney eliminated was: restaurants, shopping, buying stuff, going out on mini-breaks like going to Rome or Vienna, Prague.

There was a bit of resistance on the part of Barney’s wife when faced with big cutbacks, but also there was the understanding that working long hours, indefinitely was not the solution either.

One of the challenges to cutting back was the social factor. Their friends continued spending as always, so Barney and his wife had to mentally disconnect in order to stick to the plan. In prison talk, their friends were institutionalized.

A book recommendation to deal with what other people may think about you is:Not Caring What Other People Think is a Superpower.

As far as investments, Barney learned to like steady Eddy, boring companies. On the other hand, glamour and excitement are traps. So investing is partly quantitative, but it’s mainly about controlling your emotions, it’s about not getting carried away, it’s about NOT falling in love with a particular stock, it’s realizing that you want to play the percentages and you don’t want to strike out. The biggest lesson was that the less exciting a stock was, the better.

Barney’s portfolio is 80% stocks, 20% bonds. The stock part is 50% individual stocks and the other 50% is index funds.

We spoke about the home bias tendency in investing (the tendency for investors to invest a large percentage of their money in domestic equities) and how the Vanguard All Word Index may be a good solution to solve the home bias.

Having his savings, earnings, and investing in place, it was time to make a move, to go for financial independence. There were several blogs which served as inspiration, some of those blogs where:Monevator, Mr. Money Mustache, J.L. Collins, and The Mad Fientist Podcast. After reading about the 4% rule, Barney did some calculations and discovered that he had enough to retire.

After a conversation with his wife, the only step left was to wait 4 months, until his last bonus was paid off. Ironically, after Barney gave his notice of resignation he was asked to stay a bit longer as an independent contractor. The transition from employee to financially independent was slow and smooth.

We spoke about The Count of Monte Cristo, who was a prisoner for many years until he made his escape. It’s not just about the scape, but it’s a journey of self-improvement and knowledge. The Count of Monte Christo represents many of the themes evoked in financial independence.

When Barney gave notice that he would be leaving his job, he noticed that the power dynamic of employer vs. employee had shifted. No longer was the employer the party with most of the power. Now he, the employee, had as much power as the employer. They were dealing as equals, both parties working to achieve a common goal. Unlike the regular employer-employee relationship where one party is dependent on the other for subsistence.

Being smart with your money doesn’t have to be about early retirement. Financial independence is about giving yourself choices.

We spoke about the movie The Shawshank Redemption, where one of the prisoners is so institutionalized that he has a hard time dealing with life in the free world. Having enough money is not enough for financial independence, you must have enough mental fortitude to walk out even when the gates are open.

We spoke about the books that shaped Barney’s thinking about financial independence before and after the breakout.

Final thoughts:

1. The idea of aggregation of marginal gains. Everything is optimized to achieve a particular objective, and it’s the aggregation of all those little details that create the big change, the successful execution of the goal.
2. The Principles of Life Hacking. Read the blog post right here.