It’s not an easy road….analogy between Iron Man competition and Financial Independence

By: ispeculatornew
Date posted: 04.28.2011 (5:00 am) | Write a Comment  (2 Comments)

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Have you ever wondered by so few individuals are able to one day live off of a passive income portfolio? Many are able to get by either counting on a government or other pension,  by diminishing their expenses, by working longer than expected, etc. But how many people do you know who were able to reach financial independence and live off of their passive income (dividend and other) without touching their capital? Very few I would guess.

Iron Man is a competition that includes a marathon, the equivalent of a marathon swimming and also on a bike. It’s something that is often done in 12 hours and sometimes a few more hours…. it’s not easy at all, but the participants usually are all capable of making it through.

It’s not because they can’t do it

Every Iron Man competitor generally has the skills and body to finish the race. The same could be said about financial independence. I strongly believe that in 90% of cases, that goal is not only reachable but also very reasonable to expect. It’s not about how much you are paid per hour, what school you went to or even the skills that you have. I truly believe that is goal is possible for almost every individual.

Possible? Absolutely. Easy? Not even close

While Iron Man participants are able to finish the race, they usually will feel negative about the outcome for a good portion of the race. I can guarantee that no matter how good your plan is, you will often feel discouraged and disappointed by the performance and improvement of your portfolio.

It’s not about taking shortcuts

Iron Man is a competition that values endurance and consistence, I think the same is true for building a solid passive income portfolio. It will always be tempting to take shortcuts to improve the size and the speed of your accumulation. But as I wrote last week, I think the key to growing your portfolio has very little to do with being aggressive/taking shortcuts. It’s about being consistent with your investments, your contributions and everything else over long periods of time.

You will have setbacks

In Iron Man as in many other sports, athletes encounter setbacks such as injuries that can severely challenge their will, their determination, etc. I think it’s important to understand that setbacks will also happen when you are investing. Over a couple of decades of investing, you will experience market crashes, changes in the markets, changes in your personal circumstances, etc. All of these will be tests to see if you can keep your focus and stay on task.

In the end, success depends on you

It’s easy to blame family, friends and work for lacking time to train, injuries, and other factors that might have slowed down Iron Man athletes. But in training as in everything else, the major factor is not others, events or circumstances. It’s all about you. Are you dedicated enough to invest in a smart, dedicated and consistent manner and keep it up for 20 years?

It seems like a never ending road

It’s easy to put off a run, a swim, a good night of sleep or a good meal when the race is 8 months away isn’t it? I would argue that it’s also the case for investing. Why start investing when you are 40 years away from retirement? Why be focused on dividend stocks when you can try a few mining stocks and revert if it doesn’t work? Etc, etc. The truth is that you should start planning and executing your dividend portfolio right now. Not 10 years from now, not 10 months from now and not even 10 days from now. It’s just too easy to put it off a little bit longer….

You can do it

It seems like such a “cliche” but it’s true. Every one of us can get to the point where our passive income can account for all of our expenses. As I’ve said a few times in the past, I always set aside a specific amount invested in a steady and consistent portfolio and take a portion of what’s left to be more aggressive with my long & short tech stock picks. Are they paying off? You bet. Things are going great. But I am staying on course with the rest of my portfolio as I slowly head towards my finish line; financial independence.

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2 Comments

  1. Comment by Dividend Mantra — May 1, 2011 @ 4:49 pm

    It’s kind of like the “millon-mile journey begins with a single step” thing. Getting to $1 million requires you first start investing with $1 dollar.

    The key is start early, contribute to your investments often and always monitor your holdings. Just as a marathon competitor can’t finish unless they start..the same is true with the investor.

  2. Comment by IS — May 1, 2011 @ 5:01 pm

    @Dividend Mantra- Very well said, every penny saved is one more step:)

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