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ON THE NEWS the other day, they were discussing technological change. “It happens gradually and then suddenly,” said the guest commentator.
The commentator was borrowing a memorable phrase from a book written almost a century earlier, Ernest Hemingway’s 1926 novel The Sun Also Rises.
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
Although this fictional conversation refers to financial ruin, “gradually and then suddenly” is also how most financially successful people accumulate wealth. They reach their financial goals gradually by practicing good money habits over many years. Most people don’t get rich quick by earning a high six-figure income or owning a lucrative business. Instead, they spend decades saving and investing small amounts.
Meanwhile, the dollars invested compound. The investments are generating earnings that are reinvested and those earnings then generate their own earnings. Because of the way compounding works, money can grow exponentially over time. This is how our investment portfolios grow gradually and then suddenly.
Of course, it isn’t as easy as it sounds. It takes discipline to stay the course during good times and bad, so that we don’t disrupt this wealth-building process. That’s why financial security isn’t just about the financial markets. It’s also about our behavior.
Absolutely agree. Due to my naivety and ignorance in the 80s to early 2000s, I spent all my savings in a startup and became bankrupt in 2007. I put my head down, eschewed all ambitions of joining management and started IT contracting as an analyst. For nearly ten years, I worked 60 hrs a week and retired in 2018. My spouse joined a startup and also added to our investment strategy identical to what is prescribed here. We are now in the Bay Area, CA, paid up home and car and based on my calculations, we will not run out of money until the end (maybe 15/20 years away) with a decent sum left to our son. I wish I had this knowledge when I was 19 – but I was totally oblivious. My niece on the other hand did a financial planning course in school and at 26 years is worth $400K already.
However as Indian immigrants, we are generally more frugal and have been taught by our parents to save a significant portion – but no investing advice. With sites like this, I strongly believe that the new generation will be better placed in lifetime investing than our current 65+ generation.
Very nice piece. I sent it to both of my sons, especially my literature-loving one. Save money the Hemingway!
Great article, and as someone who is just starting to experience the ‘suddenly’, I can vouch for phenomenon. For 15 years it felt like 1 step forward and 2 steps back. Money was tight, demands were high. Medical and academic costs kept rising, and the kids weren’t in college yet (no private schools, mostly special needs costs.) Parents needed financial help. Despite raises, mortgage refinancing, keeping car costs low, and a partnership, we just couldn’t get any traction.
Then all of a sudden we did. Enough to fund college real time. Enough to plan a trip for our parents (likely their last one). Enough to pay off business loans early. Enough to rebuild our emergency fund that had been drained dry 7 or 8 years earlier.
It took a long time, we needed perseverance and luck, but when the switch came it came fast. The challenge now is to keep our lifestyle costs flat and hit FI as soon as possible.