In my last blog post, we went through Nelson’s retirement planning tips. Below is Part 2 about building your Plan B, in Nelson’s own words.
Looking back, I don’t think financial independence came from doing anything extraordinary.
It came from understanding one simple idea early enough:
Compounding applies to more than money. Skills compound too.
Financially, I saved, invested and allowed time to do much of the work. I didn’t need every investment to be a winner. I needed to stay invested, keep contributing and give compounding decades to work.
But at the same time, something else was compounding.
My skills.
Before my IT career, I had a vocational education and learned practical, hands-on skills. Then I spent decades in technology learning systems, solving problems, managing projects and adapting as technology changed.
None of those earlier skills disappeared when I moved into IT.
They were still there, quietly compounding with everything I learned afterward.
Build Plan B While Working Plan A
That’s why I believe you shouldn’t wait until Plan A ends to start thinking about Plan B.
Build Plan B while you’re still working Plan A.
Plan A gives you income. Use some of that income to save, invest and acquire productive assets.
Plan A also gives you experience. Combine that experience with skills you’ve accumulated throughout your life.
Over enough time, you end up with two powerful forms of compound growth:
Financial capital and human capital.
One gives you the financial ability to choose what comes next.
The other gives you the ability to do something meaningful with that freedom.
My Layoff Became My Graduation
That’s why I’ve come to view getting laid off as a kind of graduation.
I didn’t choose the graduation date, but fortunately I had already done much of the coursework.
My investments had been compounding.
My real estate experience had been compounding.
My vocational skills had been compounding.
My technology skills had been compounding.
My ability to learn, adapt and solve problems had been compounding.
So when Plan A ended, I wasn’t starting from zero.
I was starting with decades of accumulated capital, skills and experience.
The Past 12 Months Became Another Real-Life Example
This past year reinforced the lesson for me.
I didn’t do anything extraordinary.
I didn’t discover some secret investment strategy. I didn’t suddenly develop a skill nobody else had. I didn’t reinvent myself overnight.
I stayed invested, kept learning new skills and kept putting what I already knew to work.
And over those 12 months, I watched the same principle play out again.
My investments continued working while I continued learning.
The financial foundation I had built over decades continued to compound, while my skills, knowledge and confidence continued to compound alongside it.
That’s what I find so powerful about compounding.
We usually talk about it only in terms of money. But the same principle applies to almost everything valuable in life.
Money compounds.
Skills compound.
Knowledge compounds.
Experience compounds.
And when those things begin compounding together, the effect can become much greater than any one of them individually.
This past year wasn’t about doing something extraordinary.
It was another real-life example of what can happen when you stay invested, keep learning and give things time to compound.
You Don’t Need to Do Extraordinary Things
That’s probably the lesson I would most like someone early in their career to understand.
You don’t need to become wealthy overnight.
You don’t need to perfectly time the stock market.
You don’t need to know exactly what your Plan B will look like 20 years from now.
And you certainly don’t need to have everything figured out.
Start anyway.
Save. Invest. Learn. Build skills. Acquire productive assets. Stay curious. Keep going.
Let your money compound.
Let your skills compound.
Let your experience compound.
And most importantly, give them time.
Plan B wasn’t one brilliant decision I made at 38. It was thousands of fairly ordinary decisions made while I was still working Plan A.
My layoff didn’t erase those years. It revealed what all those years of compounding had built.
That’s why I think of the layoff as my graduation.
Plan A had done its job.
Plan B was already waiting.
And this past year gave me the chance to prove something to myself:
You don’t need to do extraordinary things to create an extraordinary amount of freedom. Sometimes you just need to keep learning, stay invested and let compounding do its work.
Thanks for reading!
A big thanks to Nelson Chu for taking the time to chat and share this thoughts about retirement and layoffs. Remember to read Part 1 about 5 ways to prepare for retirement.
I hope this inspires you to start thinking about retirement, save a little bit more each month, and better prepare for both planned and unpredictable times throughout your career. Let me know what you think about this topic on LinkedIn.
Best of luck!