Start with a Buffer

There is what you can do, and what you do do. In between, there is the stuff that gets in the way or helps. That stuff in between is resilience. It determines whether you are fragile and break, or anti-fragile and benefit from the noise in the world. I am a big believer in 'building buffers'. What you can do takes a lot of time to build. What you do do is a collection of deeply wire habits. Changing those habits also takes time. The buffer is where you can be micro-ambitious. The buffer is where you start.

A Financial Buffer may be saving one month's salary, so that you aren't living payday to payday. A slightly bigger buffer may mean you have a few months salary in case you lose your job. Then you can start investing. Grow it a little and you may be able to voluntarily leave a job to train for a better job. Grow it a little and you may be able to have a stab at building your own business. Grow it more and you can build an Engine, so you are freed to work because you want to, and not because you have to. A Buffer doesn't tell you what to do, or how to do it, but it gives you the freedom to have a go.

Emotional Buffers are similar. I don't think there is any point in arguing with someone you don't like. Relationships need a buffer of kindness and respect. Start with that. Once you like each other and can find a few solid points of agreement to work from, only then can you start exploring differences. Grow that through context and understanding and you start to give each other the benefit of the doubt. You start interpreting what people say in the best possible way. Grow that and you have love. Love doesn't tell you what to do, or how to do it, but it gives you the freedom to have a go.

Buffers are about looking after yourself. Looking after others. They are a recognition that the world can be random, confusing, harsh, and unfair. They are a recognition that even the best-laid plans can just be a set up for a cruel joke. They are a recognition that we are wrong more often than we are right. That what sets us apart is our ability to learn. Buffers let us listen and adjust.

Start by building a Buffer.

Build a Buffer to absorb the shocks

Buffer v Engine

A Buffer is an Engine that isn’t free. It’s all well and good to have a gap between your hand and mouth and build up Capital, but life isn’t smooth. We have some predictable unplanned events. A Buffer can smooth those out. Cracked windscreens, dropped phones, lost wallets, broken glasses, and all those things that aren’t in our control but happen. Then there are things that need replacing. We can use a Buffer to smooth out the impact of new fridges, new shoes, new clothes and other things that cost money in a bumpy way. A big Buffer can handle the even nastier surprises, like periods without work or illness, but only for a limited time. A Buffer allows self-insurance. But Buffers need replacing when they are dipped into. An Engine is self-sustaining. It is money that is put to work. If you only spend less than it earns, it can grow, and it can survive. Given time, and if not too aggressive, an Engine can even self-repair if it is occasionally treated like a Buffer. If an unsustainable amount is taken out… but then it is left alone to recover. Find an income. Get breathing space between your hand and mouth. Build a Buffer. Build an Engine.

Buffers help us Regenerate

Retire Retirement, Build a Buffer

I found 'On the Road' by Jack Kerouac a tough read. While there were beautiful passages, it was tormenting. Sal, the main character, was living hand to mouth. Constantly searching for and then finding brief interludes of ... well, whatever happened. His best friend is a whirlwind. He seems close and gives the impression of caring but his presence is uncertain and his impact intoxicating.

It made me think of the value of a 'margin of safety'. I spoke yesterday of my concern with a focus on starting early to build a nest egg that will allow you to retire. The concept of retirement is for me an Industrial Revolution one. We had to roll our sleeves up and build a world that was safe and had enough food. At some point your back starts to hurt and you pass the shovel to the young guns. As we move to more creative, cerebral activities, you still have a lot left to do and give as you get wiser. Ideally you never 'retire', you just slowly do more of the stuff that makes you Flow. What you do need is a buffer. You can't spend your life living hand to mouth. As Jeffrey Cufaude (@jcufaude) put it in a reply to 'Wrinkles and Grey Hair Rock', ' Living beneath my means and always saving something...'.

The goal changes a little if you 'retire retirement'. If you can consistently earn 5% real annual return on your investments and plan on living forever, you need 20X your salary to retire, do nothing that earns you money, and still get 'paid'. Most people don't live forever, so the figure comes down to a suggested 12-14X. The figure gets lower the more you pretend you will earn a lot more than others and the more risk you are willing to take of outliving your money. Getting to 12-14X is a long way away. But if you aren't aiming for this magical 'Nest Egg', but are instead aiming for a 'Margin of Safety' or a Buffer, the figure is lower. Maybe you only need 5X salary to give it a go. To take a chance and try shift from the job that you are doing to something that allows you to have Flow and work without dreaming of retirement. Maybe you love your job, but just want to add some firepower - Buffer. Maybe you just want a year off every 7 years as Stefan Sagmeister suggests - Buffer. Nothing but rich generous parents, the lottery, or some luck removes the need for the hard work to build the buffer, but it is a much more realistic and achievable goal.

And if you want to hit the road like Sal - a buffer will let you do that too.

https://en.wikipedia.org/wiki/Jack_Kerouac

Routine or Catastrophic

Risks can be routine, and they can be catastrophic. 

You can drop your phone. Spill wine on the carpet. Burn dinner. Puncture a tire. Miss a flight. Lose your wallet. There are various things that suck, but if you aren't living on the edge, you can deal with. Like shock absorbers on a car, a buffer can allow you to drive smoothly over the little knocks we face. A buffer can let you plan ahead.

Catastrophic risks will wipe you out. A buffer is not enough. Most people's biggest asset is not their house or car, it is their ability to earn an income. If something goes wrong and you can't work, that is a huge problem. A buffer just helps you smooth out the bumps till things recover. A buffer is no good if you take the road away. Poverty is another catastrophic risk. If you are born with no buffer of parental or societal support, routine risks for others can become catastrophic for you. The road being taken away is a taste of the road never being there to begin with.

Routine risks are things we should try deal with ourselves. 'Moral Hazard' means, being human, we change our behaviour if bad things don't hurt at least a little. Some concern keeps us sharp. Helps us take responsibility. A buffer works better than insurance. Buffers aren't just financial. You can have a couple months salary in cash in the bank for curve ball expenses, but some of life's bumps require relationships. A strong community spreads the hurt a little keeping people sharp as a team.

Insurance comes into its own with Catastrophic risks. The law of large numbers means that things that are hard to predict for one individual become easier to predict for very large groups. Sharing risk for something completely out of your control, that could destroy everything you work for, makes us joint custodians. A big, unlikely game-ender, becomes small and manageable.

Capital and Labour

My first salary felt amazing. After years of being a student, suddenly there was real money in my account. It was more than my mother earned as a teacher after decades of work. That was humbling. It made me realise how strange it is that we often define ourselves by our salaries, when in truth, a salary is just the price of labour.

And price is not the same as value.

Price is set by supply and demand. It does not reflect whether the work you do is good, meaningful, or changes the world. It is just a market signal.

I had studied actuarial science, a pragmatic choice. Early on, I went to see a financial planner. Partly I wanted to test the process, since I was working in risk product development and thought I could probably do it myself. But I also wanted to see how someone else would frame my situation.

The thing that hit me hardest was this: I was the asset.

My income depended entirely on my ability to keep working. If something happened to me, the income stopped. Even scarier than thinking about life cover was the thought of being alive but unable to earn, still here, still needing money, but with the engine broken. 

At that stage, I had no dependants. But the idea that other people could rely on my salary, when I had no buffer and no engine outside of myself, was unsettling. That was the moment I understood the difference between capital and labour. Labour ends when you stop working. Capital keeps going. Without capital, you are the engine, and that is a fragile place to be.

The Hard Scrums of Inequality

South Africa is rugby-mad, and I often think about wealth like a scrum. The forwards decide whether you win the match. The backline only determines by how much. In the same way, building wealth is not about flashy tries or quick wins. It is about grinding, unseen work that sets the platform.

First-generation wealth creation is brutally hard. Many South Africans live hand-to-mouth. For them, “delayed gratification” is not about giving up luxuries, it is about giving up survival comforts. In that context, talk of Buffers and Engines can sound tone-deaf.

But if we never acknowledge this and never try to break the cycle, we remain trapped. Poverty compounds just as surely as wealth does. That is why I think of wealth-building as the work of a half-hearted warrior. You do not need to storm every hill at once. You just need to create a little bit of space, enough to start building.

For me, the Buffer is that first space. It is the small emergency fund that shields you from life’s daily chaos. It does not make you rich, but it creates silence in the noise. The Engine is the goal. It is the asset that generates income separate from your own labour. Building an Engine from nothing is slow and often discouraging, but unless we aim for it, we will never get there.

Buffer vs Engine

A Buffer is your shock absorber.

Life does not move in a straight line. Some months you spend more than you earn, other months less. Without a Buffer, those bumps knock you off track. With one, you can keep rolling.

That is why people talk about an emergency fund of three to six months’ expenses. It is not glamorous money. It pays for replacing a tyre, fixing a broken window, covering a surprise tax bill, or helping a friend in need. A Buffer does not make you wealthy. It just means one bad month does not break you.

An Engine is different. Where a Buffer absorbs shocks, an Engine provides momentum.

Engines generate income separate from your labour. They are the assets that pay you while you sleep: a rental room, dividends from a fund, royalties from creative work. For many people, the “Bank of Mom and Dad” plays this role for a while, helping with fees, housing, or start-up costs. But a true Engine is independent. It keeps paying pocket money even after childhood is long past.

The ultimate Engine would be something systemic, like a Universal Basic Income or Community Wealth Fund that guarantees a baseline for everyone. That is when you know your basics are covered, no matter what goes wrong.

A Buffer gives you confidence that you can survive the bumps.

An Engine gives you confidence that you can build a future.

The Structural Fixes

Of course, the obvious counterargument is that not everyone can save.

And that is true. Especially in South Africa, where a small tax base carries enormous weight, and millions live hand-to-mouth. Talking about Buffers and Engines can feel tone-deaf against that backdrop.

That is why structural fixes matter.

We already have elements of support, like social grants. But grants are means-tested, which is expensive in itself. The irony is that deciding who qualifies costs money. That is the elegance of Universal Basic Income. It skips the gatekeeping. Everyone gets it. Those who do not need it simply pay it back through tax. It appeals to the left because it guarantees support, and it appeals to the right because it shrinks the state’s role in micromanaging people’s lives.

The real question is: can South Africa afford it? My answer is that we cannot afford not to think about it. Affording it means wasting less, fixing potholes, keeping the lights on, building competent administration. I like the way my friend Gareth Morgan puts it: good governance is about being good at crises. We need less politics as theatre, and more politics as administration.

South Africa already has a culture of “making a plan.” We improvise. We hustle. We survive. But we also need to create space for families to build steadily, and for communities to compound progress rather than constantly reset.

Yes, inequality here is in your face. Our Gini coefficient is the worst in the world, but it is also the same as the world’s overall Gini. The difference is that here you cannot pretend it away. It is on the streets, in your neighbourhoods, part of daily life. And maybe that is an advantage. It forces the conversation.

If we can combine the resilience of individuals with the competence of institutions, then Buffers and Engines do not just become a personal dream. They become the architecture for a society where wealth is not inherited by a lucky few, but built by many.

Call to Action: Get Your Money a Job

At the end of the day, the mantra is simple: get your money a job.

But before money can work for you, you often need to stop it working against you. That is why I think of First Aid as the starting point (First Aid). Get out of debt. Stop the bleeding. That may mean hard choices, painful trade-offs, and resetting priorities. It means writing down what matters most and breaking it into small, achievable steps.

From there, it is about micro ambition (Micro Ambition). Tiny goals that add up. It does not sound glamorous, but that is the magic of compounding: small efforts, repeated, snowball into something powerful. Money makes money. That is how the system works.

So the path looks something like this:

1. Stop the bleeding by dealing with debt.
2. Secure income, since your salary is the origin of wealth. Labour is the first Ox in the scrum. It takes sweat and red faces to push forward.
3. Build a Buffer as your shock absorber against life’s bumps.
4. Feed the Engine so assets can work even when you do not.
5. Compound micro ambitions into long-term freedom.

The hard truth is that first-generation wealth creation is invisible. Compounding works in three stages. First nothing seems to happen, then progress appears slowly, and finally it becomes undeniable. The heavy lifting is always at the start.

You can fight money, resent it, or ignore it. But that only leaves you at its mercy. The better option is to learn how it works and put it to work for you. Get your money a job

pic: SA Rugby Mag

Income Addicts

You can live off an Income, a Buffer, or an Engine, but they are very different beasts. If you live off an Income, it has to come in. What you get, you spend. So if you don’t work, you don’t get, and you can’t spend. A Buffer has to be very liquid. You have to be able to sell it quickly if it isn’t already cash. That means it can’t be working too hard, or be doing something where the benefits only come in the future. If you are living off a Buffer, the clock starts ticking. It will run out. But, it gives you time to retrain or find more work. An Engine is a long-term vehicle. It provides Endurance if you can live off less than it produces. If you are a good custodian who doesn’t extract all its future potential during the short term. If it is protected by a resilient Buffer, and invested in when there is work available. Unfortunately, the world focuses on humans as productive assets and calls this “Work Ethic”. With no Buffer, and no Engine, there is no space to pause. To breathe. To reflect. When you have no choice but to stop, the cost suddenly becomes real. When the world restarts, we must never again forget the need for Buffers and Engines.

Work (1852 - 1865) - Ford Madox Brown

Expected Unexpected

A Buffer is a form of self-insurance. Like a salary that only meets your expenses is hand-to-mouth survival, actual insurance takes the bumps out of life in exchange for a premium. It is hand-to-mouth risk control. You pay someone else to remove the bumps. A Buffer is Capital that you can draw on if you need to. Some months you spend more than others, because of expected unexpected events. Flat tires, broken toilets, dropped vases, leaky fridges and rats in the roof. These are annoying but hardly unusual. If you have breathing space between what you earn and spend, building a Buffer can take care of you. The bigger the Buffer, the more you only need to pay for insurance for the smashes and canyons that would wipe you out. A Buffer is temporary, till things right themselves, support. An Engine would be enough Capital to give you Financial Security without requiring you to be a productive financial asset. An Engine would be the breadwinner, and rock, in your family so that you can build a life. And rock.

Building Capacity

A Buffer is cash that helps you breathe. Yoga is “stilling the waves of the mind”. A Buffer is an Emergency Fund of 3-6 months’ worth of spending. You can’t plan all spending in advance. There are unexpected things that mess up even the best laid plans. A Buffer isn’t there to spend, it is there for when a particular month is a little greedy. If you orbit zero in your bank account, then the waves can knock you off course. Practicing Financial Yoga by gradually building up a Buffer requires internalised discipline. The default becomes having a little space. Protecting that little space. Building that space up again after it gets used. A Buffer creates lung capacity. Breathing in and out with calm, steady, control rather than gasps.

Surface Waves

Beyond Nails

Every business does the same thing. All businesses solve problems. Money is exchanged because someone gets something they didn't have, or gets rid of something they didn't want. 

Effective teams are those that build trust. They let other people solve parts of the problems. Normally a problem has multiple solutions. If you decide 'you' are the important bit, rather than a solution being the important bit - then 'you' need to be the one who solves the problem.

We grow up with questions like 'what do *you* want to be when you grow up?'. Our identity then gets wrapped up in the particular kind of problem we solve. That is a terrible idea. It turns people into productive assets. It turns people into hammers constantly searching for nails. We specialise so much that we stop trusting people who don't see the world in the same way we do. We stop trusting people who don't ask the same type of questions we do.

Beyond a world where everything is a nail

Ideally, you can snap the connection. This may take time. It may take generations. It may take you snapping the connection for your grandchildren, and the community of which they are a part.

The first step is to build a Buffer. Stop living hand-to-mouth. Have a little bit of a gap between your hand and your mouth. Then stop connecting your identity with your hand. Gradually the Buffer can be put to work. The Buffer can grow into an Engine. An Engine is something that earns more than you spend.

Then the magic starts. If your Engine can build a Buffer between what you spend and what it gives you, it can slowly start to multiply. The Engine can then start to support others you care about. Engines could grow into Community Wealth Funds. A Community Engine can solve multiple problems without being defined by any of those problems.

Not everything is a problem. Not everything can be clearly articulated as an ask (buy) or an offer (sell). Some things are much more fuzzy and much better when they are allowed to be fuzzy. When they are relational, rather than transactional.

I don't think we can answer the question, 'who are you?' until our hands and mouths are free. Until the hands and mouths of our communities are free. Until we can stop trying to solve problems. Which forces us to see everything as a problem.

A Proper Engine

The most important thing about an engine is that you have one. Even if it is tiny. Engines start life as buffers. They need to be looked after, and to grow, but the help is reciprocal. You can dip into a buffer. That is why it is there. A buffer takes the edge off as you get into position to have a proper engine. With a buffer, your labour is still the engine. You need to fill up the buffer again. An engine fills itself. Left alone, an engine grows. Even if it is not left alone completely, it will grow if it generates more than is taken out. You should try not dip into the engine, but use what the engine makes. Eventually one day, your engine can give you the financial security to direct your energy towards things that count, but can't be counted.

Start Little

When Panic Subsides

'Sometimes I do what I want to do. The rest of the time, I do what I have to do' - Cicero
The Gladiator (2000)

Buffers are important because they let you focus on what matters to you. I spoke about Maslow's Hierarchy in 'No Pudding Without Creativity'. The stuff that counts is higher up, but the stuff you do first is at the bottom. If you are worried about what you are going to eat today, where you are going to sleep, or whether someone is going to kill you - you do what you have to do.

We don't really have free choice in the sense that we can do whatever we want. We can do whatever we want with the situation we are in and the tools we have at hand. We tend to underestimate those tools and what we can do, but we can't really use them if we are living hand to mouth. Without a buffer, noise matters. You have to deal with every situation and in a very real way, every day becomes the boss of you.

The extreme example of being able to ignore noise are the uber wealthy like Warren Buffet. Here are a couple examples of 'Noise' that doesn't really matter (Yes, $1bn can become noise):

• 'Warren Buffet made £1Bn dollars in 22 hours'
• How Warren Buffet lost $1Bn

This noise doesn't matter to Mr Buffett because it doesn't affect the food he puts in his mouth, the roof over his head, or the woman he gets to kiss. He has a rather large buffer. It doesn't have to be that big though. You just have to think of the things that can blow you out of the water (what would happen if you got disabled? Buy a buffer with disability insurance) and protect against them, and then live beneath your means for long enough that you don't have to panic about the next few years. Effectively, so you get to the point where you are 'self-insured' against the noise.

When panic subsides. When you breathe properly. When you open your toolbox and see what else is available.

You make good decisions.

Source: www.rottentomatoes.com

Universal Basic Buffer

A Universal Basic Income doesn’t have to be funded through hand-to-mouth tax redistribution. It could be funded by Capital. Paid as a dividend to the owners of that Capital. The challenge is obviously time. Capital needs to be built. There are always competing priorities, and putting money to work rather than spending it on pressing needs can mess with the head. Building Capital isn’t a “rainy day fund”. Building Capital isn’t storing or hoarding. It is shifting from a consumption to a custodial mindset. Shifting from cutting down the trees to living off the fruit. Capital building starts as buffer building. Expenses are noisy, and do make loud demands. Sometimes cutting down the trees is the right thing to do. Eventually, with spending constraint, you can get the buffer to be big enough to handle unexpected needs. At that point, Capital can get a proper job with a long-term perspective. A baby step to a Capital funded UBI may be a Universal Basic Buffer. Aim for Capital that would only last for 6 months if constantly drawn on. Then 1 year. Then 5 years. Then, one day, a secure permanent financial base to everyone. A societal foundation for creativity.

Seeing through the noise

Reciprocal Care

A Buffer helps take care of the noise. An Engine is Capital that earns (on average) more than you spend (on average). Spending is noisy. Which means there are expected unexpected expenses. Sometimes the answer to “Why did this bad thing happen?” is “bad things happen”. Don’t be surprised. There is a difference between noise – “Good Months, Bad Months” – and Permanent Impairment. Starting again. A Buffer is only a Buffer with reciprocal care. If it is topping up your earnings when they are less than your expenses, but never being topped up, then you are leaning towards Permanent Impairment. Neglect. The Buffer will fade away. Engines are bigger (and can work on longer term projects because they aren’t needed for smoothing) but also need care and maintenance. Like fruit producing trees. You can live off the fruit, but you can’t consistently cut down trees. Buffers and Engines can provide care. But they need caring.

Overexploiting Resources

First Aid

I believe in Engine and Buffer building. In snapping the idea that people are productive assets defined by the work we do. A Buffer is some Capital that you have built up, that means that you are no longer living purely hand-to-mouth. It provides breathing space and resilience. It means that bumps don't break you. A sufficiently big Buffer, unused, can start to grow into an Engine. An Engine is a Muse. It earns the money so that you don't *need* to. It doesn't mean the work you do might not still make money, but that money becomes a bonus. You could choose to completely focus on something that doesn't make money. Like raising a family, creating art, or working a country mile from a wallet. Like putting in a chunk of unpaid time, that might one day lead to an opportunity to work in an area you would love to be.

Step One is more pragmatic. Step One is First Aid. You have to stop the bleeding. Apply pressure to the wound. The pumping heart of Financial Security is that your Ins are bigger than your Outs. There is a minimum amount you need to survive. If you don't have that, any idea of putting some aside is a hypothetical campfire story. Far too many people on this shared rock are not even at that point.

We spend a lot of time in Dreamland. Thinking of where we want to end up. I believe it is all about the base. The deep underlying confidence that you will be okay. Some of us are lucky. We come from communities where we know that to be true. The bank of Mom and Dad stands ready to step in. Friends and Family have spare rooms. Spare couches. A web of people care about us and stand ready to pick us up if we fall. There are jobs we could get at the drop of a hat, but don't, because they are "beneath us". We can move to cheaper houses. We can move to cheaper areas. We have options. A lot of people have no options.

Even if you have options. I still believe it is all about the base. Start where you are. Take control of the bleeding. Make sure you can get the Outs less than the Ins. Then start to build a Base. A floor to the worst case scenario. Grounding. Then you can explore. Then you can shoot for anything you want.

1. Stop the Bleeding

2. Build a Buffer

3. Build a Base

4. Build an Engine 

Breathe and Build

The biggest pushback I get to my suggestion that people build Engines (An Investment that earns more than you spend) is that the Savings Rate required is completely unrealistic. Most people are barely getting by on what they earn. Most people live Hand-to-Mouth. Yes. That is 100% true. What is also true is that for most of the people reading this, there are people living on less than half of what you earn.

The median disposable household income in the UK is £27,300. For South Africa, the average family income is R138,168 (roughly £7,000). Now these figures aren't directly comparable. Services and taxes are different in the two countries, and the figures are calculated in different ways. But that isn't important for the point I am trying to make.

A 'Median' means more than half the people are living on less than that. An Average will be higher because it will be pulled up by the few people at the top who earn the big bucks. Those few people at the top earning the big bucks are normally where our eyes stray.

We don't tend to look at the people in our own country, or other countries, 'magically' making do on much less than we do. It is from them that we can at least see that it isn't impossible. Hard isn't the same as impossible. We can do hard. It just takes tough choices.

Engines start their lives as Buffers. A Buffer is breathing room. A Buffer is enough to help you handle the bumps and dips, without being enough to cover your expenses for the long term. A Buffer needs you to continue building it into an Engine. It just gives you space to retrain, try something different, or panic a little less, so you can make good decisions.

A Buffer may start life as enough to let you not have to live in debt. Debt is the opposite of an Engine. Especially if it is debt on something you have nothing to show for. Interest being paid on the ghosts of Christmas Past.

All big goals like personal financial security start somewhere. A first step. The first step is to snap the connection between your hand and mouth. Build a little. Breathe a little. Then take another step.

The Ghost of Christmas Past

Ordinary Matters

Extremes get too much attention. It is the ordinary that drives what compounds. Extremes can destroy you though, so they do need a little more focus. Just not everything. A small Buffer may be one month’s salary. Enough so that instead of going under, and being saved by a check for a desperate gasp each pay day, your head is above the water. A slightly bigger Buffer may be 3-6 months’ salary. An Emergency Fund. Enough to give you a few month’s breathing space to find new employment if you lose your job. An even bigger Buffer starts getting exciting. What would you do with 5 years’ breathing space? Retrain? Start a business? Change your ordinary? Don’t let the extremes bully you. It is what you do every day that matters. Create space for your every day.

Don't be Bullied

Stilling the Waves

Yoga is stilling the waves of the mind. You could consider Financial Yoga, stilling the waves of the connection between what we earn and how we finance our lives. Ideally you pay yourself a sustainable dividend. This dividend is financed by a combination of (1) your earning ability, (2) your cash buffer, and (3) capital working on your behalf. The cash buffer reduces the noise of (1) and (3). Your earning ability can be interrupted by business cycles, changing consumer preferences, new competitors, changing regulations, redundancy, job loss, reskilling, family commitment, unpaid work, disability, illness, or a dysfunctional economy that doesn’t have enough jobs on offer. Your capital can be interrupted by times of panic when the price people are offering for your engine reflects their fear that bad times will last forever. The cash buffer recognises that “This too will pass”. Yoga is partly a practice in not identifying with the temporary. Finding a more solid point of focus, so that you can let the temporary float in, sit, and float out. We need money. We don’t have to be, the way we earn money.

Start with Space

You can’t build capacity to absorb shocks and stress (to prevent losing sight of what matters), without finding space and time. 

Space is not “what is left”. Start with space. In financial terms, that means “paying yourself first”. 

First, put some money aside to build a buffer. Work towards having 3-6 months of spending as a cushion for the expected unexpected. To absorb months that cost extra. To absorb shocks that would have derailed you. Before you save to spend on a thingthing, put money aside to deal with anything life throws at you. 

 

The money is there, but not there. Protect the boundaries around your buffer. It is not there to spend, it is there to hold. Repair the buffer when noise shakes it. Pay yourself first. Then with whatever is left, decide consciously how to spend it. Don’t start with a list of things you have to spend on. Start with what you have, and choose how to spend that. Start where you are. 

Easier said than done... but we can’t focus on what matters, if we can’t focus.

Space is not what is left

It is where we begin

Empowering Consent

The first goal is to stop the bleeding. To get to the point where the Outs are less than the Ins. To live within your means. Then you build a Buffer. A gap between the Ins and Outs. The cost of living isn't smooth. We get caught off guard by unexpected expenses that aren't part of the plan. You can plan for the expected unexpected. That is a Buffer. Some Capital that builds resilience. 

These are short term measures.

For true Freedom, you need to build a base. A foundation that is independent of you as a productive asset. For most of us, our labour keeps us alive if we are lucky enough to have a job. A Base would be sufficient Capital that survival isn't the objective. A simple roof over your head. Warmth and security to allow a sense of calm to soak deep. Food and water to keep you sustained. A Base isn't the dream house. It is the foundation. A base gives you sufficient freedom to say No. Empowerment in the form of Consent. If you do something, it is because you want to, rather than because you have to. Yes carries very little information if No was not an option.

When you are living within your means, and you have a Buffer for the bumps, and a Base to give you confidence... you are in a position to build an Engine. An Engine is a Muse. A Patron. A Breadwinner. An Engine is the pragmatist that accepts the way the world works so that you don't have to. An Engine can take the abuses of failure because it doesn't have an identity to defend. An Engine can do multiple jobs so that you can focus on the things that really matter. An Engine is bigger than a Base, and works for money so that you can work for whatever you want.

A Community Wealth Fund would be a big Engine that can provide a Base to a number of people. When security and confidence go viral, trust becomes the community superpower. The Endurance to sustain a thriving community, the Resilience not to get knocked off track, and the Creativity to create the kind of world we want to live in. Every day.

Ups and Downs

In my Corporate incarnation, I once had a client telling me I was the worst Salesperson he knew. I took it as a compliment. In my line of business, as is probably true of most long-term commitments, expectation management was way more important than the sale. Airing the dirty laundry visibly and loudly made it less likely someone would be disappointed if they jumped on board.

Just over four years ago was the last time I received a steady pay-check for full-time work. Over my career, I had been an aggressive saver and investor, living well within my means. I had built what I call an Engine, that had the capacity to earn more than a relatively frugal life would require me to spend. Not by any means frugal in a global context. Sufficient to allow me to still participate selectively in my Bubble, but with much more disciplined spending. I figured reading, writing, and spending time with people was what gave me my kicks. That is all rather cheap.

The last decade has been a bizarre time in Financial terms. Governments in desperation to keep economies ticking have used one of the few blunt tools they have - interest rates. By keeping these low, the theory is 'the price of money' is low... so businesses can borrow and invest. The problem is interest is also the salary paid to Savers. People who retire often put their money in Fixed Interest vehicles. Cash and Bonds. This is also "money available" to businesses to put to work in exchange for interest. Banks and Insurance Companies act as the middlemen. This means, lowering the interest rate may benefit homeowners (cheaper mortgages) and other borrowers, but not those living off stable interest rate savings. The thinking is that borrowers will put the money to work.

I was 34 when I stopped working for money. So I was under no illusion that I would be able to live off salary like fixed interest. Unlike me, my money couldn't sit around reading books and having fat chats. My money had to work. Hard. My Engine is invested in real businesses. Through a couple of Equity Funds, and then gradually through individual companies I have selected. I now have a portfolio of 20 companies. My money doesn't earn a salary. It only grows if the companies that I have invested in grow over time.

That doesn't happen in a straight line. In 2018, the businesses I selected made me nothing (roughly worth as much at year end as at the beginning), and the biggest fund I am invested in lost just over 20%. My strategy works if I can earn (on average) more than I spend. If I have too many 2018s, then it doesn't work. 

For those who depend on fixed interest rates, the traditional approach to retirement doesn't work if you have too many 2008-2018s. When interest rates are almost zero, you are no worse off if you just keep a pile of money under your bed. Like most of us, we need an incentive to work.

I talk about Buffers and Engines. A Buffer buys you space and time. It allows you to look up and plan. It reduces panic. An Engine can actually do the work for you, so you can think of things that are nothing to do with money. What the Engine does, matters. "Fundamental Investing" is called that because beneath the numbers are real businesses. An Engine that isn't working is just a Buffer.

Normal jobs, the kind with salaries, are very similar to fixed interest bonds. Someone pays you a salary to take away the noise. The owners of the business have to deal with the stress of 20% down, or even 40-60% down, years. Clearly if they have 100% down years, then redundancies kick in. A well-run business, with a good business model, doing good work can give employees a degree of certainty. Those businesses will have Buffers for the bad years so they can carry on working through the times when no money is made.

This post is a version of 'airing my laundry'. I don't want to paint a false picture that some do of Entrepreneurial lifestyles. I believe in Buffer building, and Engine building. I believe Capital can set Labour free to work on things that have nothing to do with money. The stresses don't disappear though. They just change form.

The question I keep returning to is "How do you build a sustainable daily practice?". How do you decide what it is you want to do with your time? What you are building? We live in a world that needs financing... we have to pay the bills. The bills aren't what matter. What we do matters. The bills just have a habit of getting in the way. Crafting financial security and financial freedom, is the process of putting that stress in its place.

Doing the Laundry