The best financial question that my pastor ever asked me was, “How much savings would you need to decide that you don’t need to work for income any more?” Granted, I was 25 years old when I heard this, but I thought, “10 million dollars.”
Whoa. That response says a lot about me at the time. What could I possibly need that much money for?
I’ve never been flashy or extravagant. I still drive the same car from my freshman year in college – a 2000 Honda Civic. My TV is 7 years old. I already had a good income. If I wasn’t spending money then, when would I ever spend it?
The 10 million number reflects the fact that no amount of money would have made me feel secure. Money to me was a safety blanket. Unlike most Americans that spend more than their paychecks, I drew comfort from watching the numbers in my bank account climb up and up.
- If I ever lost my job or business, I had several years worth of savings to cover living expenses
- If I wanted to buy a house in cash, I could have done that (houses in Dallas-Ft Worth are cheap, even in the good areas)
- My wife and kids could have gone on many, many amazing vacations.
So what did I do with a big chunk of that money? I invested $138,923.66 in a business in Ireland that ultimately failed. The money is long gone. The investment is worthless.
There’s no amount of money that will keep you safe. Whether you’re in a hyperinflationary collapse (like Argentina), your forex broker goes bankrupt or you make a once-off, terrible investment decision like me, something can always happen that takes your money away.
If your money can disappear so quickly, then why do you want to be wealthy in the first place?
Personal success inventory
My pastor’s question – and losing my investment so quickly – pushed me into taking a personal success inventory. I’m sharing mine in that hopes that it will spur others into thinking more carefully about why they’re trading and why wealth is important to them. Maybe wealth isn’t even the right word to describe it. A better way to phrase it is “when do you have enough money?”
Beat the market
My overwhelming passion is designing systems to beat the market. The performance is my scorecard, but I find the day to day mechanics of the markets boring. Boring as in really boring. Rip out your eyeballs boring. Nobody could ever pay me enough money to watch prices tick up and down all day.
The challenge is designing the system. The collapse of the Swiss franc peg is a great example. My QB Pro system traded USDCHF at the time. I knew that if the peg ever broke and I was short francs, it could be an epic disaster. I programmed a rule into the strategy that if the EURCHF ever traded below 1.1998, then exit at market with unlimited slippage. Just get out.
Thankfully, the system was not in the market when chaos unleashed. The problem is a good example of how to think about unlikely ways that your trading system can go wrong. I enjoy these challenges and gave myself a pat on the back when my system’s ejection seat looked like it would have done exactly as intended.
That’s not a financial reward. I like feeling clever.
Math nerd
As many of you have noted, math really gets me going. That’s pretty funny because I majored in Arab history in college. It wasn’t until I realized that math was useful in real life that I genuinely started to care. Stumbling across academic papers discussing fractal markets – and understanding none of it – made me realize it was time to learn what I ought to have learned at university.
I had to take a big step back to go down that path and buy “Precalculus Demystified”. Seeing that I wasn’t completely awful at math motivated me to pursue online learning. I took calculus classes through MIT Opencourseware and eventually moved on to Coursera and free online textbooks. Once you find a topic that strikes your fancy, it’s easy to find support online.
Nobody pays me to study complex analysis after my kids go to sleep. There’s no obvious, direct use for the material. By designing trading systems and identifying weak spots in my math skills, it’s pushed me into a new hobby. I truly enjoy the classes. Even without financial markets, I would continue with my math hobby.
Safety blanket
Money comes and goes. It’s nice to have, but there’s a point where cash in hand becomes less and less valuable.
On the other hand, there’s also a minimum threshold of cash to keep available for monthly expenses. Health insurance for my family is $906.06. We spend about $800 a month on groceries. Then there’s 3 types of insurance, housing, gas… it costs a lot of money to provide for my family.
$138,923.66 is far beyond the threshold of what I needed to feel safe. That’s more than 3 years of living expenses (assuming no income). Needing $100,000 in cash to feel secure is over the top. 12 months seems like a much more realistic concern. Everything beyond that should be considered savings and not the security blanket.
Money
Yes, making a lot of money motivates me. But I’m not wanting to make millions of dollars to fund a new kind of lifestyle.
I would still do what I’m doing even with 1 or 10 million in the bank. I can’t imagine sitting around wondering, “What am I going to do today?”
It took 5 years before I ever saw a decent profit from financial markets. It’s obviously not the allure of money that pushes me to design systems.
The primary reason that I like earning money is that I like business. It’s fun writing a blog, guessing how customers will respond and building relationships with people. It’s a dynamic system that keeps me on my toes. I have to think. I have to be social. All of those things are big positives.
I don’t want to be a pushy parent, but I do have dreams of teaching my young boys how to run their own businesses. I respect the scrappy entrepreneur and hope my sons will learn some of those skills from me.
Religion
Since this is an honest conversation… I believe that God put each and every one of us here for a reason. Trading and speculating in the markets as my sole purpose doesn’t fit with my view of building his Kingdom. The question is what to do with the money once I have it.
My father in law’s ministry at the Colleyville Prayer Room is very important to me. I know the pleasure that I receive from supporting ministry. It would be nice to reach the point where I feel secure tithing a larger percentage of my income.
Your inventory
Have you ever thought about how much money you need in order to stop working purely for income? How does trading help you achieve that goal? Share your thoughts in the comment section below.
PS: If you’re married, your first thought was probably, “How did your wife take it?”
Neidy took it pretty well. She was able to deal with it because that was money I had saved before we married. Had I invested our joint savings and lost it all, she informed me that it would have been “a much bigger issue”. That was her way of telling me not to relearn the lesson a second time.
Neil Jetty says
Great post Shaun. From the heart. Getting to know you has been a real pleasure. Your family is blessed to have such a great person in their lives. All the best. Neil
Shaun Overton says
Thanks for the encouragement, Neil. I really appreciate it.
Baz says
Hi Shaun, All successful people have a setback. Good on you for being honest, this will empower you for the future. cheers Baz
Shaun Overton says
My family reminds me of that constantly. I’m thankful we live in a culture where it’s ok to fail. It’s an unpleasant but necessary part of life.
TJ says
Thank you Shaun, very well written and thoughtfully lesson/s for all of us… GBU, TJ
Shaun Overton says
Glad you liked it!
Mark Koster says
Hi Shaun, trading is seeing me go broke, on my way to blowing another account, so far trading is not helping me achieve my goals, just causing a lot of stress & no sleep.
Regards
Mark Koster
Shaun Overton says
Anyone that learned to trade from home started exactly where you’re at. If you’ve watched my YouTube interviews, nobody that taught themselves to trade successfully learned how to do it in under a decade. I haven’t had the stomach to calculate my initial losses before I started to turn things around, but I always tell people that the losses were between 10-20k spread out over *years*. If you’re passionate about it and can afford the losses, the best way to protect yourself is to open tiny accounts and to view the gains and losses as tuition. You learn when you lose.
Mike says
Shaun, If you love what you do then you are doing the right thing and the money isn’t the most important. I’m learning to trade for my family and my wife’s family. I would love to help them all to have what we have. I hope to learn a lot from your posts and maybe one day try automated trading. Keep helping us we appreciate someone with your skills beating the market.
Shukran saudiki
Cheers Mike
Shaun Overton says
Ahlan Mike!
Thanks for sharing your motivation. Just remember to keep the risk in line. I can tell you from managing money with QB Pro. It’s 10x more stressful managing other people’s money than it is my own.
Philip says
Hey Shawn,
Thank you for sharing,it’s a really inspiring story; how you were able to extract lessons from that loss – it takes some humility… and of course the support from your wife 🙂
indeed, money comes and goes; a well know monk once said: “you can know how rich you are by counting the things you have that money cannot buy”.
and what i appreciated the most out of your article, is your decision to use whatever you will accumulate for a higher spiritual purpose. Actually i believe it allows us to receive the blessings of the Lord in our undertakings.
What i always keep in mind now, after reading many of your articles suggesting it, is retrieving profits monthly.
Thanks a lot for constantly reminding us of that, i’m sure in the future and for many traders out there, applying that advice will turn out priceless 🙂
All the best!
Philip
Shaun Overton says
My wife is a tremendous blessing. Not too many husbands get to walk away from that kind of a loss without a severe browbeating. She knew how devastated I already was.
I really hope people take the profit taking advice to heart. Go buy some gold, pay down your mortgage. Money isn’t real. It’s a lot harder to lose true assets like land and metals, especially if you’re not constantly putting them at risk.
I think of consistent profit taking like Nassim Taleb’s barbell strategy. Forex is my crazy, insane risk taking with very high payoff, but I only expose a little bit of money. Real assets are the opposite end where I probably won’t make a lot of money, but I won’t lose a lot, either.
Jim says
Great article Shaun and ballsy of you telling us about your failed investment. How much is enough is a question I’ve always asked. Like you, I find the challenge more exciting than the actual trading itself. I would rather be doing something else other than trading, but I do realise it is a means to an end. I use to have big dreams of being a big time money manager, but now wonder why. One day I may manage someone else’s money, but it would have to be on my terms. I just need enough to pay the bills and enjoy life, so why stress myself out. Happy wife, happy life…cheers.
Shaun Overton says
That phrase is oh-so-true. And I agree. Even with managing QB Pro, I don’t want to manage a jaw dropping sum of money. There’s a finite ceiling where enough is enough. Adding more money would add to the stress without adding a benefit to my daily life.
Elly says
This is a great read I like the way you have put it. Yes there is a lot of thinking involved and risk taking. Just like you said money come and go’s I recerntly have lost a bit of money on the markets. Noway near what you lost on your investment. It gives me drive to keep the firer burning and I love it the hole learn process understanding yourself having faith in God.
Shaun Overton says
Thanks for sharing about your loss, Elly. Knowing that others experience the same problems is what motivated me to share my misadventure.
Carl Shirley says
Shaun, I appreciate your article of openness and generosity talking freely of faith and practice. You’ve subdued “Grinch,” a foe I continue to do battle with. I’m encouraged to take a more proactive stance in that personal battle.
Thanks
Shaun Overton says
Excellent! I’m glad to see people feeling encouraged to face the same struggle.
Chris Z says
Yes. I agree on many points. Ultimately the game is more fun than the money. The money is just a tool, but as you get older you’ll start thinking you need a bit more for security as your kids get in college and you imagine your health could prevent you from working at some point.
That said, I’ll trade you might 93 Corolla for your 2000 civic 🙂
Shaun Overton says
Haha. The worst I can say is no, right? I’m sure the security blanket amount will climb with time. I just hope it’s more reasonable in the future.
Daniel says
Hey Shaun, been reading your blogs for a while now. They are always thought provoking.. I feel like I’ve been on a similar journey. This is my 5th year trading and recently built a system that is very successful but have discovered that I can’t stop designing and improving because that too for me is where my passion is. Thanks for sharing!
Shaun Overton says
Thanks for speaking up. I’m glad to feel like you’re making progress. The 5 year mark seems to be where most people feel like they’re starting to turn the corner.
Daniel says
It seems that way, I came to realize early on that many people expect to reap the rewards of the market instantly while in any other well paying profession people commit years of study and thousands of dollars before they expect a return. I feel the long term approach produces a healthy trading mindset for me.
Shaun Overton says
Amen to that!
Conway says
Good article Shaun, it only seems as we get older and mature further we tend to place less importance on money and focus more on happiness and the core values in life.
Your statement “How did your wife take it?” is interesting as my ex took everything, so I had to start over with my son.
I have matched my weekly job income with trading income now, once I have paid down some debt I will make a move to a more quality filled life away from what a full time job starves me of.
Thanks for sharing your story.
Shaun Overton says
Hey Conway,
That’s very impressive that you’ve been able to match your income with trading profits. No doubt that’s been on a very long journey.
I hear you on paying down debts. Debt feels like a leech taking away your vitality. Aside from never having any, paying off debt is a great feeling. Neidy and I are hopeful that we can pay off her student loans in the next year or so. Those monthly payments won’t be missed!
Paul says
Hey Shaun.
Thanks for this inspiring story. I learnt about trading Fx in 2008, just when the markets went bedlam. As a young graduate student, I was curious how can billions be wiped out from the balance sheets at the blink of an eye. As an infectious diseases scientist with little finance knowledge, I invested time studying where the money went. To make the long story short, I learnt about the rate race I was in and wanted a means out of it: to practice science simply because i love it and not be chained to my job to meet finical obligations.
FX trading was a solution to that, and over the last 5 years, I have made a total loss of 15559.75 CHF. I have learnt a lot about myself from that. In 2013, I got my PhD, and got married. Since then I have taken time put some of my math competence to work and its slowly taking shape.
Thank you for this touching piece. We only fail when we stop trying. In the lab we fail 95-99% of the times. But when we get it right its sweet victory. With the right mix, that EUREKA may be good enough to get a phone call from Stockholm 🙂
Shaun Overton says
That’s an awesome story, Paul. Thank you so much for sharing. And belated congratulations on getting married!
I knew you were a grad student, but you never told me it was in infectious diseases. You have the *perfect* background for transitioning into markets. As I’m sure you noticed, the math that explains infection rates is very, very similar to the math explaining price changes. They’re both fat-tailed.
Kebaya says
Quite to find out you a Christian and born again for that matter.
Very encouraging to find out God fearing traders out there..
Am coming out of the closet …
Thank you Shaun for this post.