{"id":15,"date":"2023-09-04T12:00:00","date_gmt":"2023-09-04T12:00:00","guid":{"rendered":"https:\/\/moneywithkatie.com\/a-different-kind-of-financial-confidence-and-the-downside-of-stability\/"},"modified":"2025-09-03T18:54:36","modified_gmt":"2025-09-03T18:54:36","slug":"a-different-kind-of-financial-confidence-and-the-downside-of-stability","status":"publish","type":"essays","link":"https:\/\/moneywithkatie.com\/essays\/a-different-kind-of-financial-confidence-and-the-downside-of-stability\/","title":{"rendered":"A Different Kind of Financial Confidence, and the Downside of Stability"},"content":{"rendered":"
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As a personal finance hobbyist forged in the flames of fairly extreme<\/span><\/a> FI\/RE rhetoric, my perspective on wealth as a source of confidence was always unemotional, mathematical: By the time I\u2019m worth $X, I can withdraw between 3% and 4% per year and comfortably live on $Y.<\/em> <\/p>\n

It was a straightforward way to derive financial confidence from stability<\/strong>: a portfolio of assets to draw on if (when) things go sideways. As such, I maintained a utilitarian, linear view of the process: You ratchet up your income as much as humanly possible (and by whatever means necessary!) such that saving the vast majority of it doesn\u2019t hurt, and then you press the eject button from paid labor whenever it stops being fun. The clearly defined finish line and path paved with hard \u2019n fast rules always satisfied my rubric-loving, syllabus-reading self. <\/p>\n

This wasn\u2019t just my way\u2014it was, in my view, the only<\/em> way. It wasn\u2019t until I started to unpack that strategy with my friend (and collaborator on an upcoming project!) Tara Reed<\/span><\/a> that I realized there were other<\/em> valuable lenses through which I could view my finances\u2026and career capital. <\/p>\n<\/div>\n

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>
\n \u201c<\/span>Rather than memorizing the rules of the gameboard and carefully maneuvering one square at a time, these people flipped the whole damn table.\u201d<\/span>\n <\/p><\/blockquote>\n<\/figure>\n
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As we talked through my approach (earn, invest, ball out), she shared her own: Rather than deriving confidence from an ever-increasing nest egg that can produce predictable income in the future, she explained that she prefers to devote her energy to developing relationships, businesses, and habits that reinforce her confidence in her own<\/em> ability to create income. I\u2019m paraphrasing: \u201cI\u2019m not optimizing for stability<\/em>, I\u2019m increasing my confidence\u2014the confidence that I can turn on that money spigot at any time.\u201d<\/p>\n

While these might sound like two sides of the same coin, the implications about the types of choice<\/em>s we\u2019d make according to these worldviews are very different: Where I might walk down a dead-end path today simply because it has a dollar sign attached to it that I can funnel directly into VTSAX, Tara might choose the longer, meandering road with no certain paycheck\u2026that eventually leads to six more. It\u2019s the difference between short-term and long-term thinking.<\/p>\n

As I reflected on her ideas about the various ways to reliably produce future income, I was reminded of classic stories about early employees at startups that eventually made it big\u2014they turned down the lucrative six-figure consulting salary to take a risk on a new venture because they believed in the mission, and ended up cashing out to the tune of millions of dollars in equity just a few years later (I know a couple of people for whom this was true, and while their decision looked foolish at the time\u2026they definitely got the last laugh). <\/p>\n

Rather than memorizing the rules of the gameboard and carefully maneuvering one square at a time, these people flipped the whole damn table\u2014risking utter destruction in the hope that their tiny metal Top Hat might land on Boardwalk.<\/p>\n

That\u2019s not to say either approach is better than the other, just that they reveal a lot about what, exactly, you\u2019re comfortable placing your faith in: Do you want to rely on the storied success of the public markets, or are you interested in placing a leveraged bet on yourself<\/em>? <\/p>\n<\/div>\n

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>
\n \u201c<\/span>The type of stability we\u2019re taught to chase is directly at odds with the risk-taking required to place the type of entrepreneurial bet on yourself that our culture so devotedly celebrates.\u00a0\u201d<\/span>\n <\/p><\/blockquote>\n<\/figure>\n
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Take my own example: By selling Money with Katie to a larger media company at the end of Year 1, I took the first stable exit on offer. A bird in the hand, right? It\u2019s obviously worked out well for me, but we don\u2019t know what would\u2019ve happened in a parallel universe in which I had said, \u201cThanks, but no thanks.\u201d<\/p>\n

Still, it\u2019s easy to venture into romantic territory here; in the United States, we love the rags to riches story of The Little Hustler Who Could who french braided their bootstraps, bought some lemons from a black market wholesale dealer, and turned them into gourmet lemonade at a 400% markup. But \u201cbetting on yourself\u201d is a lot more charming in theory than in practice, when your mortgage is on the line and the little mouths in your home need to be fed. <\/p>\n

This belies a contradiction within the fantasy of the American dream: The type of stability we\u2019re taught to chase (the W-2 job, the starter home, the 2.5 children and golden retriever named Max) is directly at odds with the risk-taking required to place the type of entrepreneurial bet on yourself that our culture so devotedly celebrates.<\/strong> <\/p>\n

When a single 24-year-old sharing a fifth-floor walk-up uses their nights and weekends to build a company and strikes it rich, it\u2019s inspiring; brave. When a 35-year-old sole breadwinning parent quits their stable accounting job to hang out their own shingle, it\u2019s risky; foolish. <\/p>\n

Counterintuitively, the less you have, the bigger swings you can take.<\/strong> Stability might cap your downside (or, at the very least, create the illusion of a capped downside), but it often places a limit on your upside, too. <\/p>\n

(A brief aside: You can always build a business on the nights and weekends as a parent so that you don\u2019t have to quit the job that supports your family, but as many parents of young children have told me, that often requires an unreasonable sacrifice of time you\u2019d probably like to spend with *checks notes* the aforementioned children\u2026all for an uncertain payoff. And while there\u2019s a bewildering strain of hustle porn that effectively claims, \u201chaving children made me grind harder and made me more successful,\u201d I\u2019ll give you one guess as to which gender that type of rhetoric comes from. Hint: It\u2019s not<\/em> the one who\u2019s statistically more likely<\/span><\/a> to bear the burden of caring<\/em> for those children.)<\/p>\n

Bigger swings become riskier as your lifestyle, business, and family grow, because you simply have more on the line. In my own<\/em> rush to secure a stable situation (secure income, a nice home, a relatively \u201csafe\u201d investment portfolio), I didn\u2019t notice the opportunities I was forgoing. Being too preoccupied with \u201cresponsible\u201d choices often led me down predictable paths with equally predictable outcomes\u2014and while predictability can be great, it\u2019s also inherently limiting. It\u2019s indisputable that the Katie who shared an apartment with a friend for $800 per month could afford to take more chances than the Katie who pays $5,000 per month for shelter. <\/p>\n<\/div>\n

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\n \u201c<\/span>I know in hindsight that sometimes fear often masquerades as maturity.\u201d<\/span>\n <\/p><\/blockquote>\n<\/figure>\n
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Funnily enough, I remember thinking at the time that I could never<\/em> quit my job to pursue my side hustle full-time. It felt \u201ctoo risky,\u201d despite being a single renter with no dependents and very low overhead in a robust job market where it would\u2019ve been a piece of cake to get another paycheck job if things went bust. Even in my relative \u201cfreest\u201d state of adult existence, I didn\u2019t feel comfortable betting on myself\u2014and while I told myself at the time it was because I was just too responsible to take chances, I know in hindsight that sometimes fear<\/strong> often masquerades as maturity.<\/p>\n

Of course, I\u2019m thankful for how the last few years have gone: Despite my preference for the safe and stable path, I\u2019ve had (what I consider) fairly outsized returns, both in business and in life. But Tara\u2019s words have rung true in a way I hadn\u2019t expected: She\u2019s inspired me to have a little more faith in my ability without<\/em> the safety net of a big name institution or someone else\u2019s stamp of approval. Because at the end of the day, short-term thinking communicates something very specific: I don\u2019t believe that I can generate another, better opportunity, so I\u2019m gonna take this less risky one that\u2019s right in front of me<\/em>\u2014whether it\u2019s a job offer that\u2019s not quite<\/em> right, or an investment that feels \u201cgood enough\u201d but not \u201cgreat,\u201d or a life path for which the most compelling benefit is stability. <\/p>\n

And hey, sometimes that is<\/em> the best opportunity you\u2019re going to get\u2014in which case, you should probably take it. After all, if you grew up in a home that was often chaotic and unpredictable, or you\u2019ve experienced dire financial insecurity, sometimes stability is what you crave most (or what you crave most right now<\/em>). <\/p>\n

But for me, I\u2019m not sure I ever thought twice about what I was optimizing for\u2014or if stability was the most inspiring<\/em> thing I could aspire to. It was just the most obvious<\/em> thing. Fortunately, on that path, I still meet people like Tara, who help me think about money and opportunities just a little<\/em> bit differently\u2026and in those moments of coming together, new opportunities can arise. And the next time they do, I know who I\u2019m betting on.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

As a personal finance hobbyist forged in the flames of fairly extreme FI\/RE rhetoric, my perspective on wealth as a source of confidence was always unemotional, mathematical: By the time I\u2019m worth $X, I can withdraw between 3% and 4% per year and comfortably live on $Y.  It was a straightforward way to derive financial […]<\/p>\n","protected":false},"featured_media":2486,"template":"","meta":[],"categories":[52,18],"tags":[],"class_list":["post-15","essays","type-essays","status-publish","has-post-thumbnail","hentry","category-money-psychology","category-productivity-and-time"],"yoast_head":"\nA Different Kind of Financial Confidence, and the Downside of Stability - Money with Katie<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/moneywithkatie.com\/essays\/a-different-kind-of-financial-confidence-and-the-downside-of-stability\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A Different Kind of Financial Confidence, and the Downside of Stability - 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