The importance of developing actual skills

January 2, 2011

Philosophy

I am a big fan of the blogs Early Retirement Extreme as well as I Will Teach You to be Rich.  The former, written by Jacob Fisker, teaches you how to become financially independent within 5 years by saving 75% to 80% of your income, maximizing the use of your resources, and cutting expenses to the point where the revenue generated by your saved income exceeds those expenses.  The latter, Ramit Sethi, believes that you can only cut expenses so much and that at a certain point, you should concentrate on earning more.  He has a course called Earn 1K on the Side in which he shows his students how to generate additional income through freelancing without quitting their full-time job.  Although the two authors differ in how best to achieve financial independence, they also share a common thread that made me realize something.  I am highly lacking in actual skills.

In his book, Jacob Fisker talks about the difference between the Salary Man and the Renaissance Man.  The Salary Man is something that most of us are.  We go to work day in and day out, living from paycheck to paycheck, and use the money that we earn to purchase stuff that we use (food, housing, clothes, etc.).  In turn, the more stuff we use, the more we have to work in order to pay for that stuff.  It is essentially a cycle with no end unless you change the fundamental structure.  The ideal solution is to have enough assets saved so that the dividends received from those assets is able to pay for the stuff that you use.  It is at that point that you have achieved financial independence because you have eliminated the need to work to pay for the stuff that you consume.  Essentially, the work produced by others is now paying for your expenses.  However, there is another problem with being a Salary Man.  The main problem is that he has essentially put all his eggs in one basket.  If he loses his job, the scramble is on to find another one because his only source of income has been eliminated.  If the economy is good and he is able to find a market for his skill, then all is well.  However, especially in today’s economy, it could take months if you even end up finding another job.  It can be pretty stressful given the fact that you could be laid off at any time and be forced into a tough situation.  With unemployment at 10%, many Americans are currently in this predicament.  The Renaissance Man has no such problems.  Rather than being specialized in one skill, he is relatively proficient in many.  Since his skills are varied and not directly tied to one another, losing one source of income is not a big deal because he has multiple options and other sources of revenue that he can sustain himself with.  Skills can include things such as watch repair, bicycle or automotive repair, construction, carpentry, etc.  Since we have evolved into a society in which we pretty much pay someone to do even the most mundane of tasks for us, having such skills can prove to be even more valuable than many white-collar skills that are typically associated with more earning power.

Switching gears, one of the first exercises that Ramit’s Earn 1K on the Side Course asked me to do was to think of some skills that I could potentially freelance with in order to earn money.  I must admit, this was an extremely difficult exercise for me.  Yes, I could tutor or provide financial advice, but this exercise really made me realize that I had few actual skills.  In essence, I was not a true Renaissance Man who would have no difficulty coming up with at least 5 skills he could effectively freelance with.

I believe the fist step in transforming yourself into a more versatile and, in essence, more interesting person is to start learning about something that you think you’d be interested in.  Rather than wasting time watching TV or playing video games, you could spend that time developing those skills until you are relatively proficient in it.  Jacob suggests that it takes approximately 1,000 hours to go from novice to journeyman (competent in your skill) and 3,000 hours to become a master (proficient in your skill).  Being competent or proficient in a variety of skills has the following benefits:

  • You open your mind to new ways of thinking that you can couple with existing knowledge in different and interesting ways.
  • You make yourself recession-proof by being able to earn money in a variety of ways, not just one.  However, if the dividends achieved by your savings can cover your expenses, this is a moot point.
  • Your can cut your expenses because you are able to do more things for yourself rather than having to pay to have them done.  You become self-sustaining and independent.

I have to emphasize that developing such skills shouldn’t be all about money either.  Although they can be used as a source of income, I believe that being versatile and self-sustaining (being able to build your own house or grow your own food, for example) is much more important.  I don’t know about you, but I need to get started on becoming a true Renaissance Man.

One Comment on “The importance of developing actual skills”

  1. Andre Lataste Says:

    This is an interesting topic, but our economics class taught us the opposite. She was relating to efficiency though. Personally, I would rather have skills that are money saving, but don’t take up too much of my time. Sometimes it is easier to pay someone to accomplish a task that I know I will never do again, therefore I don’t have to waste time learning the skill.

    Reply

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