Introduction

Welcome to another coffee break here on my blog! Today, I want to share with you three principles that have profoundly changed my life. These insights stem from my six years of experience working in consulting at McKinsey, as well as my subsequent roles in industry and startups as a C-level executive. So grab your favorite drink—I'm sticking to water today since it's quite late here in Germany—and let's dive in!

Principle 1: Achieving Financial Freedom

Let's start with the first principle, which revolves around the concept of financial freedom. Now, I must warn you that what I'm about to share might differ from what you expect. Many people believe that saving is the best way to achieve financial freedom. While I have emphasized the importance of saving in the past, I want to explore a different perspective today.

What does financial freedom really mean? There are various definitions out there, but I particularly resonate with the definition used by the FIRE movement—Financial Independence, Retire Early. This group of individuals aims to stop working at some point in their lives and live solely off their capital and capital gains. This is the definition I want to adopt for our discussion.

The 4% Rule

So, what does it take to achieve financial independence? One commonly applied rule in the personal finance community is the 4% rule. This rule suggests that if you invest your capital in a mix of stocks and bonds, you can expect an average pre-tax return of about 4% indefinitely without depleting your capital. After accounting for capital gains tax, which can be around 25% in countries like Germany, you might end up with a post-tax return of approximately 3%.

Using this 3% rule, you can calculate the capital needed for financial independence. For instance, if you aim for a net disposable income of €10,000 per month, you would need around €4 million invested. This figure may seem daunting, but it serves as a useful benchmark.

The Reality of Earning

Now, let's consider how realistic it is to save that amount. Imagine someone earning an average of €100,000 per year gross before tax over a 40-year career. While this may sound achievable, remember that this is before taxes and social security contributions, which can easily consume a significant portion of that income. Additionally, living expenses, rent, and other financial obligations further complicate the picture.

Even for high earners, saving €4 million can be incredibly challenging if you follow a traditional career path. This leads to my first key insight: achieving financial independence through regular employment is extremely difficult. Even in high-profile careers, the majority of people will find it hard to reach such financial milestones.

Embracing Entrepreneurship

So, what can you do? If you aspire to improve your financial situation and achieve financial freedom, you may need to consider entrepreneurship or developing side projects alongside your regular job. This approach can open up new avenues for income and help you reach your financial goals more effectively.

Principle 2: Avoiding the Tyranny of the Or

The second principle I want to discuss is about avoiding the tyranny of the or. This concept comes from Jim Collins' bestseller, Built to Last. Collins describes how successful individuals can escape the limiting belief that you can only have one thing or another—it's either A or B, but not both.

The Genius of the And

Many people fall into the trap of thinking they can either be a good person or climb the corporate ladder, spend time with family or pursue sports, or have fun in university or excel academically. This mindset is what Collins refers to as the tyranny of the or. However, successful people embrace the genius of the and, realizing that it is often possible to achieve multiple goals simultaneously.

For example, I often receive questions about how I manage to work a full-time job while also creating content for my blog. The answer lies in prioritization and a strong desire to achieve my goals. So, I encourage you to ask yourself: What is your version of a YouTube channel? It doesn't have to be a YouTube channel, but where can you embrace the genius of the and in your life to enrich both your personal and professional experiences?

Principle 3: Being Right vs. Winning in Life

The final principle I want to share is about the difference between being right and winning in life. My grandmother once asked me, "Heinrich, do you want to be right or do you want to achieve your goals?" This question has stuck with me, as many people become obsessed with proving they are right, often at the expense of their relationships and overall happiness.

The Cost of Being Right

People will go to great lengths to prove their point, even if it means losing friendships, money, or their peace of mind. This behavior is often driven by fragile egos and wounded pride. While there are situations where standing your ground is justified, it's essential to take a step back and ask yourself what you truly want to achieve and whether being right helps you get there.

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💡 Conclusion

In conclusion, these three principles—achieving financial freedom, avoiding the tyranny of the or, and understanding the difference between being right and winning in life—have significantly impacted my journey. I hope they resonate with you as well. Remember, if you're looking for a way to track your GMAT progress and stay motivated on your journey to success, consider exploring GMAT Sprint. It's a fantastic platform that can help you stay on top of your goals.

Thank you for joining me today! If you found value in this article, please share your thoughts in the comments below. I look forward to hearing from you!