Over the last week, several people have sent me this story from a bunch of different websites. I’m not sure where it originated, but the first place I saw it was on Financial Mentor. Here’s the parable:
The Parable of the Fisherman and the Banker
An American investment banker was taking a much-needed vacation in a small coastal Mexican village when a small boat with just one fisherman docked. The boat had several large, fresh fish in it.
The investment banker was impressed by the quality of the fish and asked the Mexican how long it took to catch them. The Mexican replied, “Only a little while.” The banker then asked why he didn’t stay out longer and catch more fish?
The Mexican fisherman replied he had enough to support his family’s immediate needs.
The American then asked “But what do you do with the rest of your time?”
The Mexican fisherman replied, “I sleep late, fish a little, play with my children, take siesta with my wife, stroll into the village each evening where I sip wine and play guitar with my amigos: I have a full and busy life, señor.”
The investment banker scoffed, “I am an Ivy League MBA, and I could help you. You could spend more time fishing and with the proceeds buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats until eventually you would have a whole fleet of fishing boats. Instead of selling your catch to the middleman you could sell directly to the processor, eventually opening your own cannery. You could control the product, processing and distribution.”
Then he added, “Of course, you would need to leave this small coastal fishing village and move to Mexico City where you would run your growing enterprise.”
The Mexican fisherman asked, “But señor, how long will this all take?”
To which the American replied, “15-20 years.”
“But what then?” asked the Mexican.
The American laughed and said, “That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich. You could make millions.”
“Millions, señor? Then what?”
To which the investment banker replied, “Then you would retire. You could move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”
The Useful Lessons
This story is a really valuable one that teaches some worthwhile lessons about life and money.
Simplicity Has Great Value
That’s the big one, of course. Both the millionaire and the fisherman dream of a very simple life. When it gets right down to it, many of us dream of a very simple life. However, many of us are saddled with situations and desires that pull us away from that simplicity, making it less of a reality and more of a dream.
We don’t have to have complex lives. We don’t have to have a job that we hate. All that job does is pay us more money… but what will we really do with that money? Do we use it to secure our lives? Or do we just buy progressively more expensive stuff?
The simple things in life often have great value. I find again and again that when I think of my ideal future, it’s a simple life, not too different than the life of this fisherman. I want to fill my days with writing, with some time with friends and loved ones, and with my hobbies and passions. I want little stress and little demand on my time and energy except for when I choose to give it.
Instead of earning $80,000 a year and spending every dime of it to live a life of alternating stress and creature comforts, why not live a life earning very little but with very little stress? A simple life eliminates countless points of stress and gives you the time and energy and freedom to do those things.
A Simple Life Is a Frugal Life
Think about that nice life that the fisherman describes again. “I sleep late, fish a little, play with my children, take siesta with my wife, stroll into the village each evening where I sip wine and play guitar with my amigos: I have a full and busy life, señor.”
That life is a pretty cheap one. He catches most of his own food and probably has a garden to fulfill the rest. He doesn’t need a mansion for this lifestyle. He sips wine in the evening, but it’s probably wine given to him by friends and he likely gives them fish in exchange for it.
He doesn’t have a lot of material needs. His life is inexpensive and full of many, many pleasures. He has romantic time with his wife. He has time for his children. He has time for his hobbies – playing guitar – and his friends.
These pleasures don’t cost money at all. This life can be lived very cheaply.
It’s all the extras we choose to add to our lives that devour money. A bigger house – remember, he probably has a two or three room tiny house. A car or two or three. A television with a cable package. Prepackaged food for quick preparation because we don’t feel like we have time for it. Garbage pickup for all the trash we generate. A cell phone with a data plan.
All of that stuff really isn’t necessary, but we choose to convince ourselves that it is, and in that process, we ensure that we can’t have this beautiful simple life. We have to earn a lot more to pay for all of the things we’ve convinced ourselves that we need.
The problem is that the dream of the millionaire isn’t really exactly like the life of the fisherman. Sure, in both cases, the person would live in a small coastal fishing village where you could sleep late, fish a little, play with your kids, take siesta with your wife, and so on.
But there are some key differences, and those differences demonstrate some of the real problems with this simple story.
Lack of Security
Let’s say a hurricane strikes this little fishing village. The fisherman who has not built a secure future for himself will likely struggle to even put food in his mouth for a while. If his house is gone and all of his fishing equipment is gone, he has nothing. In order to gain any of that back, he’s going to have to work hard.
The millionaire likely pays for hurricane insurance (or for insurance against whatever kind of disaster may happen). He’s able to do this because he’s earned so much money from his business activities.
What happens if the fisherman gets sick and can no longer fish for his family’s needs? Likely, they’ll quickly slip into extreme poverty. He likely won’t be able to access medical care and even if he does, the cost will be absolutely back-breaking for the fisherman and his family.
The millionaire has health insurance. If he gets sick, he goes wherever he needs to go for medical help and the insurance takes care of it.
What happens if the fisherman dies suddenly? Again, his family is quickly in dire straits.
The millionaire, on the other hand, has life insurance that will keep his family safe.
The truth is that as idyllic as the fisherman’s story sounds, it is still a stressful life if you look too close. It’s far from perfect.
What are the problems with the path proposed by the rich man, then? The rich man makes his path of entrepreneurship look like an easy path, but it’s loaded with risk. If it were as easy as the rich man describes to build a thriving shipping business out of nothing in just a few years, it would happen all the time.
The truth is that it takes a lot of work and a lot of luck and often some talent, too, in order to make a business idea successful. Most don’t try. Most who try, fail. It’s only the sliver that remains that are actually successful.
Having said that, you can only succeed if you try. That’s the big secret of starting a side business, whether it’s something as simple as starting a blog or a Youtube channel or something like starting a fishing boat fleet. If you just shrug your shoulders and say “I can’t do it…” you never will.
So, is there a happy medium between the millionaire and the fisherman? One that balances the happiness and simplicity and lack of stress of the fisherman with the security and organization of the millionaire?
I certainly believe so. Here are the four key tenets of that plan.
Live Frugally – Spend Far Less Than You Earn
Here’s a big secret: most of the stress of modern financial life comes from spending everything we earn as soon as we earn it (or close to it). It’s that approach to life that keeps us from saving for the future. It’s that approach to life that has 76% of Americans living paycheck to paycheck and the majority of Americans having virtually nothing saved for retirement.
It’s that same philosophy that keeps us stressed out. It’s that same philosophy that ensures that our futures are linked to our jobs until the very end of our lives.
That philosophy doesn’t work. You need a new one, one that’s centered around living a life that focuses on spending significantly less than you earn, eliminating all of your debts, and saving a very large portion of your pay.
My perspective on this is that you’re choosing to live the life of the fisherman – at least as close as you possibly can while still earning a healthy income. Live in a small home. Live a simple life without lots of extra expenses. Savor free time and new experiences and friendships and family. Don’t worry so much about having lots of things or having all of the trendy experiences.
This is the real kicker: if living a simpler life doesn’t really appeal to you, then why are you reading this article at all? If you don’t have the goal of this kind of free life, then this entire plan doesn’t apply to you.
Living frugally simply means adopting many of the aspects of a simpler life now rather than later. The result of that choice is lower stress, more security, and a gradual progression toward a point where your financial future is completely unlinked from your work.
Plan for Financial Independence Sooner, Not Retirement Later
Many people view retirement as a state where they can completely stop working and just “enjoy life.” Well, for me, and for a lot of people, a life without doing anything productive and enjoyable sounds like complete misery. I might enjoy it for a few months, but after that, I would be miserable.
Life is at its most enjoyable when I have something productive to work on. Ideally, it comes on my own terms without the stress and strict deadlines of a high-paying professional career, but it gives me something to fill my hours in an enjoyable way and earns at least some income. It might earn a lot of income – but, again, wholly on my own terms.
I call this state “financial independence,” not retirement. I will probably be earning a small income in this state, but I don’t need to be earning a large income.
What this means is that I don’t necessarily need as much in the bank as I would in the event of full retirement, but I need that amount sooner.
What does that mean? With a closer “deadline,” it’s even more imperative that I save a lot today. If I’m shooting for a large amount in 30 years, I can rely on the power of compound interest to build up much of the amount that I’ll need. However, if I’m shooting for a smaller but still fairly large amount in 15 years, I can’t rely as much on compound interest to carry me to my destination. I need to save big – now.
This falls right in line alongside the idea of living the life of the fisherman today – or as close as you can. If you live a simple, low cost life, it becomes much easier to put a lot of money in the bank, which moves you to that point of financial independence at a very healthy pace.
Start Side Gigs
Entrepreneurship is a very valuable tool that can really help you accelerate your path to financial independence, but for many people, it’s not a viable long term option to simply say “I’m done with my job and I’m starting this business from scratch.” Take me, for example. I have three young children at home. It is somewhat possible for me to wake up tomorrow and say that I’m quitting my job to launch a business, but that’s only because I’ve been saving like a madman for years. For the vast majority of people, it’s just not realistic – they need that security of a steady income.
So how can you enjoy doing something that you love with the potential of seeing it earn a ton of money if things go well while still having a secure job? The key is a side gig.
When I say “side gig,” I simply mean finding a way to do something that you love on a freelance basis in your spare time in the hopes that you’ll earn some money at it. Rather than dreaming about being a novelist, for example, just write a novel, edit it, and self-publish it on the Kindle store. Rather than dreaming about being a painter, start painting and sell some of your best works at community events. Rather than dreaming about being a graphic designer, actually design some logos for community groups and put out your name in the community. Rather than dreaming about being on Sportscenter, start a sports commentary podcast and Youtube channel.
Do what it is that you love in your spare time. Share and sell what you produce. Get better and better at it.
What happens is that, again, you’re living part of that life of the fisherman. You’re filling your spare time with something that you love. However, you’re also being entrepreneurial. You’re opening the door to actually earning some income on what you do and, if things go really well, you might start earning a lot.
The thing is, this can never happen if you don’t start doing it. If you dream about doing things, start doing them now. Don’t keep filling your spare time with empty and unfulfilling things. Spend your spare time actually doing the things you’ve dreamed about doing.
Keep Your Eyes on the Prize
The biggest challenge in all of this is simply the distractions that a modern and complicated life throws at us. There are constant distractions. Technology distracts us. Popular culture distracts us. Advertising distracts us. The people we interact with every day distract us.
All of these things push short term desires in front of us. Those short term desires almost exclusively drain our time, our focus, our money, and our energy from our bigger goals in life without giving us nearly as much in return. Giving in to a short term desire gives us only short term fulfillment and takes us away from our bigger goals in life.
Don’t let that happen. Keep your eyes on the prize. Don’t give into those impulses. Instead, let them flow over you and watch how they simply disappear if you don’t give into them, like a mirage on a hot summer day.
It can certainly be hard at times. Letting those short term desires flutter by can leave you feeling like you’re missing out on life. The problem is that by grabbing onto those desires and giving your time and money and energy to them, you take your time and money and energy away from the rest of your life – and for what? A fleeting desire that passes in the night, leaving you nothing but an empty bank account and another day in which you didn’t do anything to get closer to the dreams you had for your life.
It’s not worth it. Stop worrying about what other people think. Stop desiring the latest gadget. Stop feeling jealous of the things that your neighbors have or your friends have. They won’t bring you anything that lasts. They won’t eliminate your stress – in fact, they’ll bring more of it. They won’t bring you closer to the things you really want in life.
The fisherman and the millionaire both have the same beautiful goal, but for many of us, neither path sounds perfect. The fisherman’s path is filled with risk, while the millionaire’s path requires entrepreneurial drive and a healthy amount of luck along with a guarantee of stress.
A much better approach is the one offered to thoughtful people in the modern world: a hybrid of the two that involves actively choosing a simpler life and putting money in the bank while choosing simple entrepreneurial paths based upon the things we’ve always dreamed about and always loved to do.
It’s a path that really works. That path led me to starting The Simple Dollar and today gives me the freedom to write for a living while being there at the door when my children come home from school. Sure, I don’t have every material thing I might desire, but in the end, I don’t really have time for most of that stuff anyway. I have too many things to do as it is – many of them deeply enjoyable and fulfilling – and Sarah and I are socking away money as fast as we can.
I hope to wind up where the millionaire winds up in that story – but I intend to do it on my own terms. You can do the same if you just make that choice.