Everyone alive has the exact same number of hours in their day.
If we’re brutally honest, how many of those days we each get is largely down to luck of the draw.
- Luck of the draw in terms of educational opportunities.
- Luck of the draw in terms of genetics.
- Luck of the draw in terms of geography.
- Luck of the draw in terms of demographics.
- Luck of the draw in terms of socio-economic status.
To a limited degree we can influence the hand we are dealt, via the dietary, exercise and lifestyle choices we make. That said, where we start has a huge impact on where when we finish.
Each hour represents a life token, that we can invest in whatever activities we choose to undertake.
Eating. Sleeping. Walking the dog. Writing. Working. Lego. Whatever… all activities require an investment of life tokens.
Life tokens cannot be hoarded or saved.
Once spent they cannot be recovered.
Given their scarce nature, life tokens are our most precious commodity.
Hitting a moving target
This presents us with a tricky puzzle.
We each need to generate sufficient income to cover our individual cost of living. Most of us earn that income by selling our life tokens to an employer.
However most of us derive more pleasure from activities outside of work, such as spending time with loved ones, pursuing hobbies, holidays, and leisure activities.
This creates a constantly moving optimisation point. Selling just enough life tokens to fund our desired lifestyle, while leaving enough remaining to actually enjoy it.
Selling off life, one token at a time
Historically people used to work far more than they do today.
Average annual hours worked at the tail end of the Industrial Revolution (roughly 200 years ago) were nearly 50% higher than they are today!
That required workers to invest more than double the number of life tokens each week as the average worker today.
When people are young they typically have much energy and enthusiasm. This is a great thing, because without marketable skills and expertise their life tokens are not worth all that much to others. They must sell a larger quantity of life tokens to offset that shortcoming, in order to generate sufficient income to cover their desired lifestyle costs.
Over time people gain experience, which should increase the market value of their life tokens.
The median average weekly hours worked by age suggests the number of hours worked peak in a person’s 20s, gradually taper off through to their late 50s, then fall away in their 60s and beyond.
The chart also highlights the degree to which the average worker sells yet more of their life tokens in pursuit of overtime and additional jobs. This suggests their day job alone is inadequate to fund their desired lifestyle costs.
Not all life tokens are created equal
It is worth noting that not all life tokens are created equal.
When people are young they believe they have all the time in the world, often failing to maximise the value derived from investing each life token. This is unfortunate, as many of us were fitter and healthier in our teens and 20s than we will be at any subsequent point in our lives. Adventure travelling, drinking, and playing sports are all much more enjoyable at 25 than at 55!
As people progress towards old age their health and mobility tend to suffer. Regardless of how many life tokens they may be available to invest, some previously pleasurable activities may no longer be physically possible.
Frailty and age discrimination can make selling life tokens for wages more challenging at either end of life, with employers generally reluctant to hire inexperienced kids or “past their prime” pensioners.
This is a key reason why investing in themselves is one of the best uses of life tokens.
The more valuable their skills and experience become, the greater the premium they can demand for investing their life tokens.
Work smarter, not harder
“Working smarter, not harder” minimises the quantity of life tokens required for lifestyle funding, while maximising the quantity available for lifestyle enjoyment.
The next chart displays gross income by age, overlaid with projected life expectancy. It is unlikely to be a coincidence that the earnings cross the life expectancy lines around that same point that average weekly working hours peaked on the previous chart.
The amount by which a person’s earnings exceeds this life expectancy line represents the relative size of the premium they should demand for investing each additional life token. The older a person gets, the fewer life tokens they have remaining to invest, so scarcity makes those remaining ever more precious to the individual.
A person who has maximised the market value of their life tokens will cross that threshold at a much younger age than someone who has not.
Once their lifestyle costs are funded, the person enjoys the luxury of choice regarding how they will invest each additional life token.
- Sell fewer life tokens to an employer, and invest the remainder in more pleasurable activities.
- Capitalise on the premium life token price that their accumulated skills and experience command now, to move closer to buying financial freedom later.
- Some combination of the two approaches.
Life tokens versus net worth
The final chart displays average net worth by age, again overlaid with the projected life expectancy from that age onwards. Note that net worth crosses the life expectancy lines at a much later age than the earnings line did on the previous chart.
The point at which net worth exceeds life expectancy represents when a person has accumulated “enough”. Once that threshold has been breached the person enjoys the luxury of choosing how they will invest all their remaining life tokens. The size of that figure varies from person to person, determined by the cost of their desired lifestyle.
A person who maximised the market value of their life tokens by investing in themselves will reach this point at a much younger age than somebody who diligently sells their life tokens off at a bargain price.
What the individual does with that opportunity is entirely up to them, the luxury of choice!
- Evaluate how you are investing your own life tokens. Are they yielding the level of returns you require?
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