Recently I heard of a friend who lost his job, then tried to start a business and failed. I do not know much about what he is doing now (afterall people tend to keep these kind of non-glamourous things quiet) but I think he is doing some online freelance work for now. Not living a good life. The good thing is he is not married.

Some background: This friend studied his Masters Degree in the field of engineering in Germany and was offered a chance to continue his PhD with an allowance of 2000 Euros per year. That was about 10 years back. But he rejected the offer because he saw his friends who went to work after their Bachelors earning decent sums of money. Looking at himself, he felt he was lagging behind and decided to return home to China. My friend was from China.

He was subsequently offered a job in an average university in China but rejected it. He felt that the salary was too low (starting salary 3000 RMB) and he could make it far better in the private sector. He also worked temporary in a Government-linked company but also left because such companies are a bit like civil service – lots of parasites sitting at the management where politics are common and promotion are more time-based rather than merit-based.

He also temporarily partnered with another friend to start an online Taobao (the Amazon or eBay of China) business, but did not put much effort into it as he was focusing on his 10,000 RMB salary day job in Beijing (the capital of China). Subsequently he was kicked out of the partnership, which he did not seem to mind. He later bought a 35 square metre apartment in a prime area in Beijing with his and his parents’ life savings + borrowings from family, friends and of course the bank. The apartment in the prime location did appreciate in price.

Note: This is a very typical decision path of a young and capable person. Nothing morally or legally wrong with that.

This friend of mine worked OT everyday, devoting everything to the company in exchange for this high salary. Yet when he reached 35, unfortunately, Covid struck, and he was left without a job. Previously he was flying around everywhere for his job, coming home for only a 2 or 3 days each week. Despite that, he had refused to rent out his prime location apartment and stay in a rented bigger house in a more remote location.

In Asia, age is a very big factor in seeking new employment. Unlike Europe where there are rules or laws specifying a work week consists of 37 hours of work, it is not the case for Asia. Bosses like young and energetic people who can give their all for the company. You can do 55 hours a week? The younger guy can clock 60 hours. My friend could not gain a new employment because of that. Despite willing and still able to clock the overtime, the new potential bosses were not confident of that and thus did not offer him a job.

Out of desperation, he rented out his prime location apartment (5000 RMB mortgage per month) and rented a bigger but cheaper house on the outskirts. He started a pub business which folded soon after. As mentioned earlier, he is now doing freelance work while seeking a more permanent job.

Now onto the main topic. There are a series of decisions above which could have been made, any of which would not sink him to such an unfortunate state. I have to clarify here first that none of the decisions are wrong when looked at individually, but when stacked together creates unnecessary financial stresses. Everyone has a different background and reality that they have to handle, so this post does not mean to tell you what you must or must not do, but rather to explore the financial consequences of each action. Let us look at the decisions made so far:

  1. Not taking up PhD in Germany when offered. Decided to go back to China.
  2. Rejecting an offer in the university or resigning from a Government-linked company.
  3. Focused all his time and energy for his company.
  4. Buying an apartment in a prime location.
  5. Starting a business while desperate for income.

Not taking up PhD in Germany when offered. Decided to go back to China.

Taking up a paid PhD is actually a very good opportunity. Not only are you paid to further your studies and to climb up one level, the number of opportunities awaiting you is huge. Whether he decides to go back to his country or continue staying in Germany after that, it will certainly open up more doors. Furthermore, staying in Germany for 10 years gives you the opportunity to apply for a Permanent Residence, which opens up even more doors. For those who do not know, staying overseas gives you the resources of both the country of residence (obviously) and your home country. Many do small businesses making use of the double resources they have. But even if my friend just wants to focus on his work, getting a PhD, living and working in Germany is less stressful compared to Asia. At least he does not have to work 60 hours a week, and at the age of 35 be told that he is too old to work overtime. With all the hours saved, he could have easily done something else on the side, or to simply chill and have a beer at his own free time.

Rejecting an offer in the university or resigning from a Government-linked company.

Nothing wrong with not wanting to take up a lower salary job or a Government-linked job where the salary is lower or promotions are given to a bunch of parasites who simply stayed longer. But this brings us back to the topic of public sector jobs or private sector jobs (Part I and Part II). Wanting to work in the private sector is noy wrong. Focusing everything on the day job is also not wrong. What is wrong is that he did not get a good grasp of his situation. Surely, he would have heard of colleagues or others being retrenched because they are old. Surely, even without Covid he would have known of the impending financial crisis that comes once every 10 to 12 years. Not taking action beforehand is like an ostrich its head in the sand. At least if he had worked for the Government, retrenchment would not be an issue.

Focused all his time and energy for his company.

Some want to climb up the corporate ladder. A common advice where I worked is: Work as hard as you can for the first 10 years, so you can relax in your later years. Applicable only for public sector work though. If you wish to climb the corporate ladder or to earn more salary through your job, spending almost all the time at work is almost a given. But while you are doing so, note that although companies always emphasise our loyalty to the organisation, they absolutely have no regards for your life or death when it comes down to their profit. They have no loyalty to you. Be very clear of that. You are just a tool to them. A bit similar to the above, there was no contingency planning but a foolish perception that the company will always want him.

Buying an apartment in a prime location.

Spending so much money to buy a small apartment in a prime location is not financially wise, unless you have information or confidence that it will have a very significant increase in value. A logical choice in his situation would be to buy a cheaper house in the remote area to stay, and use the remainder of the money to buy another for rental income AND for gradual appreciation in value. More explanation on this here.

Starting a business while desperate for income.

He lost his job and started a pub business, which folded shortly after. He had opened his business in times of Covid. Granted that China at that time had already settled their Covid issues and people are going around as usual without masks, but China is a huge manufacturing and exporting country. It is not spared from the global crisis. Opening a business in times of crisis requires good planning, experience and substantial financial resources to go through the times. Starting a business should be done either when you have leeway to fail or when you are sufficiently prepared in normal times. For example his Taobao partnership should continue even when he had a full time job, slowly building things up to make it an extra source of income. Or if one wishes to go full time into business, to prepare sufficiently in terms of monetary savings, ground preparation and in a good overall climate. Starting with zero experience in desperate financial need can only work when you have zero risk (eg online shop). Definitely not for a pub business.

As you can see, there are 5 significant decisions above he made throughout his 10 year career path, any of which if done well would not have sank him into such desperate times. While making all 5 decisions correctly is no easy feat and also not for everyone due to different background, opportunities and preferences, many times we need to make only 1 or 2 correct ones to live decently. Of course, for financial freedom, it is best you make as many correct decisions (in the financial sense) as possible, even if you do not like it.

Success, as mentioned in the title, is a series of correct decisions. Not a one time explosive jackpot decision. Make one or two right ones, and you would have a normal peaceful life. Make a few more correct ones, you are closer to financial freedom. Make all wrong decisions, suffer with no compassion from society. No one is obligated to help you. Everyone else is also struggling on their own.

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