SubscribeSat 14 Jan 2006
Disclaimer:
This site is dedicated to answering questions, and sharing some insight. While I like to think I can offer some good advice, please don’t hold me liable if I am, in fact, incorrect. These are just my personal opinions and should not be construed as professional advice.
Now About Me:
I’m an early 30 something guy living in Boston, which means I still remember the show ThirtySomething. I majored in Economics and did a minor in Chemistry at Dartmouth. I am not a financial professional. I do, however, work in the fairly quantiative energy industry.
If you want to know more about me, keep reading. This is my story, and indirectly the reason I keep a personal finance blog.
My family came to the U.S. via family ties. My grandfather, though dead by the time we arrived, had been in the country since the 1940s. Only with reestablishment of diplomatic relationships in the 1970s had it become feasible to reunite family members from China. My father, and by extension my mom, my older brother, and myself were such people. My step grandmother completed the paperwork that my grandfather did not live to finish, and we arrived in April of 1980. My parents were 40. I was 4 and my brother 8.
On arrival, neither of my parents spoke english. The state provided assistance that allowed my father to attend english classes, and some additional welfare. Eventually both my parents got jobs. My dad as technician at a chemical company, he was chemist by training. My mom at electronics manufacuring company as an assembly line worker. Both my parents stayed at the respective companies the rest of their careers from which they both retired recently. My brother entered school. I was sent to nursery school because my mom had to work. I later learned that nursery school was effectively 60% of what my mom earned.
Growing up, we were clearly on one of the lower rungs of socio-economic ladder. However, my parents did manage to save enough to put a downpayment on small house in a Boston suburb after two years living with my step grandmother. Our first home was 4 room cape, 2 bedroom, kitchen and living room that probably total probably less than 1000 square feet of living space. When my step grandmother got a new car, we took her old car, a 1973 beige Plymouth Valiant.
I spent the first 3 years out of school without much of a plan, let alone a financial plan. I invested badly both in my own brokerage account, and my 401k. These were some of the worst years to be putting money into the market, and I didn’t do anything to make it better. I turned 12k in contributions (both mine and companies) into less than 5k in 401K. My brokerage account fared about the same. I turned 10k inheritance from my step grandmother into 5k. My savings amounted to what I had in my no interest checking account. It amounted to less 3k total at any given time. Still, I was lucky. I was always employed, and had some great opportunities to travel abroad.
At 26 I decided to buy a condo. I used what little savings I had, my bonus from that year, a 401k loan, and help from my parents to fund a down payment. Buying the condo was the one first steps I took to examining my financial life in more detail, not because it was great investment - it hasn’t been, but because having a mortgage made me think more seriously about where I stood financially. I owed my parents money, they had actually borrowed from their home equity to help me. I wanted to pay them back quickly. Here was a son who had received so many good tidings borrowing from his parents who had received so few. I wasn’t really even borrowing - they gave me the money without string attached. However money in my family doesn’t work with boundaries one would normally think of, but that’s a story for another day. What was important was at 26 I had the means to pay my parents back not only for the help on the condo, but everything else they’ve given me. All I had to do was to want to do that, and I wanted to.
I started thinking about my finances, about what I wanted to do, and where I wanted to be. My main realization was not that I spent too much money - I didn’t. I didn’t have any debt except student loans. What I didn’t have was a plan or any goals. I was living paycheck to paycheck only because it was easy.
While it’s easy to get caught up with the idea of accumulating wealth, money really is only a means to an end. The first thing I had to figure out was, what ends did I want? I knew what my short term/intermediate goal was. I wanted to pay back my parents. But longer term, I still hadn’t figured out what I wanted beyond that. I had no pressing needs. No children to support, and I still don’t. For many people, goals in life are forced upon them by circumstances. They were for my parents. Their main goals were keeping the family fed, and putting my brother and I through school, and then saving whatever they had left for retirement. There was scant room financially to think of anything else.
My own circumstances have been more generous. Because of the sacrifices made by parents, I stood in a choice position. Financially I earned enough to save for retirement, and still be able to provide for a family in the future. All I had to do was keep on working. That was the problem. At 26 I had a great job, and I continue to have a great job that pays well without being all consuming. Knowing my fair share of lawyers and investment bankers, I count myself extremely lucky to have the kind job that I have. However, the thing I realized even though I like my job, I didn’t want to be in the position that in 15 years I had to have my job. I knew at some point in the future I wanted the freedom to pursue a career purely based on the nature of the work. Financial freedom does not mean leaving my job, nor does it even mean not having a job at all. For me, it just means the ability to work without thought to financial necessity.
The first thing I needed to know was where I stood. Up to this point in my life, I had never really assessed my net worth. I had a vague guess, but it was never logged. That November of my 27th year, I started tracking my net worth. I put the value of all my accounts into spreadsheet for the first time in my life. I was worth approximately 40k after accounting for all my liabilities. I was doing OK, but I could’ve been doing better.
Financial Freedom comes at a cost. Part of the cost was organizational. I estimate in that first year of scrutiny, I was able to save another $2500-3000 purely by organizational changes. I shifted my savings into better paying interest rates (+$120 on savings of a 1000). I transferred my high interest 2nd mortgage to zero percent credit card balance transfers, and opened a supplemental home equity line at a initial teaser rate. That last moved saved me nearly $2700 in interest in the 1st year. Being organized cost me a few hours a month - a pretty good tradeoff for thousands of dollars a year. I didn’t want to just finance my savings by just being better organized. I wanted to save money by actually spending less money as well.
While my current consumption at the time was not great, I was more worried about future consumption. The biggest obstacle people face with achieving financial freedom is letting their spending run their lives rather than the other way around. I didn’t want to get that point, and I knew I could only avoid that fate by actively thinking about where I actually wanted to spend my money. For me personally I decided money spent on friends and family was money well spent. Vacations, dinners out, and other expenses incurred in the process of spending time with people I cared about was money I was willing to spend. What I decided I didn’t need to spend money on was, nice clothes, cars, and gadgets. The former I never had much of penchant and was easy to forgo. The latter wasn’t. Like many men, I like gadgets. However even more important than actually saving money was act of making a sacrifice. A sacrifice is only a sacrifice if you actually give up something you actually desire.
In a land of plenty such as the U.S., it’s too easy to both want and have more. Often times there are two ways to take on personal finances. 1) To Live With Less, and Want For Nothing 2) Earn More, Invest Better, and allow for guilt free spending. These two tactics are not mutually exclusive, but many people tend to lean towards one rather than other. My goal is to strike a balance. I want to live well but simply by:
- Consuming less
- Investing better
- Giving back more
- Making better use of time
The last item is truly the holy grail. As I’ve gotten older, the one thing I value more and more is my time. Financially, I want to be in position where money does not have to dictate my time. That moment is still a far away, but until then I can certainly be more efficient with the free time I do have.
July 4th, 2008 at 9:52 am
Great bio, learned a lot will be adding this blog to my favs.