Tag: finance

Personal Finance Lessons Learnt Part I

I have been a saver and investor all my post-Army/post-college life, that’s a good 27 years at the writing of this post, and want to share as much of what’s worked and not, so hopefully you can benefit from it. It goes without saying, but this is really just my opinion, please consider your own circumstances carefully, and seek professional advice if you need it.*

Read about Personal Finance and Investing

The first place to start is what you are doing right now, I highly recommend regularly reading up on personal finance and investing. Read different perspectives, and different authors, see what resonates with you and dive deeper into topics you find interesting.

When I first started working, the web was still in its infancy, so I read the financial press – The Wall Street Journal, the Economist, Money, and the like. I also read the newsletters from my financial institutions – at one time or another I have been a client of USAA, Vanguard, Schwab, Fidelity, E*Trade and they all used to publish newsletters on personal finance tips and planning advice. I always found Schwab’s On Investing to be the best and looked forward to it coming each quarter.

And of course now with the tremendous amount of resources on the web, there’s no shortage of advice (and opinion) – I maintain a list of my favorites on the Resources page.

There isn’t any one thing you will get from all this, it is the grounding you’re after, to learn the language of finance, see how certain topics are generally presented, and look for some contrarian opinions among FIRE bloggers.

Fair warning that you will read a lot of crap, and you’ll also notice that a lot of writers will all write about the same thing, so you will need to read everything critically. But in the process you’ll also start to see through some of the hyperbole in the press, you can think of these as inoculations against following the crowd when the press is screaming about the market collapsing or the bull run extending for X months. “DOW 40k!!!”, “This bear called the last recession, you won’t believe what he says now!” Meh.

Blog forums and comments, and finance sub-Reddits are also good places to connect with others pursuing FIRE or just better personal finances, but tread with caution, and double check any recommendations you get there before acting on them. For God’s sake don’t take anyone’s word for it when it comes to taxes. Read the primary source, at least here in America it’s actually pretty understandable and easy to find on the IRS’s website. I have been surprised to find that it’s easier to read the IRS materials rather than sort thru all the different opinions you’ll find on the internet.

Track Your Spending

The best place to start next is to get a picture of where your money is going now. See what you are spending your money on, and really spend some time thinking about if you are getting the value out of your money. One of the exercises in Your Money of Your Life that has really informed a lot of my choices in life is understanding what you are trading in terms of the hours and energy of your life for a thing you are about to buy. In other words – if I want X, really do the math on how many hours I would need to work in order to afford it (after taxes) – this can be a very clarifying experience and I have passed on a lot of impulse purchases because of this. And while I am a big proponent of being frugal for the benefit it brings your finances, sanity, and lack of clutter, etc. – you will also quickly see that you aren’t going to skip a few lattes into financial independence.

Others have written a lot about frugality and the Big Four, but saving on housing, transportation, food, and taxes is where you will find the fuel for savings and Financial Independence. While I didn’t go the hardcore route exemplified by many millennial FIRE bloggers, my wife and I did make deliberate choices to mange the cost of these like:

  • Renting a little further out of the city – this saved on rent of course, and we were always able to take some form of train into the heart of the city or the trendy parts of town without paying the associated rent to live there,
  • Once we were ready to own, we always put at least 20% down even when that meant getting a smaller house. You save on interest, on insurance, and we never paid PMI, which I just found offensive, as you are paying to insure your mortgage company.
  • We took the higher deductibles on insurance, and contribute the difference to our emergency fund, essentially partially self insuring.
  • We shared one car and took public transportation while we lived in the city (I realize no car at all is better, but we didn’t make that choice.)
  • Bought our cars to own; paying cash or aggressively paid off our loans early, and then driving them as long as possible
  • Buy fresh ingredients and cook at home, which also has health and relationship benefits
  • Hike, bike, and go camping instead of fancy vacations or cruises.
  • Max out tax deferred savings vehicles like IRAs, 401(k)s and HSAs

For me, the thing that tracking really highlighted in the beginning was interest payments, and the amount of just random retail crap we were buying.

Having to look at the interest payments every month helped me get motivated to aggressively pay down debt and not buy things on credit (other than our house.) Since we paid off our credit card debt in 1997, we have always paid them off in full every month. For big purchase we saved up for them first (I know, a novel idea!) in high interest savings accounts set up for specific goals.

As for how to track your spending, there really is no lack of choices, depending on how nerdy you want to get with it, you can build custom spreadsheets to slice and dice the data any way you want. To just get started however, I’d go with an automated aggregator that can pull in all your financial transactions and categorize them for you.

Looking at our random spend also made us really think about whether we really needed things before we bought them and, though it sounds fundamental, stopping yourself in store or online when you are about to buy something and really think about it, what it costs, and how long you’d have to work to pay for it, really helped us really cut our spending. Now it’s not uncommon for us to allow a day or two to pass between when we put something in the online cart and when we actually purchase it. Easily 1/3 of purchases never make it through the filter of a little time.

As for tracking tools there are a lot of options – Mint and Personal Capital are good online options, I’ve used Quicken for just about forever (and MS Money when that was a thing.) There are tons of other options out there, just find something that works for you and see what’s lurking in your spend.

* I am not a financial professional or consultant, none of this information should be taken as advice for your specific financial and personal situation. Do your own research and form a plan that is appropriate for you.

Photo by Markus Spiske on Unsplash

Five Books to Re-read This Year

Day 5 of the Daily Stoic’s 14 Day Stoic Challenge is to pick 5 books that were impactful in your life and re-read them, with a focus on studying them more deeply than when you last read them. The idea of course being that with each re-read you will get more and different lessons out of them.

I want to elaborate the why behind my selections, and neither the challenge’s Slack channel, nor my remaining social social media channels seem appropriate, so I am putting these here, mainly for myself to be able to come back to after I’ve read each.

Anabasis by Xenophon

Written by the Athenian Xenophon, it details the return trip of a group of 10,000 Greek mercenaries after the defeat of their patron, Cyrus the Younger, in the battle of Cunaxa in 401 BCE, outside Babylon. I originally read this when I was an NCO in the US Army National Guard between deployments to Bosnia and Iraq. I remember being struck by how little has changed in terms of leading people, and human dynamics. Certainly technology has changed, our view of the world has changed, and religious views are quite different, but I remember that the leadership challenges he faced were all too familiar.

I have therefore long considered this to be one of the greatest books on leadership (that you’ve probably never heard of). So I am eager to see how that holds up, and as I served right at the site of Babylon for most of my deployment to Iraq, I am curious to see if re-reading this brings out any other connections.

Tao Te Ching by Lao-tzu

I am using the Stephen Mitchell translation. The Tao Te Ching was the first book I read from a school of belief that was not the Catholic Bible, and it was the start of a reading exploration that ultimately led to me to Stoicism. I remember that I felt like I had found a whole new way to look at the world, and I remember being a little surprised at how much the Tao seemed to have in common with Lucas’s Force. I feel like there is a lot of shared wisdom between Stoicism and the Tao, including the notion that there is no good or bad beyond the value we choose to assign to things. So we will see how that holds up.

The Problems of Philosophy by Bertrand Russell

I remember this book from my first philosophy class in college at the University of Connecticut, and I remember that class being the first time I realized that philosophy was not a stuffy subject for insufferable snobs. That it could both be interesting and a tool for thinking deeply about things we assume, and a way to work on oneself and our beliefs.

Your Money or Your Life by Joe Dominguez and Vicki Robin

I am re-reading my original 1993 version, though I may eventually read the revision that several FIRE thinkers have written about including Mr. Money Mustache, who I read regularly. Reading this set me on the path of my own financial education and led me to take control of all of my own finances, and to buck conventional wisdom on money and investing. I never fully embraced the almost hippy approach of having minimal attachments, no home, travel often, extremely minimalist possession, but it did teach me to value my time carefully and not trade it for things I didn’t need. And I never again took on debt other than a mortgage. I do remember Joe advocating buying 30 years bonds as the means of financial independence, so that part won’t hold up, but I do want to see how much of their thinking remains relevant and how broadly it is reflected in the FIRE community.

*A Short History of Nearly Everything by Bill Bryson

Bill Bryson is simply one of the greatest writers of our time, and I have read nearly everything he has written, but this and A Walk in the Woods are my favorites. This one for the simple fact that it really makes you realize just how much of a miracle just existing really is, for me it was a tonic for being too wrapped up in work and myself. And the stories about the rivalry between scientists and how human they all actually are is just fascinating. (And you have to have some sympathy for someone who has spent their entire professional life invested in something that has turned out to be wrong – you might resist that too.)

I will post back to this as I complete each book and any new observations I have to share.

What will you read?