Unfolding my story one bit at a time. Not financial advice.
I don’t write about my financial investments because I consider the story of my financials to be grand. There are plenty of more exciting stories. At most, I would say that my story isn’t one of poverty and that I am incredibly privileged with my start and opportunities.
Context is important.
My parents are young parents, and their parents were young parents (and I assume their parents were young parents). I’m the second child, born around two years after the first. (I talk more about the time we spend with people in our lives and how this is relevant in my collection of ideas on relationships.)
Growing up, I recall my parents seeking to become more financially literate and vaguely remember seeing and hearing things about Dave Ramsey (American personal finance advisor and author). After some quick googling I came across the seven baby steps by Dave Ramsey:
- Save a $1,000 beginner emergency fund
- Get out of debt using the debt snowball
- Building a fully funded emergency fund
- Invest 15% of household income for retirement
- Save for children’s college
- Pay off your home early
- Build wealth and be generous
And principles of this were ingrained in me as a young child. The idea of having a beginner emergency fund, and I vaguely have the idea that Dave recommended the next emergency level is to have around $15,000 in the bank just for emergencies because shit happens. An unexpected hospital or car bill is enough to put most Americans under for life. The ruthless debt avoidance. Investing. Saving for future large purchases. How the friction of using cash instead of a card makes you think more about how you spend money.
I imagine this gave roots to the semblance I had that money builds wealth by investing. And if I want money to compound over time instead of losing money to inflation, I should figure out how to invest.
I grew up in the Midwest suburbs and went to a large, rapidly growing school district. The school district had nearly 30 schools across grades K-12, and over 20,000 students enrolled across them. My high school graduating class was over 500.
When I was around 14 or 15, my parents pushed me to get a job. Chick-fil-a had a big “Now Hiring” sign, and so I went and started working at Chick-fil-a by having my parents drop me off. Part of my pay would go straight into a savings account that I wouldn’t access. And at some point, I downloaded the Mint app to track cash flow.
I wasn’t particularly ruthless about saving money. The first job and the first feeling of “I’m making money” tends to lend itself to “now I get to spend this money, I have to!” And so I expectedly fell into that trap. I wasn’t very frugal, nor did I save all that much. But I eventually saved up enough money to split a car purchase with my parents.
I only wanted one thing from my car–for it to be a manual transmission. I wanted to have a stick shift to shift gears because, well, it was all younger me wanted in a car because it’s cool and changes the driving experience. I didn’t care if it was a beat-up piece of garbage; I just wanted a stick shift. Luckily, I found a gem.
We started walking around a dealership, and I didn’t see anything I liked. My dad pointed out a Nissan Juke, and I said it looked stupid and bug-like (sorry). I don’t recall who pointed it out, but I remember seeing my dad sitting in a slim silver coupe–stick shift. The only thing you could complain about was the handles with cracked paint, but it was love at first sight. Everything was perfect.
My parents wanted to continue looking at other dealerships and cars, but I had made up my mind. We bought it the same day, and my dad drove it home because we just purchased a manual 2007 Scion tC that I didn’t know how to drive!
I eventually quit working at Chick-fil-a because of a manager and moved on to work at a movie theater some close friends were working at.
But my 18th birthday rolled around while I was working at Infinite Smiles.
On my 18th birthday (when people in the US can finally sign contracts independently) I signed up for Acorns to start investing simply.
The pitch of Acorns was to start small.
Invest your spare change automatically.
I started investing slowly with weekly or bi-weekly investments of $10. Then after a few months, I bumped it up to $20. Then after another 5 months, I bumped it up to $50 weekly.
By the end of the year, I had around $800 and thought it was time to look towards something more extensive–whatever that meant. So I started looking at things that were just a bit more complex–Wealthfront and Betterfront. I ended up choosing Wealthfront and started by investing $700. I ramped up with a short stint at a well-paying internship, adding $100 a week before COVID shut that opportunity down.
Around ~March 2020, I stopped adding anything after I lost my internship. I did some freelance work and added another $1,000 after a few months, bringing the account contributions up to $2,720.
(Sidenote: I chucked another $1,000 entirely into Slack because many writers I followed began talking about it, and it felt like a fun YOLO. Several months later, Salesforce announced plans to acquire, and the stock jumped.)
Up until this point, my account value was pretty much always less than my contributions–I was technically losing money, hundreds at times. I imagine this is what spooks people about investing.
Looking back at diversified investments over time, we can see that short-term numbers with their dips and peaks are consistently meaningless. But many don’t feel that way at the moment. Many feel every drop is a sign of worse to come.
Funny enough, right after I invested that last $1,000 before stopping, my account value rose above contributions for the first time.
I read (at least partially) I Will Teach You to Be Rich by Ramit Sethi at some point. The title and marketing of the book leave me with a negative impression, but respectable people talk well about Ramit, and reading the book left a good impression.
A few points I recall:
- Most people think that doing more financially means cutting everything back and tells you what you can’t do with your money–that you shouldn’t buy that cup of Starbucks everyday. That’s not what it’s about! It’s about understanding how that cup of Starbucks fits into your overall financial plan. (And understanding that plan!)
- Spending money on things that save you ample time is money well spent.
- But also, you can haggle out of fees that come with credit cards and banks and things.
- The work of investing is largely done for you in the background, and can be mostly set up automatically.
At some point I discovered the Bogleheads wiki.
Bogleheads emphasize starting early, living below one’s means, regular saving, broad diversification, and sticking to one’s investment plan.
I also decided to try to read a simple book about investing and so I read “The Simple Path to Wealth” by J L Collins. It’s interspersed in my collection of ideas about wealth.
The moral of the story is pretty much this: Spend less than you earn—invest the surplus—avoid debt.
The book also led me to discover Mr. Money Mustache (MMM).
the whole country seemed to be displaying the same odd behavior: living ridiculously expensive lifestyles while thinking they were completely normal, and then being baffled when they had no money left over to buy their own freedom.
Relevant ideas from The 2021 Early Retirement Update:
- Conspicuous Consumption
- Keeping Up
- Seeking to be Visibly Awesome
At any rate, I didn’t realize that this happened to so many people: Once they have been established in their careers for a decade or more, they 1) feel secure in their job 2) have accumulated some money and 3) feel compelled to start spending. And once everyone in your peer group is spending more money — well, then everyone is looking over their shoulder at everyone else’s spending and this is really how the whole Keeping Up game begins.
she wasn’t trying that hard anyway, because she had acquired, somehow, New Life Dreams, which had to do with Conspicuous Consumption and Keeping Up and being Visibly Awesome — dreams which are at odds with my own.
And although it’s a bit old now, MMM wrote about Betterment vs Vanguard.
Betterment combines the (slight) advantages of more advanced investing, with an even simpler experience than you would get with just buying shares of VTI. The worthwhile things they provide, in my opinion, are:
- tax loss harvesting (see below)
- automatic tax-saving coordination between your standard and retirement accounts with Betterment
- really good tools to show you things like, “how much tax would I owe if I sold these shares right now?”, “how much income would my portfolio generate if I retired right now?”, and other useful visualizations
- a very sleek charitable giving system, which makes it easy to donate some of your appreciated shares – giving you a much bigger tax advantage than simply giving cash.
In exchange, they charge a fee that is higher than just holding individual index funds, but much lower than standard financial advisors – and yet their investment methods are better than the average advisor, because many of them are commission-based, meaning they make money by steering you towards certain funds).
So in my view, Robo-advisors are a good way to invest for people who want things to run on autopilot.
I’m not financially literate enough to properly weigh “this vs. that” (yet?). And as of now, I have never spoken to a financial advisor. And as of writing, I don’t have that much money built up, so it’s not as consequential.
So far, we’ve identified a few clear financial traps:
- Building bad debt (without a plan out)
- Feeling like you have to spend more when you start earning more.
- Not thinking about the money future you will need and helping them out by saving and investing as soon as you can.
- Investing is simple and boring. Everything else is a trap. Real investment doesn’t make exciting news headlines.
- Seeing other people spend money on things and feel like you’re missing out on life if you don‘t keep up with such spending.
So that’s the story of my financial investments for the first 20 years of my life. I’ll come back (hopefully) and update this over time.