The following is the latest post in my "Reader Profiles" series. Each post in this series details the financial situation and challenges of an FMF reader. The purpose of this series is to help us all identify with people like us (in similar situations -- not all will be, of course, but eventually I'm sure you will find someone like you here), get to know the frequent commenters on the site, and hear some financial wisdom/challenges from people other than me.
If you're interested in contributing to this series, then drop me an email. The series seems to be very popular with readers and I need a steady stream of new ones to keep it going.
Next in the series is FMF reader BB. He answered my questions (in red below) as follows:
Please tell us a bit about yourself.
First off, big thanks to FMF for generating and aggregating some amazing content over the past few years! Also, thanks to readers Megan, JM, Apex, and Mike Hunt. Great reader profiles that I have bookmarked! Everyone should check those out if you haven't already.
I'm a 24 year old guy with no kids, wife, or girlfriend. I'm the middle child and only son. I have a B.S. in Computer Engineering and work (as a Software Engineer) at a fortune 500 in a large southern city, let us call it Big City. I've been out of school for 1.5 years and at my current job (first one out of college) for just over one year. I cooped as a Software Engineer at a different company during college.
The 1/2 year between college and work was mostly spent living at home and being lazy; I was ready for a little break and not in a rush to get into a job without doing an adequate investigation of what was out there (my mom though I was nuts!). I really enjoyed hanging out with my dad (bike rides and such) multiple times per week and eating regular dinners at each of my parent's house. After a couple months I ramped up my job search first by figuring out why I wanted a job and then narrowing down the most important aspects of any potential job. I then took to "networking" over the internet and phone; over the course of a month I was able to have some really insightful conversations with some amazing senior engineers and VCs across the country about work and life; the conversations were very organic and could be either general and philosophic or would lead to specifics (especially if that person was at a company or in an industry I was super interested in). Also, my creative juices were really flowing during this 6 month period. Recorded a lot of project/business ideas (but didn't take any action, lame) and was doing a lot of good philosophizing. I've noticed a dramatic decrease now that I am working.
I owe so much to my parents and sisters. They are awesome. My father, especially, has taught me so much about what it means to be a good human being, man, and father. The only real financial lessons I remember from my parents were my dad espousing the benefits of investing early and how interest works. I also loved hearing about exactly how he has grown his career and also used our homes (we moved a lot before I got into middle school) as investments (getting a good deal in a good school zone, doing some diy repairs). My parents were generally open on topics of money, though they never shared their salaries with my siblings or me. They forced me to take on jobs in middle/high school like cutting yards during the summer and working at a pizza shop. I think the best thing they gave me in as it related to personal finance was consistent positive feedback on my habit of saving money.
I am very laid back and almost never get stressed. Unfortunately, though, sometimes I feel as if I am not taking my life by the reins enough; I let things in my life unfold and take action when the inflection point arrives. This especially applies to my young career, investing, relationships, and social life.
I hope that wasn't too boring and narcissistic. Now to some meat.
Describe your financial situation (who works in your family, how your income is (general), how your expenses are, etc.).
My base income is $70k but it is around $80k after bonus, stock purchase plan, and retirement matching. No other income.
Cash Flow:
The following expenses are all amortized (* denotes not amortized, but rather a number grabbed from my annual financial planning spreadsheet) over the past 12 months. No significant changes to regular monthly expenses in the past 12 months except for reducing my 401k contribution:
- ($1,450)* income taxes
- ($1,500)* retirement contributions w/ match. maxing out Roth IRA and HSA
- ($ 480)* charity donation
- ($ 30)* health/dental/life insurance (HDHP, 1 year of salary life and some dismemberment insurance)
- ($ 0) car insurance (my mom has still been paying this.. i feel bad, will be getting my own plan next month)
- ($ 380) rent
- ($ 45) utilities
- ($ 50) cell/data plan (paid to father)
- ($ 100) car (gas, routine service)
- ($ 130) groceries
- ($ 170) restaurants
- ($ 60) alcohol/bars
- ($ 30) coffee shops
- ($ 250) travel (predominately airfare to see family)
- ($ 70) shopping (clothes, hobbies, books, electronics, software)
- ($ 55) entertainment (concert, sporting event, movie theaters)
- total: (IN) $6,667 + (OUT) $4,800 = $1,867
In the past year I splurged on:
- $3300 corrective vision surgery (I have better than 20/20 vision now!)
- $1000 bicycle
Significant Assets (rounded off):
- $22,000 Roth IRA (was at $14k one year ago thanks to my coop)
- $12,000 Roth 401k
- $ 4,250 HSA (treating it as a retirement account, not dipping for medical costs)
- $16,500 online savings
- $ 1,500 online checking
- $ 6,000 online savings (emergency fund)
- $ 2,000 car (same car I bought when I turned 16 for $500)
- total: $64,250
Liabilities (rounded off):
- $1750 student loans (had basically a full scholarship)
- $1700 on my credit card currently (it's near the end of the month.. $900 per month sounds about right)
Net Worth: $60,800
Allow me to comment on some of my expenses above:
(1) I am proud of the rent I pay! It's a 2BR/2BA apartment about 2.5 miles from work in a major city that I share with a co-worker. The complex has pretty good management and is gated. Nearby complexes are not so nice... My neighbors are mostly of the lower income variety, seemingly. Friends my age with similar salaries pay upwards of $1,200 to live in a cooler part of town (and an 8 mile commute in thick traffic). The only down side (but not really) is that I rarely think about buying a home; my city seems like a pretty good buyer's market right now and has been growing healthily at least the past 10 years.
(2) I recently reduced my retirement contribution to the 401k to 10%
(3) The "charity donation" amount gets direct deposited into another online banking account which I do not include in any of my financial tracking. I never really even know how much money is in that account until I make the donations.
(4) I should have shopped around for my vision surgery
(5) I need to legitimately ride my bike more (if I think of the per use cost of that bike right now I feel bad).
What are the current financial issues you're facing (saving, paying off debt, etc.)?
Basically I am just enjoying where I am at right now. No real debt to speak of and I would like to keep it that way unless as an investment. Just finished funding my emergency fund!
I have all my retirement accounts automated to make index fund purchases 6 different dates per month. The retirement accounts are definitely buy and hold. The only interaction would be re-balancing or skipping a buy or two if I think we are in a particular boom/bubble, thus giving me some cash reserve to make a purchase during a bad bust cycle. Here is how my funds are allocated currently in all of my retirement accounts:
- 29% 2050 TARGET
- 21% cash
- 16% SMALL CAP
- 9% INTERNATIONAL
- 7% EMERGING ASIA
- 6% CHINA
- 5% INDIA
- 3% SOUTH KOREA
- 2% JAPAN
- 2% Company Stock
I definitely need to be looking at ways to put more of this cash (both in retirement accounts above and the 16.5k in savings) to use. Maybe a taxable investment account?
Also, I am new to charitable giving and not really sure of where I should be giving. I think it was FMF who shared a link to for researching non-profits. I don't feel comfortable giving the majority of this amount my church (but perhaps to some Catholic charities). Advice welcome.
What are your plans for the future (retire early, build your career, etc.)?
I think building a technical career makes a lot of sense. But at the same time seeing what quality engineers are capable of is daunting (come on BB, they have 20+ years more experience than you! if you are going to compare yourself to others, compare to those your own age! oh wait... mark zuckerberg) and makes me question my skills and true passions. I have thought about getting an MBA because I really like financial/economic/measuring/optimizing stuff but I am hesitant because there seems to be a glut of MBAs and there contribution to society is not really admired by the engineering community at large from what have gathered. Also, not being a wage slave is very attractive and I think I could succeed at my own ventures.
So yeah, in short I don't have any clear vision on this topic!
I would really love to start a family. But I think that is the most "in the future" than other plans. Plus finding that certain somebody is pretty tough! I dated a great girl for 3 years in college and thought she was the one but, alas. I suppose that IS one benefit of being male: no huge time pressure to starting a biological family.
I would like to build my own dream home once I am "settled down."
I do plan on semi-retiring early. But have reduced my contributions to my retirements account somewhat because I would like to have access to a lot of these funds before I turn 65. My parents are still 10 years away from 65. Perspective. I don't really care to be "forced/stuck" working after my kids are already moved out from home.
I am wondering if Big City (and the median Big City person I may meet) really meshes with my personality. There are indeed some awesome perks of living in Big City but I don't really enjoy them as much as I should since I have a limited social circle. I think I would really, really enjoy a town like Nashville or Boulder/Denver. Or even abroad. I think I will give Big City another year but be more open to recruiters etc. (have already had some "renowned" companies' recruiters offering interviews over the past year). So far in life I would say the really great parts of a city would be: the outdoors/weather, along the same lines an athletically healthy city, a good music scene (I love blues, blues-influenced rock, blues-influenced country, some indie, and music good for dancing), would be nice to have an option of a good Engineering school or MBA program, and perhaps close to family.
And of course, as I said earlier, "I let things in my life unfold and take action when the inflection point arrives." So I am a little worried that I am just talking the talk in this section.
What's your best piece(s) of financial advice and/or your general philosophy on personal finances?
I gave some advice to my siblings recently after a slightly awkward encounter during Christmas which involved my older sister basically thinking my saving habits were strange and then realizing that she might actually be the strange one after all my cousins affirmed my actions. So i'll share that advice in a condensed form below (note: it was probably all inspired from various blogs or books over the last few years, sorry for no linkies as I don't keep good records like that). For the record, my older sister is one of the most amazing persons I know and she will be just fine:
Actionable:
- Automate your Money - you want to go ahead and plan out what you will be spending money on in the future, and make savings/retirement/investment accounts for those things. Then setup automatic transfers each month into those accounts for what you can afford after bills and necessary costs. Thus when you see your "general checking/spending" account balance, it reflects what you can actually spend AFTER saving.
- Track your Net Worth - Every decision you make, ask yourself what it does to your ability to grow your net worth. Don't make the choices that make it harder to grow. Once you see it growing you will find it easier to grow it more and more. If you don't think about net worth, you will likely fall into the mindset of whether or not you can afford something. If that is the only question you are asking, it will ensure you can never afford much, because you will always be spending all you can afford to spend.
General:
- You choose to trade your life energy for money. When you spend money, you’re actually spending time at work. Talk yourself out of purchases by asking yourself if you really get enough enjoyment out of this item to be worth the time and energy you had to invest to actually earn enough take-home money to pay for the item. This tends to move you quickly toward focusing on low-cost items and you’ll find that you can eventually spend your time without having to exchange it for money.
- Is this expenditure of life energy in alignment with my values and life purpose? (somewhat related link) The more you reflect on these things, the easier it is to use them as a filter for the choices you make in life.
- Possessions own you. Look at the real reason you want to buy more expensive crap and realize that it all comes down to validation from others in one way or another. The need to buy new crap dictates your life - it fixes you in one location with that house and furniture, and it governs how much money you need to earn. And it almost never actually enriches your life in any way. The less you own the better.
- Take the 3 above with a grain of salt, deferring your happiness to the future is a terrible idea. All you have is the present; enjoy the show, don't wait for the finale. (Just remember what will truly make you happy) Don't become cash rich but time poor.
- Memories are better than material objects
- Avoid debt at all costs
- The earlier you begin to invest, the longer compound interest has to work. A small amount now will be a large amount in 35 years. A medium amount in 30 years will be a medium amount in 35 years
Thanks! Advice and questions welcome!
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