Featured

On the edge of the cliff, poised to jump

The best is yet to come.

— Me

In a week and a half from now I will be giving my two-week notice at work. After 15 years in the workforce I will be calling it quits for good (for now at least). The term most commonly used is FIRE, Financial Independence, Retire Early. I’m beginning to think of it as the Life: the next phase. Like most big changes in life I expect it to have its ups and its downs. I am convinced that when I settle into a rhythm that whatever I find will be more meaningful and rewarding than what I have been blessed with so far. It may be a bumpy ride getting there; good thing I enjoy change in life.

#FIRE, #retirement, #freedom, #gratitude

Do You Want to Act Rich or Be Rich?

When I was a kid I was socially awkward and nerdy. Somehow my meager clothing allowance never seemed to extend far enough to get me anything that felt cool. I managed to tie those two things together in my mind and came to believe that if I just had enough money to wear fashionable clothes to school I’d be transformed into a confident, outgoing person several rungs higher up the social ladder.

When I got my first job out of college it was therefore important to me to finally be able to dress the way I had always wanted to. Ann Taylor Outlet was my friend and I stocked my professional wardrobe with lined slacks and silk twinsets. I got myself the leather “ducky bag” purse women in my family had always carried when I was a kid. I had the outer trappings of having made it.

Being early in my career my bank account and 401k were about as empty as my professional resume. I slowly began to understand that I couldn’t just jump to the finish line by merely looking like a successful adult; I had to take the time and do the hard work to earn my way to that position in life, in my career, and my finances.

A lot of people fall for the trap of believing that being rich is owning a lot of expensive stuff. When people express the desire to be a millionaire, often this means the literal opposite “I want to spend a million dollars”. The problem with this is the desire to spend like you are rich is exactly the behavior that will prevent you from ever being rich. So you have to ask yourself, what is more important? Acting rich or being rich?

Personally I started out by wanting to act the part without the bank account to back me up. Soon enough I learned that this gave me a hollow feeling. I looked smart but I was afraid of a big expense popping up that would expose how fragile my financial situation really was. Slowly I built up my emergency fund and my 401K, opened an IRA, and got myself on the path to having real wealth. Over time a curious thing happened to me; the more things I could afford to buy, the less I wanted to buy them. In the process I realized that more than being able to buy things, what I really crave about money is the freedom it gives me to pursue whatever opportunities life may put in my path. 

So here comes my personal definition of rich: having enough money to have the freedom to do what I want with my time. What is rich for you?

Money Is Just A Tool

Part of our problem with talking about money is the emotions and judgements that get stirred up. If you don’t have enough of it thinking about money may make you angry, jealous, or make you feel like you aren’t in control of your life. There are those who think money is the root of all evil and prefer to avoid it as much as possible. Others may believe that the key to happiness in life is just being able to finally get enough money to fill in the blank.

However peeling back all of that emotional baggage, at the root of it money is simply a tool, no more, no less. It is a tool that allows us to convert our labor into goods and services we want. Before money this process was (and is still) achieved through bartering. “I’ll work my garden and grow these vegetables and exchange them for the eggs your chickens laid.” The benefits of using money over bartering are numerous. A few of them include:

  • Store value over time – I can exchange my money for eggs three months from now instead of today. Money, conveniently, doesn’t rot like my veggies will. 
  • Facilitate multi-party transactions – I have vegetables and want eggs, but the person with eggs wants his wheel repaired and the wheel repair person is interested in vegetables. Without money coordinating this exchange of goods so everyone is happy is a logistical nightmare.  

In today’s economy things are a lot more complex than in the example above, so I find it helpful to think of money as described in the book Your Money Or Your Life. This book teaches us to think of money as our life force, meaning we convert our time and energy and labor into money which we then use to spend on whatever we want. The book encourages us to calculate our after-tax, take-home wage and then convert the purchase price of things into hours of work. If my take-home pay is $20/hour, buying those AirPods means an additional 8 hours of sitting at work. Is that worth it? Maybe it is, maybe it isn’t, but the important thing is to recognize the tradeoff being made in that purchase decision.

Like any tool, money can be misused by those who don’t have the right skills. In the hands of someone with knowledge and experience this tool can be used to make beautiful things. I know which category I’d like to be in. Will you take the time to learn how to use this tool wisly?

Becoming Rich Is Not Easy, But It Is Simple

You want to get rich, right? I want to get rich. Hell, we all do! That is the American Dream. Or something. In any case, building enough wealth to at least be secure and not stay up at night worrying about money is a great goal. So roll up your sleeves and let’s get started.

If you’ve never had money or are just one of those for whom money seems to be like water that just slips between your fingers and is gone, getting rich may only seem possible for those who win the lottery. Setting aside the part where many lottery winners eventually go broke, most people who have substantial wealth didn’t get that way overnight but built it up over time. I’ll share with you the very secret, complex, and magical formula for how they do that:

Earn > Spend

Translating that into English: Spend less than you earn, and save the difference.

To turn that into a (truly appalling) image, let’s think of money as water flowing through a pipe. The money you earn is the money coming into the pipe from the left and your spending is money flowing out on the right.

Earn = Spend

If you spend as much as you earn, then the water (money) just flows right through your life. You can see that as soon as you stop earning money, you’ll quickly have no money. (Hint: this is what most Americans do)

Earn > Spend

When you spend less than you earn, you start to build up a pile of cash. In our water example you might break your hose and blow water all over the place. Luckily with extra money building up the result is usually happier and a lot less messy.

Of course, there are lots of details that are getting glossed over here, like how to earn more money, how to spend less, what to do with the extra money you save, how to know when you’ve saved enough. I’m also not saying that it is EASY to spend less than you earn. That takes willpower and delayed gratification and other adult-y kind of things which we will cover later. However you can’t deny that on the surface, building wealth is SIMPLE.

Why We Should Talk More About Money

The old expression goes that you should talk about religion or politics at a dinner party for fear of wading into shark-infested waters. (Side note: remember back in Before Times, when you could get together with friends in person?) We do sometimes broach these subjects, infrequently to have measured, thoughtful exchanges of ideas, and more often to just shout randomly into the void over social media. A more stubbornly taboo topic remains money, in particular personal finance. I expect most of us would rather explain how sex works to prepubescent kids than share details of our balance sheets with friends and family.

Why this taboo? In part it is because money carries with it a good deal of baggage. What it means to us personally, what our relationship with it is, whether we had enough of it or not growing up, what we feel about people who have less or more than us, to what extent we conflate net worth and worthiness as a human being. All of this means that opening up about personal finance is scary because you don’t know how another person will judge you.

Not talking about money more openly however has downsides. Much like sex, money is something that we will all experience in our lives at some point. Also like sex, financial education leads to better decisions and better outcomes. Depending on the state you live in, the sex education you receive at school may be anything from comprehensive to shitty. On the other hand, almost no one learns good financial education in school, all the more reason why we should talk about it more in real life. 

“But eek!”, you say. “I don’t want anyone to know how much money I have in the bank!”. And that is fair. I’m not going to tell you my exact number either. But we can talk generally about finances and the decisions we make. For example, right now the only way we judge someone else’s financial status is by exterior signalling – what car they drive, where they live, what clothes or gadgets they carry around. As we know, these signals can be very misleading. Does my neighbor drive a Tesla because she is rich or does she have nothing saved and can barely make the payments? 

What if instead of proudly posting pics of a new purchase we bragged about front-loading our IRAs in January? Could you get comfortable turning down an invite to dinner and saying “i’m saving up for X instead” rather of making an excuse? If so then I’d like to recruit you to help me break down this taboo.

#FinanceLetters

Introducing myself

The best is yet to come. -Me.

I couldn’t say where I picked up this tagline, but I have carried this sentiment of optimism with me for two decades now. Life, with its ups and downs has been pretty great to me, but I choose to believe that there is always something better around the corner. This leads me to daydream big. My husband has learned to laugh ruefully at yet another “what if we spent summers in a new country each year?!” but also appreciates the eternal and often misplaced optimism “maybe tonight is the night the baby will finally sleep!”.

That isn’t to say that things are always great or I am always happy.

The last few years have actually been a roller coaster and the last six months especially so. As other parents may related, the highs are higher but the lows are significantly lower. Layer on top a growing sense of time being finite (hello, late 30s!) and a realization that fulfillment and meaning in life aren’t going to come from my career, I feel like I have a good amount to unpack. Blogging is cheaper and easier than therapy, so here we are.

#zerotohero