Accountability Time

I’ve spent way too much on discounted video games I can’t play yet.  But I haven’t bothered to actually account for them in the budget.  That combined w/ some recent car expenses (at least $938, $500 insurance deductible when somebody tried to steal my car and $438 to replace all 4 brakes, just regular maintenance) means that I’m not on track w/ my savings for Burning Man.  I probably still have enough to handle everything outside of the main $4k/month plan, but I have to actually… see where I’m at.  So here’s the dirt.  Here’s what I’ve spent:

  • 53.73
  • 55.18
  • 14.98
  • 22.48
  • 10.98
  • 32.10
  • 3.99
  • 29.55
  • 7.49
  • 34.18
  • 14.99
  • 15.96
  • 18.45
  • 88.15

Total: $404.21

Arrgh.  I was thinking it was more like $300.  No more for me.  What did I get for that?  I tried to buy games only under $10, so this better be >40 games.  80+ games.  Value wise, I guess that’s not too bad.  Except that I can’t play many of them until I have a PC.  😀  I guess I’m allowed to be retarded once in a while… as long as I recognize it and punish myself for a responsible amount of time afterward.  Burning Man is definitely going to be focused on value this year.  Since I’ve cut up all my credit cards, I really have no choice but to stop spending the money.  Otherwise I’ll have no choice but to cut into the $4k, and emotionally I really don’t want to do that.

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Why to Risk Investment

Investing is a risk.  So why take it?  Let’s look at how retirement numbers work out w/out investing.

15% savings per year from age 30 to age 60.  Let’s say on a $100k salary.

$15k * 30 years = $450k

Awesome!  Retiring at 60 with $450k.  Great.  Oh wait, let’s account for 3% per year inflation.  1.03 inflation * 30 years = 2.42.

So what $1 buys today, $2.42 will buy in 2044.  So if you want the same lifestyle in 2044, you’ll need to earn $242k a year instead of $100k per year.

$450k/2.42 = $186k

Congratulations.  If you don’t invest your money, saving 15% of your income every year will get you less than 2 years of retirement after 30 years of savings.  Seems like a shitty deal.  Let’s look at the results of investing when the market yields 8% average.

$1,835,187.87

And then we account for inflation…

$758k

With a modest rate of return compared with historical values, you still come out 4X better.  If you don’t invest in *something*, you’re hosed, so there’s really no option.

 

Women and Money

Controversial topic time!

It seems like today, if you’re a dude and you say anything other than “Women are treated horribly unfairly and we need to try much harder to help them in every way possible and give them advantages and accommodate them when they are pregnant, etc. etc.” – you’ll get jumped on and yelled at by a bunch of women.

I’ll preface this post by pointing out that I was raised by a single mom with a PhD, a woman who worked in public service for 30+ years and finished off her career with a consulting that paid about 10X per hour what the average american makes.  This is a woman who worked long hours at a relatively high level.  Did she experience discrimination?  Absolutely.  The other person in the household was my sister, who received the top legislative recommendation in the state for both the U.S. Naval Academy and West Point.  She played Olympic Development soccer.  She has one more year of vet school, which she started after serving 5 years in the marine corp, part of that time in Iraq.

Growing up, my sister would sit on my head and fart.  As the youngest and only male member of the house, there was no talk of women being inferior.  It was pretty clear from the beginning that women were pretty badass.

I have no doubt that women are treated unfairly by men.  I’ve seen it myself.   The statistics and the anecdotes don’t lie.

But I also have no doubt that whining about it isn’t going to change anything.  If you’re a woman and you’re upset that there aren’t more highly paid female engineers, reading MySQL documentation is a faster path to success than complaining about attitudes towards women in science and math education.  My sister didn’t get into the Naval Academy complaining that only 11% of her class was female.  She got in by running until they had to add titanium to her foot to keep it going.  She got in by staying after school every day for ROTC.

Complaining that there aren’t more female executives is similarly fruitless.  If you’re female and you want to be a CEO, then look at the resumes of CEOs and copy them.  Marissa Mayer and Sheryl Sandberg gained a meaningful voice *after* they’d reached highly visible career positions, not before.

This isn’t to say that you shouldn’t be assertive while you’re climbing the ladder.  Don’t let people patronize you.  Don’t let people overtalk you.  It’s important to call people on their bullshit.  Sexist attitudes are so engrained that even the most well-meaning man will make mistakes in this area.  If they’re smart, they’ll appreciate being pulled back in a direction of fairness and meritocracy.

But if you’re not the first and last person in the office every day, don’t be surprised when your salary matches up with the sad statistics.  Is it fair?  No.  But we’re not talking about fair.  We’re talking about what a person needs to do to accomplish a goal.  Some people are born with larger piles of shit and smaller shovels, but that’s not the point.

The point is that we’re scooping hard and spending our nights carving out bigger shovels, so that someday we can use our dump truck to bury the haters in a giant pile of their own crap.

Women are badass, but I don’t see enough of them seeking out technically challenging work.  Man or woman, if you want to get ahead in business and you’re not super-gifted, you’re probably going to have nuke that whole work-life-balance thing, at least for a while.

The Definition of Affluence

One of the most eye opening things I’ve read recently was when the author of “The Milionaire Next Door” claimed that affluence was a function of net worth, not income.

Seems about right to me.  When you think of an affluent person, you don’t think of someone who needs to work.  There’s a stereotype of the “lazy rich person.”  I’m cool with that.  It would be great one day if I was allowed to be lazy.  It might even be called retirement.

The book recommends to measure economic decisions as a ratio of your net worth rather than as a ratio of your income.  For a person who wants to grow their wealth by leveraging investment, this makes a lot of sense.  You can’t earn much money through investment unless you have a substantial amount invested, and for most people, that substantial amount is going to be most of what they have.

So when I read lines like this from the NYT:

For those who can crack the top 20 percent, there is great promise. Most people in that elite group, Rank told me, will spend at least part of their careers among the truly affluent, earning more than $250,000 a year.

I have a little brain fart.  A person isn’t among the ranks of the “truly affluent” when they earn $250k in a year.  Certainly not if they spend it all.  Which isn’t difficult.  Of $250k, the government will take $100k.  You’re left with $150k.  That’s quite a lot . . . but if you have high expenses:

  • 2 kids in private school ($40k)
  • $600k mortgage on your 3 bedroom, 1600 sq. ft. $800k San Jose house ($65k)
  • Food for a family of 4 ($12k)
  • child care ($12k)
  • House bills (insurance, electricity, water, gas, internet, cable, etc.)($12k)
  • Vacation ($5k)

= $146k

Not much left over for retirement.  Not saving for kid’s college.  You’re living a good life, but in an expensive area, but you don’t live in a mansion.  If one spouse loses a job, your life gets difficult really fast.  Is that affluent?  It’s certainly better than living below the poverty line, but at the end of the day, it’s just a gold-plated rat race.

Salary isn’t really the relevant thing.  It’s net worth.  Mark Zuckerberg has no salary, but wouldn’t you call him affluent?

So if you’re making a bunch of money right now – great.  But you haven’t “made it.”  You’re not “doing well” if you spend most of it.  Especially if you’re young.  As long as people keep internalizing income-based views of wealth, they’re going to have a hard time reaching financial independence.

 

Living With Your Parents

A recent NYT article proclaimed:

It’s Official: The Boomerang Kids Won’t Leave

http://www.nytimes.com/2014/06/22/magazine/its-official-the-boomerang-kids-wont-leave.html?_r=0

“Boomerang Generation”

At the top, they showed 14 slides of kids living with their parents.  Kids with massive student loan debt.  Art degrees, biology degrees, film degrees.

Millennials’ parents could be forgiven for underestimating the consequences of these trends. For most of American history, it was natural for each generation to become richer than the previous one. Now that’s no longer true. These changes created a new, far less predictable dynamic — some people would do much better than their parents could have ever dreamed; others would fall permanently behind. Given the volatility of the changes, the idea of an “average” worker was becoming obsolete. And while much of the discussion about economic inequality has centered on the top 1 percent, it’s the gap between the top 20 percent and the rest that’s more salient to young people. “That is a dividing point,” says Mark Rank, a professor at Washington University in St. Louis. People in the top 20 percent of income — roughly $100,000 in 2013 — have taken nearly all the economic gains of the past 40 years. (Of course, the top 1 percent and, even more so, the top 0.01 percent, has taken a far more disproportionate share).

This article is another sad example of mistaking statistics for reality.  I don’t care if you’re in the top 20% or the bottom 80%.  If you think strategically and work really hard, you can dig yourself out.  The problem is, most people’s expectations of how hard they need to work are too low.  They need to reset their expectations.

I’ll give myself as an example.  I wake up at 6AM.  I get to work by 8AM.  I work until lunch.  I spend 15 minutes at lunch and 45 min. walking afterward.  After that, I work until 6.  I get home at 6:20.  Walk again from about 6:30-7:30PM.  So on a typical week day, I’m walking 2 hours and working at a desk for 9 hours.

When I get home at 7:30PM, I’m doing other things.  I’m writing a simulation for a friend’s research paper.  I’m writing a blog post.  I’m running different investment scenarios and playing with spreadsheets.  It’s not all work, but before you know, it’s 10PM and time for bed again.

Then the weekend comes.  Not time for rest.  I get up at 6AM and start working hard on this blog post.  I know because of the spreadsheets that I need to start selling my stuff because early money will accelerate my long term wealth building tremendously.

Do I want to spend my weekend looking at San Jose housing affordability statistics and thinking about how to construct a light box so I can get rid of things I love?  Not really.  But I’ve done the planning, and the planning says that’s the way forward.  I don’t really have a choice unless I want to get stuck.  Fuck that, I’m not getting stuck.

Yes, the student loans are bad.  But as far as I can tell, most of the kids in this article are suffering from job entitlement.  They think they’re entitled to a job in the field of their choice, and they think their entitled to a salary that will pay back their loans.

Nope.

When I left college, I had no debt.  I worked in college, but it didn’t pay nearly enough per hour to touch tuition.  I was lucky, and my mom paid it.  But I didn’t know that until the end of college.  I knew while I was there that I had a big financial burden coming, and I’d have to figure out how to get rid of it.  That was the primary motivator: getting rid of the debt.

After there was no debt, the primary motivator was not burdening my mom — *not* working my dream job.  My dream job was creative writing, and that didn’t pay anything.  The writers at my 2nd job made about $35k, which is about 30% of what I made working for the same company.  Is it because what I did required so much more intelligence?  No.  It’s because what I did was way more boring.  I made what I made because I was willing to sacrifice my wants for money.

I wanted to write some fictional bullshit that would make people laugh.  Instead, I spent hours reading stuff like this:

https://developer.apple.com/library/mac/documentation/Cocoa/Conceptual/CoreData/Articles/cdMOM.html#//apple_ref/doc/uid/TP40002328-SW1

A model contains NSEntityDescription objects that represent the model’s entities. Two important features of an entity are its name, and the name of the class used to represent the entity at runtime. You should be careful to keep clear the differences between an entity, the class used to represent the entity, and the managed objects that are instances of that entity.

So when I see an art major who is unemployed or underemployed living with their parents, I think they are acting stupid.  I didn’t major in computer science – I learned it all from reading stuff online.  Put away your paint brushes and start reading about nursing programs, or IT, because medicine and technology are where the market is, and you need money to pay back your debt.

I’m not against people living with their parents.  It would drive me crazy, but financially it can be an excellent move, but only if you are aggressively saving/investing or aggressively paying off debt.  If you’re doing neither, it’s just a way to decrease pressure.  If you’re young and not making any money — you need some pressure.

There’s an idea in America – I had it earlier in my life – that, as the land of opportunity, a person should be able to make any amount of money in any field.  That a person should be able to have a house, a nice car, and a nice vacation if they only work diligently at whatever profession they’ve chosen.

That ain’t true.

If you want those things, you have to calculate how much they cost.  Then you have to look at what jobs and what job markets are paying those salaries.  Then you have to look at the resumes of people who have those jobs.  And after all that, you have to start talking to your friends and figuring out how you’re going to land that first foot-in-the-door position.  Then, you’ll probably have to work for at least a year or two in a much less pleasant position.  You’ll have to work that job 12 hours a day so you can do the crappy parts *and* do the learning parts.

So, if you’re living at home.  And if you think, “Oh, my situation is different, the economy has screwed me over, whoa as me.”  I’ll leave you with some Charles Dickens.

The world is becoming a hard and cruel place. One must steel oneself to survive it and not be crushed with the weak and infirm.

One step forward, One step back

[somehow this wasn’t published on the 6th]

Maybe even two.  Only six days into the month, and already my per diem allowance has fallen 24%.

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This has been from a number of different purchases:

1)  Mario Kart 8 (good purchase b/c it’s fun and I can afford it)

2)  $30 for 2 shots of tequila (stupid!)

3)  $25 for an external HD connector (a good purchase, because it lets me use 4 HDs that are just sitting around)

4)  eBay bill from last month for selling my mom’s phone

5)  Amazon bill from last month while I was trying to run a server (I need to shut this down).

 

Christmas in June

[somehow this wasn’t published on the 13th]

I woke up this morning with $6500 total in my bank accounts.  ~$2750 in savings and ~$3750 in checking.  Most of my checking balance is from my paycheck ($3668), because by this time I have already allocated most of the dollars to investment, savings, cash for food, etc., or the automatic withdraws they are destined for have already taken place (HOA dues).

In the past, the second paycheck of the month has been a world of possibility.  I have relatively few bills to pay in the second half of the month ($200), so I’d consider most of the paycheck as ‘funny money’ – available to fulfill my latest gadget/yo-yo desire, or to be spent on a nice dinner, a trip, etc.

But no more.  This, I guess, is the sad part of having a budget.  The sad part of having a plan and realizing the opportunity cost of the funny money philosophy.  Every dollar is already marked, $3381 for saving and investment.  The rest for bills and gas.  So reallyit’s not Christmas at all.  Of the $411 remaining in my account, about $200 is for the remaining bills, so really there’s only $200 or so.  $50 for gas.  I need the extra $150 for overdraw padding.

In my wallet, I have some hope though.  I mean cash.  $184, in fact.  About $10 a day for the rest of the month.  Woohoo!  I will have $14k in my EJ account and $4k in my savings account when this month is done.  That’s $18k total.  Roughly 18% of the way to my goal, unless I use the money for a Roth conversion, and only if I keep no emergency fund, which wouldn’t be responsible.  So really I haven’t even started on the whole house-paying-off thing.  But I’m going to pretend that’s not true, because it motivates me a lot more than a boring emergency fund or Roth conversion.

😀