Category: Money

The world is not fair. So much in our lives hinges on two things, where we were born and who gave birth to us. In both cases we have no say in the matter. The hand you’re dealt is the hand with which you must play the game.

I understand that I was dealt about as good of a hand as anyone could hope for. I was born in a first world country to a middle class family as a white male in a system that unfairly favors white males. My parents read to me as a child, were patient and loving, and taught me how to excel at school and at work. The list could go on, but you get the point.

Others are dealt more challenging hands in the game of life. You might be born into a much less privileged situation than I was. I can imagine it is easy to disregard my thoughts and advice from that perspective, “Yeah, he can save money and invest it because he was born into a privileged life!”

I agree. I acknowledge that I will never fully understand anyone else’s perspective but my own, and my privilege may keep me from seeing things as others do. That being said, I believe that everyone’s unique perspective is valuable, and we all have things we can learn from each other. In the last few years I have had the opportunity to learn a great deal from hearing about different perspectives and life experiences.

And I want you to learn from mine!

I want the secret equation to become wealthy to be common knowledge. I want it to be a tool that everyone uses, not just those from privileged backgrounds. I want everyone to know the benefits of consuming less. I want everyone to know how to use a Roth IRA to achieve a comfortable retirement. I want everyone to have access to information that they can use to improve their lives if they so choose.

No matter who you are, I believe the ideas I discuss here are applicable to you. Everyone can benefit from simplifying their life or taking a closer look at how they’re spending their time and money. There is not a single human on this planet who is perfect, therefore we all can improve. Since people are still drinking toxic sludge, still buying $3,000 chairs with money they don’t have, and still spending billions on storage units for junk they don’t use, I’d say we have a lot of improvements left to make. #MoneyGoals

 

(Pictured: Hope Outdoor Gallery. Austin, Texas. March, 2015)

“Time is money.” We’ve all heard this phrase, and as a cliché it’s all but lost its meaning. But it’s true!

Just think, how did most of the money that you have ever had in your life get to you? Yes, you probably received some gifts, maybe a scholarship, or an inheritance even. But the vast majority of the money that comes to you is probably coming from your job. No matter who you are or what kind of job you have, a job is simply a tool that converts your time into a good or service, that you are then given money for. Therefore, money is just a measure of the amount of time you have put in.

Say I make $10 per hour, and I want to buy a new bike that costs $300. That bike costs 30 hours of my time. Easy enough right?

I was thinking about this concept while standing on a sidewalk in downtown Dallas yesterday at 5 pm, waiting for the bus to take me home. I watched an unusual amount of new fancy cars thunder past me. Mercedes, Range Rovers, Jaguars, and a Maserati. Each contained exactly one person, a business man or woman speeding home.

Let’s say for easy math, a new Range Rover costs $100,000 (actual price is pretty close, not bad!) and our luxurious businessperson makes $150,000 per year, or $75 per hour (which would almost put them in the top 5% of earners in the US).

This means that their Range Rover costs 1,333 hours of their time just to purchase, not counting gas, maintenance, or insurance.

1,333 hours. 

I wonder if the people who buy these cars would make the same decision if the purchase was presented to them in hours instead of dollars and cents. “Ma’am, this vehicle is the top of the line in luxury products, and you only have to spend 1,333 hours away from your friends, family, and hobbies” No thanks!

What’s more concerning is people who don’t make that much per hour, and then buy a fancy car with a loan. If you’re making $15 an hour and take on debt to buy a $30,000 car, then you’re signing away a future 2,000 hours of your time (most likely more due to interest). You are now chained to that car payment, it owns you.

The next time you make a major purchase, think about the time that it costs, not the amount of money. Is the time that you could spend doing *insert thing you love doing* worth giving up for *insert purchase*?

And if you decide to save the money, be sure to invest it and make that retirement account grow! #MoneyGoals

I’m not a huge fan of fairs. Lots of overpriced and unhealthy food, lots
of oversold and unhealthy people, and not much peace and quiet. But I am a fan of people watching!

Last fall I went to the Texas State Fair with my homie Mars. We did a lot of walking around and exploring. Eventually we got tired and wanted to rest for bit. Fortunately there was a tent set up by a well-known mattress chain, with plenty of very comfortable looking furniture to test drive.

I sat in a modern-styled reclining chair with a footstool, and man it was comfy! It could’ve been that I’d been on my feet for the last 4 hours, but still. I melted into it.

Mars and I were talking about how much we thought that the chair would cost, and out of curiosity I asked the sales rep dude. He said “I think 2 or 3 thousand, lemme check,” then talked to another dude who knew, and said, “They’re $3,200”

$3,200 for a chair. What.

I wish that was the worst part of the story. Despite me emphasizing that I had asked simply out of curiosity and had no interest whatsoever in taking one home with me, the sales guy started hounding me pretty hard to buy one. He brought over his clipboard and put it right in front of my face.

Out of semi-politeness, I told him I didn’t have that kind of money and I’m a broke college kid. Partially true, but not fully because I could pay cash for a few of those silly chairs if I wanted to. But “I can’t afford it” is a lot more polite than “Get outta my face!” right?

Now, I know it’s his job, and everybody has to pay the bills. But after I told him that I was not able to afford a $3,000 chair, he tried to convince me to finance it. So basically telling me, “Hey poor college student, I know that you don’t have money now, so how about you pay it off little by little over a long period of time, paying more than you would have paid up front, and making sure you don’t have money for the next few years!”

His actual words were “It’s $20 a week, that’s less than your cell phone bill!”

Jokes on you bro, my phone bill is $19.51 a month $12.18 a month (as of April 2017).

Here’s what we learned:

1.   Someone out there is spending 3 grand on a comfy chair. Otherwise they wouldn’t be selling them. Don’t be that person.

2.   If somebody tries to sell you something, and they want you to finance it, pay for it over a period of time, “take advantage of a layaway option”, please say no and stop talking to them. If you’re financing something, you will pay a lot more for it. Looking back, I should’ve asked them what the interest rate on that financing was, so I could calculate how much more it would cost “with special financing”. But I just wanted to get out of there afer he started badgering me.

3.   One of the most powerful words in the English language is “no”. If you are not comfortable telling people no, get comfortable with it.
There will be people out there who are trained to make you part with your money, and they do a great job of masking the fact that it’s for their gain, not yours.

 

(Pictured: My cat using a significantly less expensive chair. Mora, MN December 2016)

One of my friends recently asked me what should come first, paying off student loans or investing. It really depends on your situation.

First of all, if you are paying interest on your debt, and that interest is higher than what you expect to make investing (over 7%) then pay it off as soon as you can. Eat rice and beans until that crap is gone. Seriously.

But if you have debt that you aren’t paying interest on yet, or the interest is very low (less than 2-3%), take a look at how much debt you have, and how comfortable you are with it. Take for example someone who is getting done with 8 years of higher education which they’ve funded by taking on a lot (read: a crushing mountain) of debt, and will not be paying it all off in a short period of time. In their situation, I would recommend focusing all financial efforts towards getting that debt paid off, and freeing yourself. Once the debt is gone, then the savings and investments will start piling up.

On the other hand, if someone has a smaller, more manageable amount of debt that they expect to pay off quickly (within a year or two) upon graduating, then starting an investment strategy may be a good option. When contributing to your Roth IRA, you can only deposit $5,500 each year. So if you had the opportunity to contribute the maximum amount one year ago, but didn’t do it, you’ll never have that opportunity back. In other words, if you have 40 years until you withdraw that money, you will have given up $82,000 in tax-free money in retirement ( 5,500*(1.07)^40= 82,359.51 ).

Especially if you are not currently paying interest on that small amount of debt that you plan on paying off quickly before graduating, then contributing to a Roth IRA makes a lot of sense.

That being said, you should still consider your situation and how you feel about debt. If having any debt at all stresses you out, then you might be happier getting rid of it right away (I would be in this category). If you are ok with having some debt, and are confident you will be able to pay it off as soon as interest payments are due, then feel free to get started on your investments. But after maxing out your IRA for the year, paying down your debt should be the next priority if you’re in this situation.

P.S. I am a big believer in the power of just getting started. Even if you open up a Roth IRA today, and put a hundred bucks in it, then don’t touch it for the next four years because you’re paying down debt, that’s an awesome start. Simply knowing that you have an account there waiting for you to put more money in can motivate you, and it will be easy to transition from debt payments to IRA deposits once your debt is gone.

***Also, if you are working full-time, and your employer offers to match your contribution into a retirement account like a 401k, always contribute enough to get that match. Even if you’re in debt. That’s free money, please don’t throw away free money!

 

(Pictured: Me getting a workout in at Enchanted Rock, Llano, TX March, 2016)

The Vanguard Total Stock Market Index Fund is a collection of stocks that represent the entire market. A stock is a piece of ownership of a company, and stocks can be bought in one share or multiple shares. For example, you can buy a share of Apple, and you will own a small chunk of the company. That means that if the company makes money, you will get a little bit of those earnings.

But owning only one company is dangerous. Even billion dollar companies can lose lots of money, or even go out of business (#tbt to Enron).  So it’s best to diversify, and buy many different successful businesses to reduce your risk.

This is where VTI comes in. It owns over 3,600 different U.S. stocks, basically getting as much diversification as possible. With every approximately $115 share that you buy of VTI you are owning a chunk of profits from thousands of companies. That way if one company goes bad, it won’t hurt much at all, and most companies will continue to be successful!

That doesn’t mean that VTI will never lose money. It will go up and down just like the individual stocks do. It might go down 10% one year, and then up 20% the next, but over the long term it will go up about 7% every year just like I mentioned before.

Now, some people are able to make better than 7% on a consistent basis. Those people are rare, and have billions of dollars like Warren Buffett. I am no Warren Buffett, and you are no Warren Buffett. I used to think I was, and spent a couple years thinking I could do better than VTI. I couldn’t. And neither can 86% of Professional Money Managers.

VTI is where it’s at fam. Super easy.