Out of the two of us, Joe’s part of this blog makes a lot more sense. He’s an engineer, he’s worked in IT, he has like 6 laptops that all get used for different things. It makes sense that he blogs about computers. I, on the other hand, have pretty much no credentials other than the fact that I get paid and do something with the money. So, this week I thought I’d share the story of how I got into personal finance. Seems appropriate after last week’s more technical post.
A Young Joey
My history with money is quite brief. I held a brief job or two growing up, but for the most part I didn’t work and my parents bought me everything I needed and more. At some point they started depositing a few hundred dollars in my checking account every other week1This was in addition to covering larger expenses such as rent when I was in college.. But if that wasn’t enough I’d simply ask them for more. They are quite generous, and to this day always ask if I need anything, including money, despite my well above average but still really unimpressive savings rate. So, for all intents and purposes, I really had no income apart from my parents until I started graduate school. Based on some old saying about not understanding the value of money until you have to work for it–I really didn’t understand the value of money.
A More Recent Joey
But let me tell you, nothing will decrease the value of a dollar more than having a couple thousand of them dropped into your bank account every month. And this is pretty much what happened to me when I started grad school. Twenty dollars had previously seemed like a nice chunk of change, but now was less than 1% of what I got paid every month. What was a $5 cafeteria lunch? Or a $7 burrito from Chipotle? Or that new $100 kitchen gadget? I could afford them all!
At the same time, I had this vague idea that I wanted to be “smart with my money”. So I plotted to set aside a cool $1,000 a year and stick that in a CD, which I learned would magically give me 2% of my money, FOR FREE, every single year! It sounded pretty magical. So I bought a 5 year CD2which currently serves as my emergency fund, so I didn’t ruin too much! in my first year of grad school and patted myself on the back.
The Dark Days
One thing that has always kind of disgusted me is blatant greed or pursuing of money simply for it’s own sake. But to be honest, that’s kind of what I was doing a couple years ago. Some early frustration and boredom with grad school led to a lot of wasted time that ended up being spent trying to figure out how to make more money with my money. I started buying individual stocks, became kind of obsessed with credit card rewards, and even got into day trading a little and buying and selling stocks around earnings releases. I remember when I filed my 2016 taxes I had like a zillion transactions that ultimately lost me $4 total3lesson learned!. What a waste of time! The even sillier thing is that I still had pretty much no concept of Defense and savings rate, so any money I would’ve made might have been wasted anyway. Fortunately, the stocks I actually held on to, like Amazon and Square, actually did quite well. Better than the overall market, in fact. The other fortunate thing is that some of things I “learned” did come in handy–like the Rules of Credit Cards, for example.
The Sunny Days
The ensuing transformation between the Dark Days and the Sunny Days can at least partially be attributed to a couple personality traits. First, I tend to be a pretty logical/analytical person. At some point, I stumbled across the concept of index investing. And even though in my limited experience I was beating the market, it didn’t take long for me to realize this was pretty much pure luck, and that virtually no one not named Warren Buffett has been able to do this for a sustained amount of time.
The second personality trait is a little bit difficult to explain. In general, I tend to be bad at things that are really hard, but really good at things that are not that hard but require a good deal of persistence. In fact, I really enjoy these types of things. I’m also not an especially emotional person, at least when it comes to decision making. So the idea of regularly investing in the whole stock market, and the fact that just a little emotional fortitude can make all the difference when the market does crash, really appeals to me.
At some point during the transformation from stupid, greedy obsession to actual, sincere interest I decided to start reading Mr. Money Mustache. Like from the very first post. I mention this source in particular, among the many that have influenced me4Look out for a future “Resources” post on my favorite places to learn more about particular topics. , because that blog was really the first thing that opened my eyes to Defense and the relationship between Defense and Offense (which, as we learned, is the most important concept in personal finance). Furthermore, playing good Defense also appealed to my personality traits. It really isn’t that difficult, but does take some persistence. It’s a long term project that is ultimately very rewarding. And it’s kind of a hidden treasure–not many people know about it but it’s very valuable to those who do.
There’s also a kind of beautiful efficiency in all of this. Living frugally, persistently following a straightforward investing plan, and making small optimizations along the way. It may not be as immediately exciting as opening that new box of StuffYouDon’tNeed from Amazon, but it does provide a deeper, much more fulfilling type of satisfaction. So much so that I feel the need to share it with everyone on the internet!
The End (sort of)
Well, that’s kind of the story in a nutshell. Of course there’s more, but I wouldn’t want to bore you with ALL the details! And maybe this blog will someday inspire somebody else to share this same interest. Then we can talk about it all the time!!!
Next week will be a pretty exciting one on the blog. A kind of marriage between Money and Megabytes. A reversal of roles. A venturing to the other side. Stay tuned!