“He’s the Investing Type”

So, some coworkers of mine said something interesting to me the other day.

They were discussing the fact that someone from their division was retiring. He was, they pointedly informed me, only in his mid-fifties. My reaction was something along the lines of “Okay, sure. My dad’s is fifty-some and he’s planning to retire in the next year or so. Your point?”

Their reply was that retiring now left him with maybe 30 years of life left, and that it was weird that he was retiring now. What was he going to do with those 30 years? But then, as if to excuse the odd behavior, another coworker mentioned that “he’s the investing type”.

Wait, what?

The conversation ended at that point, but I spent the rest of the day thinking about it. My coworkers had some very distinct ideas about the man’s retirement, and it kind of shook me that I not only didn’t agree with them, I’m not even sure if I really understood them.

For example, the 30 years comment? In retrospect it could be taken two ways.

The first, which is what I think they meant, is that 30 years is a long time to spend without a purpose of some kind of keep you busy. The most obvious purpose is, of course, a job, but it could just as well be volunteering, a hobby, or looking after grandkids. If this is how they meant the comment, then I really hope that they hadn’t actually thought too hard about what they were saying. For starters, the ‘standard’ retirement age is 65, only 10 years off. As far as I can tell, keeping yourself busy for 20 years vs 30 years shouldn’t be that much of difference. If you’ve found something that you enjoy (writing, for example) wouldn’t it be great to have an extra ten years free of work to devote to it?

Yes, I realize that retiring in your fifties throws off the idea that most of your life is spent working, as opposed to being in school or being retired (assuming you live until 85, and that you graduated at 22, retiring ten years early would mean you only worked for 39% of your life, as opposed to 51%). Still, I maintain that this shouldn’t be that big of a deal. Why would my coworkers even bother to comment about it?

The second way the comment could be taken, is that 30 years of retirement is a much harder thing to budget for than 20 years of retirement. The extra savings and compound interest during those ten years would be significant. If they meant it this way (and I really don’t think that they did) then the investing comment, at least, would make more sense.

But if they weren’t thinking about money when they made that comment, which I’m pretty sure of, then what on earth did they mean by “he’s the investing type”?

As far as I’m concerned (and almost all of the PF community would agree with me), there shouldn’t be a group of people that are the investing type, because that would imply that a lot of people just aren’t. I’m not talking about people how most people live paycheck to paycheck and don’t learn to save, I’m talking about the idea (that the statement seems to imply) that when it comes to investing, you either have something that makes you an investor, or you don’t.

This strikes me as a debilitating mindset. I know, for a fact, that the coworkers involved in the discussion contribute to the company’s (rather generous, actually) 401k plan. But they have to go out of their way to designate this one man as the investing type, as if he’s an anomaly or specially gifted or something. What does that mean for them, then? Are they doomed to being forever pushed around by financial advisers and the current DOW numbers?

Obviously, I’m being a bit over-dramatic, here, but the conversation frustrated me because I don’t think this is a healthy mindset. So what if someone decides to step out of the path of “retire at 65 and you’ll be fine because you contributed the minimum to your 401k needed to get the full employer match”? If they’ve crunched the numbers and decide they can retire at 55 (or, heaven forbid, 35), more power to them. It doesn’t mean that they have something magical, just that they prioritized differently, and wanted the extra years of retirement so that they could go windsurf in Puerto Rico.

I’ve put a lot of time and effort over the last three years (or so) into learning about personal finance. Over that time, I’ve been gathering the courage and resources necessary to decide my own future: how many luxuries I choose to own, how much money I set aside each year, and how long I need to work before I can retire. It’s tremendously empowering, to know that I can make an informed choice on those topics, now.

But my coworkers are seeing the results without seeing the effort and the process. So, all they can say is “he’s the investing type”, which is rather missing the point. We can all be “the investing type”, it’s just that you have to take the time and effort to make the important steps between high-yield savings account, and well-balanced portfolio.

Trust me, it’s worth it.

Libraries and my Research Method

So, I have this interesting reaction to being nervous/worried/concerned about changes or new elements in my life:

I research the heck out of them.

Sometimes, this means the traditional Google search, where I read the top ten helpful pages and afterwards feel a little more in control and stop looking. But when I need solid opinions, or in the time before Google became my best friend, I instead went to the library.

I love libraries. We have a wonderful relationship where I use and abuse them, and in return I occasionally pay small fees when I overstep my bounds. I’m pretty sure all of my inborn female “love of shopping” got channeled into library browsing. And that’s great, because it’s like the Monopoly money of shopping. It’s the best parts of shopping without any of the costs. You can search through shelves of products, pick out all the things that look interesting, not pay a dime even when you buy things that in hindsight you didn’t really need. And best of all within a month or two the items have been returned (with no glares from the customer service desk) and you don’t have the stuff cluttering up your house.

Yes, I might just be a little obsessed. But I find the library to a great destressor. I don’t know if anyone else feels better when they smell paper or can run their hand down a row of spines, but I find it fun and relaxing.

But I digress. I was talking about researching topics as a way of calming myself about upcoming life changes.

For library research, my method goes like this:

  1. Check out as many books as possible on the topic, and any books that happen to be shelved near those books. (This results in 20 to 40 books and a receipt that’s longer than my arm).
  2. Take the books home. Sometime in the next few days, go through the books a little more carefully, fully reading the back of the book/the inside cover. Usually, I’ll find a few books that are not remotely helpful to my situation, or a few with premises that I simply cannot stand. These go into the return pile without even being opened. (This leaves 15 to 25 books that might be useful).
  3. Next, I check the table of contents of the books that might be helpful (but I don’t know for sure). If they look promising, I might even read the introduction. This is to check that the author has a writing style that I can tolerate. Not all books pass this test. Most times, this is enough to eliminate a few more books. (Leaving 10 to 20 books).
  4. At this point, I start reading the books that I know will be helpful. These are usually the bestseller ones, with titles or authors that I’ve heard of before. I go through almost all of these before tackling my pile of “maybe” books again. (There are 3 to 7 of these slam-dunk books).
  5. Now, I take the rest of the books and I skim though them. Does the table of contents mention any new topics that the books I’ve read haven’t covered? Do they offer counterpoints to what I’ve already read? Is the author just awesome or different enough that I’d read their book for fun even if I don’t learn anything? If none of these get’s answered “yes”, than the book gets returned. Otherwise, it goes into the “must read pile” with the bestsellers.

Some examples of topics that I’ve researched using this method: How to succeed in college (I didn’t follow through with most of this advice. Ooops?), Personal Fiance (when I discovered Green with Envy), Independence/Career advice (Still feel shaky in this area. I’ll let you know when I have something worth sharing), what I should/could actually do with money (Millionaire Next Door, Richistan), and I’m currently looking up investing (Rich Dad, Poor Dad, Bogleheads Guide to Investing).

(Note: Yes, I know those are mostly about PF. I get that. I do. I’m still telling myself that this blog won’t be a PF blog, and maybe one day I’ll believe it.)

I get some interesting results using the library to do research. Some books I learn a lot from and they shift how I view the world (most of the PF books listed). Some of the books I just find amusing even if I don’t learn much (most of the college books, the finance book “Shoo, Jimmy Choo!”). Sometimes, I miss out on fundamental books because the library doesn’t have them or they’re checked out, but for the most part I feel that I’ve come out with a pretty well-rounded education on anything that I’ve used this method on.

In summary (tl;dr): Use and abuse your library. It’s like shopping without paying anything, and there is no penalty for checking out books you don’t read!

When I finally asked my Dad what his income was

When I was in High School, I volunteered in the tutoring room of the local Boys and Girls Club. This wasn’t as altruistic as it sounds; I had to clock a certain number of volunteer hours a semester to stay in my school’s honor society. Regardless, a couple of times a month I would find myself in a room with elementary school students.

One of those times, and I’m not sure if this was a new thing or if I’d just never noticed it before, one of the kids pulled out a cell phone to show off to her friend. It wasn’t anything special, just some flip phone covered in stickers and what not, and I don’t even remember her friend being that impressed, but I was kind of taken aback.

You see, at that time (2008ish), my family of four only had two cell phones. One was my Dad’s and he used it mostly for work. The other one we bought for a foreign exchange student when she insisted she needed to chat with her friends and for her weekend trips to the mall. When she left, the phone was passed to my Mom, although she would loan it out to me or my sister if we had an event and would need to call home to be picked up.

The thing that struck me about this kid’s cell phone was that, even though she was younger than me and, I was sure at the time, was from a family with a lower economic status, she had a luxury that I didn’t. I was sure that my Dad made a lot of money as an engineer, but for the first time I was curious enough to ask for a number when I got home.

Well, I got my number. And even though I had no clue about how it stacked up with the world, I still realized it was pretty darn high. It was difficult, at the time, to reconcile that large income with 10+ year old cars and only two cell phones for the family. My parents helpfully pointed out that we went on at least one expensive vacation a year, but even that didn’t seem to add up.

It took me a while to realize that the difference between my family and the little girl’s wasn’t really in income, it was in spending. My family had it’s spending areas: vacations and health food, mostly, and the girl’s family had theirs: cell phones, for one. With my Dad’s salary, we could certainly afford to get a cell phone for everyone, but he didn’t see the need.

This was the first time that I realized that income and spending habits could be completely disconnected. At the time, I soothed my wounded pride by thinking that her family might be going into debt with luxuries like cell phones. I hadn’t thought of that before, that not everyone actually spent below their means. That those people in their shiny cars might be drowning in debt, or that the person in the ratty sweater might just be a doctor who liked to dress down on their off days. (The best example of this is the classic book The Millionaire Next Door. It’s a good read, if a little dry.)

This can be both a really damning revelation or a freeing one. It means that how much you spend, or save, is up to you, and you can’t just blame your financial situation on your lack of income. I’m coming to realize how important this is now that I am actually earning money. My coworkers are getting large apartments to themselves because they “can afford it”. But then again, I also bought my car new instead of used. Mostly, however, I choose to put money in my 401(k) instead of going out to bars.

And, yes, I did eventually get my own cell phone. It was a high school graduation present.

Why this isn’t a Personal Finance Blog

If you’ve looked at the blogs that I link to, you’ll notice most of them have to do with personal finance.

I’m a big fan of personal finance blogs. I find them fascinating, a mix of sociology, psychology, and enough number crunching for me itch for an Excel sheet. In my spare time, I read a lot of books on financial advice, investing strategy, sociological studies of consumers,  and personal finance success stories.

That said, my blog is not (primarily) focused on personal finance.

As much as I would love to talk about money and numbers all day, there are a bunch of reasons why I don’t:

1) PF blogs are about having a unique personal experience or perspective. People who have dealt with (or still struggling with) debt or compulsive shopping. Someone who can live on less than $20k a year and think others can follow their example. A person who knows where to find great deals that others could benefit from. Stories like those. In contrast, my PF history is pretty boring. Really. It’s dull and comparatively privileged and full of mediocre spending/saving habits. I will eventually make a post about it, but for right now I’ll leave it at that.

2) At the moment, I have other areas of my life that I’m trying to grow in. Even though I’m still reading PF books, I spend more of my time working on other things, like cooking or writing or what have you. As it stands, I’m going through a major financial turning point at the moment (a net worth inflection point, if you will) and I’m waiting for the chaos of that to even out before I focus on optimizing my habits. Plus, I’m more concerned with learning how to do my job well, because that’s an important investment that’s going to pay off well later.

3) I lack goals, or a major ambition, to direct and drive my PF plans. At this point, I’m a little too mobile (and I’m in such an expensive city, and my credit history is still young, and . . .), that saving for a down payment of a house doesn’t make that much sense. While I would love to retire early, it seems ridiculous to me to think about that when I haven’t even been in the workforce for a year, yet. Saving for expensive vacations is easy, since I travel with my family and only have to pay for my airfare to the location. My car is already brand new, so I’m good on that score as well. There is nothing in the near future that I can use as sufficient motivation to put in the extra effort of budgeting and investing so that I can squeeze an extra $200ish a month out of my lifestyle. Eventually, in a year or so maybe, I’ll get around to getting that Mint.com account and throwing some money into an index fund or a IRA. But not right now.

Question: Other than debt or early retirement, what really could motive a youngish person to go frugal and super PF crusader? Saving up to start a business maybe? You tell me.