There is nothing sexy about our story.

too sexy

As our savings account continues to grow, I’ve been doing a lot of reflecting. How are Girl Ninja and I quickly approaching a $200,000 net worth at 25 and 27 years old? What’s the magic trick? How can I package our story up in to a $10 e-book called “Punch Being Poor In The Face” and sell it to you all?

I mean, we didn’t receive an inheritance. We didn’t get bailed out by Uncle Sam. We’ve never negotiated a huge bonus or pay bump. Our retirement accounts aren’t performing as well as I would have expected thanks to a stagnant economy. We aren’t incredibly frugal. And while this blog netted me about $3,500 last year, MANteresting cost me $7,500 so I’m not bringing in tons of passive income. Basically, my friends, there is nothing sexy about our story. 

Unless of course you find boring sexy.

Fortunately, boring works! Not only does it work, but it works really, really, really well. If I had to summarize how we’ve managed to do alright for ourselves in one sentence I think it would be this: We want a lot, but need nothing. 

For over two years now I’ve been hoping my crappy six-year-old Macbook would die. Well, actually it did die once, but I was able to revive it. I want it to die, because I REALLY want to buy a new laptop, but for as long as this little hunk of junk continues to power on, I will continue to blog from it. I recognize that I want a new laptop, and that I will buy one when this one no longer does it’s job, but I do not NEED a new laptop and there is no sense pretending like I do.

The same could be said about our housing situation. We want a house. We want more than 700sqft of space. We want a second bedroom for guests to stay in. Girl Ninja wants a second bathroom so she doesn’t have to go near it after I’ve “occupied” it 😉 We want to stop paying rent. We want to diversify our investments by including real estate in our portfolio. That said, we could still add a little more to savings to give us a bigger financial cushion after putting 20% down. We could definitely use more time house hunting and familiarizing ourselves with the local market. We want a house, and might buy one soon, but we definitely don’t pretend like we “need” one.

Heck, eight months ago we bought ourselves a new-to-us Honda Pilot (which we officially named Pontius). We dropped $20,000 cash on the car ($8,000 of which came from the sale of Girl Ninja’s Corolla). But even then, we knew the whole time the Pilot was a want, not a need. We never felt like we deserved a bigger car. We didn’t try to pretend our family of two needs a car that seats eight. Sure it was frivolous, but because we only wanted, and not needed it, we were able to make sure the purchase didn’t impact our financial situation significantly. A want has no sense of urgency; the same can’t be said for a need.

Most financial experts will tell you to separate your wants from your needs, and only focus on your needs. That’s terrible advice if you ask me. Let’s be real, we are greedy Americans who use the word “need” to justify anything and everything under the sun. If we can convince ourselves we need a new computer, phone, vacuum,  or car; we suddenly don’t feel bad about buying one.

That’s not how I roll. Aside from basic necessities like food, water, shelter, and a kiss from Girl Ninja each morning I can’t really think of anything else I need. There are a ton of things I want. Some of these things we will end up buying, others we will just continue wanting. As long as I recognize that our basic needs have already been met, I’m confident our net worth will continue to rise.

Want a lot, need nothing.

Too conservative for my own good.

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I was chatting with a close friend a few days ago about the housing market. Big surprise right? We know what the median household income is in Seattle ($66,000), and we also know the median sales price of a home in Seattle right now is $380,000. What we don’t know is how the crap people can afford a $380,000 house on a $66,000 annual income! There are only a few logical conclusions…

1. They inherited the property

2. They received a financial windfall

3. They are house poor. 

4. They are risk takers.

If they inherited the property, or received a financial windfall, good for them.

If they are house poor, I can’t say I’m jealous of them. Nothing about living paycheck to paycheck appeals to me. I would never want to be in a position where I have to sacrifice traveling, eating out, or skiing just so I can make a mortgage payment. No thank you.

But what about the people who are just willing to take a risk. Debt has a pretty bad rap. Heck, I even named my blog Punch Debt In The Face because I think it’s so dumb. But reality is, debt can be a powerful tool for building wealth; like when one takes out a line of credit to start a business, or when someone finances a rental property.

Sure it’s risky. If the business fails, or the real estate market crumbles, you could lose everything. But how bad is that really? It’s not like you have to worry about going to jail. Maybe you get sent to collections and settle your debt for less than you owe, maybe you walk away from your house and get foreclosed on. Maybe you have to consider filing bankruptcy. While none of these things are particularly enjoyable, they are solutions.

Maybe I’m too conservative for my own good?

I mean, if we bought a $500,000 house last year, we’d have about 15% equity in the thing based on recent market appreciation. That’s a $75,000 gain in 12 months!!!

What did I do? Oh that’s right. I decided to keep saving money so we could easily afford a 20% down payment on a house priced $150,000 under what we are qualified to borrow. At last check, my savings account earned a paltry 0.75%. 

Do you see what I’m saying friends? It seems to me that the risk/reward comparison of using debt to leverage one’s financial position often favors reward. Think about it.

We buy a $500,000 house and sell it a year later for a $50,000 profit (after commissions). Or we buy a $500,000 house, watch the markets tank, and walk away from the property and let the bank deal with it (Washington is a non-recourse state). The system is set up to protect one against their own stupid decisions, so much so, that these stupid decisions are no longer necessarily stupid.

Interest rates are low, and house prices are still lower than pre-bubble days. Why not use the depressed market, and government bailouts (quantitative easing), as an opportunity to make some extra dough?

Oh that’s right, because I’m a wuss.

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Being conservative might not make me rich, but I guess it beats the possibility of being poor?

I can buy anything I want.

As I logged in to Mint to give the ‘ol bank accounts a quick check, I realized something. Girl Ninja and I can pay cash for virtually anything we could ever want (excluding a house). Too be honest, it’s kind of humbling. I don’t feel like we can buy a 2013 Porsche Cayenne, but the reality is we could buy two. When the crap did that happen?

I guess this isn’t too surprising because if you DON’T feel like you can buy a Porsche, you DON’T buy a Porsche. Not buying a Porsche leaves more money in my bank account. Simple stuff.

That my friends is called financial peace. It’s been a long journey. A journey that started with a negative net worth of $28,000 and an annual income that was only slightly more than that. There was no windfall or inheritance. My boss never doubled my salary overnight. It wasn’t always easy; I sold my motorcycle to buy GN’s engagement ring because I didn’t want to take money from my savings account.

Sometimes making good decisions hurts. Bad.  

We are impatient people. We selectively forget it took us four years to accumulate our student loans, yet we complain when they haven’t been paid off in six months.

Patience, grasshopper.

You didn’t get in to debt overnight, and you wont be getting out of it overnight. Stay the course. Make wise decisions. Live within your means. Then one day, you’ll be able to buy anything you want.

p.s. part of me wants to go buy a Porsche now. 

p.p.s. Come win $200 over at MANteresting.

“Every guy wants to make more money”

I’m still trying to get my hands on a copy of our appearance on the Steve Harvey show (apparently the producers don’t email back after they’re “finished” with you). We were on stage being interviewed for about 35 minutes. The segment, however, was only 12 minutes long. They had to cut out over 50% of what was talked about on the show.

As Steve was talking with us he got a little side tracked and started telling me every man wants to make more money, and that must be the case for a personal finance blogger. When I told him I didn’t necessarily agree with that sentiment, he challenged the point, almost trying to twist my arm in to saying I wanted to make more. We bickered back and forth, and I believe at some point I said something along the lines of “You are trying to get me to say I’m not happy with my income. That’s not true and I wont say I have a drive to make more.” He finally backed off.  

Girl Ninja and I already have a healthy income compared to US averages. What’s more, our expenses are fortunately very low in relationship to that income (no debt, cheap rent, no health issues, etc). I also don’t believe making more money would say anything about my value, drive, or goals. In fact, if I was driven to make more money then I think I would have to classify myself as greedy or materialistic.

Don’t get me wrong. If my boss called me and was like “Yo Ninja I’m gonna give you a fat raise because I think you’re pretty”, I would be creeped out that he called me pretty, but I would take the money in a second. Heck, if there was another job I wanted to do and it paid me more, I’d be all over that as well. But at some point, we need to realize our success is not measured by how many square feet our house is, the year/make/ or model of our car, or the number of zeros in our paycheck.

Steve could not comprehend my contentment. We already have more than we need, so if I made more, we’d just have more having more than we need. Haha.

I like my job. It affords me a lot of flexibility and a really cool title. If I’m going to take another job in the future, it better bring a lot more to the table than just some zeros.

What say you reader. Is your value decided by your paycheck? Anyone take a voluntary cut in pay (Girl Ninja did that when she decided to teach private school, to the tune of about $11,000 a year less)? What is the “perfect” salary for you ($50,000, $70,000 $200,000)? 

Get your $h!t together.

At first glance I likely appear to be obsessed with making money and growing our wealth. That’s half-true. While there is no denying I enjoy projectile vomiting money in to our savings account each month, I don’t do it for the reason you may think.

I don’t need, or want, to be rich. Then why are we saving/investing over 50% of our income each month you ask? Check it…

We don’t want money to hinder us from being awesome at life.

This is no different from the reason we eat relatively healthy and exercise frequently; we don’t want our health to limit our quality of life.

You ever heard of a morbidly obese person climbing Mt. Everest? Have you seen someone with maxed out credit cards and a low-income purchase a $20,000 used car with cash? No, you haven’t.

I could care less how much debt you have or how much you make. I only care about how you answer this question; Are you happy?

It’s taken five years, but I can say without a shadow of doubt, I am. My worth is not wrapped up in how much I have, but in how I live my life. Do you think people will remember me for owning a huge house or dying with a few million in the bank? Heck no. But they might remember me for sending some high school kids to summer camp. Or perhaps for creating a silly blog that inspired a person or two to get their finances in order.

I don’t suspect my grandchildren will recognize the name Warren Buffet when they are adults, but they will likely know the name Martin Luther King Jr.

Are you happy? Is your financial situation preventing you from achieving your goals?

p.s. We will be on NBC today (Steve Harvey Show). You can check here for local listing times. I’ll try to post video of it in the next few days for those that can’t record it.

Paper Money is for Monopoly

Screen shot 2009-12-03 at Dec 3, 2009, 10.10.43 PMHave you heard people say “Don’t use plastic because you tend to spend more money when you do.”? That is another piece of financial wisdom I have decided to ignore. I never carry cash on me, and when I do get some greenbacks, I take it straight to the bank to deposit. A lot of PFers, Dave Ramsey included, preach the wonders of being on a “cash only” system. Their main argument is this: People tend to spend less when they pay with cash because giving tangible money tends to ‘hurt’ more than swiping a card.

I am absolutely, positively, 102% against the ‘all cash’ plan. It just doesn’t work for me. I’m a pretty disciplined dude, but dollar bills are my kryptonite. They sit in my wallet, taunting me, whispering from my right butt-cheek “Hey Ninja, why don’t you put me to use and walk over to Rite Aid and buy a tub of  ice cream?” Seriously, cash is evil. If I have it on me, it will most likely be spent on unnecessary, unbudgeted, and unsmart things (I love making up words).

For me, it ‘hurts’ a zillion times more to put it on my credit card. I pay my CC balance in full each month. Do you know what that means? I get to watch the damage accumulate over my 30 day billing cycle. As the balance grows, I become more and more frugal. Paying between $1,000 to $1,500 each due date, totally motivates me to minimize my spending so I have to pay less on my CC balance. Seeing the damage in its entirety, as opposed to incrementally, influences wise spending choices.

I’ll be honest. I don’t have the discipline (or the desire) to work an envelope system. With the envelope system, you put X amount of cash in the “groceries” envelope and use that as your guide for the entire month. If you run out of grocery money, you starve (or borrow from another category envelope). If you have the discipline to stick to your budget ALL OF THE TIME, than the envelope system is definitely something you should consider. But if you haven’t noticed, I’m kind of a bada$$ and I sometimes like to spend outside of my budgeted parameters. Envelope system = good for people who have a lot of discipline. Envelope system = ineffective for 99% of the US population.

What about you all, Do you prefer using cash or a card? How much cash do you keep on you at any given time? Do you think you spend more when you swipe? Anyone out their like-minded and struggle to keep cash in their wallet?

Me vs You

Apparently I am the only person here that thinks there is more to life than saving, investing, and/or creating passive income streams. While those things are great and all, I hardly want to give up what are arguably the best years of my life because I’m chasing some “dream” I don’t really want.

I’m assuming that you all suggest I save more, invest more, and create multiple streams of income so that one day I can have the financial freedom to cut back on work, possibly even retire extremely early. Let me stop you right there. I don’t hate my job nor do I care to be wealthy.

Multiple income streams:

Girl Ninja and I don’t think to ourselves at night, “We need to make more money.” Actually, we are completely content with what we have. Contentment is a beautiful thing.

I understand multiple income streams help protect oneself in the event of a job loss, but she’s a teacher and I work for the fed. Fortunately, this means we have a good bit more job security than those in the private sector. If we don’t need more money coming in, and we both enjoy our rather stable jobs, I don’t see an advantage to an income property or a taxable investment account. In fact, all I see are potential headaches and emotional roller coasters.

Save more:

Could we keep saving until our bank account read $120,000, $150,000, or $200,000? Sure. But what’s the point? I’ve already chronicled why I would NEVER pay cash for a house, so that’s not really incentive (side note: you shouldn’t pay cash for a house either).

I hope you all remember that the only reason we save is so that one day we can spend (or give that money away). Why do we need $200,000 in cash? Seriously, I don’t get it. Part of me thinks people want me to save more cash because it sounds like the responsible thing to do. Let me turn the tables, How many of you have $150,000 in a savings account right now?

Invest More:

I got my job six months after I graduated college. Since day one, I’ve steadily contributed 15% or more to my retirement. Since I have absolutely no desire to retire with tens of millions of dollars in the bank, I don’t really see the need to go crazy. I said I’ll likely up my retirement contributions to 30% once we reach our $100,000 savings goal, but I don’t really see a reason why I should be putting more than that away? Unless of course I want my future dentures, wheelchair, and catheter to be made out of diamonds. Barring some major catastrophic event, I think a 15%-30% investing rate over the course of a 40 year career should be just fine.

Conclusion:

I do realize however, I was being dramatic in my last post and it’s very likely many of you took me literally; Thinking I was going to buy a new flat screen TV every month just for the sake of doing it. That’s hardly the case. That post was simply my way of acknowledging, that for the first time in my personal finance journey, I’m completely content. I’ve stressed about student loans, emergency funds, down payments, and retirement for far too long.

To be clear: We will still put our excess discretionary income in to a bank account (or taxable investment account). We will continue to save for our future house (and the unexpected headaches that come with homeownership). We will make sure we have enough cash on reserves to take care of our not-yet-conceived children. But mark my words, once we reach our $100,000 goal… you’ll see a whole new side of Ninja 🙂