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 ūüôā

Unfinished Business

Exactly one year ago Girl Ninja quit her teaching job in San Diego to come move up north and join me in Seattle. It didn’t dawn on me until last week, that Girl Ninja didn’t just leave her former employer behind, but she may have also left behind some retirement savings in her old 403b. Having no clue how much she may or may not have in this 403b, I had her call the school district and get some information.

Turns out, homegirl had nearly $4,000 in her 403b. The school district told us we had three options for that money:

1. Keep the money in her SDUSD account.

2. Withdraw the money and put it in our savings account.

3. Transfer the funds to a personal IRA Girl Ninja hasn’t yet created.

We ruled out option one in the blink of an eye. There is no way we were going to leave the funds in a School District account that she can’t access. Option two, although appealing (who wouldn’t want a couple extra grand in their bank account?) also was a bad deal since we would have to pay federal and state income tax on the funds…plus an additional 10% penalty for taking an early withdrawal. That would have ended up as a net $3,000 payment to us, but nearly $400 in fees being paid to the IRS. Who the frick wants to give the IRS $400 of money they don’t deserve? We sure as heck don’t, so we did the responsible thing and created a personal IRA for Girl Ninja so we can have all $4,000 rolled in to her new account. What’s more, I’ll get to include that $4,000 in our next Net Worth update which, if you couldn’t guess, makes me a happy camper. This story had a happy ending…

Now let me share with you a story that makes my heart hurt.

Someone I know recently passed away. He left behind a pregnant wife (lets call her Jane) and three children. I also know, when he filled out his life insurance forms six years ago (before he had any kids), he put his wife as a 60% beneficiary, and his parents as 40% beneficiaries of his $175,000 policy.

The tragedy in this story, aside from the untimely death of this young man, is that I can say with reasonable confidence had he actually thought about the life insurance paperwork he filled out (pre-family) in 2006, he would have made sure his wife/kids were the sole beneficiaries on the policy in 2012.

Instead, I’m literally watching the money his parents received be squandered away. They even had the nerve to approach Jane at their son’s funeral and ask her when they could expect their cut of the life insurance policy… so they could buy a new car. Ugh ūüôĀ

Jane is forced to watch her ex-in laws blow $70,000 on things like cars and washer and dryers (they posted a picture of their new W/D on Facebook last week), instead of having that money go towards a house, groceries/diapers, or college tuition for her kids. And to think, this whole ordeal could have been avoided if that old life insurance form was simply updated.

If this doesn’t serve as a kick in the butt to get your unfinished business taken care of I don’t know what will.

What unfinished business (financial or otherwise) have you been putting off? Creating a will? Changing your name? Opening an IRA? Finishing up those last few classes to get your degree?

p.s. I just realized I still need to make Girl Ninja the sole beneficiary on a few of my pre-marriage accounts.

Attention all dads: quit being crappy dads.

As you all know Girl Ninja and I are heavily involved in a high school outreach called Young Life. We’ve gotten pretty close with our freshmen over the year, and as such, they’ve really started to open up to us about their lives. If there is one common thing I’ve noticed in each of these kids’ life stories it’s this: Most of their dads suck at being dads.¬†

Walking away from your marriage is one thing, but walking away from your entire family brings you to a whole new level of douche-ism. From physical, verbal, and sexual assault, to drugs, infidelity, and neglect; these kids have dealt with more than any person, let alone a 15-year-old, should ever have to.

I was talking with one of my guys about his parent’s pending divorce (his dad cheated on his mom with a prostitute), when he said something pretty darn mature. He said “While I don’t really have a good example of what a father figure should look like, I’ve feel like I’ve learned from my dad what NOT to do when I have kids.”

While it totally sucks that this kid doesn’t have a solid father figure in his home, I’m encouraged by the fact that he understands that his dad is a crappy dad, and uses that as motivation to NOT follow in his father’s footsteps.

Isn’t that a lesson for us all really? Heck, I bet we can even apply that to our personal finance journey, can’t we? Who amongst you has learned WHAT NOT TO DO in regards to your money, spending habits, etc from someone else’s terrible choices? Who was that “bad example” in your life; mom, dad, sibling, grandparent? We love modeling ourselves after people like “insert clich√© Personal Fiance Guru here”, when in reality people like Nicolas Cage can be just as influential…albeit for a completely different reason.

Some awesome things about Personal Finance

I woke up to a text from one my good friends yesterday morning that read “Can I pull 100% of my Roth contributions at any time without penalty?” ¬†Why yes, yes you can. Roth contributions can be pulled at any time, for any reason, without any repercussions. That’s why I like to think of my Roth IRA as a second-tier emergency fund. My Roth is really just as liquid as my savings account and that’s why I think all young people should seriously consider opening one up. The Roth is ¬†like the filet mignon of retirement planning for 20-somethings.

But today’s post isn’t actually about Roth IRA’s or filet mignon, but instead just a list about some of the most important things I’ve learned through my personal finance journey. In no specific order, here they are:

    • You don’t have to be rich to end up rich. Never knew a $50,000/year salary could turn in to millions in retirement if done right.
    • Albert Einstein once said the most powerful force in the¬†universe¬†is compound interest. I had no idea¬†age played such a significant role in one’s financial future. The earlier you get your shizz together, the better off you will be down the road.
    • 401k’s sound really boring, but in reality they are pretty straightforward and typically provide a¬†guaranteed¬†return on investment (for example my employer automatically matches up to 5% of my gross salary in contributions). Can’t beat a 100%¬†guaranteed¬†return on investment anywhere.
    • Renting IS NOT a terrible financial decision.
    • Minimum payments on debt are the worst. I remember¬†calculating¬†how much my $28,000 student loan would end up costing me if I made minimum payments. The answer….$52,000. Minimum payments suck. BAD!
    • Credit Cards are pretty awesome when used responsibly. Girl Ninja and I get airline miles for every dollar we charge to the card, dollars we would have spent anyway for things like groceries and gas. Not to mention, that my C.C. also gives me a 30 day, interest free loan. Awesome sauce!
    • Investing really isn’t that complicated. In about 30 minutes you can set up and get started investing in a Roth IRA. Investing seems intimidating, but it really doesn’t have to be. Don’t let fear be an excuse not to act.
    • You don’t have to have a car payment. When Girl Ninja and I bought our car a handful of people made inferences that we must now be proud owners of a car payment. Not so much the case. A little saving goes a long way and contrary to popular belief, you don’t need to finance your next car either.

Alright I’ll end this geekgasm here. Don’t want to totally nerd out on you all, but man Personal Finance really can be exciting. The bullet points above were all things that really resonated with me as I’ve navigated the world of PF for the last few years. What bullet points would be on your list? What are some of your favorite things you’ve learned, or come across in your journey?

Am I a thief?

So I was introduced to a super fun new backyard game called Kan Jam a few weeks back. It’s a four person frisbee game that kept me and my friends entertained for hours. Instead of explain to you how the game works, here is a nifty little tutorial…

So you basically throw a frisbee towards the can that’s 50 feet away from you. Your partner can help try to slam the frisbee down the top or in to the side of the can for points if you can’t hit it directly. I was pretty much¬†obsessed¬†with the game and decided I needed to own it. I went home, searched online, and found it on Amazon. List price, $40.

As you can see from the picture above the cans are nothing special. Just a thick piece of plastic that rolls in to a cylinder. The game also comes with a frisbee. I already own a frisbee and don’t really have a need for a second one. We could obviously afford to pay the $40 asking price to own it, but I couldn’t just bring myself to add it to my Amazon cart.

Instead, I stole the idea. 

Dang. Does that make me as bad of a person as I think it does? I just couldn’t justify the $40 purchase when I knew I could make myself the game for a fraction of the cost. So on Friday I went out on an epic journey to find the best material possible to make the game. First, I stopped at Home Depot to see what kinds of plastic sheets they had. Turns out, they don’t have any. Next stop, Joanne Fabrics. Nothing. Okay, maybe I wasn’t going to find rollable plastic sheets.

Off to Big Lots I went. They had a 26 gallon garbage can for sale for $7. I nearly bought the thing, but decided the diameter was too large and it would make the game too easy. If I was going to copy Kan Jam, I wanted my version to be as close to the original as possible. As I wandered through the store I stumbled upon a $6 cylindrical plastic laundry basket that was absolutely perfect. It was the proper height and width. I made my purchase, spent about 20 minutes at home modifying it, and BOOM! I just made myself Kan Jam.

I brought my home-made set to a friend’s lake house this weekend and we spent hours playing. It was a total blast and I don’t think having the original Kan Jam would have made the game any better.

So, my question today is simple. Am I a thief? Do I have a moral obligation to purchase the game?

Part of me thinks yes. I mean, Kan Jam was made by two guys and it’s super fun. They deserve to be rewarded handsomely for their¬†ingenuity. But then again, who hasn’t replicated someone else’s idea before? Am I obligated to buy a Hamburger from McDonalds instead of make one at home? Does Girl Ninja have to buy that shabby chic picture frame from Pottery Barn when she could easily antique a thrift store frame for pennies?

I guess the big takeaway from today’s story is this: If you are going to create something, make it too complex for a simpleton like me to replicate.

Have you stolen anything lately? 

(side note: I never go to Big Lots and still have absolutely no idea what one would go there for, nor do I know how to describe it to someone else. It’s like Ross, meets Walgreens, meets Albertsons, meets People of Walmart)

Twenty-two and frustrated.

Got an email yesterday from a PDITF reader (let’s call them Reader X) looking for ways to rid themselves of the paycheck to paycheck lifestyle. The email was much longer than the excerpt below, but I think you’ll get the gist…

First of all, let me say that I adore you and your approach to life. I read your blog with a sense of wistful jealousy and optimism that I too, some day, could have 76k in savings. That number is outrageous to me.

Whenever I read your blog, and other financial blogs, I understand they cater to people who are more… oh I don’t know… established with their jobs. People who could put $500 in savings a month with lifestyle tweaks and frugal changes. The point is, for my age, my salary is commensurate with experience. Meaning, I do not make enough money to have an “aggressive” savings plan like you and others. In fact, I am lucky if I have any money left over to save after my basic living expenses.

Do you have advice for your upstarts like me who are living on the exact amount of money they need to survive? Honestly, I feel terrible about myself because I am just treading water financially. I worry that something catastrophic will happen and my little $800 savings account wont suffice.

Before I get on with helpful advice, I have to rant for just a second and say I take issue with this line in Reader X’s email:

“Whenever I read your blog, and other financial blogs, I understand they cater to people who are more… oh I don’t know… established with their jobs.”¬†

If my blog is catered towards people who are “more established with their jobs” then I have failed miserably. I’m 26 years old. I am by no means established, and I really have no street cred to preach financial wisdom to those that are. I would hope by naming my blog Punch Debt In The Face I am sending the clear message that this IS NOT a place for the “good ol boys”, but regular,¬†everyday¬†folks, who want nothing more than to see a stupid stick figure drawing, and maybe hear a little bit about what I have to say on the topic of personal finance. Moral of the story: I am the 99% ūüôā

I really like Reader X’s perspective on his/her situation. Particularly this line “my salary is commensurate with experience”. There is no entitlement in that statement. Reader X also shared in the email they are living frugally, so typical advice like “find cheaper rent, or cut out your cable bill” doesn’t really apply.

So how does one increase savings, if they don’t have the ability to increase their income at work and they can not really decrease their already low expenses? You don’t. BOOM! How’s that for blunt personal finance?

Don’t be discouraged by this, Reader X. You are only 22 years old and have the rest of your life to pad that savings account. When I was 22, I was making $38,000/year, had $28,000 of student loan debt, and about $600 in my checking account. You have to persevere this “paycheck to paycheck” season as it is just that, a SEASON, a temporary stage of life. As you gain more professional experience, you will be able to market yourself better, which in turn should/could lead to promotions or a new (higher paying) job.

I didn’t go from negative $28,000 to $75k in the bank overnight. It took me YEARS to get to where I am, and it will probably take you a while to get there as well. Instead of feeling terrible for “treading financial waters”, be encouraged that you are not DROWNING¬†like most other twenty somethings. You, my friend, are doing exactly what you need to be doing to set yourself up for success. Work hard. Keep your costs low. Save any discretionary income you can. And smile. This is an exciting, albeit scary, stage of life.

p.s. often recommended ways to increase income are 1) Start a blog (I made $13,000 from this one last year). 2) Tutor (I made $12,000 in 2009 doing this). 3) Find a second job (serving at restaurants, or delivering pizza, is flexible with most day jobs) 4) Be content. One through three all require more of your time, if you don’t want to give up free time, you have to be content with what you have. No one is just going to randomly walk up to you and pay you $2,000 a month to watch TV. Oh, you could always get married. Dual income ROCKS!!!!

 

Why?

If you’re like me you have a goal to accumulate some pretty substantial wealth. I had a goal to accumulate $6,000,000 over the course of my lifetime. While that goal is lofty, I don’t think it was completely unreasonable. One thing I never did, however, was ask myself why? Why did I need Six Million Dollars?

Truth is, I didn’t need it. I actually didn’t even plan for it. It just kinda happened. I plugged some numbers in to a Roth IRA and 401K calculator, made some estimations for my investments performance, and BAM there it was, six million.¬†While I don’t know if I will actually reach that number, it’s not unreasonable to predict I will have at least a few million to my name when the Grim Reaper pays me a visit.

It’s one thing to plan on being wealthy, but it’s a whole different ballgame when it comes to figuring out what to do with that wealth.

So I asked myself “What am I getting rich for?” Is it so I can buy a $50,000 car every five years? Or so I can have a second house in the mountains when ski season approaches? Or better yet, maybe it’s so I can afford the $30,000 membership fee at the local country club I’ll never play golf at?

Of course I plan to enjoy my later years. I’ll probably take some pretty SWEET vacations, maybe I’ll buy a few man toys (jet ski, snowmobile, or a pet shark), and I’ll definitely upgrade my closet with all Tommy Bahama gear (side note: I love Tommy Bahama, but feel too young to wear it yet). But let me be clear. These are not the reasons I’m accumulating wealth.

When I die, how many people are going to remember how many jet skis I had? Answer: No one! What they will remember is that I donated $100,000 to a Young Life camp. That I paid for my children’s, grandchildren’s, and great grandchildren’s college tuition. That I pulled a “Bill Gates” and donated a ridiculously sizable portion of my net worth to some noble cause or charity. Those are the things that make being wealthy great!

Just to make sure I’m being completely clear, I really only have two purposes for accumulating wealth and they are…

1) To ensure my family is taken care of

2) To give a crap load of that wealth away

Thornton Wilder said it best…

Money is like manure; it’s not worth a thing unless it’s spread around.

So I ask you, what are you getting rich for? What great (or not so great) things do you want to do with your money?