Have you ever stumbled upon a solution to a problem that has been nagging you for years and felt like you’ve finally cracked the code? Back in 2018, I had such a moment. After being totally blindsided to the world of personal finance, I had finally, discovered how to manage my finances. I was never good at managing my money and I had a very negative relationship with money.
During the early days of my life, I have witnessed a lot of scarcity around money and have heard a lot of negative talk around how building wealth is a selfish pursuit. I have often battled with this idea internally and haven’t been able to resolve them. For the longest time in my childhood, I just had one recurring theme about money – It’s evil and pursuing it makes you selfish. I always wondered how money in and of itself, can be bad.
As I came in touch with people who were better off than me financially, I realized that money was not going to solve all my problems; but I was ok with it. I decided that I needed to earn money and build wealth. So I worked very hard to get a good education and earn a decent paying job.
Why I Needed A Class In Personal Finance
When I landed a job with a decent salary in Tech as a developer in 2007, I couldn’t care less about managing it well since I didn’t really need to. I was single and fresh out of college and all the years of my life spent with little to nothing in terms of money was finally going to come to an end. I was not going to “deprive” myself of any of my “wants”. My needs were already taken care of. I had this feeling of having found “my thing” (I loved my job as a developer) that actually pays well. What more could I ask for?
I spent the next several years of my life with almost no idea about how to capitalize the decent salary I was earning. This meant dining out in expensive restaurants, buying new clothes and accessories, go on vacations, etc. I did have a small student loan to pay off, which didn’t take a lot of time to get rid of. Along with this, I had some family obligations to help out my parents with their finances (which I could manage on an ongoing basis). All the while I had very little savings and it never occurred to me that I needed to have some cash for emergencies or save for retirement.
Life was going good and I met the love of my life, who also happened to be working in the same office as I did and we both ended up liking each other’s company. We spent the next 2 years getting to know each other well. Trying to understand what we liked and what we didn’t like. We built dreams about how our life would look like. Personal finance? Who cares!
We both come from very conservative South Asian families, wanted our parents to be on the same page and accept our relationship before we got married. We were pretty sure what we wanted but having our parents on our side was super important as well.
The process of having them on board took us another year or so and we finally managed to have both of our families on the same page. By the time all of this came together, we had already gotten very serious about our finances. Man! I knew marriage and kids can speed up your journey to adulthood! We had to save up for our wedding and our honeymoon!
It was during this time in my life, I reached out to a financial advisor for help. I must say that it was one of the best decisions of my life. He was the first person who taught me about investing, financial planning and how to set goals and achieve them. He was a really good coach. He taught me how to plan my cash flow and how to look at different investment options and evaluate each one of them. I was beyond thrilled to know all of this. All of this was new to me and I was so thrilled to learn about finance!
He came up with an excellent investment portfolio which could ensure I would be able to build the necessary amount needed to fund my wedding and any other expenses. It was during this time, I learned how to be disciplined with money. I saved each and every month and built this fund. I felt really good about myself. There is a certain level of security you experience when you have money in the bank and also you see the money grow in your investment accounts. The wedding day finally arrived and we both were so proud that we didn’t find ourselves out of place with our finances. We had planned for the wedding expenses almost perfectly and it worked out very well for us. We got married and went on our honeymoon and we had cash flowed it!
For the first time in my life, I learned the value of saving and investing. Thanks to the first financial advisor I worked with.
How I Ditched My Own Money Habits
All was good and we were very happily married. I had a good paying job and we never felt the “pinch”, even when my wife was not employed. She stayed home for a couple of years to pursue higher education. It was during this time, I went back to my old habits.
We threw all those things we learned out of the window. We didn’t save enough and we spent money like crazy. We took expensive vacations and I had opened up a lot of credit cards. It was as if we had forgotten all the lessons our financial advisor had taught us. We had finally ditched all the good habits.
I don’t know if we had gone too far “treating” ourselves after the marriage or we simply didn’t want to squeeze money out of our budget to save more, we just didn’t. Before we realized we had an auto loan payment staring at us. Fortunately, we didn’t accrue a lot of credit card debt. During this time, we also managed to buy our first rental property (overseas property) and we started to feel the pain.
Was the rental property the final nail in the coffin? Was it going to bring us back on track? We had borrowed nearly $100,000 to purchase that property.
Doubling Down On Personal Finance
I have written about our debt free journey in this 2 part series – My Debt Free Journey – Part I and My Debt Free Journey – Part II. As I was going through my credit card statement in January 2018, I noticed an erroneous recurring charge of $18 which seemed odd and I couldn’t recognize which subscription was I being charged for. This was the triggering event.
I decided to dig deeper into this and figured out it was some fraudulent charge that was being applied every single month to my account for the last 14 months! I was so mad at myself. How could I allow such a thing to happen? I had other battles to fight and I had taken on a mortgage and I couldn’t afford to be sloppy with money. I had to do something about it.
It was during this time that I was contemplating – Should You Pay Off Debt or Invest? We had to make a decision. I am so happy we decided to pay off all of our debt and became debt free. It was one of the best decisions we have taken in our financial life.
We not only got back our life (stress from carrying debt and having to plan your cash flow around payments was getting tiring) but also managed to do some things with the finances we never could in the past.
- We maxed out my 401(k) and Roth IRA in the same year.
- We paid off my car loan and my wife’s car too in less than a year.
- We learned a lot about personal finances, investing and saving for emergencies, all in the span of 12 months.
I have written how 2018 was literally the most influential year of our lives. It changed our finances forever. We started listening to personal finances podcasts, read books on personal finance and investing. We had managed to swing the pendulum back and were on track to take charge of our finances again! We had finally arrived, again!
How I Screwed Up The First Time Around
With the recent wins I had in my personal finance and all the stuff I learned along the way, I was just waiting to share them with my friends. It turned out they were “living in another parallel universe” and everyone else around me seemed completely oblivious to this “phenomenon” called “Personal Finance“. Was I living in a bubble or the rest of the world didn’t care about my recent discovery?
One day I had a friend of mine, who I know had some personal finance issues, stopped by my place. It was a casual visit with no specific agenda. As we were talking, I couldn’t help but bring up the topic of personal finance. I knew I couldn’t resist the itch.
I literally bombarded him with all those “you’ve got to do these things” sort of tips from the world of personal finance. For the next 45 minutes, I was giving doling him tips one after another. What had taken me years to learn, I was expecting him to digest and appreciate its importance in one meeting! Bad move!! Very bad move!
Ever since I had this conversation, he has never spoken to me about personal finance. To that end, I royally screwed up my chances of helping him in any way. I had actually done quite the opposite. I had managed to scare him away from personal finance and he didn’t show any interest whatsoever to discuss it with me.
When I look back at it I can see how awful I might have come across. I had shared with him all the “Awesome wins” I had with money and how I had learned the “Secret to building wealth”. Instead of listening to his side of the story or waiting for him to approach me to discuss his finances, I had just bombarded him with all the information that made no sense to him. It was a disaster.
Another Attempt To Get It Right
With the experience I had the first time around, I learned how to “curb my enthusiasm” and not to go around “preaching” the next person I met on my way. It was hard.You know when you listen to so many podcasts, read blogs on personal finance and read books on FIRE, it's hard to keep the information to yourself. Click To Tweet
I felt I was withholding the information that could change the lives of people if they had access to this information. But I had to be cautious this time around in how I approached this whole “spread the word” thing. I really had to learn how to introduce someone to personal finance in a way that is gradual and not feel like a head rush. I didn’t want to come across as bragging about my own wins after drinking some kool-aid and wanted them to follow suit.
Here’s how I managed to approach it this time around.
One day while I was having lunch with my colleague, we were discussing something around our 401K match at work and he shared how he was paying around 1.2% to his Chase Financial Advisor and he felt “robbed”. It was a rolled over IRA from a previous 401k that he was talking about and he seemed to have no clue how he could put an end to this “robbery”.
We discussed a lot of other things and during that conversation, he shared more details of his personal finances and how it caused a lot of stress in his marriage. He was constantly having fights with his wife about money.
This time around, I simply listened to him. I didn’t try to brain dump my knowledge nor get ahead of ourselves. I had managed to curb my enthusiasm!
How I Got My Friend Interested In Personal Finance
Over the next few days, he shared a lot more details about his money situation. They are both high-income earners and easily grossed over 350K annually (both work in Tech) combined. His wife naturally felt they “deserved” more and their current finances somehow made her feel they weren’t “there yet”. According to his wife, all of her friends were getting ahead but they seemed to be “stuck”.
According to him, there were some financial goals which seemed to be at odds with each other. The caused a lot of dilemma in how they managed their cash flow each month. It was also one of the biggest reasons why they argued a lot about money.
- They wanted to live that high on consumerism lifestyle with new cars, dine out regularly, take expensive vacations.
- Build a rental property in an expensive market like SFO.
- Pay off the mortgage balance on their primary residence.
- They also have a son who is in high school and a few years away from college. So they had to save for his college too.
- Make sure they save enough to retire comfortably (early retirement isn’t on their radar yet)
- They had no emergency fund saved for a rainy day. In a way, they were literally living pay-check to pay-check.
- They had bought a new car and it has costed them to close to $60,000. So there was a new auto loan payment which was eating up their cash flow.
- He carried a whole life insurance policy (recommended to him by a previous colleague) and he wasn’t sure if it was worth it.
- He didn’t carry any term insurance and the whole life insurance was simply not enough to replace his income. The same applied to his wife too.
- He discovered that if something were to happen to him or his wife, they didn’t have a proper estate plan in place nor had they thought about guardianship for their minor son.
How on earth was he going to do all of this? He seemed confused. He didn’t know which one of those goals to attack first. What made things worse was that he didn’t even track his spending. So he had no idea where his money was going.
At that point in time, their only savings was their contribution to their 401(k), which they maxed out (thank goodness!) but nothing beyond that. Their mortgage was fortunately not that high (I guess they owed around 400K of the total 750K in mortgage). They had managed to refinance their mortgage to a 15 year fixed (low-interest rate) and wanted to pay that off as soon as possible.
Being Intentional With Money
Once I had a good picture of where my friend’s finances were, I decided to share my own story. He felt comfortable sharing his and I thought he was “ready” to listen to mine. We both started having conversations about personal finance almost on a daily basis during lunch. The idea behind this was to discuss the issues he was facing (mostly the execution part of the plan) while straightening out his finances.
1. Tracking Expenses And Budgeting
The first time I brought this topic up, I still remember how he scoffed at the idea of having to budget since he felt it was only for those who didn’t make enough! I was speechless when he said that but I got from where he was coming from. He was operating his finances with big numbers and all the math was in his head. He had a quick mental model of how his money was being spent each month and didn’t feel the need to put that on a sheet of paper.
It was during this time that I was already well versed with EveryDollar budgeting tool and I asked him to give it a shot. Heeding to my suggestion, he went on to try it. His feedback after playing around with it for few days was, it didn’t have the feature to reconcile accounts and it seemed to discourage the use of credit cards and pay cash for purchases in general (Baby Steps recommend by Dave Ramsey). My friend to this day uses a lot of credit cards and didn’t like using this app. So he moved onto adopt YNAB (I too have moved to YNAB since early January 2019) and has not looked back.
Moving to a budgeting tool helped him see the benefits clearly. He particularly loved the savings goal feature since he could plan for irregular expenses very well. Like pay for his son’s school, plan a vacation or any other stuff that came up. It seemed to solve his biggest pain point since he recalled having to justify to his wife why they needed to plan for these things on a monthly basis instead of managing to pull off a lump sum at the end of the year.
This was one of the first “wins” he tasted in his journey of straightening his finances. He was beginning to see the benefits of budgeting and it worked for him. He had fewer arguments about money with his wife and now he was ready to explore other areas of his finances which could be optimized.
2. Learning The Basics Of Investing
Now that he had good control over his cash flow and he wanted to plug the big leak in his investment portfolio. We had been exploring the Index Investing strategy and I had shared JL Collins’s Stock Series with him. After reading it, he was beyond convinced that it was time to move out a high fee investment advisory service had with Chase. He was paying them around 1.2% to manage a rolled over IRA account and wasn’t happy with the results. It seemed particularly horrendous it was to pay such high fees. He decided to roll that account over to a 3 fund portfolio at Vanguard.
Interested to learn more about the 3 fund portfolio? Do check out this detailed article on MyMoneyWizard – 3 Fund Portfolio: The Lazy Investing Strategy that Crushes the Pros
This was his next win. He could not be happier when he did his math on how much this single move could save him in fees and other portfolio drag over the investment period. He thanked me for walking him through the details of how he could still get market returns without paying a high fee!
With the same momentum, he also moved his 401(k) from Fidelity managed services account to a RoboAdvisor called Blooom. By this time he already knew the basics of investing like asset allocation, different asset classes, etc. He felt a RoboAdvisor could be of help to him and made the move. He liked the flat fee and not having to worry about rebalancing the portfolio (although he did understand what it meant and how to it himself). He preferred to be handed off and didn’t want to worry about it.
3. Hiring A Financial Planner
While we sorting out the low hanging fruits like budgeting and switching to index-based portfolios, we still needed to a “health check” on how we were doing overall. Were we on track to meet our retirement goals, were we saving enough for kid’s college, how much house could I afford (in my friend’s case how soon he could pay off his house), was I optimizing my investments to save on taxes, etc.
We both felt we needed a very good financial planner. We didn’t need an investment advisor, we need a coach. Our search ended when another colleague recommended a financial planner to us. We interviewed him and he seemed very good. We liked his thorough analysis of our situation and his tailored plan to meet our goals.
We both decided that he was our guy and we have since then been working with him. He has been very instrumental in answering all of our questions and helping us stay on track to knock off all our financial goals. In our case, he gave us the numbers to come up with a downpayment and how we can optimize other areas of our finances to meet them. The best part of working with a financial planner is that you get to know the where you stand with your finances and are you on track to meet the different (sometimes competing) goals of your life.
We are extremely happy with his services and intend to continue the relationship. My friend recently shared with me how his plans to enter rental real estate could soon be a reality thanks to this financial planner who walked him through all the numbers and possible options to go about achieving it. This has been their long-standing dream and now they know how to materialize it.
4. Buying The Right Insurance
It was also during this time that my friend managed to buy himself and his wife a good term life policy and a disability insurance policy. He finally managed to see the reasoning behind why it mattered so much. After running some numbers, it appeared that he would be better off to keep his whole life insurance policy and ditch it after he completes the 10 year period. The math sucked! But he would be better off holding on to it than paying the surrender charges.
5. Taking Care Of Estate Planning Needs
Once he sorted out the insurance needs, he headed straight to an estate planning attorney and had a detailed walkthrough of all the necessary paperwork needed to put an estate plan in place. His son is still a minor and he was concerned about his guardianship and who would care for his son in their absence. He seemed very happy to complete this particular step since it really secured his assets and would avoid the unnecessary hassle if the estate plan was not in place.
I am so happy my friend managed to stay the course and sorted out all of his money problems. He started with no basic knowledge of personal finance and there he was, all sorted out. I mean, look at the stuff he has managed to accomplish in this short period of time. It is life changing. That’s why I love personal finance. It can literally change your life!
Unlike the earlier case where my friend seemed to be offended with my approach, this one turned out to be positive. I am still learning how to take this conversation further to the next level into realms of FI or FIRE. At this point in time, he is very much on board to listen to how these things work and often tunes into various podcasts that focus on this like Afford Anything, Choose FI, etc.
At the time of this writing, I came across this amazing piece from A Purple Life – How To Teach A Curious Friend About Financial Independence. I would highly recommend you to check out this piece. I am personally going to use some of the suggestions she talks about in the article.
What has been your experience talking to people about personal finance? Have you managed to get someone interested in personal finance? What challenges did you face? How did you overcome them? Please share your experience in the comments.