Thoughts on personal finance
$$$⌗
I wanted to quickly jot down my current positions on personal finance topics. This will be quite interesting to see if I maintain these views into the future or if I change my mind.
On Saving⌗
Saving money now (Currently 25 years old as of writing) is incredibly important due to the nature of compounding a dollar saved now is extremely important given the long time horizon it has to compund.
I currently live below my means, and hold a high savings rate most months.
I avoid status seeking purchases. Sometimes I have urges to make these purchases, but I frame them as large drains of my limited time… this makes them extremely off-putting to me. For instance, I could buy a $10,000 outfit to show off my status and attempt to attract attention. The tradeoff of my time to do so simply isn’t worth it.
$10,000 compounding annually for 40 years at 5% interest turns into $70,399.89.
Purchasing power will be reduced due to inflation, the 5% return is an assumption (Could be +/-), and there are no additional contributions to this initial investment. Irrespective of any of that, the point stands that that intial investment would be worth much more than in an outfit that will most likely be worth far lass than the initial investment in 40 years.
The other side of Saving⌗
While I closely monitor unnecesary purchases, I view travel as necessary and not something to wait until later to enjoy. I don’t go out of my way to spend as much money as possible when traveling, but I take most any opportunity to visit a new place. I enjoy maximizing my time and being comfortable while visiting and am willing to spend the $$$ to do so.
I’m also willing to spend money I wouldn’t noramlly while hanging out with friends or going out to dinner with family.
Investing⌗
I may currently be too risk averse, but my current investing philosophy is as follows:
- Buying individual equities/crypto is essentially gambling, doing this with a small amount of money is ~fine~ (Less then 2% of total net worth)
- I split investment 40/60 between sure return products(CDs and a High Yield Savings account) and indexes(Small Cap Value and VT)… in current state I think this is probably over-weighting CDs and HYS, although it does allow me a lot of liquidity if the stock market goes down
- In light of the last statement, I do NOT believe I can time the market, and I am currently acting not in the interest of maximizing returns by withholding so much cash from the stock market
- I try to weight my Index holdings away from Large Cap US tech companies as that is currently my main source of income and I’d like to diversify away not increase my exposure
I think Rational Reminder is the basis for most of my opinions and current investment philosophy.
What do I think will change⌗
I’ve never made a large purchase like a home, but it currently makes me nervous concentrating so much of one’s net worth in a single asset.
I think having a large expensive wedding is silly, but maybe I’ll see that as a once (Can only get married for the first time once) in a lifetime opportunity and change my opinions.
If I have kids, I think my financial outlook changes quite dramatically. This is not to view children as an expense, but simply to note that my current thoughts around personal finance don’t take dependents into account whatsoever. Maybe I will become even more risk averse at this point?
A reason for being⌗
My end goal is to have the freedom to spend my limited time on the things I want to do with the people I want to do them with. My thoughts, everything I wrote and didn’t write above is with this single goal in mind. I think this is a broad statement but I don’t think I can make it any more granular.
Its all a weird balancing act of present satisfaction vs future enjoyment… a rubber band of fond memories and regret. I guess I’d like to have fond memories, and leave others with fond memories as well.
Ok so maybe its:
- I want to have enough $$$ to do the things that bring me happiness currently
- I want to make sure my future self has enough $$$ to do things that bring him happiness
- I want the freedom to be able to choose how I spend my time
- I want to help others and leave a net-positive reputation with both strangers and loved ones
If I can leverage my finances to do that, I think I’d be happy.