After weeks, months, even years of learning, living, waiting and saving, I finally did my first bit of investing this past week. It’s crazy how much I’ve learned about personal finance in the last few years and I’ve found that with each new thing I learn, I get more excited. This excitement comes from having gotten myself in a good place financially and feeling confident in my ability to keep it up over the mid-long term.
2008-2010 – My Personal Finance Childhood
I’m growing up as a personal finance geek. I’m no longer a child or an adolescent. I feel like I’m reaching adulthood in how I handle my money. At first, I woke up. That stage where I looked up and saw a new, $20,000 car sitting in the garage, bought on credit, could be classified as the day I was born, or born again as a personal finance geek/extremist. I feared the mountain that I had ahead and I didn’t want to live like that for the rest of my life. I changed my life financially, little by little after that. I started tracking my spending with Mint.com, cutting expenses where I could and making a plan to get out of debt. During this stage, what you could call my childhood personal finance stage, I became addicted to The Dave Ramsey Show and its advice. Dave inspired me to think differently and get out of debt. He taught me to hate debt and today I do.
2011-2012 – My Personal Finance Adolescence
I reached personal finance adolescence the day I paid off all my debt, in December 2010. For a solid year and a half after that, I saved like a mad man. In the process, I increased my income and inherited some money from my Grandmother’s estate. It’s been an incredibly successful bunch of years for me. I don’t believe it happened by accident, but instead by dedication, a lot of hard work, and commitment. I also believe that God noticed that I was being smart with my money and he blessed me with more.
Throughout the past few years, my post debt goal was to buy a house. Because of that, I put off saving for retirement this whole time. I don’t have any tax advantage/retirement accounts at all. I just wasn’t fond of tying my money up for 30 years. I have since realized that I should probably start investing into these types of accounts this year. But that aside, my views on buying a house have changed this year. After reading the book Rich Dad Poor Dad, I’ve really changed my thinking about a house as an investment. The book argues that a house is a liability, not an asset. I agree. It’s a large expense, not an investment. I’ve read many times from many different sources that home prices, on average, over the long term, appreciate about as much as inflation. Google it to research for yourself.
So if not a house, then what? Assets. Ownership of assets make you money. That’s the direction I am heading in. When I save money, I want that money to start working for me. This is another principle of the Rich Dad Poor Dad book. The book’s author, Robert Kiyosaki, says that the poor and middle class work for money and the rich have money work for them. I’m going to set my finances up the way that the rich do. I don’t want to work for money for the rest of my life. I want to save the money that I make, buy assets with it and then have those assets work for me, for the rest of my life.
So, off of the home bandwagon I went. Sure, I want to own a home someday. But I’m single (not married). I don’t have kids yet. I am just fine renting this little apartment, for a while.
2012 and Beyond – My Personal Finance Adulthood
What I would call my personal finance adulthood, started right around the time I changed my mindset about buying a house versus investing in assets. Just after that mindset change, I attended the financial blogger conference in Denver and met Mr. Money Mustache. Not knowing what his story or strategy was, I had small talk with him in Denver. But after I got home and read his blog, my eyes were opened. The same feeling of familiarity that I got when I first listened to The Dave Ramsey show was back. Both times, I felt that these strategies were ones that came natural to me and that I had felt all along. I always felt uncomfortable with debt and I learned that from my dad. I had those feelings even before knowing Dave Ramsey. I also had the feelings of wanting to retire early/achieve financial independence since I was a child as well. So when I sat down and read Mr. Money Mustache’s blog, it felt like home.
And from Mr. Money Mustache, I found other bloggers who talk about striving for or having achieved financial independence early in life. It’s become my newest obsession. I’m head over heals right now about shooting for financial independence early in my life. When? I haven’t quite figured that out yet, but let’s just say prior to 45. I’m fired up and that is my adulthood stage of personal finance. I’m saving like mad, ready to invest, and I have the mindset that I want to invest in assets, to make the money work for me. The more I do of this, the closer I’ll be to financial independence.
My Next Steps: Investing
So I’m out of debt, I have money stashed away and I have what I believe is a rich person mindset. My next step is to invest. But where? Thank goodness for blogs like (I’ll say it again) Mr. Money Mustache, jlcollinsnh.wordpress.com (You have to read his series on stocks and investing), The Mad Fientist (great podcasts featuring both of these prior bloggers) and a book, recommended by Mr. Money Mustache, called A Random Walk Down Wall Street, I’ve learned a ton about how to invest in the stock market. Here’s the mindset these bloggers/authors have:
- The stock market is a great place to invest. Over the long term, it always goes up.
- Over the short term, it fluctuates like crazy, but that’s okay.
- Financial gurus and mutual fund managers sure try to beat the market, but often don’t.
- In the process of trying to beat the market, fund managers charge investors a lot of fees for their effort.
- Index funds have a much lower cost than actively managed funds
- Index funds can often outperform their actively managed counterparts.
In a nutshell, there is a lot of good stuff to be read out there among very credible sources on how index funds are the way to go in the stock market. So, I chose to go down that path. This last week, I bought into the Total Stock Market Index fund over at Vanguard. I put about 1/5 of my savings into it. I believe this was a good choice for me. What I will do with the other 4/5 of my savings is not yet decided, but I’m thinking that I’ll be buying into this fund more and more and may eventually put my entire savings outside of my emergency fund into this fund.
The Future. What Does It Hold?
The future in my eyes has me heavily investing over the next few years. I have set some pretty crazy goals for the next couple of years and I am optimistic about my ability to hit them. I know I’ll continue to learn more about investing and personal finance in general. I am excited for the day when I move on to my next stage of personal finance wisdom.
So, am I saving up for a house? No so much right now. Am I saving for a financial independent future. You bet. If any of you read Mr. Money Mustache’s blog, you could probably say that I’m becoming a Mustachian. Now, I just have to get my bike out and start riding it the long treacherous one mile journey to work.