Have a happy holidays 2020 to everyone out there. This has been a strange year for sure. Thankfully it is almost over and we can start focusing on making 2021 better by comparison.
Continue readingCategory: Finance Concepts (Page 1 of 2)
Financial Concepts used in the series
The holidays are upon us which means a time of celebrations with friends and family. Well, it would mean that in any other year. Unfortunately there is still a pandemic spreading across the country despite how some of your friends and family are acting on social media. You need to stay home this year and I brought the math on why using the COVID Birthday Paradox.
The problem is that we are all notoriously bad at calculating the actual risk we take when participating in our lives. All of us are. We grossly underestimate the external risk, overestimate our ability to personally mitigate it, and otherwise assume “it won’t happen to me”. The COVID Birthday Paradox calculation helps show the real risk of being in the room with a COVID positive person.
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Speeding is a huge waste of time and money. Reckless driving in general is decidedly bad for people on the path to financial independence. Not only does it save very little time (if any), but it can be very expensive to you in the long run. We are all here to save money not waste it, right? Call me old but I’ve gladly shifted myself to the center lane on cruise control. Feel free to comment in support or to tell me how wrong I am.
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What if I told you there was a way to contribute $10,000 less to your child’s 529 college savings plan while providing him or her the same amount in the end? Of course you’d want to take advantage of that opportunity if you could. Your child ends up with the same amount of money for college, and you have $10k more for your retirement. This isn’t a secret hack or pyramid scheme either. The idea came to me when I was reading about the concept of Coast FI in the financial independence community.
Introducing the Coast 529
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When you get deep enough into the financial independence community, you are going to want to start building your own spreadsheets. Don’t get me wrong, the spreadsheets available out there for free are great. But sometimes you want something quick or the pre-built ones are just missing something you need. I have three essential personal finance formulas and how to use them.
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Not everything in the personal finance world is pure optimization of assets through the use of beautiful spreadsheets. Don’t get me wrong, there are a lot of spreadsheets, and they are all beautiful, but sometimes decisions are emotional. Making some financial decisions for emotional reasons despite the math needs to be normalized. We like the quick “wins” of closing those smaller loan accounts early with the debt snowball method. It keeps us motivated to continue.
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Sure. “I was able to save $15,000 more in 15 minutes for retirement and you can, too.” Ugh, I know… I know. We all hate it when personal finance writers assume that just because they were able to do something then it should be easy for everyone else, too. That said, what I did was incredibly generic and could apply to a lot of people out there with a company-sponsored 401k.
Can you really save $15,000 in 15 minutes?
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Personal finance is like sex and religion: nearly everyone has something to say but will generally avoid discussing it. Our society has made discussing your finances with anyone else taboo. We’ve spent years associating our self-worth with our net-worth to the point that people feel like personal finance is a competition. You try ‘Keeping up with the Jones’ because deep down you don’t want to get too far behind in the race you perceive to be life. That race can be lonely because personal finance is lonely.
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Coding a new career through continuous learning
I love the job I have today. My job is an interesting mix of corporate finance, creative problem solving, coding, spreadsheets, and decision science that provides recognizable value to the company I work for. I know what you are thinking right now and I agree that any job involving spreadsheets is going to be a sexy career choice. It didn’t start out like this though. I was able, with the help of some amazing managers, to craft the job I want from the job I had over time. You can start coding a new career too.
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Are you being serious?
No, but also yes. Will cooking for yourself be that one simple trick financial advisors hate for you to know? Of course not, but it is definitely a valuable skill in the toolkit of life that will pay dividends in the long run. The math is simple enough to encourage you to learn to cook and retire early.
Learning to cook is a skill the world just expects you to have without providing any real structured way to learn it. It isn’t taught in American schools outside of the rare Home Economics class and I wouldn’t be surprised to find out fewer of those are even being offered.
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