Max's Rebound from Academia

[mcs2269]

So I have been wanting to start a journal for a while now but was afraid of disclosing too much identifying information. I don't mind being completely transparent about my finances as long as nobody calls out my identity. With that said, I'm going to start this journal off by posting a record of my accounts and saving habits. These are the most interesting things and are potential the most dangerous things to post perhaps. It's in an excel, which I don't know how to attach. So I'll post snapshots.

[mcs2269]

Actually, if anyone knows how to post an excel or attach an excel, can you just leave some instructions below? That would be the most convenient.

[Viktor K]

You can take a screenshot on your computer, upload it to an image hosting website (I use flickr), copy the image URL, and then enclose that in the BBC code image tags (you can just click the button on the full editor).

[Jason]

So your name is Maxi Pad and you are rebounding from academia.

I'm assuming the market for period pieces dried up.

[mcs2269]

Yeah basically. I regretted writing that as soon as I made it. That was my childhood nickname. Shitty cousins.
Long story short I went to school and took out debt and felt shitty about it. But I'm well on my way to recovering. I thought the title would be funny when I made it, but it isn't.

I wanted to document things in here, especially numbers and excel. I don't really want to take an image and put in a screenshot though.

I'm gonna kick off with where I'm at and where I'm going.
I started "not spending" money about a year ago and started to make money as an adult about 7 months ago. I was pretty proud to save about $24k in the first 6 months of adult employment. Going forward I'll be servicing my debt so savings rate will drop closer to 60 or 65 down from 70-80, which is really disappointing(if you're crunching the numbers you'll notice the rate change and total amount don't quite make sense, and that's because of onboarding reimbursement). I tried one month to spend more money and go out and found it really depressing because I felt like I was wasting my time.

One thing I've had trouble with psychologically is this: I know it is fastest to pay off debt and then save, generally speaking. But I cannot bring myself not to save substantial portions of my income. I feel better making minimum debt payments and saving the rest of the money. Somewhere in the back of my head I think this is in case of emergency. If I were to be at a safe withdrawal rate, I could easily pay off debt on a salary of about $30k per year, so I tell myself to just get to my number first and then chill and work part time afterwards.

What order are others approaching this in? I'd be curious to know. - I don't expect people to reply here, so when I come around to reading the rest of the blog, I'm going to answer my own question below.

[prognastat]

One thing that might help with paying of debt vs savings is to focus on your net worth rather than your savings as your net worth will go up regardless of whether you put it towards debt or savings.

Also depending on the interest rate on the debt it might be more worthwhile to invest money rather than paying off debt. It's almost always better to pay off debt than to have it sit in a savings account/CD.

[Seabourne]

Honestly, I treated pre-paying debt (ahead of required schedule) in two ways:

1) round up to next number (whether the next round $10, $50, $100, whatever seemed reasonable) and set the autopayment on that. I still have this setup on my mortgage, and I'm pre-paying the principle by around $250/month.

2) Treat pre-paying like spending. Sometimes I would have that "feeling rich" or wanting to indulge spending for whatever reason. Rather than blow money on Amazon or shopping, I'd treat myself to putting a lump extra payment against my debt - sort of a "buying my freedom" payment.

Once I'd cleared non-mortgage debt, I started using that same mechanism but buying loans on Kiva instead. Has the decision making, shopping type thing, making smart choices means less likelihood of losing money on a non-repayment loan, and as they are payed back, I'd relend them. At this point, I'm using the paybacks from Kiva as a cash-flow source. I've been drawing out the repayments at about $1k/month to supply some of my spending, as I retired 6/1/2018. With getting credit card rewards on the Kiva purchases, I actually made a (very small) amount of money on the process, as they paid more than my losses for lack of repayment or currency loss.

Not really analytically optimal, but scratches an occasional itch of the consumer side, which doesn't show in the numbers, but probably saved me a lot of money scratching that itch in more traditional ways.

Seabourne

[suomalainen]

I regretted writing that as soon as I made it. That was my childhood nickname. Shitty cousins.

I understand from others that you can click on the edit button of your first journal entry and edit the title and that will change the title.

What order are others approaching this in? I'd be curious to know. - I don't expect people to reply here, so when I come around to reading the rest of the blog, I'm going to answer my own question below.

You'll get more replies than you want. In any event, it's a balance of psychology and math. On the math side, consider the interest rate on the loans. Then consider the rate of return you can get / are getting on your savings. If loans interest rate > savings/investments rate of return, then mathematically it's better to pay down the loans. Note that you will have to compare those rates on a "risk adjusted basis", meaning that paying off your loans is earning you a risk-free X% while your savings/investments are earning you a risky (somewhere on the low risk to high risk spectrum) Y%. If you're just saving cash, the correct thing to do from a math standpoint is to pay down the loans.

On the psychology side - consider the peace of mind of having cash (or investments) vs the peace of mind of becoming debt free. The correct thing to do from a psychology standpoint is to pick the greater peace of mind.

Psychology typically beats math.

[jacob]

I understand from others that you can click on the edit button of your first journal entry and edit the title and that will change the title.

Yes... but you can not edit the subsequent reply-titles (except your own).

I could potentially edit all of them manually on request, but better say so soon then because I'm not going to go through pages of posts.

[mcs2269]

Hi Jacob,

I wouldn't mind if you just changed it to my name. Max would be fine. I'm coming back and catching up. I've been away with a new job. I'll give an update in my next post.

[jacob]

Done

[mcs2269]

When I was getting out of student debt on an entry salary, I first made a list of my student loans and ordered them by interest rate, highest to lowest. I made minimum payments on all, made the minimum contribution to my employer's retirement plan, and hoarded the rest in cash. Once I had enough cash to pay off the highest interest rate loan in full, I paid it off. And then I just repeated the process down the list until the debt was gone.

Gravy Train,

I think that would be a good approach if the magnitude of my loans was a little bit smaller. I'm guessing by the sound of it your max loan size was around $15,000-$25,000. If I were to do this it would feel a little heavy. So I've done it in reverse actually. I pay off the smaller loans first. I know, I know, it's all backwards but I could never comfortably part with say, $40,000, all at once. So I'm effectively doing what you did but repeating the process up the ladder.

It hasn't been a bad idea so far since my income has gone up since I started working almost exactly a year ago. So everything is accelerating in the right way.

[mcs2269]

One thing that might help with paying of debt vs savings is to focus on your net worth rather than your savings as your net worth will go up regardless of whether you put it towards debt or savings.

Prognastat,

Net worth would mean something to me if the debt I have was tied to a physical asset or salable security. Because in that way I'd always have some way of fetching money from the combination of asset and liability in the case of a crisis. My grandpa passed away in February so I had to fly home at a moment's notice to speak with him before he wasn't able to speak any longer. Dumping that previous month's paycheck (and tax return as it was) into bumping up my net worth by paying off debt would have been a mistake. A certain amount of security sitting around in a savings account or stock is certainly necessary.

Since I bought the ticket immediately it was $800 and I suppose that there can't be much more of an emergency than that for a relatively young and unmarried person without a home. Plus I was able to put it on a credit card and pay it out of my next month's income. I'm also aware that sort of emergency only cost me something like 2% of my wealth at the time. But at the end of the day when there is a crisis the only thing that can make something happen is cash.

When I was in New York I always had strong paranoia that the city would be bombed and I wouldn't be able to swim across the mucky Hudson in time to gtfoot. That's the level of off-my-rocker that I am. Supremo worst case scenario. Part of this is lack of life experience perhaps or from hearing too many horror stories.

[mcs2269]

1) round up to next number (whether the next round $10, $50, $100, whatever seemed reasonable) and set the autopayment on that. I still have this setup on my mortgage, and I'm pre-paying the principle by around $250/month.

2) Treat pre-paying like spending. Sometimes I would have that "feeling rich" or wanting to indulge spending for whatever reason. Rather than blow money on Amazon or shopping, I'd treat myself to putting a lump extra payment against my debt - sort of a "buying my freedom" payment.

Hi Seaborne,

Pre-paying I did while I was in school and since I make the minimum payments I'm still effectively pre-paid out at least two years. It's interesting you mention rounding though. Whenever I pay on debt I always pay it to read with the hundreds, tens, ones, tenths, and hundredths places at zero. I also do this with all my investment, checking, and savings accounts. The debt is auto-pay so after the auto-pay goes through I'll go back through and clean up the digits.

On the spending portion I really have brain-washed myself into savings oblivion. I don't spend money except on cooking and rent. I have issues with the phrase "buying freedom" because in a sense you always were and always will be free to do what you want. Freeing up future income would be more accurate in my opinion!

[mcs2269]

I took a new job as a developer in Cincinnati. It's a web application developer position with the UI in Typescript, the API in C#, and the framework in Angular. My last job was a glorified and well-paid debugger/high-end customer service position and was deeply unsatisfying. The health care industry in this country is, as many of us know, very deceitful or dirty in many ways. I always felt gross while there both from the culture of the company and from the industry we were in. I shit-you-not there was a time that I sent a hospital a $60,000 bill for a capitation add-on screen. It was seriously one screen. There is no competition in that industry, i. e. no alternatives that can work for a large scale hospital so the hospital ultimately paid. This is messed up because at the end of the line it's real people and tax-payers who foot the bill. Disgusting is all I can think of. Anyways, I left. Plus I was getting fat so I needed to change some things.

I've sort of hit the sweet spot on this current job so far. I think maybe this is a Cincinnati thing(since Cincinnati feels like the south to me and is as far south as I care to go) but this current job besides being way more fun requires way less time spent on the job. I'm allowed to work from home 2 days a week. I get around 20 days of vacation per year. I've been keeping data on actual hours per week that I work and its around 30 even though its a full-time job. Contrast this to 50+ at my last job. Overall compensation is slightly down but hourly compensation is certainly up. Now I have time to learn and do things for fun.

In terms of long-term sustainability I wouldn't mind working like this for the rest of my life. Of course the income is still decent so I see an end-point on the horizon and a lot of opportunity to move/not work. Without those in view I would likely feel otherwise.

[mcs2269]

Kroger just raised the price of a gallon of milk from 1.29 to 1.59, a 23% increase. Carrots have remained at 49 cents/pound and potatoes at 79 cents/pound over the last 6 months. I'd be fairly annoyed if my food expenses went up 23% overall.

Milk is the only drink I pay for. Got a 13% raise so my savings rate increased overall ( as I see it my total efficiency has increased ). But 23% is a big step. WTF Kroger.

[mcs2269]

I asked myself 2 months ago if there was anything useful in my daily life that I could write software for. I found the "DIY software development and/or electronics?" thread but am posting details here for easier tracking. The info I took from there is access to Plaid.

The main problem I see with apps like mint or any other financial apps is that they are focused on cash flows from your checking account as well as general net worth type statistics. After you go through the stage of slashing expenses there is almost no reason to ever look at checking account cash flows. You sort of just buy food and pay for housing, be it mortgage, property tax, or rent. I really don't know what else you can analyze here after getting your shit together. You end up seeing a lot of data that only ever matters if you absolutely must drill down into something suspicious. Theoretically if anything unusual ever happened it would show up in your expected value of your savings rate, which you should know off the top of your head from past experience.

The simple problem I identified and have since developed an app for relates to the routine I have every paycheck of auditing my finances. It goes like this: 1) I fill out an excel table of all my assets and liabilities with a primary key being the date and 2) I generate an excel balance sheet based on my up-to-date numbers(latest date) and 3) with this balance sheet I generate all the useful numbers I care about, like effective savings rate, "real-time" annualized spending, requirement for retirement based on current annualized expenses, time left to perpetuity (assuming you've either increased your expenses or haven't hit the mark yet), estimated return and equity, an "allowed" monthly spending based on previous year's increase in equity ( a number I calculate as 25% of increase in previous year's equity ). As far as monitoring cash flows goes, this is truly the only number I care about. Given the increase in my equity, what am I allowed to spend today? That question covers all parts of income implicitly from capital gains, dividends, pension, social security, labor, etc.

I wanted an app that focused on the most relevant statistics to our community and have that be a measure of financial health and progress, not the traditional look and feel you get when you enter a bank account or mint-like app. I also wanted the app to be smooth, easy, and frankly speaking sexy. So I made the process of updating financial information easy and intuitive. There is an "automatically load latest data" button that will use Plaid in testing to get latest information on all one's accounts. There is a smooth mat-vertical-stepper(https://material.angular.io/components/stepper/overview) to manually update accounts. The accounts list is generated based on a user profile when one first enters the app.

Equally as important to the info in the above paragraph, I wanted the app to work well on a mobile phone.

The UI is basically done since it is so simple. And it looks damn good, which is important to me and anybody who looks at it for the first time. I'm currently setting up my database ( I'm not yet willing to pay for a real service ). My hope is to bring this to production by end of year, although I don't always hit my own deadlines when I'm not being paid. The hardest part I don't want to code myself is the management of login and security. I'll probably use Azure for this. Again, the biggest concern is that of security. It's sort of a nightmare. But if this does make it through to production I'd have access to a lot of wealth tracking statistics on common people, which would be fun to analyze.

That brings me to another thought that has haunted me for quite some time now. I've read many times that many Americans only have at most $500 available to them at any given time. I find this hard to believe and wonder if it is because the report is generated by major banks ( like Chase or BAC ). If this is true, it may be because they're using medians of savings account values. I don't know anybody who keeps much money in savings accounts ( except maybe my brother ) since the return is like nothing.

I really do think that people can learn to think about finances "like us", meaning like this community, if they were to focus on the most useful data. I went through a stage of trying to demonstrate the logical fallacies all my family members make with their financial lives. The problem in my opinion came to intellectual fatigue/laziness. The root problem is that they've become drones via overwork and exhaustion. The consequence is that people are not even aware of what constitutes healthy financials let alone what the implications of a truly sound financial backing are. And I don't think people generally have the motivation to study Jacob's book or learn math. So that is why I route to the summary statistics page with the info I referenced above. If I can't get people to live and own FI principles first, I want to make it as easy as possible for them to monitor and own the outcome even if their understanding is only superficial. I think it is possible for understanding to come after habit, where this app hopefully enables people to easily build successful life habits.

For me it was reversed, I learned first and then changed my habits. But I don't think most people think that rationally. I think this approach is aligned with the industry at-large anyways. Rather than communicating intellectually and teaching that way, it may be easier to control attention and aid people in building habits.

[mcs2269]

It occurred to me while I was responding to someone's "boredom at work" thread that I spend an hour a day at work playing table tennis with the other developers, which is like 13% of my working day and like 13% of my salary.

I guess that means I've effectively gone pro.

[mcs2269]

Thought I'd put this thought here and come back and think later about whether it is optimal nutritionally and financially:

Favorite meal is olive oil sauteed vegetables and mushrooms with a little bit of garlic salt. Sometimes with oven baked salmon. I believe I could eat this every day. Secret to life. Mushrooms just explode with deliciousness.

Other update is my database is now complete. Fixing the api calls now to make the app functional.