Posts tagged financial priorities
October 2018 Money Diary: $500 Rent (Not In America), Automated Finances, & Living As Homeless Digital Nomads

Jennie here.

Here’s the untold truth about what I think about money diaries: I don’t really care about money anymore.

It may sound like arrogance and privilege (which it is) but in reality - if you’ve been following along with The Origami Life blog over the past 2.5 years, you’ll understand that it comes from a place of hard work.

We’re following a broader (financial and personal) life plan.

 
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Source: Our “Financial Priorities: The Origami Master Plan & Blueprint” from September 2017.

The rules/constraints/guidelines we gave ourselves led us to this moment financially. We’re in a privileged position and we no longer have to think about money during our travels and we’re really grateful.



Since We Left America:
Our Rent Was Less Than $550 In Southeast Asia

 
Here’s a broad overview of the past month.

Here’s a broad overview of the past month.

 

We are officially on our third month of travels (in our round the world trip) and it’s gone by too quickly.

What’s the most interesting (financial) thing that has happened since we left America?

  1. Our rent decreased from $1,400+ down to less than $600 in Southeast Asia. While we were living in Los Angeles, we spent more than $1,400 every single month on rent - and that didn’t even include bills.

  2. Our monthly expenses decreased from an average of $2,800 down to $2,200 simply by moving and traveling abroad.

Just as a frame of reference…
We rented one of the private rooms in
this giant penthouse apartment in Kuala Lumpur, Malaysia…and it only cost us $18 a day.
Note: This was NOT our cheapest accommodation.

To put it simply, we just have more buying power as Americans abroad and the cost of living is much “more affordable” because of that buying power.

My only job while we travel now is to keep our daily budget to under $35 a day (after rent).
And if I’ve stuck to that rule then everything else has already been calculated, planned, and accounted for. We can use the time we used to think about money to think about more important things like client work or pursuing the next creative project we’re interested in.

The point is, we’re now in a position to think for ourselves and to enjoy the day-to-day without the usual stresses of living in a metropolitan American city.


A Closer Look At Our October 2018 Money Diary & Expenses


 
The Origami Life - October 2018 Expenses (via Good Budget App)

The Origami Life - October 2018 Expenses (via Good Budget App)

 

For those who are interested, here’s a high level breakdown of our expenses over the past month. I can’t say that Ivan is super jazzed about the fact that we spent a total of $2,219.00 for the month of October. He was hoping that we’d be able to keep our expenses below $2,000. From my perspective, it definitely looks like progress as we spent about $2,900 in September. But you know what they say, you lose some and you win some, right?

Rent and Bills $779.00 USD

(35% of our monthly expenses)

We oscillated between Malaysia, Singapore, bus stops, and airports during the month of October. Fortunately, we had a really generous friend in Singapore who let us stay at his place for one week, rent-free while he was away on sabbatical. (Woot, woot to “Joe”!)

So, the bulk of our “rent” was spent on our Malaysian leg, which only cost $546 for three weeks. We didn’t stay in hostels or dorms either. These were nice, tastefully curated Airbnbs with all the modern amenities.  

Eating Out & Entertainment $532.50

(24% of our monthly expenses)

Once we got to Singapore and Malaysia - we stopped cooking. It was simply more cost effective to eat out than to buy and cook our own food.

Here’s the breakdown of a typical meal for two people:

  • Singaporean meal (e.g. fried noodles and hainanese chicken rice): $4 to $5 USD

  • Malaysian meal (e.g. two plates of nasi lemak and two coffees): $2 to $4 USD

Groceries $25.00

(1% of our monthly expenses)

As I mentioned, we didn’t need to cook at all in Malaysia or Singapore. When we were too exhausted to go out we did grab the occasional fresh fruit and vegetables though.

Flights & Transportation $478.50

(22% of our monthly expenses)

Most of our flights to date have been purchased via our airline points. So the bulk of this category were taxes and local transport (e.g. buses, trains, ride-shares, subways etc.)

Relationships $220.00

(10% of our monthly expenses)

Ivan and I mentioned in our last post that we’re going to invest more in friendships / relationships moving forward. That said, this past month, we spent time with two close friends that we’ve known for at least 10 years AND we met four new people through mutual friends.

Miscellaneous $184.00

(9% of our monthly expenses)

This part of our budget was primarily spent out getting essentials at the drug store / pharmacy (e.g. shampoo, cold medicine, etc) and coffee.

I also purchased a basic (nice quality) t-shirt from a boutique shop in Penang, Malaysia for $17 USD. And I love it.



17 Questions With The Origami Life Couple: About Us and Our Future Plans

General Questions

About The Origami Couple and Blog


1. Who are we?

Us - drinking G&B Coffee at Grand Central Market.

We’re Jennie and Ivan, a 29 year old married couple who met in Kyoto, Japan nine years ago, did six years of long distance, then decided to sell our worldly possessions by September 2018 to travel the world. We’re both Type A personalities, which means we’re goal-oriented and try to make conscious decisions in all areas of our life including our relationship, travel and money.

Here are our Myers-Briggs personality results, which you can take here:

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Ivan: I’m very lopsided (INTJ-A).

Jennie: I’m a “Debater” personality (ENTP-A). 
 

2. What are Our strengths and weaknesses?

Jennie:

  • Ivan’s strengths: Ivan is probably one of the most intelligent individuals that I’ve met in my life (if he can let go his ego). His writing, published and unpublished, is actually really good. He has the ability to think both creatively and analytically, especially when he stays the course and doesn’t let small things distract him from his end goal.

  • Ivan’s flaws: Ivan is occasionally arrogant, uptight, and sometimes - his expectations aren’t rooted in reality. Whenever he is “right” about one or two things, he starts to get delusional. That’s why I try not to overreact when he does something really well. I already know I’m going to regret saying such nice things (Ivan: Wait, she thinks I'm a genius, right? Cause that's what I heard). I gotta keep his ego in check for the sake of our financial interests. And when I say he’s uptight, I mean he could stand to loosen up - like, a lot. Sometimes, he gets so wound up in what he’s doing or “the next thing” that he misses moments that could’ve been really meaningful.

Ivan:

  • Jennie’s strengths: Jennie has a way with people and can out-hustle anyone. Not only can she understand and empathize with people, she can tailor her message to get them to do what she wants. Despite this, people like and trust her almost instantly. When we first started dating, I thought this was a fluke. I know better now. Honestly, the ability to “get your hands dirty” and knowing what makes people tick is probably the most valuable skill-set you can have - and it’s chronically underrated by specialist-types who don’t know any better (i.e. people like me).

  • Jennie’s flaws: Jennie’s waaay too process driven for things that don’t need to be mapped out by the second. Sometimes, the answer isn't to create a spreadsheet or a decision tree. Some ideas need time to marinate in your head. She also enjoys barking orders and bossing people (i.e. me) around. So even when we have the same goals, we fight over “the best way” to get there.
     

3. What’s this blog about?

Jennie: I see this blog as a way to both keep ourselves accountable and share some reflections on life, marriage and our journey with anyone who can relate.

Ivan: The Origami Life is a minimalist travel blog with some personal finance and relationship posts thrown in. It’s also a place where we experiment with different ideas. Sometimes, we write posts just to see if we actually believe in it.
 

4. Where are we headed?

Jennie & Ivan: Anywhere in the world where we see opportunities for growth - whether that’s creative, financial, or personal. Over the next 3-5 years, we’re moving away from comfort and stability and towards challenge and risk (while doing it responsibly).  
 


II. Travel Questions for The Origami Life Couple and Blog


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5. What’s our travel style?

Jennie: I’m a type A planner who just so happens to enjoy travel. I love the idea of nailing down logistics, formalizing schedules, and putting together spreadsheets. I know that some of our readers can relate because several of you have shared some amazingly detailed and useful itineraries with us over the last year (🙌 thank you!). It brings me joy to have complete control over knowing when and where I’m going. This means that I’ve researched everything thoroughly and get to do everything I want - so I won’t leave with any regrets.

Ivan: Compared to Jennie, I’m less of a hard-core planner when it comes to travel. I like ironing out the big ticket items like accommodations and airfare, so I can be more carefree with my day-to-day decisions. When I’m traveling, I like to have one goal per day. If I achieve that goal, I’m happy. You could say I’m the more “laid-back” of the two, but unfortunately, this only applies to travel. I can be a pain in the ass in other areas.  
 

6. What do we hope to get out of our RTW trip experience?

Jennie: Although I’m treating my RTW trip as a building block for the next 3-5 years of my life, I just want to enjoy myself and experience things intensely. I’ve spent the bulk of my life focusing on “the next thing” or doing things for the sake of my family. It sounds funny but I’ve been caught up and stressed with work, family, and money for the last decade and I’ve forgotten to just be myself. For my RTW trip, I want to just enjoy whatever happens and comes my way. I want to meet people and forge genuine connections.

Ivan: In my twenties, I think I’ve undervalued personal relationships and social interactions. That’s because as an introvert, I don’t need much company outside of Jennie. Even when I do put myself out there and make connections, I can be pretty lazy in the maintenance department. People often don’t know where they stand with me. This is something I’d like to get better at: maximize the number of genuine connections I have on the RTW trip and the number of “uncomfortable” social situations I put myself in. Then I’ll pick a small handful of those people and try to be more forthcoming with what I think/feel to build more meaningful relationships. (Geez, I sound like a robot trying to be human).
 

7. What countries are We most looking forward to visiting and why?

Jennie: I haven’t put much thought into it because I still can’t believe our trip is finally going to happen. Top of mind: riding the Trans-Siberian Railway partway through China, Russia, and Mongolia. I really like train travel and loved our Amtrak trip across the U.S. we did last November.

Ivan: Rural India because of the history and because I think it’ll be an interesting challenge. I’m also attracted to sleepy backwater countries like Sri Lanka and Laos.
 

8. Are We nervous about leaving our family and our home?

Jennie: Absolutely. I’m worried about all the worst-case scenarios that could happen with my family while I’m away. And that will always be the case because I’m just that type of person. But the thing is, if I was truly scared about leaving, I would’ve never left New Mexico in the first place.

Ivan: This one’s easy. I’ve never viewed North America as home. I have no family here outside of Jennie. Most of my upbringing was in Taipei and I was educated in two languages (my parents are teachers). When I’m here, I think in English. When I’m home, I think in Chinese. Not having any roots is liberating because it often gives me a different perspective on things.


III. Money Questions for The Origami Life Couple and Blog


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9. How can we afford to travel long term?

Jennie: Outside of an aggressive savings plan, Ivan keeps an iron fist on our spending / expenses each month. Every month for the last two or three years we’ve saved more than 50% of our monthly income/salary and accumulated a RTW travel fund of $40,000, a reserve of airline points - while taking care of retirement and other future obligations.

Ivan: Like I said earlier, I can be a pain in the ass in other areas.
 

10. How do we feel about reaching our $40k travel goal?

Jennie: (Deep sigh) I won’t lie, when we hit that $40,000 marker in May...I felt underwhelmed. I literally thought, “wow, so that’s it, huh?” And I think that’s because of the timing. When we hit our financial goal, we were still MONTHS away from leaving for our trip. It felt unreal and almost anticlimactic. Because the savings was always automated and I never look at our bank statements and accounts. It was never a significant part of my daily life. I was doing what I needed to do which was focusing on crushing it at work and building our business.

Ivan: This might sound like a privileged thing to say, but the money is not nearly as important as the habits you build along the way. And the realization that whatever your circumstances, there are usually ways to take back control of your life.
 

11. How has our attitude / relationship with money changed?

Jennie: I’m a lot more conscious about how I spend money now. I’m more aware that if I spend x amount on something for this month, it means that I miss out on other things that I really want to experience, have or enjoy later. But it also means that I buy or spend on things that I really want or that I love now. Having a more conscious understanding of how I spend my money has actually made me much more “fiscally literate” and it’s been a positive effect on my life. I feel like the lessons I’ve learned about money - how and when to use it and how to plan long-term actually makes me a more strategic thinker.

Ivan: I’ve always viewed money as a major inconvenience. It’s a concession I’ve had to make to society in order to keep me and the people I care about alive. The only reason I’m a “minimalist” is because I don’t like conceding much of anything. Money is only as useful as the independence it buys - to ensure that no one can ever influence how I run my life. 
 

12. What are We planning to do to make money?

Jennie: Ivan and I actually started a business earlier this year. We essentially create marketing content for cyber security startups. Due to my experience in the industry and network, we’ve got a roster of clients and plan to continue working with a multitude of security tech / SaaS startups.

Ivan: I passed all three levels of the CFA exam and am a self-taught investor. I work with clients in the VC/private equity space to do financial modeling, projections and writing investment pitches. I’m also using this RTW trip as an opportunity to interview entrepreneurs on the ground in emerging economies.
 

13. What are our next financial goals?

Jennie: I’ve been hustling for the last six years and I feel like I haven’t put much thought into my next financial goals. There’s been one thing that I’ve had on my mind - increasing our net worth / saving for long-term retirement. We’re not one of those “FIRE” (Financial Independence, Retire Early) people though. Although it’s a nice concept, I can’t imagine retiring early and if the last couple of weeks without a job is any indication of what it would be like - I’d be bored as fuck if I retired early. However, Ivan and I have a very specific number in mind for us to live comfortably and completely on our own terms; my next big financial goals is to get us there early while building up my career and potentially having a  family.

Ivan: Over the long term, the risks you take equals your reward (financial or otherwise) - provided you take calculated risks that allow you to survive the short and medium term. So, our next financial goal is to take more calculated risks and being humble in the face of uncertainty.


IV. Love / Relationship Questions for The Origami Life Couple and Blog


Us at a wedding a few years back.

Us at a wedding a few years back.

14. Describe our marriage.

Jennie: We’re still the same couple that started nearly a decade ago. If you knew us from our early days, you’d see that not much has changed in terms of heated discussions and arguments - because it’s fun for us. The only thing that’s really changes is that we’ve become much better partners, communicate better, and know each other better than anyone else in this world.

Ivan: What she said. I do think as we grow into our new roles as business partners that we should draw a clear line between business and personal. This means carving out time that’s just for the two of us.
 

15. What’s changed about our marriage over the past Few years?

Jennie: At the beginning of our time in Los Angeles, it was a pretty tense time for us due to a big move and stressful immigration processes. But once we decided to be more intentional and conscious with our time - we started planning and spending more time together at our favorite donut / coffee shop. Ivan and still very much love each other, but I’d say that in the midst of the hustle and constant goal-setting (and goal-crushing), it’s one of our more neglected aspects of our lives. We’ve spent a lot of time at coffee shops chatting about big goals, funny stories, and strategizing on work, but we haven’t spent as much time just...being together. My hope is that this RTW trip will help us slow down a bit and continue to grow our relationship.

Ivan: I agree.
 

16. What do we argue/fight the most often about?

Jennie: Most of the time, we argue about really menial things - it’s never about the big picture. It always seems to be arguments related to our behavioral / personality preferences. For example, if I ask Ivan to do something (e.g. take out the trash, do the dishes, or put the laundry in the dryer), I mean I’d like him to do it that moment because I’m compulsive about that kind of thing.

Ivan: I don’t like being interrupted when I’m working or reading, so that’s where most of our arguments stem from. To be clear, I don’t mind noise - so long as that noise doesn’t require a response from me. I’ve gotten better over the years of not lashing out, but some snark is always going to be there.


V. Plans for the Future for The Origami Life Couple and Blog


17. What’s next for Us individually and for this blog?

Jennie: We started this blog as a means for us to communicate our lives and be accountable to our life goals. However, based on emails and we’ve received from our kind readers - it feels like it actually helps add value in some small way. That meaningful / value-add contribution has been one of the more fulfilling things that I’ve experienced over the past two years. My big goal for this blog is to continue creating content that is useful for any reader that comes across this blog. 

Ivan: I’d like to experiment with travel videos. I think understanding how to combine image and sound over time can make me a better storyteller and writer. I’ve watched a lot of “travel vlogs” on Youtube and have been pretty dissatisfied with the results. I’d like to do something different. The best way I can describe it is I’d like to have the “feeling” of the Before Sunrise trilogy in online video form. The exotic destinations should be secondary to the relationship and the conversation in the frame. Hopefully, we can make this happen over the coming months.
 



Financial Priorities: The Origami Master Plan & Blueprint

Ivan here. 

This is what the average person’s life looks like:

Always playing catch up, always reacting to one situation after another. Never realizing what was truly important.  

I look at this trajectory and ask myself: did these people ever make any real choices at all? Or did they just end up accepting the choices that had already been made for them? 


An Origami Blueprint


This gets at one of the core tenets of this blog: our refusal to accept the results that most people get. It’s about setting priorities and making sacrifices in order to live deliberately, to create a life we can look back on that’s truly our own. 

If we had to design our own origami life, what would it look like? Obviously, a lot of it would be dependent on choices we haven’t made yet. 

But here’s a rough sketch: 

The Origami Life Blueprint. The plan so far.


Our 20s - Asking the Right Questions


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1. Build a Fuck off Fund

It’s not enough to simply pay off our debts to society (i.e. student loans). We need to build a fuck-off fund to ensure that society will always owe us

With a 6-12 month fuck-off fund, employers owe us better compensation, banks and credit card companies owe us better bonuses. Basically, we need financial leverage over everyone who might otherwise have leverage over us. This means that before we spend a single dime on anything that’s not essential to our survival, we first buy the option to tell someone to fuck off. 

2. Be Done With Retirement

Retirement sounds like a terrible idea. Hanging out by the beach, sipping mai-tais, with no purpose or meaning besides “enjoying your old age” is not our idea of a good time. Who wants to wait around to die? 

This is an advantage Jennie and I have over most people because it makes our retirement number far more attainable: we simply need to make sure we have “enough” by the time we’re too old and decrepit to work (not by some arbitrary age of 65). 

Our minimum number happens to be $700,000. Working backwards, assuming a 6% annual return for the next 35 years, this means we need to have $90,000 ($45k each) invested by age 30. After 30, even if we don’t invest another dollar, the magic of compound returns will ensure that we’ll have at least $700,000 by age 65. 

This is why we lived in shitty basement apartments in Toronto and a room the size of a closet in Boston - to make this minimum number happen. 

3. Build a Travel Fund

This is where readers find us today, as we track our progress through our Money Diary. Keep in mind that this came after a considerable amount of pain moving through steps 1 and 2. But what better time is there to take our lumps than in our 20s? 


Our 30s - Finding Answers


1. Insure Ourselves Against Loss

At age 30, we’ll be purchasing 30 year term life and disability insurance to protect ourselves against catastrophe (i.e. protecting our downside). Also, the younger you are, the cheaper the premiums are. 

2. Build Our Own Freelance Business & Pursue Creative Projects

Start traveling and take some major creative and professional risks. 

3. Have Kids (maybe)

We're still on the fence about this. See our blog posts on the subject. 


Our 40s - Expansion Phase


1. Grow Our Business & Creative Projects

It's too early to say how this will play out. 

2. Save for Child’s Education

Taking a cue from Ivan's parents, no expense will be spared for their education. After that? They're on their own. 

3. Support Our Families

At the end of the day, family's still family. No matter how terrible their life choices were.


Our 50s - Consolidation Phase


1. Continue to Grow Our Business and Creative Projects

Again, too early to say. 

2. Invest in Other People  

We'd like to eventually be in a position to employ other people or help them start their own projects

3. Pay for a House With Cash

We covered our rationale for this in The Hidden Cost Of Home Buying. 


Our 60s and Beyond


1. Never retire

Retirement is basically tacit acknowledgement that you can no longer add any economic value to the world. 

2. Give 90% of our wealth away

We'll leave our potential offspring with the remaining 10% and hope they don't squander it. The rest goes back into society. The only things Jennie and I hope to leave behind are a few ideas, not a burdensome estate that our beneficiaries never earned. 



Financial Priorities: When to Take Risks vs. When to Play it Safe

Daily Origami is a way for us to record our off the cuff thoughts, feelings and observations about the world around us. Published every weekday, Monday through Friday.


Challenges and risks
 
Investing is the one sphere of life where victory, security, and success is always to the minority and never to the majority. If everyone agreed about its merit, the investment is inevitably too dear and therefore unattractive.
— John Maynard Keynes
 

Ivan here. 

Here’s a list of things most people find risky: 

  • Asking for a raise ("What if my manager says no?")
  • Talking to a stranger ("What if it gets awkward?")
  • Moving across the country ("What about my family and friends?")
  • Moving abroad ("What if I get homesick?")
  • Starting a business ("What if I fail?")
  • Joining a startup ("What if it doesn't work out?")

And here’s a list of things most people find safe: 

  • Buying a new designer bag or pair of shoes ("It's an investment in myself")
  • Taking a vacation abroad ("It's a once in a lifetime experience")
  • A $26,720 wedding and $5,978 engagement ring ("It's for the rest of my life")
  • Financing a new home with credit ("Every grown-up has a mortgage")
  • Financing a new car with credit ("I've had my old car for ages")
  • Pre-spending your paycheck with credit cards ("I can always pay it off")

This is just my way of illustrating the obvious: most people seek comfort and social acceptance and avoid discomfort and rejection. 


What Safety and Risk Mean


‘Safety’ is code for what most people think. ‘Risk’ is code for what most people aren’t willing or able to do. Aspiring to be like most people is to accept the results that most people get.

In some instances, the cost of not taking risks can be greater than taking risks, just as the cost of doing a ‘safe’ thing can be higher than the price we pay for safety. 

There are those who prefer not to live with so much uncertainty. Those who may be content with their lot in life, surrounded by family and friends, doing ordinary things that most people do and living safe, ordinary lives. This is totally fine. 

But what if the safety we’ve come to rely on is no longer safe going forward? What if safety is a more expensive illusion than we ever imagined? 

The coal miners in West Virginia thought they were safe. Just five years ago, accountants, pharmacists, lawyers, journalists, and taxi drivers felt like safer professions than they do today. 

In a market system, the more people there are seeking safety, the harder it is to come by. The fewer people there are seeking risk, the more cheaply it can be acquired. 

Safety is always expensive. Risk is always on sale. 


When Should We Take Risks?

and

When Should We Play it Safe?


Jennie and my position on this question has always been:

We should never hesitate to take risks so long as we ‘safely’ plan around those risks, focusing 75% of our energy on upside and growth, while using the last 25% to protect our downside. 

To summarize: 

  1. We should be taking risks in areas where most people aren’t willing or able to take risks. 
  2. We should be safe in areas where most people have been taught to be reckless. 

 


Financial Priorities: Should You Earn More Or Spend Less?

Daily Origami is a way for us to record our off the cuff thoughts, feelings and observations about the world around us. Published every weekday, Monday through Friday.


Stocks

Ivan here. 

This dude makes $600,000 gross salary with $2M in assets, but the prospect of a market correction “scares the shit out of me.” 

 
I wish I could just sit back and enjoy being the top 1 percent, but not a day goes by without me worrying about something bad happening to my family, my job, my savings, or my country.
— Mr. Anonymous, The Billfold
 

I’m not trying to single out Mr. Anonymous here or judge him. This is simply his experience and what he feels. 

But it does raise some interesting questions: if this guy still worries about his financial future, where does it leave the rest of us? If a $600,000 salary can’t buy you security and a life free from worry, then what number is sufficient? Will any number ever be “enough”?

At some point in his career, Mr. Anonymous was part of the bottom 99%. Back then, he probably never imagined that he'd become this guy.  But I guess in his hunt for more, he never arrived at a point where he felt like he’d “made it.” Or if he did, it was a feeling that never lasted. 

The thing about want is that you always find yourself wanting. 


When Is It Okay to Stop Worrying About the Future

and Start Living in the Moment?


I happen to know that Mr. Anonymous isn’t an isolated case. 

I know this because I attended a private high school in Taipei, a school that educated the children of some of the wealthiest and most privileged families in Taiwan. 

And I know for a fact that the richer you are, the more you feel you have to lose, so you never stop worrying. Ever. A lot of these families are frickin’ miserable. I’d go so far as to say that the level of misery among the top 1% is probably higher than the rest of the population. 

Which leads me to ask: If that’s what rich is, what’s the point? 


What We Sacrifice Chasing a Future That Never Arrives


money
  1. Time spent worrying about money 
  2. Time away from family and friends
  3. Time spent commuting
  4. Years (or decades) working jobs we actively hate in order to “retire” or “retire early” 
  5. Time spent recovering in the evenings and on weekends from said job
  6. Time spent reacting to whichever meaningless task pops up first
  7. Time spent chasing the “next” thing and not being present in our own lives

A Rhetorical Question:

Should I Prioritize Earning More or Spending Less?


There are only two paths to financial freedom: 

  1. Earn more
    OR
  2. Want less

Frugality gets a bad rep because change is painful, but if “earning more”, above and beyond our most essential priorities means that we’ll never feel secure again - then what other option do we have left? 



Financial Priorities: Should Millennials Value Experiences over Things?

Daily Origami is a way for us to record our off the cuff thoughts, feelings and observations about the world around us. Published every weekday, Monday through Friday.


Experiences...

Experiences...

...or things?


Ivan here.

I’m always glad whenever the internet figures out the secret to happiness. I mean, whew! What a load off my mind. One less thing off the old checklist to worry about - right beneath fame, wealth and success. 

Now if only I could attract any woman I want by projecting confidence, making her laugh, making her win ME over, creating an emotional attachment while simultaneously being completely unattached to the outcome, then by golly, like Hershey meets Kisses, my life would be complete. 


The Secret to Millennial Happiness:
Buy Experiences, Not Things


There’s a kernel of truth to this statement, as is the case with every over-generalized piece of bullshit that loses any real meaning in its conveyance. Sure, travel may broaden the mind. Jennie and I would be hypocrites to suggest otherwise.

But it’s also not entirely fair to ask: do you want to travel the world, expand your horizons, and open yourself up to everything this magical world has to offer you - or buy avocado toast? 

It’s like asking you to choose between a meeting with the Dalai Lama or an iPhone X. Of course we'd all pick the Dalai Lama (right?). 

Here’s a better comparison: you want to be a painter. What should you prioritize: your first paint set or a meeting with the Dalai Lama? 

Again, probably still not fair, but the point is that this is a question of framing. 

Which leads to my larger point. 


What should we prioritize: experiences or things?


In my opinion, we’re asking ourselves the wrong question. The real question should be: what enables us to create and what enables us to consume? 

And we should be prioritizing the experiences and things that enable us to create over the ones that enable us to consume.

 



Financial Priorities: Should I Pay Off Student Loans or Save for Retirement?

Daily Origami is a way for us to record our off the cuff thoughts, feelings and observations about the world around us. Published every weekday, Monday through Friday.


Ivan here. 

Recently, this Oprah quote has been floating around the financial blogosphere: 

 
You can have it all, just not all at once
 

I’m going to do my best to ignore the survivorship bias of a multi-billionaire telling her followers they can (eventually) have everything, and focus on the finer point she’s making about financial priorities. 

Source: xkcd.com/1827/


What Should I Prioritize First:
Debt, Savings or Retirement?


Companies selling retirement products tell you to prioritize retirement. Student loan refinancing companies tell you to prioritize paying off your loans. Mortgage lenders tell you to save for a down payment because real estate values always go up, and nothing we’ve experienced in the past decade would suggest otherwise. 

What I’m telling you is this: run the numbers yourself. 


Here’s What You Can Do Right Now / Are Doing Already: 


But first, nothing in this series is going to make sense until you’ve done the following:

  • Have / Create a budget and are living within your means
  • Make minimum payments on your student loan
  • Have a 2-3 month fuck off fund
  • Ensure you’re paying the lowest possible rate on your loans
  • Contribute to your company 401k up to the employer match (if available)
  • Avoid other high interest loans including: credit cards, personal loans, new car loan

Should You Pay Off Students Loans First Or Save For Retirement? 


pexels-photo-267885-2.jpeg

As I’ve covered in my Daily Origami post True Value of Money, the cost of a financial decision is the value of the next best alternative. This is called opportunity cost. 

So the question of “should I pay off my students loans first or save for retirement?” could be rephrased as:

What return am I giving up
when I use my money to pay my student loans first? 

In other words, you weigh the expected return of investing for retirement against the interest you pay on your loan. 

Now before I get into the nitty gritty, I have to make the following assumptions:


Figuring Out the Market Return


Since we already know what interest rate we’re paying on our student loans, our only unknown is the market return we’re giving up. 

But first, a primer: The market is composed of companies. Companies make earnings (or profits). Earnings can either be distributed to shareholders in the form of dividends or reinvested back into the company to grow future earnings. 

Thus, in the long term, say over a decade, the annual return of the market can be boiled down to the following formula: 

Market return =
Dividend yield + Future earnings growth

Since the future obviously hasn’t happened yet, we can only look back on the data available for the last twelve months: 

And when I say valuations, here’s where we are today. 

Source: http://www.multpl.com/shiller-pe/

Source: http://www.multpl.com/shiller-pe/

This is the Shiller cyclically-adjusted price to earnings ratio. Without going into too much detail, the higher the ratio is, the more overvalued US stocks are. The highest point on this chart was during the height of the dot-com bubble in 2000. 

Notice we’ve gone eight years since the 08-09 recession, and valuations have moved past the levels seen in 2007. 

This suggests that future earnings growth over the next decade will be at the low range of 3-5%. Let’s use 3% to be conservative. 

Our estimated market return will be as follow:

Dividend yield (1.89%) + Future earnings growth (3%) = Market Return (4.89% )


Conclusion


Daily Origami Week 9-LOAN DEBT-2.png

Assuming a $40,000 student loan debt, your answer is pretty clear when you do the math. 

Even if the numbers were roughly equal, debt affects your life today in ways that not saving for retirement right away wouldn’t - especially if you’re still young:

  • Debt severely limits your options and prevents you from taking risks that could grow your future income (e.g. starting your own company or taking that lower paying but bigger upside job). 
  • Paying off debt gets you into the habit of saving, which can only benefit your retirement goals in the long run.

By running your own numbers, we can conclude that in 2017, it’s probably never made more sense in all of financial history to prioritize paying your student loans (and other debt) off as quickly as possible.