I realize that I’m perhaps not your average millennial when it comes to personal finances. Outside of the obvious fact that I run a personal finance blog, I also do a lot of things that may appear peculiar to the average millennial. I think I can count on two hand the number of times I’ve bought lunch during my working career (8 years) and eat a PB&J most days. I’ve also paid cash for every car Mrs. Money and I have owned. I keep a strict budget and save 15% for my 401(k). I’m not really one for ‘impulse purchases’ and often consider long and hard before making a purchase (I waited 6 months before getting AirPods). As such, I realize that a lot of what I blog about might not resonate, or make sense to some readers – so I thought I’d do a post explaining a little about my financial beliefs and how I choose to live my financial life!

Save a whole lot now

I’ve done a few articles on this topic, but it basically boils down to the idea that as a young professional, it’ll never be easier to save and invest. Being a young professional has so many fewer obligations on our time and money. I know it’s tempting to spend money as a young professional – there are so many things to do, see, eat, drink, enjoy. I’m of the mindset that I still can enjoy life while also saving. So, for as long as I could, I saved about 35% of my income. True story. I did 15% to retirement, 10% to my employer’s stock purchase program and about 10% to savings and general investing. I’ve scaled that back down to more of 28-30% now that BabyMoneyFinance is here (diapers and daycare isn’t cheap), but most importantly, I got in a HABIT of saving a lot. It’s much easier I find to scale back vs scaling up my savings/investing rate. 

Say “no” to stick to my goals

I don’t have specific financial goals right now per say, but I have in years past. Mrs. Money and I early paid an additional $1,000/month to student loans until we got out of student debt. After that we set our mind on a down payment for a house and took that $1,000/month and put it towards our down payment. We’ve also had to buy new cars, keep a well-stocked emergency fund and leave room for some enjoyment with our money (we love to travel). At each of those times when we had a very well defined goal, it was super easy for us to say “no” to thinks that got in the way of our goal. We didn’t eat out very often, didn’t see movies, didn’t take a ton of trips, and controlled our grocery spending as much as we could. 

If you don’t have goals for where you want to end up, you definitely won’t get there. Once you have goals, you’ll be surprised how often you can say “no”. 

Pay cash for a car

I’d say this one is decently controversial, but I’ve always paid cash for my vehicles. I grew up listening to Dave Ramsey and he is a huge believer in avoiding debt – at whatever cost. I wouldn’t say I go that far – I believe that debt, when used properly can be a powerful tool. I’m also a believer in putting your money to work where it’ll work the hardest for you. So, in theory getting a low interest loan on a car could be smart as I could put that money in another investment that pays more. 

For whatever reason, that logic has never sat well with me. Maybe it’s got something to do with the fact that a car is a depreciating asset (loses value over time), and I don’t like “investing” in something that loses money. Maybe I like the security knowing that my car is paid for and that I wouldn’t be at risk of losing it (or could sell it on my own terms) if I ran into a rough patch. 

So, as weird as it may be, I always pay cash for a vehicle. We’ve also always bought 2-3 year old cars – let the depreciation on a brand new car take it’s toll and we swipe in to pick up a deal! 

Put my money to work where it’ll work the hardest

This is something I often say, but at various times, I’ve actually been called out on not following through. The idea is simple – money if it’s just hanging out sitting there should earn the most return. That’s why I put most of my savings in an online bank (American Express and CapitalOne) that earn 1.5%+ interested compared to the savings account in my main bank (Bank of American) that pays 0.01% or something meager like that. If it’s just sitting there, it might as well work as hard as it can and earn the most possible. I’m currently paying 3.8% interest on our main house and 3.6% on our rental house, so if I ever chose to pay extra one month to reduce the principal faster, I should pay the 3.8% loan because I get more bang for my buck.

The same does hold true with true investments (stocks/bonds/mutual funds), but with a caveat for risk. Just because I’m getting a higher return right now doesn’t mean I always will on one stock or mutual fund. Investing is inherently risky, and so within my risk tolerance level I will try to make sure my money is working the hardest – i.e. earning a higher return. 

I was actually called out by a reader a few years ago for paying an extra $500/month on my mortgage at 3.6%…the argument was that $500 could (and should if I am practicing what I preach) be invested in the stock market which was pretty consistently returning 6%. 

There will likely be caveats and exceptions, but on the whole I try to stick to this rule! 

Term life, not whole life insurance 

This is undoubtedly another controversial one, but as I mentioned growing up with Dave Ramsey and he is firmly against whole life insurance, instead opting for term life insurance. The thinking here (added with some of my own) is that I should invest my money in investments, and pay for insurance that is insurance. When you blend the two, you get a diluted combination of benefits that are less than the sum of the pieces individually. Dave’s argument is that whole life insurance costs 10x more than term insurance and the ‘return’ that you end up getting is much less than what a good index fund will return you over the long run. By having whole life insurance, you’re paying too much for insurance and getting too small of a return. 

So, I have affordable term life insurance through work, and I take the other 9x money (remember whole life is often 10x more) and invest it where I get a much larger return. 

I’m coming to think that whole life insurance might be good for folks that aren’t as good at managing their money? So by preying on their fear of death, you get them to have insurance, and side benefit there’s always a cash element to the policy. Maybe? I honestly feel a fair amount of judgment from friends/family on this one but am sticking with term for right now. 

Pay for the help I need, but not more 

I used to be very, very frugal to the point the I took pride in how cheap I was. This proved sometimes to be to my detriment. I realized that in a professional setting I should probably not keep cutting my own hair, I regretted driving around that summer without a/c in my car because I was too cheap to fix it, and eating tuna pasta or hot dogs with ramen probably wasn’t good for my long term health. 

I came to the conclusion that it’s ok for me to pay for things that I need in life, and feel that I lead a little bit better of a life! So, I’m always open to paying for things in life that I need or need help doing, but try to do things on my own that I can do a good job at. I go out for haircuts (Great Clips, $15), paid $60 for CPA help online doing my taxes (had some complex stuff in 2019), and have had several handymen or repair people by the house. Especially as a homeowner, there’s always something going on and I’ve learned that it’s not worth my time or frustration to do it on my own (I’ve failed many times). Paying a repairman is a good use of my money!  

Invest in boring yet consistent investments

As someone who loves finance, I follow the stock market daily. I read all the stock news, listen to podcasts (big fan of Jim Cramer) and thought of myself at one time pretty good with stocks. So, one year I tracked things pretty closely and compared how my very generic index fund (a fund that essentially invests in all the stocks in the market, thus lowering risk) vs my individual stock picking and to my SHOCK found that my index fund did better! After eating a slice of the humble pie, I then committed to putting 95% of my investing money in index funds and then keep 5% as my “mad money” to try my hand at investing. 

I know that index funds aren’t nearly as cool or as sexy as things like electric energy, the glass maker for the screen of the iPhone6, bitcoin, buying fractional ownership of farm land, or Tesla, but all those things are risky. (All of these are examples of investments I’ve followed in the past). Sure more risk more reward but often times with risky investments they sooner or later don’t end up well! 

I actually think that for most young professionals, we actually don’t need an investment advisor or financial planner. So often I find these folks are actually whole life insurance salespeople in disguise, and/or charge too much while returning too little. Index funds are where it’s at…PERIOD! 

Experiences, not stuff 

People gotta spend their money one way or another, and even someone like this personal finance blogger spends my money (from time to time). The one thing that I’ll always opt to spend money on is experiences, particularly travel for Mrs. Money and I. Experiences can also be things like eating out, concerts, or shows. I fondly remember our trip to Southeast Asia, London, Italy, the Caribbean, but don’t really remember when I bought a cool ‘thing’. Experiences last so much longer than stuff, so choose to spend your money in something that will last! 

That’s how I approach my money! It might be different than some folks, but from reading, learning and trial and error, these are the principles I’ve come to believe and how I focus my articles on this blog!