Some Things My Finance Degree Didn't Teach Me
Some finance reflections and notes from my life and work, not an advice thread
I graduated college roughly two years ago with a finance degree but the learning didn’t stop with the degree in hand. Sometimes you learn things in the real world that simply can’t be taught in the classroom. Life and failure can really be the best teachers. This is not meant to be an advice thread. Rather, it is some reflections and notes on finance from my life and work. Notes to myself perhaps. Here are a few of those things that you may find valuable.
Happiness is expectations exceeded. If you are always expecting more money, you will never be happy with your financial situation.
If someone asked me how much money I would need to be happy, I would simply say “I don’t know.” It is truly all relative. I expect to make more at 34 than I do at 24 but I think I am happy with my finances currently. However, if I was 34 with my current situation, I wouldn’t be. It is rooted in expectations and wanting to grow. It is human nature to always want and aspire for more. There is a difference between aspiring for more and expecting more. If you aspire for more, there is a connotation of contentment but a need to eventually grow. You may be happy with your current situation but you eventually wish to improve. It’s realistic. However, expecting more creates a debt that must be repaid before you can ever be happy. Your expectations must first be met for you to be content. To be satisfied, your expectations must be exceeded. If you are in a continuous loop of always expecting more, you will never be happy because your expectations will never be met. We can’t get a promotion every year or be a CEO making millions at 25. I have found it is important to make sure your expectations are in line with reality, especially when it comes to money. A raise is nice but I have found a raise doesn’t change anything internally. To some degree, it only changes the amount that goes into your bank account each month.
It is much cheaper, and tastier, to cook your own food.
You can make a $25 stir fry that will last you a week or eat a $25 stir fry that will last you one meal. The former you make and the latter you get at a restaurant. Store-brand items help to keep the cost down. Target’s ice cream, Costco’s pizza, IKEA’s meatballs, Kroger’s private selection ice cream, and Trader Joe’s cookie butter are all cheaper, better alternatives that don’t break the bank. These places put a lot of time into research and development of these products to mimic name brands, entire departments work on this. Leverage it.
Put a disproportionate amount of energy into what you can control and don’t worry about what others are doing.
After Tom Brady was drafted 199th overall he was asked,
“Are you aware that there’s another quarterback here they drafted last year?” To which he acknowledged the situation and replied, “And I know he’s a heck of a player, but I’ve always really concerned myself with just the things I can control. I don’t put a lot of thinking into the other guys because I know I’m not at my best when I’m not thinking about playing as well as I possibly can.”
Another quote from Tom to help drive the point home,
“I never once in my life said I wanted to be the best of all time. Ever. I wanted to be the best I could be, period. I learned that in college. It didn’t matter what the other guys were doing. It mattered what I was doing.”
Ironically, I see this as a great mindset for finance. If we are always worried about what others are buying, wearing, investing in, or whatever it may be, we will never be able to focus on what we are doing. We see people driving nice cars or buying nice houses but never do we know the full story of how they got there. We just love to compare ourselves to them. I think the way to make the most sound financial decisions is to not worry about what other people are doing. What matters is what you are doing. Take the energy you might direct towards what others are doing and instead, pour it into what you are doing.
I always keep six months of living expenses. Not a bad idea to invest the rest.
Life is unpredictable. Nothing is a given. At the very least, a six-month runway allows me to sleep peacefully at night knowing if something happens, I have six months to figure it out.
No one is as impressed with your possessions as you are.
I went to Las Vegas senior year of college. We got VIP in a club to ensure we got in but not to be remiss, it was also a status thing. Splurge one night in Vegas to look the part. It was insane the amount of money flowing that night in the club. Bottle after bottle after bottle. Except, no one cared about what anyone else was doing nor were they impressed. Or what bottle they may have gotten. Everyone was focused on how they could look great in VIP. Everyone was focused on themselves while simultaneously thinking everyone was focused on them. Vegas is a place of luxury but it is also one of the clearest examples of people being so concerned about themselves they don’t have time to care about what you are doing. I have found it best to buy things for myself and expect to impress no one with my possessions.
Debt is a piece of your future that someone else owns.
I think what most people truly seek is freedom and independence. It is rooted in our genetics. Wars are fought over it. Yes, we are fortunate to be in a situation where we are afforded freedom in our everyday lives but each dollar of debt we take on is a piece of our future we owe to someone else. Our freedom and independence are taken away. Don’t lock in a house at an insane interest rate just because the housing crisis leaves few options. Don’t buy a car with insane monthly payments just because you think it looks good. You probably don’t need a truck with a total cost of ownership of $100,000 just to drive five miles on a highway to work. Remember, no one is impressed with your possessions as much as you are. I have found debt is one thing that can control you. It’s the devil that is always over your shoulder.
The reason houses are good investments is because people sit on them and allow for compounding to work.
I try to think about this with all my long-term investments. I don’t view houses as a way to quickly make a profit. I view them like my 401k.
The windshield is bigger than the rearview mirror for a reason.
I regret some things I have done with my finances. Mostly, small regrets. Namely, not learning more about crypto and not having a plan to sell my crypto. I just thought it might never go down. Anticipating regret as well as learning from regret and failure is part of the reason the windshield, the future, is bigger than the rearview mirror, the past. There is a lot of room for growth and improvement.
It took 123 years for the population of the world to go from 1 billion to 2 billion people. It only took 49 years for the population of the world to go from 4 billion to 8 billion people.
This is compounding in real life and it works. We see compounding in everyday life and it’s a beautiful thing. I have found finance is no different when it comes to compounding.
A lack of commitment is way worse than a lack of natural talent. If you are truly committed to something, you can eventually become talented at it. The opposite is not true.
How does this relate to finance? There’s a certain level of commitment necessary to succeed and a certain level of commitment needed to be able to hold through down periods. Natural talent is one thing but commitment can eventually grow into talent with anything, especially finance. I have found committing to a proven investment strategy and letting it work takes talent in itself.
Simple beats genius every time.
Simple is better than genius because you can understand it. The simple investors win. The world pays for things that make our lives simpler. Airplanes, Cars, Computers, AI, Grocery Delivery, etc. all made our lives simpler.
Positivity wins. Positivity in the United States economy and the S&P 500 pays.
In a world full of negativity, I found it best to be positive. The great thing is you can get paid for it. From 1871-2012, every single 20-year period earned a positive real market return. Positivity on the long-term prospects of the U.S. market seems to win and pay.
If you wish to make “X” amount of dollars one day, focus mainly on making more money not on cutting out your favorite streaming service which is $14.99/month.
Obviously, you shouldn’t pay for five separate streaming services. Cutting one streaming service that you actually find enjoyment in is not going to help you save for retirement or save for a down payment. The way to do this is to build your income. Just don’t let your discretionary spending grow with it.
You can travel very cheaply.
In the heart of the travel season, I flew from Barcelona to Amsterdam for $27. Last July 4th weekend, I flew Delta round trip for $200. I did fly on July 4th but there are always workarounds. On Airbnb, if there’s a property management group on the listing, I have found it best to Google search for the group and go straight to the listing on the management’s site. It can save a few bucks and you avoid the Airbnb fees. This is one of many hacks.
Saving is important, but so is living.
Time and money have an inverse relationship. The older you get, the more money you have but the less time you are afforded. Being young with little money and little savings means it is important to save. It is important to set yourself up for a successful future but it is also important to enjoy the life you have now. I have found it is best for me to have a defined plan of “X” amount into the 401k each month, “X” amount into stocks, “X” amount for fun, etc. Saving is important but it shouldn’t be my whole personality.
Money is emotional and money is different for everyone.
Not everyone agrees with your money beliefs. I’m sure some of you reading may have different beliefs than me. I always love to hear about what other people may believe because although I may not agree, I’m sure I can at least learn something. I would always love to hear yours because everyone knows something you don’t.
Appreciate you reading.
-Scantron