The Maserati Gran Turismo

I always loved cars as a kid. So much so that at the bright age of 17 I enrolled in school as a mechanical engineer, before quickly figuring out that there were a number of things you had to learn to get an engineering degree that I had zero interest in.  Statics, linear algebra, engineering chemistry…are just a few of the things I decided I had no interest in pursuing.  While I originally thought that I wanted to design and be involved in the car manufacturing process, really all I wanted to do was drive cars.  This coincided with my first summer trading stocks for my personal account, where (through dumb luck) I was able to make 20% in the span of about a month.  Ultimately this helped me decide to switch to a degree in economics, and shifted my focus to getting a job in the world of finance.

I was lucky enough to get internships both my sophomore and junior years, which were widely believed to be necessary in order to secure a full time job at graduation.  I received offers from two investment banks, and ended up taking a position as a foreign exchange trader.  When they sent over the contract and I saw that my salary alone was nearly $90k a year, I quickly started dreaming about all the things I’d be able to buy once my student loans were paid off.

My dream car was the Maserati GranTurismo.  First off – well look at the thing.  I’d never seen a car that sexy before and it was about as close to love at first sight as I’d ever get (that’s including a brief crush on Jessica Alba back in the 11th grade after watching Into the Blue.)  If looks weren’t enough, you could hear the car roar from nearly a mile away, with a Ferrari-built engine that made sure to let everyone know you were coming.  After looking at that contract I decided that this was the car for me by the time I turned 25.

Now unfortunately I never bought the Maserati.  I didn’t even buy a car until I turned 27 and ended up with a much more economical 4 door BMW.  Where did I go wrong? Well I grew up a little bit, and realized that I should really put all those savings of mine to work.  So – I bought an apartment, rented it out, and have earned roughly 7% in cash flow since buying the property in 2012.

I haven’t fully given up on my dream of owning the GranTurismo or an equally beautiful car someday.  But for now I have a new dream.  Financial independence.  Not working for the man.  Deciding my own hours.  While I’m certainly not there yet, I’m happy to put in more time working hard and building my passive income stream to the point where I no longer have to work anymore.  At that point it’s up to me to work an extra year to buy a Maserati or a Porsche or whatever I want at that point in time!

The importance of mentorship

I’ve been very lucky over the years to have a number of people I could call my mentor.  Both formally and informally through work and school, I’ve found people who I could rely on to guide me in the right direction.  I honestly believe that without this team of people, I wouldn’t be where I’m at today.

I haven’t always recognized the value of mentorship in my life.  Growing up in an international environment, I was surrounded by successful expats who were leaders in their industry (my friends’ parents), and yet, initially failed to make the connection that these people could help me out.  I wanted to do things on my own, and often felt that asking for help was seen as a sign of weakness.

As I was applying to different schools trying to figure out where I wanted to go, my mom proposed that I sit down with one of the more business-minded people in our church, a consultant at Deloitte who we affectionately call Big Joe to this day.  Big Joe gave me the no BS talk of what it actually meant to be in consulting, and helped me to see that I could do well with a degree in engineering.  With his advice, I applied to Cornell as an engineer, got in early decision, and had pretty smooth sailing for my last semester of high school.  Halfway through my time at Cornell, I did end up switching over to economics (a decision which I do regret to some extent), but ultimately his advice still set me on the right path.

When I was in the process of applying for full-time work as a senior, I ended up getting offers from two of the larger investment banks.  I was in Mexico at the time the offers came through, and was told that I had to make a decision within a few days.  Not knowing who else to speak to, I called up the head of equities at the bank I had interned with during the previous summer.  He guided me into taking the job which was slightly riskier, but ultimately offered me more upside, and looking back it proved to be the better decision for me in the end.

At every stage of my career, there have been people I can point to as being influential in the decisions that I’ve made. With that in mind, I’ve followed this basic blueprint of finding other mentors.

Find someone who is currently where you’d like to be in 5,10, 20 years time

My dad told me once that it helps to know people who are decades older than you, because they’ve likely gone through all of the same things you’re going through now.  If you’re looking to start-up a company, seek out people in your community who have successfully started companies.  If you’re trying to transition into another industry, look for people who are in that industry and willing to give you some guidance.  As great as the internet is as a source of information, nothing beats the wisdom gained from years of experience.

Let it happen naturally

I’d like to think that good mentors fall into place much in the same way that you meet a significant other.  Sure it can be structured by the company or by the school that you’re in, but for the relationship to stick it needs to “feel right.”  Just as in dating, you can’t force the relationship, and often the best thing to do is simply to sit down for a cup of coffee and get to know each other.  Over time, you’ll get a sense of whether there’s a mutual interest, and eventually they may start coming to you directly to see how things are going.

Be realistic

As great as it would be to have Warren Buffett or Mark Zuckerberg as a mentor, realistically we have to work with what we’ve got.  When you start putting yourself out there you’ll realize that your network is much stronger than you think, and you’ll quickly find people who are willing to help you out.  Studies have shown that people not only like to give advice, but they view people who seek advice in a better light.

Develop your team

There’s no reason why you have to stop at just one mentor.  Over the years I’ve developed what I like to think of as my “team” – people I can go to for specific issues, guidance, and perspective.  I have someone I can speak to on my real estate business, and when I’m in a slump at work, I have a number of people who I know can help me to see the bigger picture.  This extends well beyond my business pursuits, and even for personal issues I have people I can trust to give me clarity.

Finding a good mentor isn’t something that happens overnight.  It’s often said that good things take time, but once you have your team in place, the journey gets that much easier.  Take their advice to heart, work hard, and you’ll be guiding someone else before you know it.

So you wanna be a millionaire?

That’s basically how my first conversation with a financial planner started.  I was sitting in some swanky office saying how I’d like to make a million dollars by the time I turned 30 years old.  I don’t think I’d even started to think about how I was going to reach that goal, and unfortunately the best answer the financial planner could give me was “well you might get there with dividend stocks.”

I talk a lot about planning on the site, and this is definitely not the last time you’re going to hear about it.  I could throw out some cheesy motivational quote about how having a plan helps you reach for the stars or makes your dreams come true…but let’s just stick with this: planning works.  Having a plan may not get you exactly where you think it will, but it will push you in the right direction.

Ultimately it doesn’t really matter what your plan is or what your end goal is.   What matters most is creating a domino effect to get you there.  Like we’ve talked about before, starting small can mean the difference between sticking to your plan and falling massively short.  We need little wins in life to keep us motivated, and once those little wins snowball into bigger wins, the momentum can really pick up.  This can apply to money, to losing weight, to getting the job you want after graduation.  Breaking it down into little wins, giving yourself a plan for today, next week, next month, and next year, makes the entire process that much easier to go after.

Now barring winning the lottery or finding a pot of gold, I don’t think I’ll be a millionaire by 30.  I made a number of big mistakes early on in my investing career, but that’s not to say I completely failed.  Part of the problem was not adequately mapping out what I needed to do to get there.  I was earning enough money, and I knew I had to save consistently, but I was so worried about another equity market correction that I ended up missing out on a lot of gains early on in my career.  As difficult a lesson as that has been to learn, I still got around to coming up with a plan to get myself on the right track 3 years ago (when I was 25).  I started by pushing my budget and saving just that little bit extra each month.  I put that money directly into the market, and have learned to use leverage (carefully) in order to get closer to my goals.

Take the time to sit down and think about where you’d like to be in a year, in 5 years, in 10 years.  Think about what steps you can take to set you in the right direction, to the point where you have a plan down to the day.  That plan may change, but I have no doubt that you’ll be moving forward.  As for me, every month my number ticks up a little bit more, and even if I’m not at a million by 30, I’ll still know that I’m well on my way.

Automate your life

Life can get pretty crazy sometimes.  Whether it’s school, work, romantic relationships, or family, there always seems to be something out there which consumes us completely.  No matter how hard we try and balance everything out, as soon as it feels like we’ve figured it all out, it all comes crashing back down.  We only have so much brain power to focus on everything going on in our lives, so anything we can do to take things off our plate can help.  So what can we do? Automate our lives!

I was always a big fan of the Calvin and Hobbes series growing up.  Even to this day I always have a few of the collections lying around my apartment to page through from time to time.  As avid readers of the series will know, Calvin hated school, and figured the answer to all of his problems was to “duplicate” himself and send the clone to school.  Obviously it didn’t work out too well…and given we don’t have a high-tech cardboard duplicator machine at our disposal, we’ll have to be content with the tools out there right now.

Saving/Investing

The biggest mistake I made in my career was not having my savings on autopilot from the beginning.  It was easy to think that I was saving as much as possible every month, but without a goal or plan in mind, I definitely didn’t save nearly what I could’ve.  Once I had built up 3 months worth of expenses in an emergency fund and paid off my student loans, I realized that I could be pretty aggressive in my savings goals.  Once I figured out a realistic budget, I made sure to automate the process as much as possible.  On payday, I move money directly from my bank account over to my brokerage account or targeted savings account (for future real estate purchases), which means that I never feel like the money is there to spend.  I leave myself a very small buffer, but by cutting my liquid spending money it forces me to stick to my budget every single month.  I then have automatic investments set up in my brokerage account so that the money is constantly put to work.  I used to obsess over my investments and my savings, but now that everything is automated I can focus on what’s really important, doing well in my primary job and in my side hustles.  With the automatic process in place I can really sit back and let the money work for me.

Paying Bills

It’s 2017, and I still know people who pay their bills by check.  There is absolutely no reason to not have everything from your utilities to your credit card paid automatically every month.  The less you have to think about the better off you’ll be, and the more time you’ll have to think about the things that really matter.

Having the Right Routines

As I wrote about in Making Your New Year’s Resolutions Stick, having the right habits in place can make all the difference.  Anyone who has a good morning routine in place can get out of the house quickly ready to start the day, when others get flustered and ruin their day before it even gets started. Once something becomes habitual, it takes all of the stress out of it, and it leaves you free to focus on other things.

They say Einstein came up with his theory of relativity while working as a patent clerk, which was a menial enough task that it gave him the chance to think about all sorts of other things on the job.  While I can’t imagine any of us are going to be on that level any time soon, having as many things automated as possible can lower our stress levels and give us the chance to focus on the things that really matter to us. Spending time with family, friends, staying healthy, taking up a new hobby, you name it – it’s all within reach with just a little bit of upfront effort.

How important is location to your job choice?

We all want to make lots of money. Once we’re out in the real world and no longer have grades or teachers to tell us how we’re doing, money is the easiest yardstick to measure our level of success in the world.  With that in mind, most of us tend to gravitate towards jobs that pay the most, often without considering other factors, especially location.

Cost of Living

This is really the biggest and most unappreciated factor when most people apply for a job, especially right out of college.  We’re so used to living in dorms or apartments near campus that we rarely research fully ahead of time, and often end up quite surprised when it comes time to actually signing a lease.  Many of my friends got jobs in New York and Silicon Valley after graduating, and ended up having to spend upwards of $3000 a month.  This is fairly close to the median rent of the two cities, while Washington D.C., L.A., and Seattle are all around or just under $2000.  Over the course of the year that adds up to nearly $12,000, which on a pre-tax basis would be roughly $16k, all for choosing to live in a 1 bedroom outside of the two most expensive cities in the US.

It doesn’t just end there.  School, local taxes, food, transportation, all add into the equation as well.  Especially when looking at staying in a city long-term, the expenses start to add up and can outweigh the benefits of a higher salary.  Ahead of any big decision it’s well worth researching a loose budget to see if it’s really worth taking the higher paying job.

Earning Potential

Earning potential is the one area where cities like NYC and SF come out way ahead. Using jobs in banking as an example, it’s not uncommon for a 2nd year associate to make $200k, with managing directors making upwards of $500k.  Without being based in a big metropolis it’s extremely tough to make that sort of money, and if you’re able to live simply then it can be worth it.  This is where lifestyle inflation comes into play, and it becomes extremely important to stay away from a “keeping up with the Jones’s” mentality.

For anyone looking at job prospects, it’s worth doing research around what their trajectory is going forward.  What sort of money could I be making in two years? In five years? In 10 years?  Glassdoor offers a good ballpark estimate to see what you can expect as you move through the ranks at the company, and would be a good starting point to figure out where you’ll be going forward.

Quality of Life

Quality of life can mean different things to different people.  If you’re an avid surfer and love getting to the beach every day, then you’re going to have a pretty tough time living in downtown Manhattan.  Conversely, if you live off the energy of the city and love to go out and make lots of connections, then Manhattan may be perfect for you.  Beyond just geographic differences, it’s worth having an idea of what sort of quality of life you’ll be facing in the company that you choose as well.

In my experience, banking typically requires an average of 11-12 hours a day of most employees depending on the division, with some divisions as bad as 14+ hours a day.  It’s up to you to decide what sort of hours you’re comfortable working, and only you can know what’s best for you.

What did I do?

I chose a city that is typically thought of as one of the most expensive in the world (Tokyo), but was also able to join an industry where my starting salary was higher than most.  I lived with my parents for two years while paying off school loans, and since then I’ve been careful to limit my lifestyle inflation while still allowing myself some luxuries like a car and a trainer at the gym.  While I wouldn’t say my quality of life is as good as someone living in say, San Diego, I will say that the balance of high starting salary, earning potential, and overall cost of living were enough to balance that out.

Ultimately, it all comes down to you weighing the options and fully figuring out what the best job is for you going forward.  Worst case, there are always other jobs out there as well, but here on the Millennial Plan we like to go into things eyes wide open, fully prepared for what is to come.

 

The earnings side of the equation

When most people look at what it takes to be financially independent, they’ll generally look at it in two ways.  First – earn as much money as possible and eventually generate enough returns from your investments to cover your costs.  Second – focus on lowering your costs to the point where the returns generated from your current savings are enough to sustain your lifestyle for the foreseeable future.  While there’s no right or wrong answer, the online community generally focuses a good amount of time on the cost end of the equation, which in my situation, initially ended up doing more harm than good.

Typically in these scenarios, the “4% rule”** is brought up, and without getting into too many of the details just yet, the basic rule is this: if you spend $40,000 per year, then once you have $40,000/0.04 (or 40,000 x 25 to make it easier), or $1 million dollars, you no longer have to work anymore.  As soon as you hit a million dollars, you can (in theory) walk right out of the office and never look back.  Why are costs seen as so important?  Let’s say you’re suddenly able to cut out $10,000 per year in spending – now you no longer have to save $1 million dollars, and you can walk out of that office the minute you reach $750,000.  Cut out another $10k of spending? You can call it quits at $500k.  But at some point is this really realistic? 

I went through a similar exercise myself when I was planning out exactly what I needed to be financially independent.  I created a spreadsheet, monitored all of my transactions through online tools like Mint and Personal Capital, and tried to figure out exactly how to optimize all of my expenses.  In doing all of this, I honestly became a little obsessed. I became so enamoured with my budget and limiting my spending that I started to feel like I couldn’t spend at all.  I had reached a point where even saving 50% of my income didn’t seem like enough, and at times I’d forgo seeing friends or participating in activities simply because I felt like it was outside of my budget. I had gotten caught in a cycle where I was so driven to save that I was missing out on things in life I really shouldn’t have been.  

Finally, I had an epiphany. I could make more money.  It sounds stupid calling that an epiphany, but I was in a funk where it felt like no matter what I did I would be stuck getting paid the same amount for some time to come.  At that point I decided to give myself a reality check, and tried to think of other things I could do to improve my earnings.  I picked up a side hustle translating websites and in 2 hours of work I was able to cover my week’s food budget (I told you I wasn’t spending much).  I started hustling more in my actual job, pushing myself to really capitalise on as many opportunities as possible in the workplace and focused on improving the earnings side of the equation.  

With this shift in mindset, I decided to relax a little bit on the budget and made sure that I was living my life fully.  In the end, I probably added an extra $5k a year in spending, which according to our equation means I’ll need an extra $125k before I’m able to retire.  As a result of my hustle at work, I was actually able to get myself a raise which more than covered the extra spending, and now I feel like my head is in the right place to keep hustling and stay positive.  

Costs are definitely important to focus on, but I’d argue that focusing too much on the cost side limits our potential. Take the time to look through your budget and eliminate areas which aren’t absolutely necessary, but don’t lose sight of the fact that you are capable of pursuing the quality of life you deserve.  You can always lower your costs later on, but now is the time to hit the pavement, hustle hard, and focus on the prize. 

**For those of you interested in learning more about the 4% rule, check out what my friend The Mad Fientist has to say about it.

Making Your New Year’s Resolutions Stick

Lose 20 pounds.  Hit the gym daily.  Drink less.

What do these and 99% of all New Year’s resolutions have in common?  They’re forgotten by February and we’re back to our normal selves.  Lucky for us (and less lucky for the Mister Donut next to my apartment), this is the year we’re going to stick to our goals and turn our resolutions into habits.  

A typical resolutioner wakes up on January 1st, feeling a little bit groggy from that last glass of champagne that they probably shouldn’t have had, but definitely motivated and ready to face a new year.  They’ll dust off their running shoes, throw on some sweats, and gallop outside ready to show the world this is their time.  They’ll run a couple miles and think, wow…I should do this every day…I feel great!  As most of you can imagine, that motivation lasts for a day, and is quickly replaced by sore legs and a hunger for donuts (just me?).

This brings us to our first lesson. Start small.  The easiest way to build a new habit is to take baby steps.  Most people are so excited for the year that they forget that there are 365 days to reach their goal. There’s no reason to burn out before the confetti is swept up from Time’s Square, so take your time, and enjoy the ride.

Equally important to sticking to your newfound goal is having a planBut moreso than having any old plan, have a realistic plan.  I’m not gonna go from running a mile 3 times a year to running a marathon by February, but I may be able to run a 5k by March, a 10k by August, and who knows, maybe even a half marathon by the end of the year.  Good things take time, and there’s no harm in taking it slow.

Now that we have our plan, we’ve got to make sure we stick to it – and what better way to stick to a plan than knowing there’s a reward at the end of it.  Good news, running day is now donut day! (That may seem a little counterintuitive, so feel free to pick a more realistic reward for your new habit.)  Whatever it is, you can at least give yourself some credit for getting through the task, and enjoy each and every success.

To make all of this even easier for you, we can add in the final lesson from our good friend Pavlov (and his dog).  Set reminders for yourself to trigger your new habit.  If you want to stick to running, go to sleep in your (clean) running clothes, and set your shoes next to your bed.  You’ll wake up and see yourself in running gear, feel like an idiot for a few seconds, but then remember that you planned to go running that morning.  Whatever reminder you choose, find something that is a fairly natural daily occurrence (like waking up and looking in the mirror), and you’ll have a much easier time following through.

Whatever your resolution may be, know that it is fully in your power to reach your goal.  It may not happen in a month or two months or even within the year, but at a minimum you’ll set in place habits which will be much easier to stick to.  Now get out there, pound the pavement, and feel free to reward yourself with a donut or two – I know I will.