April 13, 2010

For love of numbers

April 13, 2010 - Categories: finance

I enjoy thinking about money. I mentally calculate unit prices in the produce section (counter-intuitively, loose garlic was cheaper than 5-head packs). I built my own spreadsheet to support financial decision-making, and I’m tempted to figure out how to do those Monte Carlo simulations. I have fun balancing books and filing taxes, and I even volunteered to help W- with his.

Why do I enjoy personal finance?

My mom occasionally tells a story about how we played Monopoly when my sisters and I were growing up. In the game, my eldest sister often gave my parents investing advice, my middle sister kept giving her money away, and my parents would often end up giving me money. With a seven-year difference between me and my eldest sister, I suspect that the finer points of real estate value, probability, and negotation were lost on me, and my parents probably just wanted to help me stay in the game. (Saling pusa.)

My mom probably sees the story as a wonderful example that three children can have very different temperaments. For me, that story’s one of the reasons why I think about money a lot. I plan and save so that I can enjoy financial independence. I find it difficult to accept gifts that feel extravagant, because I don’t want to be the spoiled youngest child. I keep my life simple and live within my means.

Living within my means and building up good reserves helps a lot. Being an immigrant means that I don’t have a ready safety net aside from the one I make for myself. I can’t just temporarily move in with my parents or crash with some relatives.

Love has a lot to do with it, too. W- is eighteen years older than I am. If I live frugally and manage my finances well, I might have the flexibility to retire when he chooses to. If he’s anything like my parents or his parents, though, we’ll probably live and work for quite a long time. Money is a major issue in many marriages. Good planning, good habits, and good communication can mean that money isn’t a source of friction, but a source of fun.

What do I think about?

I don’t spend a lot of energy worrying about stocks. Day-trading is a zero-sum game that I’d lose. I invest in the market as a whole instead, building my portfolio out of no-frills index funds.

I think about what’s worth spending money on, and what isn’t.

I think about the balance between the present and the future.

I think about what I need to learn from others.

The last time I talked about saving on my blog, my mom said she was uncomfortable with my sharing that I save more than half of my income. Money is taboo. It makes people feel judgmental, envious, or disappointed.

I write anyway. I need to connect with more people. I like reading about what other people are learning about money. I’ve read tons of personal finance books, and I can’t find enough information to cast light on the road ahead. Most of the personal finance books I’ve read focus on paying off debt, managing a mortgage, dealing with cars, setting up the right kinds of insurance, and investing. My favourite personal finance book is Your Money or Your Life, which also helps you learn how to make better decisions by thinking in terms of chunks of your life.

I’m learning that books can’t teach you everything. Books can’t cover what’s worth spending on, because that’s personal. Books written for young professionals often assume you’re shackled by student debt and buried under the debris of reckless credit card use, and not that you’ve gotten things mostly sorted out. Books don’t talk much about blended families or age-gap relationships.

I need to write and to connect. I can do that here, or I can do that in some anonymous blog to at least nod to the taboos. But I always tell people not to count on anonymity on the Internet. Sooner or later, someone will out you. And I’d rather take a look at that taboo and figure out if there’s a good way for us to talk around it.

What are the next steps for me so that I can learn more about personal finance?

Save and invest. Continue building and using my “dream/opportunity fund” for experiments, reflecting on the results.

Connect with other people who are figuring things out or who have figured this out already.

Flesh out goals. It’s good to put a price tag on dreams – not so that you can sell them, but so that you know when they’re within reach.