Home > The Master Plan > Initial Conditions – Where you start matters

Initial Conditions – Where you start matters

The Beginning

I grew up in a middle class American family who never cared or learned very much about money.   Both of my parents had their Ph.Ds*, and they loved what they did.  So they went to work everyday, lived below their means, and retired at age 55.5 with an enormous pension!  Their most important priorities were always us kids and making sure we turned out well.   The first time they ever knew their net worth was when I helped them set up a Mint account earlier this year.  The way you are raised has a big impact on how you operate your cash.  I was blessed with great parents, but they didn’t teach me much about money

That’s about as much as I knew until I actually graduated from college and started engineering graduate school.  In graduate school, I barely made any money, and it was AWESOME!  I had health insurance, I shared an apartment with one of my best friends for $266/month, and I shopped exclusively at Aldi.  My commute was an 8 minute walk, they even gave me a free gym membership, and I thought life was peachy.  I was saving a little bit of money each month, so I figured that I was a success.  The other grad students and I had this strange idea that by taking a low salary, we were doing something noble… I’m not sure about that, but I certainly respect anyone who sticks it out for the Ph.D.

At that point in my life I cared mostly about being healthy, spending time with friends, volunteering my time for charity, and doing well in school.  I tended to discount the importance of money in my life because I got so much enjoyment from things that were free.  I loved distance running, playing sports with friends, and volunteering for a variety of local organizations.  My view of life may have been a little simple, but I’m thankful that I took that time to appreciate the free things in life.

A few months in, for non-cash reasons, I decided to quite grad school and get a great job in a big city (more on that later).  My salary more than doubled and I started spending quite a bit more.  I got a nicer apartment, my commute got a lot longer, and I started blowing money on tons of fun stuff (like sky-diving!).  However, I was still saving a little bit each month.  Again, this seemed fine because I wasn’t going into debt, and I didn’t really have anything special I wanted to save money for.  My tastes started to turn towards expensive restaurants, pro sporting events, and more expensive gadgets.  This is where our journey begins.

Eventually I started to wonder about how my spending habits had changed.  Thankfully I had signed up for a Mint account in grad school, so I did some investigating.  What I found was that my savings rate had remained almost exactly the same even though my salary had doubled.  I remember that moment of realization.  It was a creepy feeling knowing that I had spent so much money without even thinking about it.

My Cash Situation

My Accounts –

  • A checking account with a national back that I direct-deposited my check into two times a month.
  • A savings account with this same national bank, because it seemed like the easiest thing to do.

At the end of each month I would transfer anything over $3000 into my savings account.  The account yielded .01% interest.  Looking at this now, it looks crazy! And it was, but I’m trying to paint a picture of where I started.

My Assets – I owned a 7  year old Subaru Forrester with about 85,000 miles on it.  I had almost traded it in for something newer and more fuel efficient.  When it was appraised at a wopping $3,000, I decided to hold on to it.  I owned no other assets.  I had a job that was paying me a good salary, so I had some room for error.  I’ll count my family in this category because I feel like I could always fall back on them if times were really tough.

Liabilities – I was unbelievably lucky and had college paid for by my parents.  I know this is a lame story, but I was be born into a pretty well off family.  For this reason, I didn’t have any student loans.  I had never learned about credit cards, and I was afraid of them.  This is actually pretty lucky because it helped me avoid any credit card debt.  I rented an apartment with a friend, so I didn’t take on a mortgage or anything like that.

My Cash Rebellion

I decided it was time for a change.  I knew that there must be something wrong with this conventional wisdom I was following, and I was determined to get to the bottom of it.  I started reading books, and blogs, and newspapers, basically anything I could get my hands on.  After accumulating a little bit of knowledge, I started making changes and rebelling against the guidelines I had grown up with (beginning my cash rebellion).  I made quite a few mistakes, and had quite a few wins.  I imagine there are plenty of both mistakes and wins still in store for me.

How we are raised has a huge impact on how we spend our money.  I think we spend our money based on a few loose principles that tend to work out in the end, but I also think there is a better way.  You may not have had the moment of realization yet, but believe me, you will.  When you realize that you don’t know what you don’t know, it will be time to rebel from the old rules.  For example, I didn’t know that the interest rate my bank was giving me (.01%) could be easily bested by an online bank.   I had always been taught to keep my savings in a brick & mortar savings account, but understanding a little bit more about my cash was able to radically change my financial trajectory.

*my dad got his Ph.D in physics, which is why you may see some pretty nerdy science references from time to time.

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