Today we continue the ESI Scale Interview series where people answer questions about their success at working the ESI Scale.
In short, the series focuses on what the interviewee is doing in the areas of earning, saving, and investing. They also get an opportunity to ask ESI Money readers for suggestions if they choose to do so.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
With that said, let’s get started.
My questions are in bold italics and his responses follow in black.
OVERVIEW
Please tell us a bit about yourself.
34, no wife, no kids, Nashville, TN.
I grew up on 50 acres of land near Nashville, oldest of three children, to an optometrist and a teacher.
We were taught the importance of self-reliance and that debt is a tool; use it responsibly.
I studied Economics and Finance at Tennessee Tech in Cookeville, TN and MBA at Lipscomb University in Nashville, TN.
I like going to the Predators hockey games! I’m dedicating this to debt anchored, educated Millennials; you can do it!
What is your current net worth?
$17,507.57.
I also just paid off $31,455 MBA, three years early!!! Details on the former payment are in the Save section.
I do feel it was the investment I needed to make, just surprised that hiring managers held it against me because of my youth.
I drive a wonderful 2013 Nissan Altima that I picked up used and a year’s less miles than average. I knew that was a deal; I pay 4.5% interest, too, because of my 804 credit score. It’s not free money, but the payoff guarantees a 4.5% return, way worse than what a bond fund is returning right now. I may make principal payments occasionally, but I can do way better elsewhere.
Dave Ramsey would yell at me, and I’d tell him he was mistaken. I drove a 1999 Toyota Camry from Feb 2002-Dec 2016.
I also hold about $800 in physical silver. It’s more wealth insurance than investment. I don’t really count it in net worth, but it’s noteworthy.
As of 01/21/18 (and yes, I need asset balance, which will be discussed):
- Vanguard: $21,028.45
- Etrade: $1,506.71
- 53: $2,036.95
- 401k (vested): $1,392.50 (I’m new to Company)
Total Assets: $25,964.61
NMAC – 2013 Altima: $(8,457.04)
Net worth: $17,507.57
How did you accumulate your net worth?
In the beginning of 2016, the Dow Jones fell to 15,900. People were freaking out. I was throwing any kind of dollar I had into my IRA! There was a lot of red for a few months on my statement, but as time went on, it went positive. My cost basis is still anchored by those lower purchases I made two years ago, and it’s boosted my returns.
When the Dow rises, buy. When the Dow falls, buy more. You’ve got many years, use them.
EARN
Tell us a bit about your career.
I’m a tax accountant. I make $65,000 (started 11/2017).
I started at $35,000 as an auditor with the state government in 2007, left in 2009 to pursue my MBA.
My wages stayed pretty stagnant during the Great Recession (between $40,000 and $50,000). I’ve now applied my accounting knowledge into high demand area of the discipline.
Do you have a side hustle?
No. Whenever I’ve investigated side hustles (ie Uber/Lyft), the costs are too high to be profitable. It’s my time that I’m giving up. I am open to suggestions, because I have too much free time.
How happy are you with these results and what future plans do you have for growing your income?
They say the best careers are non-linear. I’ve had several project jobs where I learned a great deal with limited risk and I’ve had full-time work with companies already planning layoffs when I was hired.
I’m in a great place now, though! I can’t wait to see what I can accomplish in a supportive environment.
SAVE
What percent of your gross income do you save?
I’ve never put a percentage on it, but my 401k savings rate is 7% (along with 100% match of 6% in 401k), and then I probably do another 5-8% into mutual funds, between Vanguard and eTrade (I make sure groceries and gas and stuff is funded first, though). Total, that’s ~18-20%.
In terms of my former Student loan payment: This $150.54 former payment increases my 401k from 6% to 7% (net positive of $54.17) $27.08 will go to my IRA with Vanguard, and $69.28 will go to a worthy mutual fund for a condo/house (depending on my future situation).
Over three years, this is an increase of $5,419.44. What will it grow to?!?! I asked God for wisdom over that money, and this is the answer that I felt was the wisest course. Maybe I give some of it sometime, who knows? Many good options, but I needed to take care of myself with that money to begin with, before I tried to be generous with it. And that’s totally ok.
How did you get to this level?
I’m pretty cut throat with my monthly recurring expenses. For example, I’ve not had internet at my apartment, so that I could focus on my student loans.
Now, I will reduce my data package with Verizon to purchase internet, and it should have (roughly) a net zero effect.
I have $0 credit card debt. While I prefer the security of a credit card, if there are charges, I pay them at the end of the month.
In ten years of holding a credit card, I have paid $4.19 in interest, total. (I took a weekend trip to see my sister in Wash DC, and I didn’t calculate what I’d paid off and what was new. Oops.)
I have a separate “Bills” accrual account with the bank, where I use a spreadsheet to track my bills and keep that money separate. I don’t raid that fund; it’s already spent. Electricity, mobile, rent, car insurance, and car are the only things that run through that account. This is small, but I get household cleaners at Dollar General (Plus, I worked at the HQ north of Nashville on a project, and they treated me very well). The mark up at regular retail outlets for that stuff is just unreal.
Make your own coffee. It costs Starbucks probably between $0.50 and $1.00 to make that latte; think about that the next time you’re in line.
This is the Great Depression mindset your grandparents speak of. It’s just me, so I can be pretty fascist with little consequence. Wife and kids enter the picture, I’ll back off. I’m not looking for this level in a girl; just a mentality that saving is important.
How happy are you with these results and what future plans do you have for saving more?
I’ve been so worried about my retirement; I’m not living my life to the fullest now, which is the exact opposite problem people have today. I’m working to build up my taxable accounts now, with an emergency fund always staying in place.
How did you keep yourself motivated while paying off the student loan?
I never looked at the whole balance. I broke it into each individual loan amount, and tried to lower that section’s monthly payment, until it was gone or I issued the killer blow.
Then one day, I looked at my bank accounts, said a bad word, and paid off the remainder over about ten days, about $3,500, in December of 2017.
As I clicked, “Send”, I could feel the proverbial weight people talk about, being lifted from my back. There’s no magic bullet.
INVEST
What are your main investments?
Vanguard, since 2015, is up 11%. I had mutual funds, though, up 25% in a certain time frame.
I’m in Small cap, large cap, and international stock funds. $16,357.11 in purchases/sales, and $4,353.10 in gains.
I tried individual stocks in the IRA (Hanes, International Paper, etc), and it was good (just not a lot of money invested). Just not what the index funds were doing.
I’m currently looking at bond funds in order to rebalance. Considering my age, I don’t need to exceed 15% in this.
How happy are you with these results and what future plans do you have for investing?
11% in an inexpensive index fund is just great. I’ve been buying on the way up AND the way down, so my return isn’t going to be exactly the market return. In retirement planning, studies show savings rate is most important, with return secondary.
WRAP-UP
What money mistakes have you made that others can learn from?
The MBA closed many doors, so I had a hard time getting work after graduate school in 2010 (who knew a 26 year old was overqualified to do anything).
I was out of money; there was no more. I closed a 401k with $3000. What do you want me to do? I had made all the right choices, and was getting hammered for it. I was very sad.
I have worried too much about retirement, and then have to use the credit card now. Not a mistake, per se, because I don’t carry a balance. That’s undisciplined in the OTHER direction, and I’m making a conscience effort to take care of myself first.
Are there any questions you have for ESI Money readers regarding any parts of your finances?
Bonds scare me in the current interest rate environment. Am I overthinking it? It’s probably market timing behavior, but the losses could end up being staggering to me personally.
The Physician Philosopher says
Saving 20% is good. I think you are headed in the right direction. Good job.
Bonds are an important part of the portfolio because they react in a very different way than stocks. The idea behind diversification is to have different components of your portfolio that will behave differently (zig when the other part of your portfolio zags).
So, with the bull market we are in right now it shouldn’t surprise anyone that bonds are not doing a whole lot. That said, if/when the market changes/corrects/goes Bear then you will be glad you had some bonds. It doesn’t need to be a ton given your age, but 10-20% seems appropriate.
Market timing is a losing business. Don’t dabble in it. Sock your money away into index funds (stocks and bonds) each month, let the money grow, and forget the rest. Re-balance every 1-3 years to make sure you haven’t gone outside your asset allocation too much.
Tom @ Dividends Diversify says
I wouldn’t be scared of bonds. I have about 40% allocation to bonds (all through funds and ETFs) across a number of different bond types. I could make a case you should have a 20-30% allocation depending on your risk tolerance. Low cost Vanguard funds are a good way to go. Dollar cost average into the fund(s) every month and reinvest all dividends. As rates rise the fund(s) will start to pay more dividends and you will buy in at lower prices/higher yields. Others may laugh now, but bonds helped my ride out the 2008 bear market when stocks dropped 67%. And yes, there will be another bear market some day in stocks. That is something to be afraid of and to prepare for. Tom
Chris @ Duke of Dollars says
Great job on paying off the student loans man! Can’t wait to say the same, it will be 7 years early for me if all pans out.
Loved this line:
“Make your own coffee. It costs Starbucks probably between $0.50 and $1.00 to make that latte; think about that the next time you’re in line.”
Couldn’t agree more, there are times I make my own coffee, then go to Starbucks and order hot water just to change pace and environment for productivity lol
Original Poster says
You can and will pay off those loans. Don’t look at the whole balance! Break it into parts, and pay down that one part.
One is paying for ambiance with Starbucks. 🙂 Let’s say I go to a coffee shop (Nashville has many locally owned shops), I go, stay, and have my beverage on the porch or listen to the music inside. It’s not often I do that, though. Just fall time, for the seasonal beverages and low humidity! Frothy Monkey has an Apple Pie latte, BTW. Very bad for me, i’m sure.
Thanks for reading!
Sean @ Frugal Money Man says
Kudos to you for staying COMMITTED and hammering out the student loans!
I recently transitioned within my company to a more business/growth position because my previous work consisted of doing the exact same thing everyday, and it was FILLED with co-workers who were fine with being complacent. Before I left, I heard alot of my coworkers talking about their student loans and the MAJORITY of them pretty much said that they will have their student loans until the day they die, and there is nothing they can do about it…Obviously in this community (FIRE) we know that that is far from reality, and paying down your student loans simply comes down to desire. You can do it if you really want to.
Also I am confused as to how the MBA hurt you in seeking employment? How did that credential hold you back in the employer’s eyes?
Thanks for sharing!
Original Poster says
This is the OP!
Honestly, the master’s degree I had was something the hiring manager didn’t. It was seen as a red flag: “He’ll find more money and just leave”. I think the movement disorder played a role, as well.
Original Poster says
Hi, everyone! This is the Original Poster; i’ll be in and out throughout the day!
Arrgo says
I think the same way regarding your comment about Starbucks. Its a huge markup and people blow a lot of money on stuff like that all the time then claim how broke they are. Not to say you shouldn’t indulge or go out sometimes. But that mindset will certainly give you some pause before you do it too often. Develop some self control. Think about running your life more like a business. I think this can be a lot more powerful force than people realize. Don’t over analyze your stock investments, allocation, or timing. I’d pick mostly stock funds and try to max out all retirement accounts as much as possible. I’ve done that over 20+ years (even without maxing it out till more recently) and my results have been amazing. The funny part is I haven’t put too much effort into it other than the going to work part. Picked some good funds and let it go on automatic contributions for a long time.
Erik @ The Mastermind Within says
Bonds are a joke – I agree with you. Really, there’s only one way to go… and it’s up (or down in terms of value)
Get real estate or dividend paying stocks at these levels… you can get the same yield with potential for appreciation – at least that’s how I’m thinking!
Jeff B. says
Bonds aren’t a joke. They pay a set amount of interest. We have had zero interest rates for going on 10 years, but when thing are ‘normal’, a 5% coupon is a good investment. Short term bonds are less subject to interest rate risk than long term bonds. You don’t need 50% when you are old, but they are part of being diversified. Don’t buy individual bonds. Buy a good bond fund.
Lily | The Frugal Gene says
Can you explain if your MBA was worth it? What does closed many doors mean? Hopefully that was only temporary but I have read and seen where an MBA didn’t exactly pay off (short term) but I’m wondering if it’s something you have to wait on for a return. I notice a lot of super successful entrepreneur bloggers all have MBAs. Is it applicable to growing your own business?
JayCeezy says
“I’m in a great place now, though!
Emotionally?
No! I’m at the liquor store!”
OP/ESIScale#6, you are doing great. You are a little hard on yourself, and I hope that changes. Between laying your foundation with education, employable skills, and the awareness that the ‘Savings’ component is the most important for you now, your path looks promising. Thanks for sharing, and continued success to you!
Original Poster says
Thanks for your kind words! 🙂 That has been an interview answer, being too hard on myself.
The preacher at church said, “Make the next right choice”. I believe that’s a good approach for many aspects of life. I’d like to have seen different circumstances, but if I keep making the right choices, things will work out for me!
Razorback14 says
Thanks for sharing with us today!! As “JayCeezy” said, don’t been too hard on yourself……..I enjoyed reading your post and honestly, I think you have a lot to be proud of. From paying OFF your student debt (wow), to keeping your credit card balance at zero each month, to trying to save all you can ——- You’ve done well and your future looks bright to me……..
As for earning your MBA, congrats and don’t worry about the hiring guys you meet who have not completed theirs ——– one day, you’ll be in their seat, and you’ll know exactly how to treat people who are working on building a solid and sound career. Kindness Matters —–I’ve learned that in my 63 years on earth.
Oh, and I loved what you said about Dave Ramsey – – – who cares? I like Dave, but I’m not sure he has the answer for all people and all situations. One size does not ALWAYS fit all —
Keep up the good work and carry on! Continue to mention God, often ——-
Original Poster says
I try to remind myself: I’m an American with a positive net worth: I’m in the top 1% of wealth in the world. God has taken care of me, revealing even in hindsight where He’s dodged bullets for me as I lived my life.
Dave’s methods work for the undisciplined that’s ready to change. What if you’re already disciplined? There’s ESImoney.com. 🙂
Jeff B. says
Life isn’t one sized fits all, but with the amount of people that are in credit card debt, living on a budget, saving money and not spending more than you make apparently hasn’t sank in for a majority of people in the country. You can find exceptions everywhere. We haven’t borrowed money for our last 3 cars or to remodel our house, but we use credit cards, but have never spent more than we make so for us it is easy to use them. People making $40K with a $30K car and $20K in credit card debt won’t get ahead until they change something.
Ray says
One thing I noticed – no mention of an emergency fund. Sounds like you learned firsthand why you need one, so why don’t you have one?
Original Poster says
Please see in the savings section where I say, “…emergency fund always staying in place”.
Paper Tiger (aka MI 27) says
OP, I think you are at a good point in your life where your trend looks very positive. You have a positive net worth, a solid foundational understanding of how you want to run your financial life and a solid work ethic. I think the rest is just tenacity, discipline and time. Keep working hard for what you want and don’t give up, maintain your savings, investing and spending discipline, and let time and compounding work for you to grow your net worth.
Like others have mentioned, keep your chin up and stay proud but humble, be positive and don’t let anyone tell you that opportunities are out of your reach. Opportunities are always there for people who work hard, smart and with great purpose and intention. Attitude is way more important than Aptitude. Everyone is capable of learning but not everyone is willing to maintain a positive outlook on life and keep a good attitude through both good times and bad.
And last, your faith will always be a great comfort. God is good, his plan is perfect and he wants all his children to be successful. So keep having big dreams and go after them!
MrForeby2023 says
You’re on your way, great start. Keep socking away as much as you can in your tax-deferred savings plans. I don’t frown on your car loan, look at this way; you’re building solid credit. You’ll need access to credit along the way. Kudos to you for maintaining such a high credit score!
I also love the fact that you own some silver bullion. I recommend accumulating it a little at a time, maybe have a goal of buying one roll of Canadian Maple Leaf silver rounds (rolls of 25 coins) each quarter (if that’s financially feasible). Eventually you’ll want to buy some gold bullion as well, one ounce bars sell for a much smaller premium than coinage.
You are correct about silver, it shouldn’t be considered an investment, it’s a insurance policy.
Anyway, keep saving and paying a little extra toward your car note each month to pay it down is a form of savings, you’re earning 4.25% on that extra principal payment.
Stock Street says
I love the quote about telling Dave Ramsey “he was mistaken”. I support your auto loan decision in this regard! You are actively investing and seems like you are not making the emotional and psychological mistakes so many make. You should average more than 4.5% long-term in equities. I can tell this from your quote, “When the Dow rises, buy. When the Dow falls, buy more. You’ve got many years, use them.” You get it! That is so true and I love hearing that.
Keep it up, you are on your way!
Jason says
Well, you are about where I was at your age when I started to get into investing and the like. Sounds like you are doing really well. And increasing your saving percentages bit by bit will only help the situation, particularly when you have your student loans paid off. If I could recommend something I wouldn’t wait to ramp up the savings (not that you are). I really wished I would have sacrificed a bit more about a decade ago to put more money in the market. IF so, I would be much closer to FI. I could’ve sliced five years off, but because I didn’t I probably have at least 8-10 years to go.
Original Poster says
And now I get a $900, pro rata bonus at work! What a great week!
Mysticaltyger says
I am curious if you are going to increase your retirement savings due to the tax cut?
Original Poster says
The tax cut goes into an index fund to help purchase a house; I really believe in what President Trump is doing. The retirement savings increase comes from the paid off student loan.