Monthly Archives: February 2015

City Living

At the beginning of 2014 I moved to NYC from New England to start a new position at my current employer. I had been offered a position in NYC which I could not turn down. It was in a different service line, one I was very interested in and they were footing the bill to move me to NYC, so I could not turn it down. I had never lived in a city, never mind NYC, so I made sure to do my due diligence before moving to make sure this was not going to bankrupt me or be a stressful transition.

As soon as I moved to Manhattan, I sold my car that same weekend. I loved that car, but I had priced out parking it in the city and any decent garage that was somewhat close to my apartment would run me about $400 a month. I don’t think so! Then I thought of leaving it at my parents a few hours away, but then I would still have to pay personal property taxes, car maintenance, insurance, etc. Plus it would just be capital sitting in their yard that I could put to work elsewhere. Although my parents would not have minded babysitting it, I decided to sell. I went straight to CarMax and sold it on the spot. It was really easy and I had a check in hand within an hour. I definitely could have squeezed out another thousand bucks or so if I took the time to advertise it and sell it on Craigslist, but I had just moved to NYC, was starting a new job, and had no time for that. I feel the quick process was well worth it compared to the time and effort I would have had undertake to sell it privately and try to squeeze out more cash.

Before I had even got to NYC I had decided to lease an apartment that was within walking distance to work. Luckily there was a friend of a friend with a bedroom opening up in his apartment at the same time my new job was starting. It is less than a 15 minute walk to work and I actually enjoy the walk (not so much lately when the temperature goes negative). Many people who live in NYC and commute to work have a monthly MetroCard to use the buses and subways for about $120 a month. But as I can walk to work, that is straight cash in my pocket!

Like I mentioned above I live with roommates, two to be precise. We live in a 2 bedroom apartment that was converted into a 3 bedroom. Because of that and the fact it isn’t a newer fancy building with a doorman, our rent is pretty reasonable for Manhattan. I would like to have my own place, but when I weigh out the pros and cons, it’s not even close due to the value I get by splitting everything with two other guys.

Unlike my previous apartments and houses I’ve rented in New England, heat is included in our rent. Although this may not seem like much, it is a big saver during the winter months as they can be harsh in the Northeast.

One thing I was really shocked of when I got here was the grocery costs! When I go to the grocery store I am shocked that some items can be over double the cost that I am used to paying (or triple – I pay $3.49 for a dozen eggs at the corner grocery store). Well luckily I found a remedy to this situation but unfortunately it is not a secret. Trader Joe’s offers prices that are no where close to the other grocery stores in the area, but everyone else seems to know this as it is always mobbed. Not only are the prices better, but I feel everything is fresher as they skip the middleman and order fresh from producers (unfortunately I am not affiliated…yet). It is quite the spectacle as the line for the 40 or so cashiers wraps around one whole level of the store. The closest one to my apartment is about 20 blocks away, but it is worth the trip!

Now that I’ve covered how I handle the big costs of city living, I’m going to talk about the other side of the equation – income. I would not have moved to NYC without a bump in income from my previous position. The mistake I see people making is moving to NYC making the same amount they would have made in their hometown or college town where the cost of living is much less. Wages in NYC are higher than anywhere else in the U.S. for most industries (maybe San Francisco for tech) so it is imperative to not settle for a low salary.

City living doesn’t have to drain your pockets. If you can secure a higher salary, and cut costs along the way, you can actually parlay the move into jump starting your financial independence!

About Fervent Finance

Let the fun begin! I am a 26 year old accountant* by trade, currently living in Manhattan. I moved here from not far away New England at the beginning of 2014 to take on a new role at my current employer. In my earlier posts, such as Starting the Path to FI/RE and Rich Uncle Pennybags, I explain how I have always been interested in personal finance and investing since a very young age, but I did not think financial independence was attainable for me until I found this great online community.

Growing up I always wanted to be a stockbroker which started in 5th grade where we participated in a stock market project and visited the NYSE on a field trip. The following year my 6th grade teacher told us a story of his friend who lived in Manhattan, would get picked up every morning in a limousine and get driven down to his highfalutin job on Wall Street. From then on I was mesmerized by anything involving the stock market.

I had always been a fan of making money as well, as I knew I needed income to build my nest egg. It started with helping the grandparents with chores and projects, then babysitting, then manual labor jobs during high school and college, and side projects for a local electrician and contractor in town.

I opened up an online brokerage account shortly after my 18th birthday with my own earnings from work during high school. During that time the U.S. was experiencing a strong bull market and I could not lose a trade which added fuel to the fire. It took a couple of bad investments during college to right the stock trading ship. I knew that the path to long term gains and building my nest egg was stock trading, but then again I was young and naive and wanted money faster.

I majored in accounting because I wanted a career with a secure job market, while still somewhat appeasing to my financial interests. After graduation I lived at home for a year, paid down some student loans, bought a used car (with a loan), began contributing to retirement, and built up an emergency fund. According to all the “experts” I was reading about online, I was doing everything right. But it didn’t feel right. This was not getting me ahead. I would still have to work until at least 60 years old in a career I didn’t really find fulfilling before I could retire. The last thing I wanted to be was one of my miserable superiors 20 to 30 years down road. There had to be a better way!

That is when I stumbled upon Financial Samurai and from there my eyes were opened to Mr. MMM, 1500 Days to Freedom, madFIentist, Lacking Ambition, Root of Good, Frugalwoods, LivingaFIjlcollinsnh, and many more. My income was higher than some of the bloggers I was reading about, and they were well on their way to financial freedom. That alone kicked my financial independence butt into overdrive. I reevaluated my spending, savings, and lifestyle overall. What I think also helps is that I was already transitioning to the mindset where I wanted to do things that made me happy instead of conforming to what others were doing around me.

Therefore I decided to start to put pen to paper and document my journey for three main reasons:

  1. To hold myself accountable. The first reasons is quite selfish and I’m not afraid to admit it. It’s real easy to say I’m going to spend less, save more, invest in index funds, max out my retirement accounts, etc., but if I don’t put these goals out in the open, the harder they are to follow.
  2. Share my story. While I am only 26, I believe I have experiences that are different from many telling their personal finance stories. For one I do not have a career in the tech industry (you know who you are), I was the first in my immediate family to graduate from college, and I currently live in one of the highest cost of living areas in all of the U.S. – Manhattan.
  3. Learn from and be among other like-minded individuals. Working in business and living in Manhattan does not lend itself to meeting people with like-minded personal finance goals. It seems like everyone is trying to cram in as many boozy brunches as physically possible (my fellow New Yorkers will understand this), while breaking records on how many Uber rides they can go on.

I will do my best to share interesting stories, be open-minded, and hopefully teach and learn something along the way. I hope you enjoy the journey!

Thanks for stopping by,

-FF

* Although I am an accountant by trade, this site is for entertainment purposes only. Ideas and comments are my own and are not intended for others’ situations. Please do your own research and/or consult a professional before making your own personal finance decisions.

Keeping up with the Joneses

A few weeks ago I was invited over a buddy’s apartment for a little poker game with a few guys I went to college with. One of the guys, we’ll call him Lenny, had just recently married and bought a house with his wife. Lenny had told me about the house and where the neighborhood was. Sounded like a nice place, a newer construction home in a development right near a golf course in the greater New York metro area. On the way back home to Manhattan one of the guys was telling me how he feels bad for Lenny, as he is having trouble paying his bills with the wife and the big mortgage.

So obviously as soon as I got home I Zilllowed the neighborhood where Lenny and his wife bought their house. What I found was a neighborhood where the houses start around $500k, 2,500 square feet, and $10k per year for property taxes.

What ever happened to the starter home I thought people bought when they were young and just got married? Lenny and his wife are in their late 20’s, don’t have any plans of little Lenny’s in the near future I believe (and hope for their sake), and Lenny was complaining about his student loans as well. What gives!?!?

I don’t know Lenny all that well, but besides the ginormous mortgage payment and his student loans, who else knows what he is dealing with. Maybe a car payment? Most likely not contributing a healthy amount to his retirement with all those bills to pay, and probably is lacking in the emergency fund department as well. But who am I to judge? Everyone is different and have different goals and aspirations, risk tolerance, backgrounds, personal finance knowledge, etc. Lenny has a degree from a good undergrad business school, and therefore I can’t understand why he didn’t figure out his budget before he made the big leap into a large mortgage? If you’re having trouble paying the bills when you are DINKs*, maybe you overreached… just a little.

-FF

* A DINK is “dual-income, no kids”

From WWII Vet and Janitor to Millionaire

I wasn’t planning on posting today, but I stumbled across this article on CNN* and had to share: Vermont man known for frugal ways donates millions.

Ronald Read of Vermont was a World War II veteran, gas station attendant, and janitor known for his frugal ways. He passed away last summer at the age of 92 and left his local library $1.2m, the hospital $4.8m, and friends and family the rest of his approximately $8m fortune.

Of course we don’t know everything about Mr. Read, but one can assume he did very well for himself over his 92 years, although it appears he never had a “high income” profession. According to the article he was extremely frugal and loved investing, specifically in dividend producing stocks.

I did some simple math and it appears he was born in 1922. Even if he began investing at age 30 in 1952, the S&P 500’s average return including dividends was 12.41% through 2014. That means Mr. Read’s money using the Rule of 72 would have doubled every 5.7 years for a total of over 10 times during his 62 years of investing!

If this doesn’t light a fire under your frugal, investing butts, I don’t know what does!

-FF

* I also referenced this article: Janitor bequeaths millions to library, hospital

Buffett vs. Hedge Funds

Years ago I had heard about a bet Warren Buffett made in 2007, and then on Tuesday Fortune wrote a follow-up article Warren Buffett adds to his lead in $1 million hedge-fund bet.

In 2007, Buffett made a wager with Ted Seides*, Co-founder, Co-CIO, and President of Protégé Partners, LLC, that the S&P 500 would outperform a collective group of five funds of hedge funds picked by Seides over a 10 year period.

The specific S&P 500 index fund Buffett picked was the Vanguard 500 Index Fund Admiral Shares (VFIAX). The names of the funds of hedge funds picked by Seides have not been published, most likely to conceal the fund managers’ embarrassment as VFIAX has gained 63.5% for the seven years since the initial wager compared to the collective 19.6% return (estimate as 2014 final figures were not available when the article was published) of Seides funds he selected.

The wager is now invested in Berkshire Hathaway B-shares worth $1.7 million dollars. Buffett is just doing what Buffett does best, winning. And if he does win, Girls Inc. of Omaha will be the lucky recipient of the wager.

I know that it is only seven years into a 10 year bet, but the selected funds have A LOT of ground to make up. Also, for those who think they can beat the market, here is another reason you will probably lose that battle.

Chalk one up for the the passive index investors!

-FF

* For those thinking “who is this Ted Seides character?” He is a graduate of Yale and Harvard, has his CFA, and co-founded Protégé Partners in 2002. I wonder if some of his investors ever wished they had just bought an index fund?

Rich Uncle Pennybags

I received my favorite gift ever for Christmas when I was 8 years old, when my uncle gave me the board game Monopoly. I had always known from a young age that money was important, as I noticed to buy and have “things” you needed money. I asked lots of questions when I was young so even at this point I understood why people needed to work, and that the house, food, cars, etc., cost money. Monopoly is a great learning tool for children as it teaches the concept of owning vs. renting, banks, money, trading, commerce, bankruptcy, and simple addition and multiplication. There were no credit cards in Monopoly, so I understood if you didn’t have the money for it you couldn’t buy anything (a concept which unfortunately many adults struggle with). I was mesmerized from the start and it helped paint a picture for me of finance and money at a young age, that probably would have been hard to do otherwise.

Until 5th grade, Monopoly was my only view into business, finance, and money, other than things I would learn from my family (of which have no business or finance education). But then in 5th grade we played a stock market game that in all honesty had a huge impact on me. I was hooked from the start. The fact you could buy shares in a business for sometimes a few dollars blew my mind. I could actually own a piece of McDonald’s!

But then there was a huge void in the education about anything related to personal finance and money. I took classes like economics and statistics in high school, and they offered accounting classes which I did not take, but they taught the basic accounting of debits and credits. But if I actually wanted to learn anything about investing or what a CD was, then I had to look it up online and teach myself. I declared as a Finance major before I even got to college as all of this was still very interesting to me, plus I felt there was so much for me to still learn (plus the stereotype that finance guys made the big bucks!). Luckily a professor who took interest in my college career persuaded me to go the accounting route, as I graduated when jobs were scarce and many of the finance majors couldn’t land jobs right out of school, I at least had a job even if it wasn’t in something I was all that passionate about.

So there I was, 21 years old in the work force, with a Bachelor’s degree from a business school and still had NO idea about money and personal finance. I thought I was doing great! I had a brokerage account where I traded stocks (traded not invested), had a car payment, was saving for retirement, all while chipping away at my student loans. But looking back now I just thought I was doing great, when in actuality I was far from it (at least the “me” five years later thinks so).

What scares me is that for someone who had always been interested in investing and personal finance, and had a degree from a business school, I really didn’t understand money and personal finance. Therefore I worry for other people who go through life and don’t take the time to educate themselves about personal finance. Many people think that everyone else has a car loan, a mortgage, and some student loans that they’ll be paying for most of their lives so it must be “right.” Or Bob who sits in the cube next to me contributes 5% of his pay to his 401k, and I contribute 6% so I must be GOLDEN and right on pace to retire at 55!

That’s exactly the problem with personal finance education, no one is ever taught it! Most people learn from family, friends, or coworkers who are most likely even more clueless than they are! I understand everyone’s situations are different, and people have different wants and needs, but even the basics would help. Sex-ed is was taught (awkwardly of course) in 6th grade, and again in more detail in 9th grade. Why isn’t Intro to Personal Finance taught at the high school level as a mandatory education requirement? And I’m just talking the basics such as what is a credit card, mortgage, 401k, CD, etc. Usually kids are first subjected to credit cards when they arrive on a college campus (if they go to college) and are approached by bank and credit card company reps with free t-shirts.

Yes I still have one (from said reps) and it is pink and says "COLLEGE" across the chest.

Yes I still have one (from said reps) and it is pink and says “COLLEGE” across the chest. Luckily I did NOT rack up credit card debt as a result.

So you’re saying if I buy something now, you’ll bill me in a month, and I don’t even have to pay the full balance!?!?

As you can see by my enthusiasm on the topic, this is a subject that really frustrates me as I see people squandering their hard earned money away due to ignorance on the subject. People are raised thinking money is a taboo subject and you’re supposed to learn as you go. I think this needs to be challenged and changed, and personal finance needs to be taught at a young age. Luckily my parents were very open about their finances growing up so I at least at something to base my understanding off of. But unfortunately not everyone is as lucky, or willing to put in the time to ask questions, research, and take responsibility for their own personal finances.

-FF