I love a good video game. I prefer an RPG or strategy game over a first-person shooter, usually puzzle games or games where resource management is prominent. For around two years I was really into World of Warcraft: in my opinion, still the finest MMO out there.
But I haven't been playing a lot of video games lately. In fact I've hardly played a video game in the past month, maybe longer. I noticed this recently and it has me interested, because as I mentioned, I do really like video games.
I have a theory about why this is. Video games haven't been holding my interest because real life is way more interesting. This seems obvious now that I've typed it out, but it hasn't felt obvious for much of my life. When you're a kid there are a lot of things you can't do, so video games expand your possibilities. Even now that I'm an adult, I can't fly space ships or cast magic spells. I think I'll always be up for a bit of escapism, but for now, here are the things that are really captivating my attention.
I love the pure resource management of allocating my cash. Once I paid off my student loans the cash had to go somewhere, and in fact, it's been going a lot of different somewheres. I have different savings and checking accounts across different banks, each of which has a different login. I have a Treasury Direct account for government bonds. I have a Schwab account for stocks and Lending Club for peer-to-peer notes. And there's Mint that aggregates everything in a slick video game-like interface. Every month there's new cash to play with. After I pay off my credit cards I have to decide where to put the rest of my money. Do I add more to my fledgling emergency fund? How much can I invest? Has my risk tolerance and time horizon changed since last paycheck? Do I feel comfortable locking up cash for at least three years in Lending Club notes, or a year with I-bonds, or do I want to sit on the cash for a little longer? Are there any attractive companies that I really want to own? These are fun questions for me. It's even more compelling because now I have skin in the game. If I mess up in a video game I can restore from a save point, or walk away entirely. With my money I have to live with my mistakes and learn from them.
Then there's my mystery speculating opportunity I haven't told you about yet. I'm still not ready, but I'll spill a little more: I'm buying things up on eBay, and planning to sit on them and sell them in a few years for a profit. This activity of trawling eBay for "deals" is highly addictive. I did something similar, albeit quite different, when I was playing World of Warcraft (WoW). WoW has an in-game auction house (for in-game currency, not real money), and there are iPhone and Android apps to access it. I spent a lot of time, and had a lot of fun, and made a lot of (fake) money by buying and selling different commodities on the market. I realized after a while that real value wasn't in farming a particular good and selling it: the value was identifying significant mismatches between supply and demand and capitalizing on them. I would pick a few goods and learn about them, like what materials go into making them, and what materials can they be made into. This was to try to identify goods with high (or at least relatively stable) demand. Then I made it my job to buy low and sell high, and to always try to keep the market clearing. Let me give you an example. In WoW's Mists of Pandaria expansion, they added cooking professions and different types of food that you needed to level up your cooking. Food was farmed by killing different mobs or fishing in different areas. I noticed that one type of meat, I think it was called "raw crocolisk belly" or something like that, was always scarce on the auction house. As any student of economics should be able to tell you, this means the price is too low! I farmed some, but more importantly, I bought all I could and re-listed it at a much higher price. I made a killing by ensuring a steady supply of this in-game commodity.
As you can probably surmise from my fevered retelling of my exploits, I enjoyed trading on the WoW auction house a whole lot (and, I should mention, I made a ton of gold doing it). I'm happy that I've found a somewhat similar opportunity, this time for real life. My game plan is to buy a particular product while supply is high, and then sell it years later at a tidy profit when the supply is low. I promise I'll fill you in soon.
I've been getting back into fundamental analysis of stocks. This type of analysis is the hardest puzzle game I can think of. It's also much more satisfying when the end result is an ever-growing stash of cash and investments, instead of completing a contrived puzzle or getting some empty achievement. Dividend Mantra has me jealous, as usual, of all the awesome companies he's part owner of, some of which I hadn't even heard of before he blogged about them. From watching him over the past year or two, I have come to understand how much of a long game it is, playing with these investments. This isn't a game of instant gratification. It's taken him years, but he's built his own little mutual fund that's covering somewhere around 15% of his expenses. It looks incredibly satisfying. Not least of all, he knows and loves every company he owns — he hand-picked them! A market crash here or an economic downturn there isn't going to harm him, and it's because of his own initiative and ingenuity. Contrast that with what happens in every MMO: a new expansion comes out, your gear is worthless, you spend countless hours getting back to where you were, so you can complete yet another dungeon, so you can have it taken away from you again. All for the thrill of the chase. It seems much more satisfying to me both to enjoy the chase, and to enjoy where the chase is taking me.
Friday, September 6, 2013
Sunday, August 25, 2013
August net worth update
August has been another month of Mustachianism on relative autopilot. Let's update my net worth of income-producing assets.
Here are the totals, along with the difference from my last update on July 27th:
- 401k - $24,173.59 (-$339.00)
- Lending Club - $2,403.64 ($317.11)
- Schwab - $1,496.30 (-$48.33)
- I-bonds - $600 ($200)
- Total - $28,673.53 ($129.77)
A small increase over last month's value. My 401k contributions and my I-bond purchases remain unchanged. I contributed $300 to Lending Club. The decrease in wealth in my 401k and Schwab account is due to market fickleness — no big deal.
With the rest of my income I've been saving up cash, retiring credit card debt, and beginning to "invest" in a speculative asset class which I'm not ready to share with you just yet. I can almost guarantee you'll hate it. Before I write about it, I want a little more confidence that I'm not throwing money away.
I am planning on dialing down contributions to Lending Club in the short term. My desire for liquidity has increased over the past two months; and I have been trying to buy higher-interest notes for which competition is fierce. I don't have a problem investing in B notes with interest rates from 9 to 13%, but for now that's not the most attractive opportunity for my cash. I'll let the money I have in Lending Club compound for a month or two while I reevaluate.
This month I remembered that I have around $3k of Series E savings bonds, and I think they belong in my invested net worth calculations. I haven't converted them from paper to electronic yet, so when I do, I'll start reporting on them.
With the rest of my income I've been saving up cash, retiring credit card debt, and beginning to "invest" in a speculative asset class which I'm not ready to share with you just yet. I can almost guarantee you'll hate it. Before I write about it, I want a little more confidence that I'm not throwing money away.
I am planning on dialing down contributions to Lending Club in the short term. My desire for liquidity has increased over the past two months; and I have been trying to buy higher-interest notes for which competition is fierce. I don't have a problem investing in B notes with interest rates from 9 to 13%, but for now that's not the most attractive opportunity for my cash. I'll let the money I have in Lending Club compound for a month or two while I reevaluate.
This month I remembered that I have around $3k of Series E savings bonds, and I think they belong in my invested net worth calculations. I haven't converted them from paper to electronic yet, so when I do, I'll start reporting on them.
Wednesday, August 14, 2013
How I almost lost $480 speculating in Bitcoins
Since I paid off my student loans in February, I admit I've been over-eager to build my stash. I didn't spend a few months building up my emergency fund. I immediately started investing in Lending Club notes and I-bonds. I also paid off some 0% credit card debt that's not due until next March, to improve my credit score in anticipation of applying for a Home Equity Line of Credit (HELOC).
There's another speculative investment I dallied in that I haven't mentioned on this blog: speculating in Bitcoins! I've waited long enough. It's time to come clean.
Even before I paid off my loans I've been thinking of what to do with the money I'll save. Even at my relatively unMustachian savings rate of ~30%, I regularly save upwards of $1300 per month (roughly; I haven't looked closely at the numbers recently). I know that I'm not the kind of person who can be a totally passive investor, patiently dollar-cost average into a nice index fund over a period of decades. I know that's the recipe for success for over 99% of people, most likely including myself. But I know myself, and I know my flaws, and I'm always going to have the urge to tinker and optimize and analyze and try to seize opportunities. I definitely do not want these traits to manifest as constantly turning over my stock portfolio: racking up trading fees, buying high and selling low. (As an example: last year I made three ~$300 trades in JCP and MSO, only to sell them within a year at a slight loss. I consider that a cheap lesson about what not to do in the stock market.)
With this in mind, I try to play to my strengths and work around my weaknesses. I want to keep a relatively small part of my stash in speculative investments that will take the lion's share of my time and attention, so that the majority of my wealth can be safe to do the passive compounding thing.
This is where I tell you about Bitcoins. The Bitcoin Wikipedia article is pretty good at giving an overview, but for this discussion Bitcoins are just a commodity to be traded. The key features are very low transaction costs; no need to physically accept, store, or deliver any product; and (at the time) very large price swings, often 10% in a single day. The theory is that by providing liquidity to the market, I could take advantage of large and consistent price swings by buying low and selling high.
The biggest difficulty was finding and obtaining a trading account. When I was looking in April 2013, most Bitcoin exchanges were based outside of the US, and those were the biggest exchanges. They could take upwards of two weeks to get a bank account verified and funds transferred before you could start trading. I had my solution when my friend and co-worker who was also investigating opportunities in Bitcoins showed me to bitfloor, a US-based exchange. Bitfloor even allowed transfers in from ING Direct (now CapitalOne 360).
In mid-April I transferred $400 from ING into my bitfloor account, and bought a single bitcoin from that same friend for $80. The bitcoin transferred to my account in an hour; the cash took around a week. My trading strategy was the following: place many small orders around the current bitcoin price, in small increments. As the market price rose (or fell) and my orders got executed, place additional buy or sell orders surrounding the market price. For example, let's say the market price of a bitcoin was $80. I'd offer to buy at $79, $78, and $77; and I'd offer to sell at $81, $82, $83. To make things simple I used increments of $10, and in practice I often had a dozen or two orders on the books. Bitfloor incentivized traders like myself to add liquidity to the market by providing a rebate (negative commission) if an order was on the books before it got executed, i.e. if it wasn't a market order.
This was the simplest possible strategy I could think of to profit from the volatility of the bitcoin price. I was placing bids manually so I needed something straightforward. The liquidity rebate meant I didn't have to worry about playing a losing game with being charged commissions. The decision to use fixed-dollar trades meant that when I bought at a lower price, I'd buy relatively more bitcoins; then when I sold at a higher price, I sold fewer bitcoins to equal the same amount of money. Using $10 as the trade amount meant I always knew how many purchases I had cash for. The way I saw it, as long as the market price of bitcoins kept vacillating, I was basically guaranteed to make money.
That was my strategy, and it worked beautifully... for a day. Literally a single day. On April 17th my cash cleared into my bitfloor account and I started trading. I was doing pretty well, up about $30 from making dozens of trades. That same day, bitfloor announced it would be shutting down operations due to "circumstances outside of [their] control". I finished the day with $509.27 in my account, meaning I made $29.27 in a day of trading, or about 6% in a single day. At that point my cash was locked up and I basically didn't know if I would see my money or not.
I'm pretty sure that over time I would have been able to improve my methods and deploy more of my cash — I didn't have most of my money tied up in trades that first day — and so I think I could have improved my rate of return. The thought of earning 10% per day is pretty awesome, and at that rate money compounds pretty quickly. Of course, since then the market has settled down and we're not seeing anywhere near the 10% swings we used to (though I haven't kept close tabs on bitcoins). On the other hand, I didn't fully account for risk of loss associated with the trading platform imploding.
Just this week I got my money back to the tune of $504.27: a $5 transfer fee was assessed. I'm pretty happy with this outcome as I could very well have lost my $480. I learned a lesson about what else to look out for with speculative investments, and I gained some valuable experience. I am planning on always keeping my eyes out for speculative investments in the future. It's something I enjoy, there is potential for outsized returns, and it's a liberty I have now that I'm (mostly) debt free.
I'll let you know what other kinds of speculative shenanigans I get myself into in the future.
With this in mind, I try to play to my strengths and work around my weaknesses. I want to keep a relatively small part of my stash in speculative investments that will take the lion's share of my time and attention, so that the majority of my wealth can be safe to do the passive compounding thing.
This is where I tell you about Bitcoins. The Bitcoin Wikipedia article is pretty good at giving an overview, but for this discussion Bitcoins are just a commodity to be traded. The key features are very low transaction costs; no need to physically accept, store, or deliver any product; and (at the time) very large price swings, often 10% in a single day. The theory is that by providing liquidity to the market, I could take advantage of large and consistent price swings by buying low and selling high.
The biggest difficulty was finding and obtaining a trading account. When I was looking in April 2013, most Bitcoin exchanges were based outside of the US, and those were the biggest exchanges. They could take upwards of two weeks to get a bank account verified and funds transferred before you could start trading. I had my solution when my friend and co-worker who was also investigating opportunities in Bitcoins showed me to bitfloor, a US-based exchange. Bitfloor even allowed transfers in from ING Direct (now CapitalOne 360).
In mid-April I transferred $400 from ING into my bitfloor account, and bought a single bitcoin from that same friend for $80. The bitcoin transferred to my account in an hour; the cash took around a week. My trading strategy was the following: place many small orders around the current bitcoin price, in small increments. As the market price rose (or fell) and my orders got executed, place additional buy or sell orders surrounding the market price. For example, let's say the market price of a bitcoin was $80. I'd offer to buy at $79, $78, and $77; and I'd offer to sell at $81, $82, $83. To make things simple I used increments of $10, and in practice I often had a dozen or two orders on the books. Bitfloor incentivized traders like myself to add liquidity to the market by providing a rebate (negative commission) if an order was on the books before it got executed, i.e. if it wasn't a market order.
This was the simplest possible strategy I could think of to profit from the volatility of the bitcoin price. I was placing bids manually so I needed something straightforward. The liquidity rebate meant I didn't have to worry about playing a losing game with being charged commissions. The decision to use fixed-dollar trades meant that when I bought at a lower price, I'd buy relatively more bitcoins; then when I sold at a higher price, I sold fewer bitcoins to equal the same amount of money. Using $10 as the trade amount meant I always knew how many purchases I had cash for. The way I saw it, as long as the market price of bitcoins kept vacillating, I was basically guaranteed to make money.
That was my strategy, and it worked beautifully... for a day. Literally a single day. On April 17th my cash cleared into my bitfloor account and I started trading. I was doing pretty well, up about $30 from making dozens of trades. That same day, bitfloor announced it would be shutting down operations due to "circumstances outside of [their] control". I finished the day with $509.27 in my account, meaning I made $29.27 in a day of trading, or about 6% in a single day. At that point my cash was locked up and I basically didn't know if I would see my money or not.
I'm pretty sure that over time I would have been able to improve my methods and deploy more of my cash — I didn't have most of my money tied up in trades that first day — and so I think I could have improved my rate of return. The thought of earning 10% per day is pretty awesome, and at that rate money compounds pretty quickly. Of course, since then the market has settled down and we're not seeing anywhere near the 10% swings we used to (though I haven't kept close tabs on bitcoins). On the other hand, I didn't fully account for risk of loss associated with the trading platform imploding.
Just this week I got my money back to the tune of $504.27: a $5 transfer fee was assessed. I'm pretty happy with this outcome as I could very well have lost my $480. I learned a lesson about what else to look out for with speculative investments, and I gained some valuable experience. I am planning on always keeping my eyes out for speculative investments in the future. It's something I enjoy, there is potential for outsized returns, and it's a liberty I have now that I'm (mostly) debt free.
I'll let you know what other kinds of speculative shenanigans I get myself into in the future.
Saturday, July 27, 2013
July net worth update
It's easier to call these "net worth updates" even though I only really care about income-producing assets. I have a goal to have $100k in income-producing assets as soon as possible. I'm making progress toward my goal mostly by relying on the Mustachian habits I've already cultivated.
I haven't been posting as much as I'd like, but I've still been busy. I've just been busy with non-financial endeavors. It's pretty great how frugal habits compound over time, to the point where even when I'm not actively trying, I'm still maintaining a high savings rate.
After paying off my student loans I've found that spending money is a bit easier. For example, I spent $55 on 5 video games during the Steam summer sale. I even bought a MacBook Air last month, after not having a laptop for four years. Even so I've been accumulating cash and deploying it to productive uses: debt paydown and Lending Club notes. I've found it's possible to buy nice things you want and still live well below your means.
Here are the totals, along with the difference from my last update (June 16th):
- 401k - $24,512.59 (+$1,751.79)
- Lending Club - $2,086.53 (+522.23)
- Schwab - $1,544.63 (+$56.62)
- I-bonds - $400 (no change)
- Total - $28,543.76 (+$2,326.65)
My 401k has been doing well because of the recent strength in the markets. Around $1000 of that gain was new contributions (plus employer match). The rest was appreciation.
I added $500 to Lending Club, and the other $22.23 was interest.
My Schwab account still has 100 shares of Corning (GLW). Once I have around $2k in extra cash I plan on finding another company to invest in. Until then my Schwab account value will vary according to Corning's stock price.
I didn't buy more I-bonds last month. This was because my Treasury Direct account was locked, so my automatic purchase didn't go through. I'm going to continue investing in I-bonds as an emergency fund, even though the interest rate is low and getting lower. It's a stable store of value that can't decrease in real terms, and the fact that it's not in my savings account means I'll respect it as a rainy day fund.
The over $2k increase from last month is an awesome number, considering I didn't invest much of my after-tax income at all. I used a lot of cash to pay off my credit cards: I want to improve my credit score so I can qualify for a Home Equity Line of Credit (HELOC) and then hopefully never use my credit again. I paid off my MacBook purchase as soon as it hit my card (~$1,400), and got my 0% card down to around a $3,500 balance — take that, credit utilization!
A few months ago I lent $5k to a family member as a sort of cash-flow loan. When I got paid back, I used it on my credit cards. This means that, while I'm not building my 'stash as quickly as I could be, I don't have to worry as much about when the 0% offer will run out next March. Buying productive assets and paying down debt are both really fantastic options.
I added $500 to Lending Club, and the other $22.23 was interest.
My Schwab account still has 100 shares of Corning (GLW). Once I have around $2k in extra cash I plan on finding another company to invest in. Until then my Schwab account value will vary according to Corning's stock price.
I didn't buy more I-bonds last month. This was because my Treasury Direct account was locked, so my automatic purchase didn't go through. I'm going to continue investing in I-bonds as an emergency fund, even though the interest rate is low and getting lower. It's a stable store of value that can't decrease in real terms, and the fact that it's not in my savings account means I'll respect it as a rainy day fund.
The over $2k increase from last month is an awesome number, considering I didn't invest much of my after-tax income at all. I used a lot of cash to pay off my credit cards: I want to improve my credit score so I can qualify for a Home Equity Line of Credit (HELOC) and then hopefully never use my credit again. I paid off my MacBook purchase as soon as it hit my card (~$1,400), and got my 0% card down to around a $3,500 balance — take that, credit utilization!
A few months ago I lent $5k to a family member as a sort of cash-flow loan. When I got paid back, I used it on my credit cards. This means that, while I'm not building my 'stash as quickly as I could be, I don't have to worry as much about when the 0% offer will run out next March. Buying productive assets and paying down debt are both really fantastic options.
What have I been up to?
I haven't been posting as much as I'd like, but I've still been busy. I've just been busy with non-financial endeavors. It's pretty great how frugal habits compound over time, to the point where even when I'm not actively trying, I'm still maintaining a high savings rate.
I'm trying to approach the early retirement lifestyle before I'm actually retired. I'm cultivating hobbies like home brewing and open source programming. I'm reading more. I spend more time outside, going on long walks with the dogs and my girlfriend.
Yup, life is pretty good. And I'm still on track to meet my financial goals. I think I could be moving toward them more quickly, but I'm happy spending more time on other pursuits. I know that the pendulum will swing the other way at some point in the future. Then I'll spend my time learning about value investing, home energy efficiency, improving my frugality.
Everything in its own time.
Everything in its own time.
Sunday, June 23, 2013
Lending Club update
I think this is my first official Lending Club update. Here's where I stand:
Don't be alarmed by the -57% net annualized return (NAR). When I started with Lending Club I purchased 8 defaulted notes on the secondary market for pennies on the dollar. I think I spent around $22 in all. Since then, all have been charged off. That's what I get for being trigger happy at new opportunities. I bought around $300 worth of debt at 90-95% discounts, when in reality the discount needed to be 98%+. This is a good lesson, which I take as: don't invest in things you don't (fully) understand. I should mention that at the beginning I was looking at over -90% NAR, and that has crept up over the past few months as interest has rolled in.
I've made $31.84 so far in interest. I don't have many notes — only 64 so far — but that's enough that every day or two I have another few dollars in my account.
My investment strategy is as follows:
I transfer cash into my account when I decide it's time to invest. This is usually in amounts of $100 to $500. I'm taking things slow while I'm liquidity-constrained in the early days of building my stash. Most recently, $300 cleared on June 20th, and I've been working to get it fully invested. (That explains the $167.59 in available cash and $175 in in-funding notes.)
When I have cash to invest, I need to choose which notes to fund. Since I don't have much cash I can afford to be relatively picky. The filters I use are: 36-month term, and home ownership of "Mortgage" or "Own". I use home ownership as a proxy for lifestyle stability though I admit this is a bit of a stretch.
I only fund notes from people who have answered a few questions, and I have to like the answers. Not many people ask questions, and notes get funded quickly nowadays, so I have two strategies.
My first strategy is to look at notes that will be funded soon. I sort by "% Funded" (so soon-to-be-fully-funded notes are at the top) and look at each loan until I find answered questions. If I get lucky and find someone who has answered some questions, I see if their answers sound thoughtful and I fund the loan.
My second strategy is to ask my own questions. For this I sort by "% Funded" again, but in the other direction (so the loans at the top are far away from being fully funded). Then I go through each and ask a bunch of questions — they're in a list with a radio selector, and you have to submit each separately. My personal favorite is "Please explain the reason why you carry a large revolving credit balance." I often use the questions asking for a detailed breakdown of monthly expenses, credit card payments per month, and what loans they will pay off.
I usually have the patience to go through one or two pages of notes at a time (the default is 15 loans per page). After firing off questions, it's time to play the waiting game. Lending Club emails me when questions are answered. Then I read through the answers and decide if I want to fund the loan.
I have had one loan that became late. Since then the borrower has paid the loan so that it's current. I'm very happy with this turn of events. Also of note, my very first payment on a note was for more than the minimum — good for that guy!
I've really enjoyed reading about what people want to do with their loans. Many of them are for refinancing credit card and other high-interest debt. Sometimes they have names like "paying off credit cards" or even "Final Credit Card!!", which makes me feel good.
I've been very happy with Lending Club so far. I especially like that, now that I've been doing it for more than a month and I have a few dozen notes, I can see compounding happen on a daily basis. This is how wealth is built: one day at a time.
Don't be alarmed by the -57% net annualized return (NAR). When I started with Lending Club I purchased 8 defaulted notes on the secondary market for pennies on the dollar. I think I spent around $22 in all. Since then, all have been charged off. That's what I get for being trigger happy at new opportunities. I bought around $300 worth of debt at 90-95% discounts, when in reality the discount needed to be 98%+. This is a good lesson, which I take as: don't invest in things you don't (fully) understand. I should mention that at the beginning I was looking at over -90% NAR, and that has crept up over the past few months as interest has rolled in.
I've made $31.84 so far in interest. I don't have many notes — only 64 so far — but that's enough that every day or two I have another few dollars in my account.
My investment strategy is as follows:
I transfer cash into my account when I decide it's time to invest. This is usually in amounts of $100 to $500. I'm taking things slow while I'm liquidity-constrained in the early days of building my stash. Most recently, $300 cleared on June 20th, and I've been working to get it fully invested. (That explains the $167.59 in available cash and $175 in in-funding notes.)
When I have cash to invest, I need to choose which notes to fund. Since I don't have much cash I can afford to be relatively picky. The filters I use are: 36-month term, and home ownership of "Mortgage" or "Own". I use home ownership as a proxy for lifestyle stability though I admit this is a bit of a stretch.
I only fund notes from people who have answered a few questions, and I have to like the answers. Not many people ask questions, and notes get funded quickly nowadays, so I have two strategies.
My first strategy is to look at notes that will be funded soon. I sort by "% Funded" (so soon-to-be-fully-funded notes are at the top) and look at each loan until I find answered questions. If I get lucky and find someone who has answered some questions, I see if their answers sound thoughtful and I fund the loan.
My second strategy is to ask my own questions. For this I sort by "% Funded" again, but in the other direction (so the loans at the top are far away from being fully funded). Then I go through each and ask a bunch of questions — they're in a list with a radio selector, and you have to submit each separately. My personal favorite is "Please explain the reason why you carry a large revolving credit balance." I often use the questions asking for a detailed breakdown of monthly expenses, credit card payments per month, and what loans they will pay off.
I usually have the patience to go through one or two pages of notes at a time (the default is 15 loans per page). After firing off questions, it's time to play the waiting game. Lending Club emails me when questions are answered. Then I read through the answers and decide if I want to fund the loan.
I have had one loan that became late. Since then the borrower has paid the loan so that it's current. I'm very happy with this turn of events. Also of note, my very first payment on a note was for more than the minimum — good for that guy!
I've really enjoyed reading about what people want to do with their loans. Many of them are for refinancing credit card and other high-interest debt. Sometimes they have names like "paying off credit cards" or even "Final Credit Card!!", which makes me feel good.
I've been very happy with Lending Club so far. I especially like that, now that I've been doing it for more than a month and I have a few dozen notes, I can see compounding happen on a daily basis. This is how wealth is built: one day at a time.
Sunday, June 16, 2013
Goal: six figures invested
I've been kind of antsy since I paid off my student loans in February. During the 14 months of my aggressive debt payoff, I knew exactly where all of my money should be going. This hasn't been true over the past 4 months. I've still been saving pretty aggressively, investing in Lending Club, and otherwise trying to keep out of trouble. But without a firm goal in mind it's easier to spend money freely.
I make the best decisions when the right two choices are juxtaposed against each other. Here's an example: should I buy this game on Steam called Prison Architect? It looks fun. At $29.99 I can definitely afford it. Without a long-term financial goal (or a budget), I'd frame the choice as: do I buy this computer game, or do I not buy it?
Now imagine I have an investing goal. I want to have a combined portfolio of $100k+ as soon as possible. Then my decision gets framed as: do I buy this computer game, or do I want to be $30 closer to my goal? It's not that buying things is bad or the wrong decision. It's that you need to know your priorities before you can make a good decision.
I've wanted a new financial goal for a while. I shied away from a specific number at first because anything less than enough money to be financially independent is going to be arbitrary. But now, months after I paid off my student loans, arbitrariness seems a small price to pay for a specific financial goal. I've read that the first $100,000 is hardest, and that seems to ring true, so that will be my goal. Also I got a little envious of Dividend Mantra when he crossed the $100k mark in March.
I haven't decided on a timeline yet, and I haven't nailed down the details (actually that's what this blog post is for). Let's lay it out.
Goal: To have $100,000 or more in income-producing assets
"Income-producing assets" means my car and my house don't count. I'm not going to count money in savings or checking accounts either, nor cash in my brokerage account, nor my HSA. I am going to count my I-bonds, my taxable brokerage account, my 401k, and Lending Club.
Here are the totals so far:
I make the best decisions when the right two choices are juxtaposed against each other. Here's an example: should I buy this game on Steam called Prison Architect? It looks fun. At $29.99 I can definitely afford it. Without a long-term financial goal (or a budget), I'd frame the choice as: do I buy this computer game, or do I not buy it?
Now imagine I have an investing goal. I want to have a combined portfolio of $100k+ as soon as possible. Then my decision gets framed as: do I buy this computer game, or do I want to be $30 closer to my goal? It's not that buying things is bad or the wrong decision. It's that you need to know your priorities before you can make a good decision.
I've wanted a new financial goal for a while. I shied away from a specific number at first because anything less than enough money to be financially independent is going to be arbitrary. But now, months after I paid off my student loans, arbitrariness seems a small price to pay for a specific financial goal. I've read that the first $100,000 is hardest, and that seems to ring true, so that will be my goal. Also I got a little envious of Dividend Mantra when he crossed the $100k mark in March.
I haven't decided on a timeline yet, and I haven't nailed down the details (actually that's what this blog post is for). Let's lay it out.
Goal: To have $100,000 or more in income-producing assets
"Income-producing assets" means my car and my house don't count. I'm not going to count money in savings or checking accounts either, nor cash in my brokerage account, nor my HSA. I am going to count my I-bonds, my taxable brokerage account, my 401k, and Lending Club.
Here are the totals so far:
- 401k - $22,760.80
- Lending Club - $1,564.30
- Schwab - $1,492.01
- I-bonds - $400.00
- Total - $26,217.11
Not too bad. Most of my stash is my 401k, built with three years of the minimum contributions I needed to get the full employer match.
Of note, I turned off my automatic $500/mo contribution to Lending Club. I'm going to be transferring money manually from now on. The cash takes almost a week to transfer, and I felt uneasy about having so much money automatically go into limbo each month. I still have $200/mo automatically buying I-bonds; the bonds show up in my account the same day that the ACH transfer happens, so that's pretty cool.
I'm kind of low on cash. Last month I lent $5000 to a family member who was having an issue with cash flow. She just got her commission check, so I'll probably have my money back by next weekend. When that comes in I'm going to spend most of it paying down my 0% credit cards. I want to buff up my credit score one last time, so we can get a Home Equity Line of Credit (HELOC) as a joint emergency fund / means of financing large home improvement purchases. Beyond that, I can't wait to buy some more notes on Lending Club.
Thursday, June 6, 2013
An excuse to bike
I finally biked to work this year. And it was great.
My first time was last Tuesday, the day after Memorial Day. My strategy was "don't think about it, just do it" which was effective. I'm prone to over-thinking, which is my most common cause of under-acting. I would normally worry about finding the bike pump, inflating the tires, laying out my bike clothes and my work clothes, cleaning out my messenger bag, and getting ready that morning. That anxiety is what kept me from biking through March and April. But the week before Memorial Day was my vacation, and I returned refreshed and with a clear head.
I had forgotten how easy it is. Last year I built the biking habit so that when I started again this year it felt like second nature. I'm making a conscious effort to wake up earlier and take my time while biking — what's the rush? after all — and that has reduced my stress level. Slow down and smell the roses, you know? When the weather is nice (or even too hot) it's a significantly more enjoyable experience than driving.
I biked twice the week of Memorial Day, and three times so far this week. My game plan going forward is basically "fair-weather biking": I'll plan on biking if it's not forecasted to rain or thunderstorm. No reason to overdose on badassity too soon; no reason to give myself an excuse to interrupt my biking habit.
I want to take some time to talk about excuses. I've made up a lot of excuses not to bike over the past year: it's raining, I can't find the bike pump, the seat is too low even on its highest setting, it's too cold, it's too hot, I'm tired, I'm late for work, I want to be early for work... I'm sure I could keep going. These reasons are incidental.
An excuse is just an incidental reason. Armed with this fact, I played a mind game on myself on the first day I biked to work. I found an excuse to bike (actually a few of them):
My first time was last Tuesday, the day after Memorial Day. My strategy was "don't think about it, just do it" which was effective. I'm prone to over-thinking, which is my most common cause of under-acting. I would normally worry about finding the bike pump, inflating the tires, laying out my bike clothes and my work clothes, cleaning out my messenger bag, and getting ready that morning. That anxiety is what kept me from biking through March and April. But the week before Memorial Day was my vacation, and I returned refreshed and with a clear head.
I had forgotten how easy it is. Last year I built the biking habit so that when I started again this year it felt like second nature. I'm making a conscious effort to wake up earlier and take my time while biking — what's the rush? after all — and that has reduced my stress level. Slow down and smell the roses, you know? When the weather is nice (or even too hot) it's a significantly more enjoyable experience than driving.
I biked twice the week of Memorial Day, and three times so far this week. My game plan going forward is basically "fair-weather biking": I'll plan on biking if it's not forecasted to rain or thunderstorm. No reason to overdose on badassity too soon; no reason to give myself an excuse to interrupt my biking habit.
I want to take some time to talk about excuses. I've made up a lot of excuses not to bike over the past year: it's raining, I can't find the bike pump, the seat is too low even on its highest setting, it's too cold, it's too hot, I'm tired, I'm late for work, I want to be early for work... I'm sure I could keep going. These reasons are incidental.
An excuse is just an incidental reason. Armed with this fact, I played a mind game on myself on the first day I biked to work. I found an excuse to bike (actually a few of them):
- I have to bike because my car is overdue for maintenance
- I don't want to drive because I had to park the next street over because they're paving the road in front of my house, and I don't feel like walking
- I have to bike because I have to get back in shape
All of these are true. None of them are the underlying reason why I biked to work. I biked because I decided I was going to and then I followed through. Armed with these excuses, it was easier to keep myself from backing down. This is precisely the opposite process of our brains using excuses to keep us from doing the things we know we should be doing.
Excuses have a bad connotation, but they're just incidental reasons. I'm going to try finding excuses to do more things I've been putting off. For example, I have to make a vet appointment for my cat because otherwise she'll stop loving me. And I had to write this blog post because otherwise my adoring readers would forget all about me and I'd die alone and abandoned. See, excuses don't even have to be feasible. They just have to spur you to action.
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