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Taking Charge Of My Finances

I’ve recently started reading and employing the tips and tricks of “I Will Teach You to be Rich” by Ramit Sethi. His blog iwillteachyoutoberich.com is one of the most popular personal finance blogs on the web and his book promises to be very valuable.

The reason that I chose Ramit’s book over the thousands of other personal finance books is that he has many of the same beliefs or philosophies that I do. He argues that being actively involved in your finances on a daily basis and worrying about them is not the way to success. He argues simplification and automation, many of the same principles from “The 4 Hour Work Week“. I’ve worked hard in the last few months to really improve my productivity and effectiveness of my work days.

With my upcoming wedding and other big financial decisions looming, I decided to get this book and really take charge of my situation. I’m very lucky to have such a solid income during such a crazy time and I owe it to myself to take advantage of that. I would highly encourage buying this book and employing a more automated savings strategy . Stop worrying about savings and create a system that will both simplify your life and maximize the results of your financial situation.

Now Where To Invest?

As financial control is regained, we will have to make some decisions about where to put our money. This decision is a tough one, in a time where many of our parents, the baby boomers, have lost significant portions of their net worth it’s very difficult to trust the stock market.

When I was 12 years old I put $500 dollars (a ton of money to a 12 year old) into Motorola and AOL stocks, two companies that were “supposed” to remain strong for in the long term. After the 2001 tech bubble both stocks plummeted. Even today they remain practically worthless from the amounts I first purchased them. More recently, in the last 3-4 years, as I started getting some decent money to invest in my 401k and other retirement accounts. I again trusted ‘the market’ and I’ve lost huge with the recent financial crisis. I now hate the stock market.

My father has always been a real estate guy. He owns a few apartments and has done well with them. I’m very tempted to save as much money as possible outside of retirement accounts so that I can get into the real estate game as soon as possible. But this post from Charlie O’Donnell’s blog, ‘This is going to be big’, challenges the existing belief that real estate will be the investment savior it has been in the past.

So this question from Charlie’s post raises a large internal debate. Where should I put my damn money?

What are some of the other things young people might invest in?  Well, think about my specific case?  In order to buy an apartment (you know, since I did the silly thing of buying something I could afford), I moved out to Bay Ridge, Brooklyn, a 45 minute commute into the city.  On average, I go into the city six days a week.  That’s about an extra 4 hours of time compared to if I was living in the city per week.  Multiplied over a whole year, at a rate of $100 an hour (let’s say I chose to do consulting with that time), you’re talking about $20,000 a year.  I never factored that cost in.  Nor did I factor the social cost.  Who am I not building better relationships with because I live further away?  Isn’t investing in my social network at this point a higher potential return than real estate as an asset class–especially given that I’m an entrepreneur?

Maybe buying a cheap home away from everyone isn’t the best decision. Maybe splurging to put myself in ridiculous, freedom limiting debt isn’t the best decision either. So where will I focus my time and efforts?

My Investment Focus

With so much uncertainty in the stock market, and the social costs of a potential real estate investment, I’m investing in the asset class that I have the most confidence in, myself. My financial investments will be moderate for now with many traditional savings accounts, waiting for the right opportunity to buy a house. I’ll continue to expose myself to the upside of a recovering stock market through my retirement accounts (401k, Roth IRA, etc.)  But, as far as my most valuable resource, my time, I’m going to continue to focus on my professional development at work,  my web startup SocialDreamium, and never stop learning.

It’s extremely important to me to enjoy every minute of my life. I have a specific list of dreams that I keep open in RTM and I monitor it almost daily. I am going keep the level of international travel as high as I can afford and focus on the personal and professional relationships I have with the people around me.

When making investment decisions I would strongly encourage you to look at more than just your finances. Think about your life as a whole and think about what kind of return you want from both financial and life investments. Keep the big picture in mind,  periodically (but not obsessively) monitor the results to your  investments and you WILL reach your goals both financially and otherwise.

If you’ve struggled with these investment decision and want to share please do in the comments below.