Learning to balance my frugality alongside some fatherly finance advice.

Hi everyone, when I first set off to write this article, it was going to be a video where my financially literate dad and I went over some simple finance topics. However, as I was editing, I couldn’t help feeling like I needed to talk about where my mind is at regarding money and about my personal finance journey, so the beginning half of this article has turned into a letter to myself.

If you’d rather not read about a first world problem, no worries! Scroll down to Fatherly Advice for some key points from the conversation. 

When I first started learning about personal finance after starting my first job out of college, I couldn't help but feel a little weird and embarrassed about it. Growing up, I was always wary of the negative stigma associated with the finance industry, especially now with the rise of cryptocurrency and finance bros. From the outside, it all seemed like a huge scam. However, I was sucked in after learning about the concept of compounding interest (honestly mind blowing at the time), which encourages you to save as much as possible while you’re young for massive rewards towards retirement. As a generally frugal person, this confirmed my bias towards saving and appealed to that nagging voice in my head instilled upon me by my Asian American parents. However, this mentality has led me to turn down countless opportunities that were deemed “too expensive” and has left me regretting not pulling the trigger on a lot of activities that I know I would’ve had fun doing. 

The further I got into calculating my rate or returns and filling out a brokerage portfolio, the more this mentality engulfed my decision making. I’ve spent my share of time on retirement calculators and simulations, so I should be the best person to convince myself that I am on the right track. Even so, looking at the numbers was never able to convince myself of that. I don’t know if it was the regret of saying no to things piling up or if I finally hit another level of personal finance understanding, but recently I feel as though I’ve hit a breaking point. I am starting to recognize the importance of balance in this aspect of my life and am working on finding a happy medium between securing my financial future and having fun in the present. 

I am lucky enough to have a job that pays me well enough to afford living in a city like Los Angeles, with enough left over to both save and spend a bit. As such, I’m trying to get through to myself that not every single Starbucks coffee is going to ruin my retirement portfolio, and at this point of my life, neither is the occasional “expensive” trip or activity, especially if I plan for it. Moving forward, I recognize that I need to have a healthier relationship with money and not let it control me as much as it has. I acknowledge that this is not a luxury that many people my age have and that I come from a position of privilege, but this is still something that I feel I need to work on to lead a happier life. 

To everyone that I’ve declined activities, please don’t take it personally, I am working on it! To everyone struggling with the opposite issue of spending too much money, maybe we should spend some time together and rub off on each other.

Fatherly Advice

"What's the biggest thing that people my generation are missing about finance?"

Dad: "The biggest thing I see people struggle with is having a financial goal in mind. Whether that be buying a house, having children, or retiring at a certain age, every goal will require a different amount of saving and sacrifice. Once you figure out what your goal is, you can begin to start planning the path to get there, like having an amount to save every month. The earlier you figure out your goals, the easier it will be to plan and achieve them. I know you don't want to hear it, and your goals might change, but you should really sit down and think about it."

"Once someone figures out their financial goals, what's something that they can do to help them get there? Or I guess, what's something that anyone can do at any point in their lives to get ahead?"

Dad: "Something that anyone can do no matter what stage of their life they are in is starting a budget. Tracking your income and expenses is the first step to achieving any goal remotely related to money.”

“But that doesn't really make you money nor save you any money either."

Dad: "Yeah, but if you're going to spend money, you should at least know what you're spending it on. In general, a budget will be broken down into a few different categories of spending and you can see where most of your money is being spent. Comparing to general percentages, you can see where you're overspending and hopefully that will help identify any bad habits. I know in California, you might be spending a large portion of your paycheck on rent, but that just means you have to make up for it in a different category.”

"What are some common financial pitfalls or misconceptions that beginners can make?"

Dad: "Many times when people start a budget and begin to calculate their income or plan for the future, people forget or don't know to differentiate between gross income and net income. When you talk about salaries to people in passing most of the time, you will reference gross income. It's an easier number to understand but can be misleading when trying to plan for the future. Most people know that tax exists, but it takes many forms. We pay taxes when we buy products and also when we receive paychecks. Net income is the amount of money you get to take home after both federal and state taxes have been deducted from your paycheck. It is crucial to use this number when calculating your financial future or budgets."

Helpful Links

Budgeting Template - Use this to start your own! All you need is Excel or Google Sheets!

Budget Category Percentages - Compare your spending to these estimates!

Paycheck Calculator - Figure out how much you’re actually going to make based on your salary. Don’t forget to input your state for state taxes!

Investopedia - I thought this site was a joke because of the name until I actually started reading the articles. They’re informative and have minimal bias towards specific institutions. You can search and find anything really. This link is about 401k’s!

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