Today we have our 18th Freedom Fighter interview in this series.
The 2009 financial crisis motivated our guest Matt to devour blog, books, and podcasts on the topic of personal finance. He recently published a book called “Your Roaring Twenties: Avoid the Paycheck-to-Paycheck Life as a Twentysomething.” This book really came as a result of a conversation he had with some friends that had absolutely no clue about 401k’s, tax deductions, or investing.
But I will let Matt tell you all about his story in his interview below…
Who are you and what do you do? What is your story? How are you fighting for your Freedom? Where did you start, where in the journey are you, and where do you ultimately want to end up?
My name’s Matt. I grew up in a small upper-middle class town outside of Boston that gave me every opportunity to succeed. Due to the influence of my parents, I early on realized that hard work and saving were both critical to succeeding in this world.
However, I also had a naïve view of money. While not necessarily wealthy, my parents could provide enough support to my brother and me that we didn’t have many wants: we had a used car in high school, and my parents paid for my public-school college tuition (I paid for books and meals). Though I had worked hard at jobs since I was 14, for whatever reason, becoming wealthy was never a high priority for me: I haughtily strove to pursue a “life of the mind” by majoring in history and didn’t think I’d ever need to earn more than the median income to be financially secure. I didn’t take a single business class in college.
It wasn’t until my senior year in 2009 that I was shaken from this ambivalence towards money. Sitting in my dorm room, I would switch between watching the economy crash on CNN and fruitlessly filling out job applications. Though I had a low-paying job lined up, I for the first time seriously considered what my life would be like independent of my parents and realized just how unprepared I really was.
So I did what history majors do best: I researched. For the next 6 years I read blogs and books and listened to podcasts on personal finance, real estate, the stock market, and economics in general. I made good financial decisions, like optimizing my costs and growing my income, and bad ones, like investing in stock options without doing my homework.
After a recent conversation with some friends who came from similar backgrounds as me but who were equally as clueless about things like 401ks, tax deductions, and stock market investing, I decided to put some of the things I’ve learned since 2009 on paper (well, my computer screen, anyways) and published Your Roaring Twenties: Avoid the Paycheck-to-Paycheck Life as a Twentysomething. Which brings us to today!
Favorite Quote: I have two that I like: First, from Albert Einstein: “The only source of knowledge is experience.” I think that while it’s important to read as much as you can about something to ensure you’re adequately prepared, true learning doesn’t happen until you’ve tried it. Failure is more instructive than success as it can redirect your efforts and show you what you need to improve upon for next time.
The other one I like is “Work is so bad, they pay you to do it.” I notice many people in the millennial generation are searching for their “perfect” job or career that will be high-paying, personally rewarding, and flexible.
While there are a lucky few out there who find this combination, in this day and age you’re lucky to find a job with one of those. I think a lot of people are constantly “chasing the white rabbit” and end up leaving imperfect but solid jobs or taking on crippling debt for a graduate degree that offers limited employment prospects.
Best Financial Decision: Living with roommates, even when I could afford to get my own place. Rent is often the single highest expense for people in their twenties, especially if you live in a high-cost urban area like NYC, Boston, or San Francisco.
Since leaving college, I’ve never lived alone. I first moved into a 3BR with two friends after college, then moved to a 5BR with random craigslist people who were (mostly) amazing. I now live with my long-term girlfriend.
I’m not sure exactly how much this has saved me over renting a studio or 1BR, but if I had to guess, it’d bet at least $50,000.
Worst Financial Decision: Investing in individual stocks and options. Going back to my naïve feelings of exceptionalism that I had as a history major (“the job market is bad for liberal arts grads, but that doesn’t matter because I’m the exception and am super awesome”), I similarly thought I was smart enough to start trading stocks for profit.
I started slowly by taking $5,000 I had invested in an index fund and buying Apple stock. I did reasonably well, though I fell victim to the roller coaster ride of price movements. I started spending a lot of time researching and trading stocks on my online trading platform. I discovered biotech stocks, which were extremely high risk/high reward due to FDA approval decisions. I then moved on to options, which are basically leveraged stock contracts with even higher risk and reward. In short, I was addicted.
As you could probably guess, this ended badly with many thousands of dollars in losses. Three years after I kicked the habit, I’m still deducting those losses from my taxes.
The worst part? That initial $5,000 index fund investment would have been worth about $11,000 today, a return of 120%.
Definition of Financial Freedom: I define financial freedom as being beholden to no one. For me, it’s not just about having no debt but also about having the freedom to either work or not work. The latter part involves building enough assets to support a passive income stream to cover your living expenses, which is my current long-term goal.
One Book Recommendation: It’s seldom one gets to honestly say this, but a book that truly changed my life was Mindset by Carol Dweck. The book describes the differences between the fixed mindset, in which people believe they have a certain amount of innate skill that doesn’t really change, and the growth mindset, in which people believe self-improvement and change is possible.
People with the fixed mindset are the ones who are constantly searching for the perfect career that finds their skill set, shirking away from things that challenge their skills. I was in this camp for much of my life.
Growth-minded individuals build and conform their skills to their current task at hand, relishing challenges they meet as new opportunities for learning and improvement instead of commentary on their self-worth. Once you adopt the growth-mindset, the possibilities truly become limitless as they are only bounded by your will for self-improvement.
On Building Wealth: I mostly focus on the lowering costs side of the equation, but I also emphasize making smart decisions with your money (like avoiding graduate school if it has bad ROI or ensuring you max out your tax-deductible 401K contributions).
However, I think building your income potential is equally as important, and it’s easier to do now than ever before due to the skill development opportunities online classes offer as well as “side-hustle” opportunities through online businesses and contract jobs.
Best Piece of Advice I’ve Ever Received: I’m going to turn this around and list some of the WORST advice I’ve received, which I think many in our generation have heard from their parents:
“You can be whatever you want, and it doesn’t matter what you major in.”
This may have been true in the 80s and 90s when the economy was booming, but it really isn’t true today. Don’t get me wrong – this advice is given my extremely loving parents who only want to do what’s best for their kids. However, I think it’s the fast road to missed opportunities and unfulfilled expectations.
Instead, I think it’s better to emphasize realistic goals and dreams, then iterate on them. Instead of saying “I want to be a CEO,” build realistic steps and landings that go in that general direction. At each career landing point, stop and consider if this path is helping you build a life that you want.
In other words, it’s better to have low expectations and focus on short term gains. That way, you’re seldom disappointed :)
Where Can You Find Me?
First please check out my book, Your Roaring Twenties, and leave a review on Amazon – I’d love to hear your feedback! I’m also just starting to get a website off the ground, YourRoaring20sPersonalFinance.com, which provides tools and insights to help you build your financial future. Feel free to reach out to me to network or for any other purpose!
Awesome, and I totally agree with you on the worst advice… Example, if you’re paying money to go to law school today, you obviously haven’t read the news. It’s shocking to me how many people continue to pay exorbitant amounts of money to go to law school which has to be the most mind numbing and grueling education you can find. All this while the supply of lawyers continues to outweigh the demand for lawyers. You would be surprised how many lawyer friends I know in San Francisco who sat around unemployed for over a year, and eventually had to take a job outside of law. And these friends of mine had degrees from top 20 law schools… Can you imagine going $200k+ into debt, and collecting $0 in income for several years?
Sorry to rant about this, but good post!
Oh, one more thing related to your worst financial decision to invest in individual stocks… Don’t you think you’re worst financial decision was to invest in individual stocks for short-term gains? It seems your poor returns were not a result of the investment in individual stocks, but rather due to your quick selloff of them? Just wanted to point out this caveat, as I’m a huge fan of building my own portfolio of individual stocks.
Anyhow, look forward to reading more!
It’s amazing how many people see grad school as the objective as opposed to the career after graduation. I’ve had friends tell me they want to go get their MBA, and when I’ve asked why, they’ve said “to meet women and relive the college experience.” If that’s all you want to do, why not take that $100,000+ in loans and go on a crazy trip to Europe for 2 years?
That said, people can benefit greatly from grad school if they think it through sufficiently. You’re likely to be more successful if you say “I want to be a management consultant/venture capital analyst/urban planner etc., and I need to get x degree to do that” than if your attitude is “I might as well go to law school because I don’t know what else to do.” You increase your chances of success even more if you do a proper market demand analysis as you suggest above.
Here’s a post I wrote over at Invibed on the ROI of grad school in case you’re interested: http://invibed.com/is-grad-school-worth-the-cost/
Also, totally agree on your comment on individual stocks. My issue was that I was gambling with them instead of investing – if I had just hung on to a few of the stocks I had (like NFLX), I’d be sitting pretty, but at the time I was just too emotional about the whole stuff. Now I just use Betterment to automate my investments and rebalancing, taking my unreliable brain out of the equation :)
Thanks for sharing your thoughts!
Nice to meet you, Matt!
I really like your point about everyone searching for that job that’s everything – high-paying, personally rewarding, and flexible. So true! So often I see people discontent and ungrateful, always looking for something better. For the most part, they fail to realize that reality never quite seems to measure up with perception. People constantly compare themselves to others, which can be dangerous! Gratitude is key. IF something is good, be grateful and stop looking for something better. You’ll never find ultimate satisfaction, if that is the outlook.
Catch you later!
Nice to meet you too, Wes! Thanks for reading. I agree with people searching for that “unicorn” job – it might be out there, but you might give up a lot in the search for it. That said, I don’t think people should stay in jobs that make them miserable. Life’s too short for that. Rather, look at a job/career as a means to accomplish goals and build security. Having a job that helps you meet financial goals and doesn’t make you miserable is certainly something to be thankful for, especially in this day and age!
This post from WaitButWhy is one of my all-time favorites: http://waitbutwhy.com/2013/09/why-generation-y-yuppies-are-unhappy.html