let’s talk about money, part ii: the state of the union

lets talk about money - feat. moneycat - anothertoast

featuring your host, the lovely Miss Lucifer Muffinbutz

As promised in my introductory let’s talk about money post, Part II (this post!) is all about the current state of my finances and how I got here.

Checkin’ My Privilege

To start, I have to acknowledge the lucky circumstances I was born into and the advantages I have been given. Here are some things:

I am an able-bodied, overall healthy, cisgender, Asian American woman in my mid-20s. I work in tech in the San Francisco Bay Area and receive a San Francisco Bay Area tech salary* and San Francisco Bay Area tech work perks, such as fully covered health insurance and free lunch more than once a week. I have a good relationship with my mom and family so I’ve been able to live at home since graduating from college. My mother was in a stable enough financial position at at least one point in her life to purchase a single family home, and I grew up in a safe neighborhood with good schools nearby. I had access to a computer and the internet at home while I was growing up, thanks to supportive extended family members. I have never had to choose between eating and keeping the lights on. I attended private school until 8th grade. I didn’t pay for college, so I was able to focus on my studies and graduate without student loan debt. I have never paid and still don’t pay for my own cell phone bill or car insurance (I drive approximately once every two years; I should really switch to Metromile or something else mileage-based so it’s cheaper). My current job is not especially stressful except when there are deadlines, which are few and far between.

*I’d like to note that I work at a startup, not a large public tech company. As such my base salary is significantly lower than that of, say, a software engineer at Google. Which is not to say it bothers me – I still have a very comfortable job – but for those to whom the Valley** all looks the same: I’m in a littler league than Google and Facebook.

**Silicon Valley. For those who have decried the use of “the Valley” to describe Silicon Valley, yes, people really do call it just “the Valley,” and no, nobody in the Bay Area thinks you mean the San Fernando Valley anymore. Language changes, y’all. Keep up.

Checkin’ Your Privilege

As I mentioned in my previous post, I feel guilty but not ashamed about my financial situation. This is because I’ve lived a life with many privileges and undeserved advantages, but I also don’t enjoy the same privileges as, say, a white dude born into an upper-middle class family. Here are some things:

I am an Asian American woman who works in tech, a male-dominated industry. I’ve worked with exactly 4 other engineers who are women in my career, and at least 34 engineers who are men. I have been sexually harassed by my coworkers because of my race. I was born and raised in San Francisco in a single parent family; I did not move here for my tech job. My mom struggled to make ends meet in order to send me to private school for K-8, though I didn’t realize it until college. This negatively impacted her ability to save for her own future. I attended a public high school. I also attended an in-state public university and graduated a semester early with a 3.87 GPA despite suffering from depression. I didn’t pay for college because I received a combination of federal aid (because our household income was low enough) and merit scholarships (because my grades were high enough) that were enough to cover all fees and tuition as well as housing and living costs. I entered the tech industry without a technical degree by qualifying for and then attending a 12-week coding bootcamp that doesn’t charge tuition until you find a job. Since I started my first full-time job, I’ve covered from 40-100% of the monthly mortgage payment on my mother’s house, depending on the month. I fully expect and intend to financially and practically assist my mom in her retirement and old age. My partner and I split shared expenses proportional to our incomes, which has historically been close to 50/50. (This ratio will probably change soon, but the proportional split won’t.)

A Financial Snapshot

I’ve been perusing /r/financialindependence more and more frequently over the past year or so, and while I’m still a long way from being financially independent, I find their community’s posting guidelines very useful for providing a relatively short but comprehensive overview of a person’s financial situation. Here’s a snapshot of my current financial situation, (mostly) following that format:

Life Situation: Single, with no dependents. (That’s my filing status. I do have a partner, but we’re not bound together by law. Only by love.) San Francisco, CA. Mid-20s. Software engineer.

Gross Salary/Wages: I don’t want to publicly disclose my exact salary, but I get paid something like market rate for the SF Bay Area/Silicon Valley.

Yearly Savings Amounts: I don’t want to publicly disclose my exact savings amounts, either, but I aim for at least a 50% post-tax, post-fixed-expenses savings rate.

I max out my 401k every year, splitting the maximum allotted $18,000 between traditional and Roth accounts. (I started at a 65/35 split but am moving toward even more traditional and less Roth to further lower my taxable income.) My employer doesn’t do any kind of matching, but at least the plan provider offers funds with decent expense ratios.

I also max out my Roth IRA with a $5500 contribution each year. My Roth IRA is with Betterment, and I cannot recommend it enough to anyone who’s interested in long-term investing but who might be too intimidated to DIY a portfolio. Yes, there are service fees, which make Betterment more expensive than, say, an account directly with Vanguard, but Vanguard is dirt cheap anyway so that’s not saying much. Betterment’s pricing model is totally reasonable, and the interface is both easy to use and easy to understand, which is especially important if you’re just starting out. (If you’re interested in signing up for Betterment and feel like sending some referral credits my way, hit me up via email for a signup link.)

I semi-recently signed up for a high deductible health plan through my employer and opened a Health Savings Account (HSA), because my employer contributes $50 per paycheck to my HSA. Over the course of a year, that’s a cool $1200 I’m getting for free, plus I get to avoid federal taxes on my own contributions, which is an extra bonus. Given that I am lucky enough to have no chronic health problems, have a 6-month emergency fund, and don’t intend to touch these savings until retirement, the HSA seemed like a good choice.

I receive fully covered health, dental, vision, short-term disability, long-term disability, and life insurance through my very generous employer. I also opt to pay $4 out of pocket per paycheck for additional life insurance coverage. (My reasoning is that I won’t even miss that $96 a year, and I would pay more than $96 for the security of knowing that in the event of my death, my mom and brother will receive a substantial insurance payout. (Money doesn’t make life significantly easier after you hit your basic needs threshold, but a lack of money sure as hell makes life significantly harder, so if something good can come of my death for such a low price… heck, why not?))

On top of my retirement accounts, I also have a taxable investment account with Betterment, which I opened back when I was working at a small startup that didn’t offer a 401k plan. I figured that even if I wasn’t totally sure what I was doing, it was best to start investing early, so I eased my way into it with monthly deposits of $100, which I’ve increased over time.

Current expenses: Technically my current non-negotiable expenses are $0 since I live at home and generally don’t pay for groceries (and all discretionary spending could in theory be cut), but most months, I choose to spend my money like so:

Mortgage (mom’s): varies by month, but still cheaper than renting in San Francisco
Causes (ACLU, Planned Parenthood, NARAL Pro-Choice America, The Trevor Project, Meals on Wheels San Francisco): $40 (I could up this, but I’m more concerned with making a habit of giving than with giving a lot right now.)
Talk Direction: $5 (Support Talk Direction on Patreon!)
Going out: $240 – $300
Things: $100 – $200
Necessary: $0 – $180

As you can see, my budget isn’t set in stone, and my spending categories are pretty vague.

I’m okay with this, because given where my life is right now, I don’t feel the need to go into hardcore budgeting mode. My fixed expenses are low, and I save at least 50% of my post-tax, post-fixed-expenses income before I even think about discretionary spending. (Back when I was making less than minimum wage, I still managed to bank half of my paycheck. I also didn’t contribute to household expenses or go out AT ALL, but this is just to say it’s always been second nature for me to save first.)

Most of my “going out” budget is spent on eating out on the weekends. I’m okay with this, because it’s always social eating, and I get much more satisfaction from going out for breakfast with my partner on Saturday mornings than from staying home and cooking for 3 hours to save $25. I purposely made my “going out” budget larger than my other expenses, because I want to spend more money on experiences (trying new restaurants! watching movies! attending cat-themed short film festivals!) than on objects.

“Things” covers clothing, accessories, makeup, tchotchkes, and gifts. I’m actively trying to cut down here because I own too much stuff, period, and I spend the bulk of my fun-shopping money on clothing.

My “necessary” category covers things like skincare, deodorant, contact lens solution, health expenses, etc., as well as any money spent on my family. Usually what happens in any given month is that I won’t spend all my “necessary” money, but a few months later, I’ll end up needing to spend several months’ worth of “necessary” money all at once. It works out more often than not and I’ve never really gone over budget here.

(It’s probably worth nothing that sometimes I spend large amounts of money on family things like roof or sidewalk repairs, or, like, a down payment on a new car for my mom (a work in progress). This doesn’t come out of my “necessary” budget, but out of a discretionary savings account which I contribute to regularly. It started off as a house down payment fund, until I realized I can’t afford a house in San Francisco unless I live at home and leech off someone else’s income until I’m like 40. Now it serves as a car down payment fund (as well as my next-year’s-Roth-IRA fund), but I dip into it when large family-related expenses come up.)

Expected retirement expenses:

According to this MIT Living Wage Calculator, it is possible to live as a single person with no dependents at poverty levels in San Francisco for $33,553/year, assuming you spend $16,944/year or $1412/month on housing. (I’m sure it’s possible with a roommate in a less trendy neighborhood.) I use this as my baseline for expected retirement expenses, not because I expect or want to live in poverty when I retire, but because reaching even that number is so far off I can barely imagine it. (As a very rough calculation, taking 25x of poverty-level annual expenses results in a required nest egg of $838,825 at retirement.*)

(*If this amount is extremely alarming to you, keep in mind that compound interest works wonders.)

Assets:

My traditional and Roth 401ks are split 90% stocks/10% bonds. I used this guide from /r/personalfinance to determine which funds to pick, because I had no idea what I was doing. Here’s the basic breakdown for my accounts:

10% bonds
15% midsize domestic stocks
50% S&P 500 index
25% international stocks

Both my taxable account and Roth IRA with Betterment are also split 90% stocks/10% bonds, and I don’t pick what funds are used, but I’m pretty sure Betterment uses mostly Vanguard.

I also have a relatively small amount in I Bonds (my OG savings vehicle, after my cash savings started looking too big but before I started investing), and I have a small amount invested with Robinhood. I definitely have a buy-and-hold personality, so I haven’t done much with my money in Robinhood, especially since my employer started offering a 401k plan, but it was a revealing experience, purchasing individual stocks… Now I know that holding stocks in specific companies makes me kind of anxious and I would never cut it in finance. (Robinhood is doing a refer-a-friend program where the referrer receives a random free stock, so if for some reason you want to sign up after my unconvincing review and you want to send me some free stock, hit me up via email for a signup link.)

My God That Was Exhausting

All this grotesque detail into my finances is just my way of setting your expectations, ’cause I’m not in a typical financial situation, but I do have typical long-term financial goals, and I would be remiss in letting anyone think that I did not start my financial journey in an advantageous position.

I am hella lucky. Sure, I’ve worked hard, and I plan to spend a big chunk of my good fortune on my family, but despite not being a real estate heir with a trust fund, I still know that I got lucky, which is a big part of why I’m where I am today.

I’m trying to be smart with what I’ve been given (and what I’ve earned), and I hope you won’t judge me for it.

The next post in this series will cover my long-term goals in greater detail.

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