My Story: Retirement By Age 34 – Part 2

At age 25, for the first time in my life, I actually had extra money!  I started working, paying off my immediate debts and started saving some money in the bank.  Like most young people, I didn’t know what to do with my money, but keeping it in the bank seemed like the sensible thing.  I made a few inexperienced mistakes a long the way, which we can go through along the way.

Mistake 1: Not using the 401k

When I first heard of the 401k, I was pretty excited because it was free money!  My first company at AOL was matching 50% up to 6% of my contributions.  So I was making a not so hypothetical $70,000 per year, and if I contributed 6% ($4,200), then AOL would pony up 50% of $4200 ($2100). Unfortunately, I didn’t heard or understand what a 401k was for months, missing out on some extra contributions.  After I learned about it, I immediately decided to put in my 6%.

Mistake 2: Not utilizing the 401k to full extent

So I quickly put in 6% to receive the full company match, but in retrospect, I should have put even more in.  The longer your investments sit, the more your money gets to accrue with compound interest.  That’s a good thing.  Well, I was young and at least I got to enjoy that money in other ways.

Mistake 3: Picking the wrong 401k fund

When you sign up for a 401k, you just don’t put your money in it.  You also have to decide what to invest your money in.  Back then I didn’t know nothing about this, but i’m sure I searched google and the general rule of thumb is that you invest “more aggressively when you are young”.  This is pretty sound advice, as your accounts have more time to absorb all the peaks and valleys of aggressive investing.  So I picked the “aggressive” fund and that was that.  I may have picked the right strategy, but I didn’t pick the right fund.  Funds come with fees also called “expense ratios”.  That’s a fee based on a percentage!  If the expense ratio is 1%, then you are charged 1% of your money invested every year, regardless of if you make money or lose money!  Anyway, at least I was learning my way into investing properly.

2010 – 2015: The Money Years

In 2010, I left my first job as a tech analyst, and got my first job as a programmer at a startup.  I got an increase in base salary, lost the 401k option, but gained these things called stock options.  When these stock options were granted to me, I had no idea what it meant to have X amount of options.  All I cared about was the salary, which is definitely not the whole picture.  Stock options, are a bit of a gamble, but i wish I knew then what I know now about them now.  I don’t know if I would have negotiated differently, but I would have liked to understand the value of them.

Anyway, this company was a dream to work at!  It was smallish (which I like), very generous with raises and bonuses, and I couldn’t believe they were paying me to basically learn my craft!

Buying a Condo 2012

Previously, I had just lost about $5000 in the stock market due to the market crash of 2008.  This turned me off to investing in stocks, but now I was sitting on quite a pile of cash I had saved up for 4 years. I was living in Emeryville, a city right outside of SF, and I was paying $1350 in rent.  My parents were advocating for me to buy a place.  I didn’t really want to be tied down but I realized at the 2012 prices, if I bought the exact condo floor plan I was in, My out of pocket would be about the same (after tax deductions), but I would be building up around $300 a month in equity.

To break it down, after the down payment, it would cost me $1650 a month in expenses.  I would save about $300 from tax deduction on property tax and mortgage interest, so the net spend would be around $1350 a month which was my current rent price.  But out of that net $1350, $300 of that was going to paying down my principal on my loan, so I was only going to truly spend about $1050 a month!

Honestly I got pretty lucky and it was a great time to buy in that area.  Now a days I don’t really advocate buying a property in most areas as the prices are sky high!  What i didn’t realize is that even though I was “saving” $300 in equity, I could have invested that $70,000 down payment and and made interest on that.  Fortunately for me, housing prices are way up and so is the value of my condo.  But generally speaking, housing can be somewhat risky.  Just ask all those people that got screwed in 2008.

Today is April 16, 2018 and its almost 6 years since I bought my condo.  My condo’s value went from $265k to $500k which is an 88% gain!  But in the same time, the S&P 500 went up 125%!  Basically, real estate appreciation generally is slower than the S&P 500 not just from my example, but historically.  The reason why buying the house worked out was because I took out a loan and basically invested $265,000 into real estate and not just my downpayment of $60k.  What I’m saying is that it was kind of a fluke that it worked out for me.  If i could take a loan and have invested it in the S&P 500, then I would have made even more.  But I guess that’s where housing can help, as they allow you to get a low interest loan and over leverage and you can get lucky.

Putting it all together

After I spent my entire savings purchasing my condo, I was in save mode again.  I felt like I had no safety net and I was aggressively saving.  I think I started to figure out the basic rules of investing around this time. The biggest lesson I learned is that most of the investing advice is BS and just misleading.  There are all these financial advisors, expensive mutual funds, shitty combo investment/insurance products, pyramid schemes, and hedge fund managers that basically will take a percentage of your money for services that don’t exceed a passive investment strategy!  The crazy thing is, these same people selling you stuff, honestly believe they are helping you with your investing, which I guess can be true if you’re doing nothing.  All you have to do basically is pick a low cost index fund for your investment and stay away from financial products that make other people rich!  If your financial advisor or some insurance rep is making a lot of money selling you a product, then YOU’RE PAYING TOO MUCH FOR IT!

I started to really get into investing again after I bought my condo in 2012.  I was making a high income, so I had no problem maxing my 401k.  I was doing other strategies like backdoor Roth IRAs, tax deductions for my side business, and even started investing in taxable accounts with my extra money.  I do my own taxes on turbotax and I do rather enjoy the process of itemizing my deductions, but I have to say my taxes do still confuse me as the tax code is super complicated.  But that’s next level stuff.  I just hope to get everyone at least investing for retirement with a passive investment strategy.

Bay Area Coming to an End

By 2015, I was 32, and I was feeling like my life was a bit mundane.  I had worked the same amazing job for 5 years, but life was getting stagnant and I felt like I needed to do something to shake things up.  I quit my job and was looking to travel and volunteer somewhere for a few months to give me some perspective.  I had always put off traveling to work and during work, it was hard to coordinate travel with others.  But when my friend decided to start up a company and was recruiting me, I decided to do one last go in NYC.

2015 – 2017: 18 months in NYC

NYC is a magical place and I think I stayed just short enough to leave wanting more. Here we were, working that startup from the ground up!  Job was exciting, city was exciting, and life was interesting. I wanted to shake things up and moving to NYC, the people, the pizza, and the startup life, learning the MTA quirks, was an amazing time!

This time as a somewhat entitled senior engineer who just quit a job making upper level pay, I realized i wanted equity more than salary. At the time I felt I was making top software engineer income, but was topping out.  Could I ever get to financial independence just working for salary? My answer was “not fast enough”, so I negotiated for a lower base salary and more equity.  This ended up being about a $115k bet on this company, if you factor in my reduced pay, exercising the options, and paying AMT taxes.  I guess only time will tell if this gamble will pay off…

Retirement on the Horizon

After about 1.5 years of NYC startup sprinting and living the NYC Manhattan life style, I had gained 20 lbs and my health was deteriorating.  Maybe my clean California environment didn’t prepare me for the harsh germs of NYC living and transportation, but I had like 7 different colds/flus/throat infections during this time.  Also the weight gain was making me feel lethargic, and perhaps the worst, was I was developing this weird eye pain that was getting worse making it difficult to look at computer screens which was basically my life.  During this time I had met my fiance who also had a desire to travel more.  She had previously worked abroad as an international school teacher and talked of many travel opportunities. I was feeling tired of work and was thinking about all the travel promises I had pushed back.  So with little preparation, we visited an international teacher job fair and made a life altering decision within that weekend to move in together across the world in Manila.  If you’re a teacher in the US, international teaching is truly the way to go!


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