If you think you have to come from money to learn good money habits or to create wealthy. Think again. This week’s Simple Inspiration shows you can achieve the finance goals you want to achieve if you put your mind to it even if you don’t come from money.
This week I have the pleasure of interviewing the Gen Y Finance Guy.
Gen Y Finance Guy is a site dedicated to the stated mission to Humanize Finance, Build Wealth, and Reach Financial Freedom. He writes from the perspective of a practitioner and not an academic. He provides a level of transparency that you won’t find on most blogs. Every month he produces a detailed financial report that covers everything from: net worth, gross income, expenses, assets, liabilities, etc. It’s just one way that he aims to humanize finance and provide context around the things he shares on the blog. He puts his money where his mouth is.
He is also offering a free giveaway which runs until the end of July so check it out by clicking below.
Let's hear how the Gen Y Finance Guy has simplified his finance:
What event lead you to decide to pursue financial freedom?
I grew up on welfare and lived in section 8 housing as a kid. Somehow I managed to find awesome mentors that showed me a different path then the one I was on. All the statistics say that I should have ended up in prison like my father or at the very least addicted to drugs like both my parents.
Those early experiences were turned into motivation to reach a level of financial success that would ensure my life looked nothing like that of my parents.
How long had you planned this?
This is what I have been working towards my entire life (probably since I was about 11 years old). When I say my entire life, don’t let me fool you, I am only 28 years old.
Results don’t come over night, but things have really started to compound and snowball for me. It all started when an amazingly altruistic man by the name of Dan entered my life in the 6th grade.
He was the first person to hold me accountable. I went from failing out of the 6th grade to being a 4.0 student. It is amazing what a person can do when they have someone who cares in their life. I learned a lot about business from Dan, since he owned a few pizza places.
It was my experience with Dan that led way to my business studies in college. My parents didn’t graduate high school and I was the first on both sides of my family to get my college education (besides my aunt). If I was going to be financial free one day I knew that I was going to need to understand how money worked. So I got my degree in Corporate Finance.
What steps are you taking to achieve financial freedom?
Well, first, I should start off by telling anyone building wealth in the pursuit of financial freedom only needs to remember this little secret to wealth building:
Spend less than you make and invest the difference wisely.
Don’t let anyone try to tell you that it is anything more complicated than this. It is really a rather simple fundamental to building wealth.
Here is what I am doing to achieve financial freedom:
- Saving 50% of my gross income
- Maxing out my 401K every year
- Maxing out an IRA for my wife every year
- Making after tax investments in Prosper and Rich Uncles REIT
- Paying off our 30 year mortgage in 7 years
- Putting money in short term CD’s
- Trading Options
- Building an online business
One of the things that make me different than a lot of the financial bloggers out there is that I tend to be more focused on the income side of the equation. Because in order to crack the code of wealth building, to spend less than you make, you need to live below your means.
Now when it comes to living below your means you have 2 options. The first option is to be expense focused, keeping expenses as low as possible. This means no $4 lattes or eating out regularly. It’s too restrictive for me.
So, I choose the alternate way of living below my means by constantly expanding my means. I am constantly looking for ways to increase income in order to indulge in the things that bring me joy, while still saving 50% of gross income.
This tends to keep my in a state of abundance rather than put me into a scarcity mindset. Because in reality there is a natural floor to how much you can cut your expenses. However, there is no limit on how much income you can earn.
What is your biggest challenge or roadblock to achieving financial freedom?
I think that the biggest challenge that everyone suffers from is falling trap to lifestyle inflation. The way I address this is with the 50% savings rule. I am okay with lifestyle inflation as long as it remains proportionate with income.
It is so easy to compare ourselves to our friends and what they have. Don’t get sucked into “keeping up with the Jones.”
Be a non-conformist.
Our friend’s thing we are crazy for paying off our mortgage in 7 years. We think it would be irresponsible if we didn’t. When I did the math, I showed my wife that we would be earning a minimum of $1.4M over the next 7 years and our mortgage was only $352K. We immediately agreed that we would be dumb not to pay it off.
We bought a house that was half of what we could afford. Most of our friends buy a house that is exactly what they can afford.
We have cars that are free and clear. Our friends have monthly car payments.
We don’t carry any credit card debt. We do use credit cards and take advantage of reward programs, but we pay those suckers off every month.
We automate our savings and investing. Many of our friends have not even started saving or investing yet.
So, like I said be a non-conformist.
What are your current financial goals?
We have two major goals that we are working towards right now:
1 – Pay off the house in 7 years (before our 35 birthday)
2 – Achieve a $10M net worth by the time we are 48 (which is only about $5.5M in today’s dollars with a 3% inflation rate)
We will actually reach financial freedom sometime in our 30’s, but we have bigger goals, and that’s why we have the 20 year plan.
How will you feel once you reached your financial goal you have?
I truly believe that it is not a matter of if, but rather when we reach our financial goals.
What I love about the way we have structured our plan is that we don’t have to delay gratification for 40 years and then at 65 retire and try to do the things that we wanted to do when we are younger.
We plan to balance living in the present while preparing for the future. A high and high savings rate is the linchpin to our plan.
What one thing have you done to enable you to live your current lifestyle?
I have aggressively worked to increase my income since graduating college. Over the last 7 years I have averaged annual raises of almost 21%.
What's your best savings tip?
Automate your savings. When you automate your savings and “pay yourself first”, the expenses will work themselves out. And then you can have no guilt spending what is left over.
Do you have an emergency fund established, if so how did you determine the amount needed to fund it?
We do have an emergency fund, but we honestly don’t call it that. Over time the wife and I have become comfortable with a certain balance in our bank account. We have never lived paycheck to paycheck, so the bank has always retained a surplus. When we first got married we didn’t like to see our bank balance dip below $20K. These days we feel a lot of comfort maintaining a balance around $40K.
Although we spend about $10K/month, our bare minimum living expenses are around $4K/month. In the event that something did happen and we both lost our incomes this would give us about 10 months of runway before we had to tap any of our investments.
What book, blog, or podcast would you suggest to someone who is looking to simplify or improve their finances?
The book that has been the most influential in my life is the “The Slight Edge”, by Jeff Olson. This is the only book that I re-read every year.
What advice or thoughts you would like to share with others who are looking to achieve financial freedom or just improve their financial life?
Yes, it’s a quote from Jim Rohn:
"If you don't design your own life plan, chances are you'll fall into someone else's plan. And guess what they have planned for you? Not much."
As complicated as people try to make wealthy building it is actually as simple as spending less than you make and investing the difference. Once you realize that, you need to decide whether the extreme frugality path fits your goals and personality or if the income expansion method fits you.
From experience, expanding your income is way more fun.
If money was not a concern, what would you do for fun?
First, I would like to reiterate that I am not a big fan of suppressing all of the activities you enjoy in the pursuit of financial freedom. None of us are guaranteed another day, so I strongly encourage each and every person reading this post to make sure they do something they enjoy every single day.
With that said I personally would spend more time doing the things I currently enjoy doing on a regular basis: reading, working out, traveling with my wife, trying new restaurants, cooking, blogging, investing, spending time with family and friends, and playing with my dogs. These are all things that for the most part I do on a daily basis, if not weekly. The only exception to that is the travel piece. Our current schedules really only allow us to travel a few times a year, but we are working on that. Once our house is paid off, our goal is to live in a foreign country or somewhere by the beach for 3-6 months at a time (first up is Italy).
Thanks Dominic. Your journey is amazing and I hope it inspires others to simplify their finances. If you would like to read more about his journey check out the blog Gen Y Finance Guy or follow his journey on twitter @genyfinanceguy.
P.S. Gen Y Finance Guy has a special giveaway that he would like to extend to everyone reading this. He is giving away 11 books that will not only change you money mindset, but will set you well on your path to financial freedom. Enter the giveaway and then earn an additional 3 entries every time you share it with others that sign up. The giveaway is only running through 7/31/15, so don’t delay!
To read previous interviews in the series click below
If you are interested in sharing how you have simplified your financial life, send me an email and I will follow up with you. Enjoy the rest of your week.
Til next time, take one step at a time to simplify.