Managing Career, Family and FINANCES

For the past decade I have been focused on improving financial health of our customers. My mission is to help people improve their financial lives. This meant I spent a lot of time learning about how people make ends meet, how they manage their finances to get ahead and what gets in their way of financial success. I have been exposed to several tools and tactics that people have used across many countries. I have been inspired and have taken a lot of these learnings into how we build products. However, I never applied these learnings to myself because I have a good job, I am generally a saver and we have been doing some investments over the years. And I work way too hard to have any time for anything other than work of my family.

Q4, 2020 was different. PayPal, where I work at, talked a lot about employee financial wellness. That made me think about myself too. In addition, I had also expanded my research as I realized that we need to do something drastically different to help even more customers. I widened the horizon of my learning and picked up a few books on finances. Traditional books! I read almost 40 such books from Nov to Jan. I also went to blogs and podcasts that were outside of my general knowledge. I started learning about the “FIRE” community and financial independence. I realized I could apply some of these insights to my own life. I learnt so much! I realized there were several things we could’ve done differently over the years that could have set us up better financially than where we are today. I also read shocking truths like written here https://www.ellevest.com/magazine/disrupt-money/truths-about-women-and-money Now I ensure that members of my family and my friends avoid these mistakes.

While I am not the best at this, I wanted to post this here to encourage all of you to spend a bit of time thinking about your own finances as you build out amazing careers.

Some simple questions to ask yourself: These might not be relevant for everybody at all stages. This is not financial advise but only some points to consider.

• It is never too late or too early. If you are just starting your career, do the most amount of saving and investing right away. But it is never too late. Whatever your age and wherever your life is today, start now (if you can)
• Can you “Pay yourself first”? Just like you might be making automatic payments of your bills, can you “pay yourself first” to keep saving?
• Do you really know how much you spend in a month? There are several tools that can help you do so. Don’t just imagine or calculate in your mind. Use any of these tools like Mint, Personal Capital, YNAB to help you.
• Do you know what your Savings rate is?
• When you get a pay hike, can you put all of the increased pay into savings? Can you continue your lifestyle with your previous pay? If you can afford to do so, try to put all of most of it into savings or investments. You can do so by simply automating your additional pay out from your bank to a savings or investment account.
• Do you automate your money? Can you automatically set aside a % of your pay into savings or investments? This way you don’t even see it to spend it. There are also tools like Digit which do a great job at saving for you. I use Digit and after some period of time, I pull all of that money to invest it.
• Understand the power of compounding. By saving and investing every month from the very beginning of your career or whenever you can start adds up. Learn about “The Latte factor”
• Did you know how to get to financial independence? You can calculate that as an FI number. This number is the amount of net worth you need to have accumulated before you can be financially independent and possibly retire. Typically this is calculated as 25*$X where $X is your annual expenses. Once you reach this number you have technically reached financial independence and can get to freedom of working in any job you like or retiring. There are many blogs around it and you can look for them. So this gives you an option of not having to think like you have to work till 65 but strategies that you can put in place today to get you to freedom sooner. Freedom to chose whatever you want to do.
• Can you max out your 401k? Some people just put enough in 401k to take advantage of an employer match. For ex., if an employer matches upto 5% of their income, then some people might only put 5% into 401k. As of 2021, we are allowed to put in up to 19.5k in a 401k. Can you afford to do so? If so then consider the tax advantages you might get and the returns on it after a few years.
• After you put in your 401k, do you manage the investments? Consider going in to your 401k account and reviewing how your money is working for you. There are several options for you to choose in where your money can be invested. Can you review the past performance of these funds to see if they might be a good option for you? I have a friend who let her money sit in a money market fund where there is no return on investment. This means that her money is actually losing value (because of inflation)
• Do you qualify for a Roth IRA? If so can you take advantage of it by putting money in it? If you don’t qualify then there is also an IRA that most people can contribute to by adding 6k/per year post tax into it.
• What are Mega backdoor Roth? Is this something you can take advantage of? This is still way too complex for me but maybe you can learn about it and use it for yourself.
• Are you using a financial advisor? And have you invested through them? Do you know the cost of the investment? the “Boggleheads” evangelize democratizing investments through Vanguard or other low cost funds. These low cost funds save thousands of dollars each year. Consider the costs of your investments
• Have you documented all your financial details including accounts, login information and other details so that in case of death, your loved ones are taken care of and don’t struggle getting access to their inherited finances? This also includes ensuring you have beneficiary named in all of your accounts, having joint accounts if needed to simplify access, having life insurance to the right level, etc.,

Some resources

Books

• Smart women finish rich
• Playing with Fire
• Psychology of Money — A short blog about it here
• The Boggleheads guide to investing

Podcasts and blogs

• Choose Fi podcast
• The Latte factor podcast
• Introduction to Investment by Jot