Money & Finance: Top 10 Ideas and Solutions

1.  The Greatest Asset is Time – Not $$$: How much would you pay to be 20/30/40/50 years old (or any age) with an awesome community and real friends to have sober fun with in North County, CA? Does it really matter how much anyone would be willing to pay? It’s still the same price – priceless!  Time can buy anything but nothing can buy time.  In our mind, it’s not even close, time is the most valuable asset.  Not money or material items, time.  Time is precious and scarce for each of us.  It is one of the first things we gave up in our addiction until we eventually had none of it left.  In our addiction, nighttime was taken first with drinking and using, followed by our morning time of hangovers and withdrawals and afternoons of purgatory until the next night.  A vicious cycle of giving away all of our time to substances.  Today, whether you have a lot of sober time or you have a lot of time left to be sober – we sober people are the most fortunate and abundant when it comes to time.  We are present morning, noon and night.  This is what we are most grateful for in sobriety – real, sober time with our friends and family, to get to know ourselves, to adventure through life and achieve our goals and ambitions.  Better yet, we get to remember these sober moments as we pass through time. 

2.  Recurring Costs are the Silent Wealth Killer: Being sober is bar none the best financial decision anyone can make. Heck yeah us!  We get a kick out of tracking how much we are saving each week, month and year by not drinking and using in our apps (we use the “I Am Sober” app).  So let’s take our financial savvy and savings to the next level and see how many recurring charges we are incurring each month with an app like Truebill.  We were stunned with the all the stuff / crap we were paying for each month.  It’s not so much the bigger one-time purchases that get us.  It’s all those $5-15 per month charges that started adding up in a hurry to $500 bucks or more (that never end until we end them).  Once we were able to see what we were paying for each month – we were able to cut back to what we needed, loved and wanted to keep.  The basics stay: rent/mortgage and utilities, health and car insurance, phone bill and debt payments.  Then we enter the maybe keeps which are basically subscriptions services like Netflix, Apple TV, Hulu, Spotify, etc.  We love our Spotify so that’s not going anywhere.  But then – we enter the last category – which is “I can’t believe I am paying for this”.  This can really range the gamut, from an old gym membership to an old newspaper subscription.  We kill those silent killers.  Today, we know what we pay for each month – and that helps us only pay for what we need and love.  More importantly, that helps us save and build wealth.  Recurring costs are savings and wealth killers in the form of death by a thousand cuts.  Kill them before they kill you. 

3.  If We Have to Finance It, We Can’t Afford It: It’s truly gotten out of hand – they (aka the Big Bad Lenders) are making everything “affordable”. Finance your bed, e-bike, Christmas gifts, phone, toothbrush, surfboard, shoes, clothes, furniture, vacations, etc. for just $X per month.  They whisper, “Don’t worry – you can afford it.  Just pay us later – over the next two years.  Buy it.  It will feel good.”  This is what really happens – we use the thing in two months and pay for it for two years.   To pay for something you have already used is psychologically a demoralizing torture and financially (see #3) a wealth killing recurring cost.  So we keep it simple, if we can’t afford the sticker price today – we can’t afford it today.  We save up and buy it outright.  Who knows – we might not even want it by the time we save up.  Or maybe there’s something shinier or newer that we want.  Either way, when buying things outright (not with debt) we are able to feel the true inertia of the purchase and more importantly maintain some semblance of financial hope for the future.  There are two areas we generally make exceptions for in favor of financing (i.e. taking out debt): 1) A house / mortgage for a primary residence and 2) Education.  More to come on why we “appreciate” these life purchases more than others. 

4.  Use a Budgeting App: We’re kind of old school and like to make a budget in Microsoft Excel. Snowball’s chance in hell that’s going to catch on with the masses.  So alas, this is the 21st century and there are way better budgeting options.  Our personal favorite is the app, Mint.  Mint is not only great for setting a budget and tracking our spending but it even categorizes our purchases so we can see what areas we spent too much in each month.  Another close second is the app You Need a Budget (YNAB).  Check ‘em out and see which one you like better.  We’re not perfect in keeping to our budget – but we have one and we know when we blew through it.  And once in a while – we even save a bit. 😊

5.  Do Your Diligence: What Does That Mean? SUGGESTION: STOP BLINDLY TAKING PERSONAL FINANCE AND INVESTING ADVICE FROM YOUR BARER/HAIR DRESSOR, CO-WORKER, WAITER, PERSONAL TRAINER, AUNT, ETC. If they were financial geniuses – they wouldn’t be working.  It’s way safer to assume they are wrong than right.  It is absolutely astounding to us how many people, with no finance background or MONEY, give and take personal finance and investment advice from each other in rehab/recovery centers.  DUMBFOUNDING!  For personal finance and investment advice, we refer to: 1) financial advisors / professionals and 2) reputable financial informational sources / websites.  As financial students and skeptics, we love referring to Investopedia for the many terms and things we don’t know about personal finance and investing.  They have fantastic posts and videos that explain, in layman’s terms, what just about every personal finance and investment term, product or strategy means.  Investopedia gives amazing explanations to all of our financial questions (that we may be embarrassed to ask out loud) from: “What is a debit card?”, “What is a credit card?”, “What is a credit score?”, “What is a stock?”, “What is an investment?”, “What is speculation?”, “What is the stock market?”, “What is a cryptocurrency?”, “What is real estate?”, “What is a mortgage?”, “What is an interest rate?”, etc.  No matter what we hear people confidently spewing about as the greatest financial advice since sliced bread, we do our own diligence (with Investopedia) and ask the people we trust with credible, legitimate financial backgrounds.  If we don’t know a word, we look it up.  If we don’t understand something, we don’t act until we actually understand it.  This allows us to make educated personal finance and investing decisions with faith rather than in fear. 

6.  Bank Accounts, Debit Cards and Credit Cards: We look to Nerdwallet when considering which bank to open a bank account with (which will also be your debit card provider) and especially when choosing a credit card. They do a wonderful job of comparing the pros and cons of different banks and credit cards to help us find the right ones for us.  Personally, we started out with Discover credit cards to build credit.  Today, we bank with Chase and use American Express for our credit cards.  That’s what works for us.  But that’s probably not what works for you.  If you already love your bank and credit card – great!  If you are considering who to bank with or a new credit card, we suggest finding what works best for you on Nerdwallet.  Lastly, we would remiss not to make this warning – pay your credit card IN FULL every month.  It is not free money.  It is the most expensive money you can borrow if you don’t pay it back, in full, every month.  We have been in credit card debt – big time.  The things we owned ended up owning us.  We were debt slaves.  It left us financially paralyzed and hopeless until we were able to slowly claw back to financial freedom in sobriety.  Save with a bank you like, build credit with a card that is right for you, steer clear of debtor’s prison. 

7.  Credit Scores and Improvement: What is a credit score? Per Investopedia:

A credit score is a number between 300–850 that depicts a consumer's creditworthiness. The higher the score, the better a borrower looks to potential lenders… Lenders use credit scores to evaluate the probability that an individual will repay loans in a timely manner… There are three major credit reporting agencies in the United States (Experian, Equifax, and Transunion), which report, update, and store consumers' credit histories. While there can be differences in the information collected by the three credit bureaus, there are five main factors evaluated when calculating a credit score: 

  • Payment history
  • Total amount owed
  • Length of credit history
  • Types of credit
  • New credit

How do we check our credit score, credit report and improve our credit score?  We use Experian which is one of the three major credit reporting agencies.  We’ve heard good things about Credit Karma too. With Experian, we can easily see our credit score, what shows up on our credit history (i.e. cards, debt, collections, etc.), and tips on how to improve our credit.  They even have a “Boost” feature that can boost your credit just by making regular credit card payments.  In the last year, we have improved our credit score ~75 points from the 600s to the 700s.  We’re sober now – why not build and have good credit?  

8.  Appreciate Assets [Things] That Appreciate; De-Appreciate Assets [Things] That Depreciate: In sobriety, we have changed our financial lens to appreciating (i.e. spending more money on) things that appreciate or go up in value over time and de-appreciating (i.e. spending less money on) things that depreciate or go down in value over time. We also consider healthy lifestyle choices as an asset that appreciates because these decisions improve quality of life over time (and the reverse holds true for unhealthy lifestyle choices).  Here is our major buckets of “appreciating assets” versus “depreciating assets”:

Appreciating Assets (things that we spend more on because we expect them to go up in value)

  • Savings
  • Investments (not speculative gambles)
  • Home (owning a primary residence)
  • Education
  • Healthy Relationships
  • Healthy Food
  • Fitness
  • Memorable Experiences

Depreciating Assets (things that we spend less on because we expect them to go down in value)

  • Clothes / Shoes (Retail Items)
  • Cars / Bikes
  • Rent (unfortunately a necessary evil until home ownership is possible)
  • Furniture
  • Boats
  • Toxic Relationships
  • Unhealthy food
  • Unused gym / activity memberships

9.  Investing Versus Speculating: We ask ourselves before we put money into anything – are we investing or are we speculating? The fool is not the one who invests or speculates – the fool is the one who does not know the difference.  Investing and speculating are NOT the same but are way to commonly both called investing.  The most common “investment” advice we hear in the sober community is in some no-name crypto currency that’s a “sure bet”.  There’s a lot wrong with that advice but let’s just stick with the most wrong part – that is speculating (or gambling), not investing.  Let’s make sure we are calling a spade a spade before we deem ourselves “investors”.  We’re not saying one is wrong and one is right.  We make more tradition investments with the majority of our money and have some fun speculating on ideas that might go to the moon (but more likely to zero).  But the key is – we know when we are investing and we know when we are speculating.  Per a post on Investopedia:

Whenever a person spends money with the expectation that the endeavor will return a profit, they are investing. In this scenario, the undertaking bases the decision on a reasonable judgment made after a thorough investigation of the soundness that the endeavor has a good probability of success.

But what if the same person spends money on an undertaking that shows a high probability of failure? In this case, they are speculating. The success or failure depends primarily on chance, or on uncontrollable (external) forces or events.

The primary difference between investing and speculating is the amount of risk undertaken. High-risk speculation is typically akin to gambling, whereas lower-risk investing uses a basis of fundamentals and analysis.

10.  Our Order of Operations (Save --> Kill the Bad Debt --> Invest --> Homeownership): Below is our personal philosophy on the order of where our money goes to build personal wealth. First, have a minimum amount of savings.  Second, pay off old debt.  Third, invest.  Fourth, buy a house.  We didn’t pay down our debt before having some level of savings.  And we didn’t invest before paying down our debt and having some level of savings.  We’re still not at the homeownership point but we’re working on it. 

  1. Start with Savings: Whether you call it emergency savings or a rainy day fund, having some level of savings is mission critical to maintaining any kind of sanity, serenity, or peace of mind. For us, as least $5,000 must be set aside in savings at any given time.  That way our world does not seem to be ending if we need to go to the doctor or our car breaks down.  But it may be $3,000 or $10,000 that gives you peace of mind – find what minimum savings level makes you feel safe.  It’s also okay you aren’t there yet – we weren’t when we first got sober.  But we did our best to save where we could (see #3 for budgeting) until we got there.  And when we dip into our savings we make sure to replenish it to the minimum level we are comfortable with (for us $5,000). 
  2. Kill the Bad Debt: For the love of God, don’t take out a personal loan just because you can (literally the worst financial decision ever and a sure-fire way of not building any kind of wealth). Welp, we had both credit card debt and old personal loan debt when we got sober.  We were the worst.  Blast you pre-sober self!  But once we had some level of emergency savings/rainy day funds, we chipped away at our pre-sobriety bad debt until we were debt free.  Because we had multiple loans outstanding, we consolidated them in to one lower interest loan.  Per Nerdwallet, “Debt consolidation loans help borrowers combine multiple high-interest debts into a single payment.”  That’s what worked for us to focus on one evil debt lump to kill off. Whether you consolidate or not, to us it made sense to have emergency savings and to kill the old, pre-sobriety, bad debt we raked up before becoming investors (even if the idea of investing seemed shinier and more exciting). 
  3. Invest (Don’t Speculate): We’re going to be careful not to give investment advice here. However, we will share our favorite wealth management apps, how we invest, what investment platforms we use and the books we learned from. Also, when in doubt on any terminology, we refer to Investopedia
    • Favorite Wealth Management Apps: Our personal favorite is Personal Capital (with Betterment as a close second). Personal Capital is fantastic for setting wealth goals and tracking our investment accounts in one holistic picture.  Feel free to pick the one you are most comfortable with. 
    • How We Invest: We are not stock pickers and do not invest in individual stocks. We invest in diversified ETFs and/or Mutual Funds that meet the asset allocation we are looking to achieve.  Additionally, we dollar cost average into these funds each month with a prespecified amount of money (for us ~$2,000).  Put another way, we put a predetermined amount of money into our investments no matter whether the market is up or down.  It is nice when the market is up but it is also nice when the market is “on sale” or down.  Either way, we don’t pretend to have a crystal ball and know what the market is going to do.  Rather, we have faith over a long enough period of time the overall market / economy will prosper and our investment will grow with it.  We like to use the Rule of 72 for some back of the envelope math on what type of return we would need to achieve to double our initial investment.  Per Investopedia, "the [S&P 500index has returned a historic annualized average return of around 10.5% since its 1957 inception through 2021". Using the Rule of 72 and assuming a ~10% annual return expectation for the S&P 500 over the long run, we hope to roughly double our investment in the S&P 500 every seven years. Again, we only invest money after our monthly costs are paid, emergency savings are met and we have no bad debt. 
    • Investment Platforms We Use: We use Vanguard and Robinhood for our actual investment accounts. We love John Bogle and we love low expense ratios on our funds.  There are plenty of other great options out there – these are simply the ones we use.  If you love Fidelity or Chucky Schwab – rock it.  If this is getting at all confusing, let’s do a quick review.  We have bank accounts at banks like Chase with checking and savings accounts (and debit cards).  We have investment accounts with investment firms like Vanguard and Robinhood.  Lastly, we track our overall wealth management picture and goals in apps like Personal Capital (which integrate our Vanguard and Robinhood investment account information in one place). 
    • Favorite Investment Books: When it comes to financial literature, we’re fans of the oldies. First up, why not defer to the dude, Benjamin Graham, who taught Warren Buffet how to invest?  Check out “The Intelligent Investor” – it’s not the most riveting book, but we’re with Warren Buffet when he says it’s “the best book about investing ever written”.  Next up, we like Burton G. Malkiel’s “A Random Walk Down Wall Street: The Time-tested Strategy for Successful Investing”.  We think it cuts through all the bullspit and is much aligned with our personal passive, low-cost, indexing approach with Vanguard ETFs and Mutual Funds.  Speaking of Vanguard funds, the last book we’ll recommend, written by Vanguard’s legendary founder John Bogle, is simply titled, “The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns”.  If only common sense was a bit more common. 😊
  4. Home is Where the Wealth Is (The Good Debt): Once we are able to, we will stop paying rent and buy a house in North County via a mortgage. Why?  Because owning a home is like living in a massive piggy bank that grows in value as you pay for it.  Rent is preverbally earned money that is torn in half or set on fire each month.  A home mortgage payment is a form of savings and investing – and a place to live and love.  It’s so virtuous!  Why do we consider a mortgage “good debt” versus other “bad debt”?  First, a home purchase isn’t realistic for us without a mortgage (i.e. we don’t have a million bucks to pay for a house outright).  Second, there are many wonderful tax benefits / deductions that can be gleaned from mortgages on first time, primary residence home purchases.  But enough of what we think – here’s some eye popping empirical data published by people smarter than us on the incredible wealth creation that occurs from home ownership.  Every three years, the Federal Reserve conducts their Survey of Consumer Finances in which they collect data across all economic and social groups. Their latest survey data, covering 2013-2016 was recently released. The study revealed that the median net worth of a homeowner was $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013). These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter. ‘Nuff said.