Financial Report Card: Robert A.

This post is one in a series from real actual life. Along the financial journey, we do some things well and others not so well. We learn as we go, and benefit from sharing our stories.

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Robert A. , 32 (he/him)

Principal program manager, Chicago

Looking back at your 20s, how would you grade yourself in the five key areas of personal finance?

Creating income: B

I did good to line myself up with a full-time job in a steady field in 2009. Tech has continued to grow, especially in the local market. I had the right background to be able to apply for promotions, and I put in the work to get raises and continue to move up. Overall, it was pretty easy to generate income from my job.

I was also part of a smaller company that got bought by a bigger company, then was later laid off. That was actually a good thing, because I could take advantage of retention bonuses and severance packages that you get with a bigger company. I put those into investments and had a leg up on my peers.

Spending less than you made: A

I did a lot of saving through most of my 20s, especially in the first half. After 3 or 4 years of intense saving, my wife and I were able to buy a house in the western suburbs. That was just before we got married, when I was 26.

It was a joint purchase that we considered as an investment, something we could grow into. We looked around and waited to find a home that was near good schools and had proximity to public transportation. We wanted more than a starter home, and we’re still here.  

One thing that became apparent after buying the house was the need for a rainy day fund. That wasn’t something I had had to deal with in the past. There were a few things that broke during the same year, and it was a few thousand dollars to get everything fixed. We had those savings, but it was a wake-up call to be more proactive. So now we have a separate savings account for the house. We can use that money for fun projects when we don’t need it.

Saving for the house set me up for how I budget and look at things today. Because of that, I’m in a much more comfortable position, not overspending or being in debt. I had that mindset from beginning.

Part of that was my parents. I had an upper-middle-class upbringing, and I would give my parents pretty high marks for this category too. A lot of what I’ve done, as I look back I can draw a straight line back to the way I’d been taught.

Paying down debt: A

I was fortunate and never had the pain of debt on my head. I went to college without student loans, because I had a scholarship that covered 90% of my tuition. I lived at home and didn’t have to pay room and board. I worked part time to cover miscellaneous expenses and was able to start saving. That allowed me to get ahead.

From there, it was easy to see the path to buying my own house without a problem. I never had a big debt until then, and I’ve never had trouble making the mortgage payment. After about a month, I did the math and realized I could pay $100 more per month and take roughly 6 years off the mortgage. So we were already 2½ years ahead at the start of this year, and then we decided to refinance since rates were so low. Now we have a lower rate and a 15-year mortgage, still putting in that $100 extra every month. There’s a big snowball effect in paying that off early.

Investing in your future: B+

My job allowed me to dabble in investments, but I was pretty conservative there. I started the job in 2009, coming off the big crash. Looking back, I probably could have made more by being more aggressive. I had just seen things take a huge downturn and didn’t have enough experience to see that things would probably turn around from that low point. There was definitely room for things to grow, as we’ve seen since then.

Now I do the basics, max out my 401(k), keep my savings. I wanted something more liquid than full investments so I put money in CDs (certificates of deposit).

One thing I haven’t done but need to start doing is working with a financial planner on investment opportunities, saving, reducing my taxes, that kind of stuff. Beyond the basics of 401(k). That’s kind of the only egg I have in the retirement basket right now. I need help diversifying from that perspective and making use of the right accounts to help reduce my tax burden.

Knowing your money: A

I’m very type A when it comes to knowing what I’ve got at all times. I have a checking account, a personal savings account, a savings account for the house, and then my investments. I’ve adjusted the automatic deposits into each of those. I log in and look at those accounts once or twice a week at least. So I definitely know what’s going on.

Every Saturday morning I have a reminder pop up on my phone. I log in to my credit card account and take a look at everything to understand the charges. Generally I use digital receipts, like at Home Depot. That’s partly for the sake of having the record, but it’s also easier to have a digital paper trail for returns. I generally don’t save paper receipts for anything less than $1,000.

I find I’ve had to pay more attention to my accounts in my 30s than in my 20s. Now there are a lot more subscriptions that automatically hit my credit card, and they’re easy to forget or miss. Let it go for a few weeks and then it’s a surprise when the statement comes.

Typically I don’t use automatic payments unless there’s some advantage. I get $10 off cable and Internet, and a better rate on my phone bill for doing autopay. For everything else, I’d rather make the decision to take money out of my account and send it to someone.

My wife and I have also figured out how to go into conservation mode, out of necessity. She has a government job and has been furloughed a few times. When there’s a shutdown, the federal government has to get a bill passed to provide back pay. We’re always a little worried until that happens, but the saving habits from early on have helped us to get through those times.