I’ve got a confession. There’s only about two weeks of living expenses left in my bank account before I go broke. It’s very unsettling that I may have to ask for a loan to make ends meet in case something bad happens. Dad, are you reading this?
In need of some therapy, I discussed my tenuous financial situation with a tennis buddy on the public court one afternoon. He told me to hang in there and revealed a rough patch where he once racked up $50,000 in credit card debt. He felt like he was drowning because he could only afford slightly over the minimum payment each month.
When I asked him what made him go into so much credit card debt, he confessed he has a gambling addiction. Like me, he loves playing Texas no limit hold’em. But unlike me, he decided to venture into the bigger $10/$20 no-limit games where the average player held roughly $5,000 in chips. He got bad-beat one too many times and resorted to withdrawing cash from his credit card at a 24.99% interest rate to feed his poker addiction.
I don’t know how much my tennis buddy makes, but I can’t imagine he makes much more than $65,000 a year working at the San Francisco International Airport. It took about two and a half years for him to get rid of his credit card debt after a family intervention made him stop.
What Happened To All My Money?
So what happened between the time I published my Investment Tracker Spreadsheet in January and now? Like most addicts, I couldn’t control my urge to invest the remainder of my cash balance in a variety of stocks, bonds, and real estate deals. I went from having a cushy ~$150,000 cash in the bank to less than $3,000 in a matter of weeks!
Here’s a weekly spending and investing e-mail update I get from Personal Capital which shows me blowing over $100,000 on investments in December. I ratcheted down spending in the first half of January until I went crazy again with my investments at the end of January and early February.
In the post, The Case For Bonds, I mentioned I wanted to build a $250,000 California municipal bond position over the next 12 months. My goal was to start buying CMF aggressively once the 10-year bond yield hit 2.5%. Well, my target was hit in the second half of December and ran all the way up to 2.6%, so I decided to press without any regard for my liquidity!
Here’s a snapshot from my Citibank wealth management account. Before Trump’s victory, I had $0 in California municipal bonds. Now I’ve got a ~$276,809 position.
I knew from past experience that having much less than six months worth of living expenses starts feeling uncomfortable. I begin to worry about my future. I lose some patience. And, I start hoping that no major investment opportunities occur before I replenish my nut. The whole idea of having enough money to not worry about money goes completely out the window once I get into these addictive phases.
But what’s more, in addition to my new $276,809 CMF new position, I also invested $25,000 in the S&P 500 and $25,000 in an Austin, Texas multi-family real estate crowdfunding deal since the beginning of the year. The market kept showing signs of strength so I wanted to keep participating.
I basically deprived myself of all spending beyond my mortgage in order to invest e.g. “you spent $42 this week” per the e-mail above.
Gambling And Investing Parallels
You may think playing at the poker tables is completely different from investing in the stock market. But you’re wrong. The poker player sits down with the mindset that he has the potential to make a return on his capital. By making high expected value bets, the poker player should win in the long run. This is exactly how I think before deploying any new capital. However, even if you are an 82% favorite to win with pocket Aces against pocket Kings pre-flop, you still have an 18% chance of losing.
A good poker player will realize he can sometimes run bad. He’s disciplined enough to protect his bankroll to fight another day. A bad poker player who cannot control his addiction to gambling will overly commit his bankroll until he runs out of money exactly like I have done. An addicted gambler will resort to borrowing money to keep on playing!
And guess what? Borrow money is what I did. I asked my wife to lend me $10,000 to invest in a particularly attractive real estate crowdfunding investment in Austin, Texas. I barely had the minimum ($15,000), but I borrowed $10,000 from her so I could invest $25,000 instead. If I had more money, I would have probably invested up to $100,000 in this particular deal because I’m all about pressing into the heartland!
The Austin property I bought a piece of in January
As an money/investing addict, I see an ENDLESS amount of good investment opportunities. Further, once I believe in a winning idea, I sometimes press to the detriment of proper risk management controls. After all, I did borrow $1,220,000 at the age of 28 after putting down $300,000 for a SF property I purchased at the end of 2004. In retrospect, that sounds nuts!
Knowing my tendency to go “all-in” is the reason why I’ve at least limited most of my public equity and bond investments to large index funds. In the past, I may have bought $200,000 in one stock. Now, I’ll buy $200,000 in an index like the S&P 500, with the understanding I may lose 12% to make 12%, instead of potentially losing 35% to make 35%.
I’ve also become more open to investing in actively managed public or private funds, which do the investing for me. Private funds help with diversification and force me to set aside capital due to my commitment.
Confining myself to index funds is one step in mitigating risk, much like confining myself to playing at the $1/$2 no-limit tables where the average player only has $100 – $200 in chips. But that still leaves my occasional inability to manage liquidity risk.
The Importance Of Liquidity
I’ve got to be much more responsible now that I plan to start a family. Instead of only thinking about myself, I’ve got to think about my wife, a helpless baby, my parents and my in-laws.
In the past, if I went broke, I knew I could subsist off of water and ramen noodles while working a minimum wage job for months until a better opportunity came along. With so many people potentially depending on me, it’s totally irresponsible to be left with so little cash.
We all know the importance of having enough emergency cash to pay for unexpected medical, auto, and housing expenses. I am pleased that ~98% of you can handle a $400 emergency cash expense without having to go into credit card debt or borrow from anyone.
But the other reason for having emergency cash is to take advantage of massive irrational sell-offs! There’s my investing addict talking again.
The Positives Of Being Cash Poor
Despite investing irresponsibly, there are some positives for being cash poor that might help boost your net worth over time. As such, you may consider forcing yourself into cash poor situations from time to time.
1) Money becomes much more rewarding. Thanks to my municipal bond purchases, I noticed a nice $1,000 in tax-free income hit my money market account at the end of January because I only had a balance of $3,000. A $1,000 injection is a whopping 33% increase in the balance of my account.
When I had over $100,000 sitting in my savings account, I wouldn’t even notice a $1,000 dividend. What’s the difference between $167,000 and $168,000? When you aren’t excited about money, you start taking money for granted. Now, every dollar that comes in feels rewarding.
2) Sensitive about who owes me money. After going cash broke, I realized a corporate client still owes me $6,000 from three months ago. I had assumed they were just going to automatically pay me within a month. After all, they have all my deposit information on file from a previous deal. Now I’m going to follow up like a bounty hunter to collect what’s rightfully mine!
Here’s a list of all the past due money that’s owed to me:
Corporate C: $6,000
Corporate S: $5,000
Corporate Q: $700
Affiliate F: $450
Affiliate P: $306
Affiliate R: $148
Affiliate W: $72
Personal Consulting Client: $600
Total: $13,276, or more than 4X what I have in my savings account.
3) Motivation to earn increases. Having no money reminds me of the days when I had to flip burgers for six hours straight for just $4/hour. My feet were constantly aching and I felt bad sweating bullets on the disgusting burger paddies. But hey, how else was I supposed to make any money to take a girl to the movies?
Thanks to being almost broke, I recently locked myself up in my place in Lake Tahoe for 10 days and wrote 50 articles. 50 is a ridiculous number for me since I only post about 12-14 articles a month. During my solitary confinement, I also had a money making epiphany that may very well bring in an additional six figures this year. We shall see!
4) More appreciation for what you already have. Like many Americans, I have too much stuff. I’ve been actively giving away things to the Salvation Army and Goodwill for five years in a row and I still have too much! It’s like having a bottomless stomach at an all-you-can-eat buffet table.
As a cash broke guy, I began to appreciate the clothes I haven’t worn by wearing them again. Instead of spending money going out to eat a $60 dry-aged rib-eye, I decided to cook myself some vegetable soup to not only save money, but to eat more healthy. Instead of paying $20 to go watch Rogue One in the movie theatre, I opened up an old picture album and began reminiscing about the good ‘old days.
What I couldn’t believe in the album was that I have pictures of myself and the co-creator of the hit HBO show, Westworld, hanging out in Beijing in 1997! Such a small world. She’s now married to a famous producer/writer and they’re probably one of the most in-demand creators today. Maybe she’ll be willing to do an interview here. That’s an example of how new post ideas keep on popping up on Financial Samurai.
The Return To Riches
What drives my money addiction? I think it all started when I was 12 years old living in Kuala Lumpur, Malaysia. The dichotomy in lifestyles between my rich friends and my poor friends was astonishing. It seemed completely unfair that one friend lived in a mansion with three housekeepers and a chauffeur, while another friend lived in a 300 sqft studio with his parents and sister.
I also remember giving one ringgit to a beggar at a Buddhist temple in Penang. As soon as I did, I was swarmed by 15 other women and children who almost dragged me to the ground in order to have whatever was left in my wallet. At age 12, my money addiction gripped my mind because I feared poverty. As an adult, I fear that without enough money, I’ll somehow become a deadbeat father.
I forgot what it was like to live paycheck-to-paycheck, and I’m sorry to all of you who have to go through this experience more frequently. I’m always focused on sending the message of abundance, but sometimes bad things like gambling, accidents, medical emergencies, theft, and robbery have a way of beating us down through no fault of our own.
With a lot of introspection, I hope to gradually ween myself off of this never ending desire for more. In the meantime, I’d like to ask for your understanding when I sometimes go off the rails and seem clueless about the plight of others.
Steps I’ve Taken To Beat Money Addiction:
1) Admit my problem to myself and to others.
2) Write things out in a series of posts such as this one.
3) Left my well-paying job to make 80% less for two years.
4) Focus on work that I enjoy, not work that pays me the most.
5) Try to understand the root cause of the addiction.
Related: Overcoming The “One More Year Syndrome” To Do Something New
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Readers: This comment is not related to the post so skip it if you want to read something relevant. Being that it is Valentine’s Day I thought it was the perfect time to share how fond I am of the Financial Samurai.
Dear Financial Samurai,
You had me at “FIRE.” Who knew I would fall for you so hard and so fast?! My life has changed dramatically ever since I met you online a year ago. Though, I feel like I’ve known you since the beginning because, after all, I’m close to reading all your posts and comments…input from others was really informative. I found myself going to the gym more often and staying there longer just so I could indulge in your posts while working out on the stationary bike. Your work is insightful, thought provoking, entertaining, humorous, inspiring, and so helpful!
I took lots of your advice and have made great progress to my net worth (according to Personal Capital, thank you very much!), became a 3.0 tennis player within a year, and picked back up on the mortgage payments (for a rental that’s 63% under water), that I had welched on for over a year, because deep down I want to be financially honorable. At the time I had stopped making mortgage payments, it was costing me 13% of my net income to keep the place. Buying the place was my most regretful financial move. Actually, letting the place go and seeing my 780 credit score take a nose dive was a worse move. Instead of getting bogged down by the situation I should have gotten defiant about it. You taught me to take my failures and regrets and work towards eliminating the regret because anything is possible with effort. I have always felt bad about asking for more rent but did increase it to a fair rental rate during the last renewal period, I launched a website for my side business, saved $4,000 in annual interest from paying down CC debt, and modified the loan terms on the mortgage which has eliminated the 13% “income loss”. On top of those financial improvements, I was also promoted 6 months ago with a 10% pay raise…which reminds me of your post on how being positive brings about opportunities.
It was an awful feeling to lose hope that my financial situation would ever change because my previous efforts didn’t seem to provide much reward. Because of your advice I was able to see progress and that’s when the hope and visions of a wonderful future came back. Thanks to you not only am I in better shape financially but I now have killer legs, too! I’m looking forward to continuing this love affair so please don’t stop blogging anytime soon…and please, no more April fools jokes like the one you pulled last year ;). Plus, don’t you still have a secret to reveal next February?
Happy Valentine’s Day!
Keigu,
Ms. Conviviality
Dear Ms Conviviality,
Wow! My first Valentine’s Day note in maybe, forever! Are you sure you’re just not saying this to all the other PF bloggers out there? If so, I understand given a unique part of the population does believe bloggers are some of the sexiest people on Earth.
I’m really glad you’ve reclaimed hope and are making tremendous financial progress. Making financial mistakes happens to all of us. Owning up to our mistakes and taking steps to improve our situation takes a lot of courage.
Congratulations on your promotion and raise as well! Getting recognized for work well done is so sweet. But perhaps most of all, congratulations on your killer legs. When you have killer legs, life gets much easier!
Keigu,
Sam
Took me a moment to figure out why my killer legs would make my life easier. I can’t argue with that comment because while I was hustling last year I gave modeling a try and got cast for two jobs. The pay wasn’t bad, about $200 for a 6 hour job. However, it was the industry norm to wait up to 90 days to receive the payment!
Aha! I think I know what your secret is, Sam! You were going to reveal that you reached FI in 2018 except you did it at warp speed and beat the goal date by 6 years. Am I right?
I’ve always believed that investing in uncertainties (like stocks, etc.) is gambling. And I can’t bear losing money that I’ve earned from toiling in absolute agony.
My parents lived paycheque to paycheque for all of their lives and it was terrible growing up. But like the lemming I was raised to be, I thought once I get a good job that pays enough (and work as hard as an ant), all of those days will be over. But when I finally realised how uncertain the job market is, how infuriatingly political the workplace is, I started making financial plans (too little, too late if you ask me).
I now live on dry bread and water because I’m saving as much as I can. But at this point in time, that light at the end of the tunnel is so faint, I can hardly see it. I hope I get through this.
At least you have money coming in at the end of the month from your new job!
“But when I finally realised how uncertain the job market is, how infuriatingly political the workplace is, I started making financial plans (too little, too late if you ask me).”
This point you make is KEY. I could not believe how difficult it was to navigate the workplace land mines without blowing myself up early on. I had one close call of losing my NYC job in 2001 before I proactively took another job in SF before they could fire me.
Then I dodged some bombs with the dotcom explosion, then some more bombs with the 4-7 rounds of layoffs a year in 2008-2010… I just felt my lives were close to over. Might as well save like hell all those years to prepare for life after work.
If you can survive off just water and bread for a while, then you’ll build that endurance. Everything else will be upside!
My paycheck to paycheck period was after grad school. The bottom of my market fell while I was in the program. I made it in my home for 6 months before moving in to a family member’s basement. The rent was significantly lower. This period taught me that my ideal job could not be so public interest focused that I could not afford to live in my high COL area. Definitely changed how I viewed money and what a job should supply. A job that makes you feel good about your contribution to the world, but forces you to eat ramen in perpetuity is not a good job.
I’m so relieved to know that I’m not the only who suffers from this addiction to be “cash poor.” I often over-invest to the detriment of my current self. It does cause me to stretch to make ends meet sometimes, but I guess I’m a little addicted to investing. Thanks for helping me with the self awareness!
Hey Sam – you may be Cash poor but equity rich! So No worries.
How funny this post reminded me of when my GF and I use to go to Tahoe on 1 day trips coming back to the City with enough gas money and bridge toll. Haha the good ole days.
Now, it’s on to the Casino of Wall Street. The action is back – but atleast a more calculated risk.
I have the largest pile of cash of my entire life sitting in my savings account, but I need it to stay safely there for the down payment on our house! I probably sold funds, etc., too early given even more gains over the last month, but my tolerance for risk with this big upcoming purchase just became too small.
I still have a decent chunk in our retirement funds though and, as you’ve pointed out, few things beat that upcoming military retirement!
Now if I could just settle on what to do in my next chapter…
Hmmm. There’s some that say you haven’t truly been an enlisted man in the military until you have lived off of saved MRE military rations to make ends meet.
You can always tell. It’s usually the Private First Class carrying a box towards his barracks or car with a set look of determination.
Interestingly enough my post today was on using credit cards to get around cash flow issues. The cause of my rare cash flow issues? Aggressive automatic and manual savings amounts. Your not alone in your addiction I guess. We should create something like money anonymous.
Towards the end of your post you mention has this self-inflicted cash strapped situation keeps you more focused on earning a higher income. I think this is key. Save/invest enough so that it hurts and that you do not become complacent :-) . I think I learnt this from you…
We’re also self-imposed broke right now — borrowed $60,000 on our house (which had been paid off for years), so we could do some repairs and put it on the market. Bought a 30-foot trailer, which is currently sitting in our driveway, with some of the money. We still need to find the truck to pull it with.
But looking at that trailer, and knowing that we’ll be able to go wherever we want, is immensely freeing. It makes it much easier to sell and donate stuff I got for pennies, anyways.
My secret vice: the thrift shop. If I can find it at a real bargain there, I’m much more apt to buy that piece of furniture, painting, etc. Even if we don’t need it, or don’t have space for it. Shame on me.
Great article and points. I do this as well.. I keep wanting to put more and more money into investments.. and end up with very little cash to pay the bills..
You mention real estate crowdfunding: do you have a suggestion/site to look at, or do you have an article about this?
Curious to look into those for investment purposes as well!
Sure, you can take a look at two posts:
RealtyShares Review
Fundrise Review
These are the two real estate crowdfunding companies I find most promising.
As a Auditor with an MBA, I approach my personal finances from a business perspective. Part of any healthily Balance Sheet is cash. Cash is king. It is a company’s first offensive weapon for expansion and first defense in a contraction. A cash position is key. On a side note, rapidly expanding companies often find themselves in a cash constricted situations as they are continually buying assets in order to expand production to meet growing demand. Stock tip, this is why Tesla is showing a profit yet.
I’ve never quite lived paycheck to paycheck, except maybe during college, but I still had my parent’s support while working. Every time my parents would deposit money into my account to cover my expenses, it would feel heart-wrenching, because I knew they were living paycheck to paycheck to be able to send me to college.
Nowadays, I just want to have enough to support myself and my family. I don’t need much more in my life other than being to provide just enough.
This morning I had to change my credit card payment to be $1k lower because of my automatic investment triggers from Vanguard. Now when I get paid tomorrow, I need to go back and pay the leftover $1k on my bill to not incur interest. I definitely am in a liquidity crisis at the moment as far as cash goes. I did have around 10k sitting in my bank account for a long time and I didn’t invest it because I wanted to keep around a buffer in case anything happens. Well, nothing has happened except for lost opportunities. I put around 5k in CMF and I can expect that to not get hit harder than 5% over my lifetime. It’s as good as cash as far as I’m concerned (though it may take a bit longer to pull it out). I’ve been saving $3k a month for the last 6 months and pretty soon I’m going to move it up to $4k a month. It’s really gratifying to see that balance jump every month. I’m happy to see that I’m not the only one who doesn’t have enough cash/gold in case the bomb comes. I’m looking to diversify and increase my cash flow soon. My rent is too high ($2700 isn’t THAT bad I know) and it’s really affecting my ability to save. Something has to change. I’m convinced that the money I spent on startup options is as good as dead. I’ve started a blog and I’ve been posting on different mediums (Medium, LinkedIn, AskADataScientist). Though I think it will be a few years until I can get real traction. Happy investing.
I guess we have the opposite problem. Have a lot more cash right now sitting earning next to nothing but feeling scared to invest as all the markets seem very high. we are maxing our 401 k but other than that have not invested much in the last year.
By the way how has your experience with RealtyShares been so far?
My experience with RealtyShares has been good so far. I was at a diversified investment panel they hosted along w/ Lending Club, Circle Up, and a solar company in February and got to meet several VCs, investors, FS readers, the RS CEO, and more.
They surpassed the $300 million transaction milestone in January and will likely raise a new Series C round of funding by 2Q2017 if I were to guess. I’m bullish on the company and the genre, and it is one place where I think I’d like to consult/work. But, I already have a new job as a high school tennis coach :)
See: How Is RealtyShares Doing In 2017?
Glad you are happy with the investment and are bullish on the company.
This is one area we are looking at to invest. Will probably invest in the next few days.
Let’s be honest with ourselves Sam and just admit that you have more than enough “liquid assets” to live for the rest of your life probably. I do not mean this is an insult, just that you likely have investments you could tap if things got out of hand (which they likely won’t.)
The worst thing that could possibly happen is you would need to pay some short term capital gains. Is that really so bad?
Nope. All I got is two weeks of savings for now that counts as liquid assets. Drawing down investments is a sign of liquidity mismanagement. There was plenty of that happening during the 2008-2009 downturn.
My goal is survive until the next pay cycle and liquidity event. I’m bullish the money will keep coming in, but you NEVER known until the checks actually clear. Highlighting $13,000+ in accounts receivable is an example of this. That money should be in my bank account already, but it’s not for whatever reason.
Sam,
Like you, I often find I have many more ideas (investing ideas) than cash. If you gave me a large amount of cash, I’d have no problems investing it in about 10 ideas I have at the moment. I think it is important to make sure you are never a forced seller of your assets as this puts you in a weak negotiating position or you may have to sell when the market is very weak. I comfort myself by knowing that I always have a cashflow coming in from various sources and I know that in the future (just like the present) there will always be opportunities somewhere. They may not be the current opportunities though!
Since I left my job, I have been loving life. But part of me keeps wanting to go back to work. I do miss my friends at work, but money is more of the draw. We have enough, but I still find myself thinking about money a lot of the time. I keep pondering different ways to invest, or businesses to start. I don’t think I will every be able to completely stop worrying about money and thinking about how much cash I’m missing out on by not working.
One thing that has helped me, is thinking about where I want to be in 5 years. I could go back to work and pad our net worth by several hundreds of thousands of dollars. But after 5 years of chasing money, what would I do different from now? There will always be opportunities, and money falling from the skies. I’m trying to do a better job of considering what chasing that money is costing me, and what would be the goal behind piling up more than we need.
That’s a great way to think about money and your future.
I’ve struggled with this situation:
In a bull market, do I work to the MAX to try and make the most money possible while the times are good? OR do I kick back more because I don’t have to work as hard since my investments are returning higher amounts?
I haven’t been able to kick back as much due to this bull market. There’s always SOMETHING that draws me to do more. Hard to say no b/c I have seen multiple downturns and they are always depressing and ugly.
Sam
At current market prices, I am satisfied sitting back and enjoying the ride. I think it will be more tempting for me to get back to work if the market corrects and stocks are on sale. In that case I would be tempted to shore up our portfolio, and with fire sale prices I would get more for my effort. We’ll see, not working a corporate gig suits me well :)
There are worst additions to have :)
Things went a little nuts for our cash balances as well over the past 40 days:
1 – We wrote a check for $105,000 for equity in the company I work for.
2 – We wrote a check for $33,000 to put my brother in rehab program.
3 – We spent $13,000 to put wood tile throughout the entire first floor of our house.
4 – We sent another $5,000 to our Rich Uncles investment account (commercial REIT)
5 – We sent another $3,000 to our Peer Street investment account (hard money lending)
6 – We sent $4,000 to my 401K
7 – All of this in addition to our normal burn rate of about $10,000/month
I think I have been reading your content for too long. I didn’t know addiction was contagious, but it is so obvious now that it is.
Wow, $173K leaving our account in a little over a month.
But I took my addiction (that I now blame you for) a little two far. Not sure how to make the cash flow work, I was desperate and took a loan of $27,000 from my 401K.
Geez, maybe I should had checked myself into rehab with my brother???
Fun post!
Thanks for making the comment so fun as well.
Cheers,
Dom
Dom,
Investing ~$150,000 in 40 days based on your ~$550,000 net worth is even more extreme than my story over the past couple of months! I don’t want to joke about money addiction… so all I can say is that you might want to talk to someone to serve as your sounding board.
I do like that you helped your bro out though. Especially if he comes out of it a better person. Best money spent!
I hope you pay yourself back in your 401k!
After 8 years of writing, of course I have a viewpoint on borrowing from your 401k here: Only Petulant Fools Borrow From Their 401k!
Sam
You sound so serious on your response…having a hard time reading you on this one.
Either way, I do fully intend to repay the loan over the next couple of months. It’s not the first time I have tapped the 401K for a short term bridge loan.
I tend to view the 401K much differently that you do. To me it is just another bucket that I can pull from if/when necessary. The fact that I also had a bunch of idle cash sitting there made it a very easy decision.
The 4.5% on the $27,000 will cost me about $100/month in interest…that of course I will pay myself.
This is the 3rd time in 8 years that I have tapped my 401K for a short term loan. I have always paid it back within 3-6 months.
I think it is awesome to be your own bank!
Very interesting you’ve tapped your 401k three times so far. If you don’t think it is a systemic problem, then all is good.
The trick is to really not be a problem because many addicts don’t think they have an addiction! :)
It may be similar to the person who has dozens of credit cards and always trying to balance transfer. Could be a smart way to go, or it could be a sign of something else.
There is a small tax problem with 401k loans where money is taxed twice. When you pay yourself back with interest, you are using already taxed dollars to do this. When you withdraw this interest later on, it’s taxed again upon withdrawal.
Yep, I am well aware of this. But keep in mind that this is a short term loan (6-months max). So those tax implications are so small they are not worth considering in my opinion.
On the upside you get to pay yourself interest for the 401 k loan! The Oroboros rises again!
Or it’s a sneaky way to get a very reliable return on some of your 401 k.
Yikes, that’s very low liquidity. You have very good income so I’m sure you’ll build it back up in no time. I don’t think I can invest down our cash account that much, though. She doesn’t check that often, but if she go to the ATM and see our balance at $3,000, I’d be in huge trouble. She needs some cash to feel secure. If I was single, I’d be more willing to go with low liquidity. I can always put it on the credit card. :)
I feel sick if I go under $100K in cash, I couldnt imagine two weeks of spending money.
I feel like $50k is my absolute minimum buffer
I’ve never lived paycheck to paycheck, however I do find myself appreciating the value of money (with material possessions and such). It is always nice to have a reminder here and there though. Sounds like you have definitely had that experience which I like how you point out as a positive. Add in your world travel and first hand experience with rich and poor, I’d say you should give yourself more credit.
Does Austin really qualify as “the heartland?” I guess it is in Texas, but judging from real estate prices alone (on HGTV house hunters) it seems to me to be more of the coastal tech world than the rest of Texas and Trump’s America.
I have the same problem. Cash burns a whole in my pocket and I itch to invest until the level of liquidity discomfort.
Mos def. Austin looks like it has Silicon Valley explosive potential with its current ecosystem, diversity, no state taxes, and network effect.
I guess we shall see in 10-20 years!
Speaking of liquidity discomfort… I have less than $100 cash at the moment. All my spare money gets invested. But I get paid later this week, and soon enough I’ll be cash poor again. Is it wrong to think about early retirement when you are 20?!
We are in a self-imposed broke situation- at the end of last tax year we maxed out our retirement accounts and drew down our excessive emergency fund. So far this year we have been living paycheck to paycheck. We haven’t reduced our savings or debt paydown though, so there is a light at the end of the tunnel, but it is eye-opening to say the least. We are blessed to have the ability to save more than we spend.
On another note, I may have a reading/writing personal finance blog addiction.
Sam, you won’t need to worry about money if you now move back to KL, you will be living in a mansion with 5 house keepers. i am planning to retire in Sabah.
Yeah, you are right. The 4:1 exchange rate is so amazing! Felt so rich when I was back there.
Alas, I don’t think I’ll ever be moving back to KL. Too far away from friends and family. And, I think I’ve acclimated to 60-65, non-humbid weather.
But the FOOD! Oh how I miss Malaysia food. Best in the world!
I lived paycheck to paycheck throughout my college days, since I had to work 30-40hrs/week to attend. I hated that feeling, and it definitely drove me to solve my financial issues early on in life.
I’m not sure if it’s money addiction or fear/guilt, but I have a real issue walking away from money making opportunities. This includes my job, which if I keep investing more time in, would continue propelling me to higher positions, including potentially a C-level suite role. I think the solution is coming up with a hard number that represents “enough”, and then having the discipline to get up from the table with no regrets.
I’m in a similar boat. I put myself through college working part time living in a rented room in a run down mobile home park. While the paycheck to paycheck part was stressful, looking back I was probably happier in general than I am making six figures with a $400k house and three cars. Now that I’ve found my “enough” number (which was surprisingly less than I expected) I’m ready to quit my job and devote my time instead to helping make the world a better place.
I actually get more apprehensive if I have a lot of cash sitting around doing nothing. But then again I have a steady job as does my wife which brings in steady income well above our expenses. I seek to maximize my dollars by investing most of my savings. But I stick to mostly index funds and mutual funds rather than picking individual stocks and putting my eggs in one basket. Much like your analogy of playing the small tables vs the bigger buy ins where more is at stake during one game.
My tune will likely change once I retire. But for now I’d rather take on a little more risk for more return. I can always tap my after tax investment accounts if worst comes to worst.
I’m curious about how you define “a lot of cash” sitting around? Do you keep a standard emergency fund and consider anything else to be cash sitting around? Or do you take the approach of investing it all due to your steady incomes? I find myself in a similar situation based on your description, so your comment grabbed my attention.
I keep a few thousand dollars sitting around in cash. My wife and I both have steady well paying jobs. Any moderate unexpected expense that pops up like a new a/c unit or something like that we can easily pay for. I also have a line of credit at 3.5% that I can tap if need be, as well as my taxable investment portfolio. Then there’s also equity in our house if worst comes to worst. In all, we have about $200k that we can access relatively easy and penalty free if we need to, and a very small portion of that is cash.
Other than the usual college subsistence experience, it was being run over on my motorcycle that turned me into a money addict. But not in the addicted to investing way, but in the playing it safe way – large emergency fund, dividend stocks, etc. But I suppose I do have the risk taker in me since I also invest in p2p lending.
Considering I was just laid off last month, I’m glad I’ve played it safe all these years, for myself, my stay at home wife, and my infant sons. It’s a whole new world when you’re the sole breadwinner with a whole family depending on you. Can’t imagine living paycheck to paycheck like that.
Sorry about the layoff. What are your plans? I guess the good thing about being unemployed for 5 years is that there’s no worry about ever being laid off!
I already feel the stress of being the sole breadwinner, but for two generations now. It’s probably largely self-imposed stress at the moment, but it is still stress all the same. Responsibility!
I hear you. I’m fortunate that both my parents were state employees (college professors) and have state employee pensions, at least for now, so there less worry there.
As far as my future, definitely ramped up the job search. Going self employed at this time would just be too stressful…
I used to have a TV addiction that totally consumed my time and definitely cut into my ability and motivation to side hustle and be productive. Acknowledging my addiction was the first step to overcoming it when I actually forced myself to count how many hours I was watching each week on average, which was about 38-40 hours at my peak. I didn’t shake it overnight, but now I watch a few hours here and there as a fun perk not as an addiction.
As far as money goes, I get very uncomfortable if I drain my cash down too low but I have had problems of sitting on too much cash in the past. Now, I try to invest at least $10k a month regularly so I don’t sit on too much cash. Having a ball park dollar amount goal also helps me from getting too aggressive in investing from one month to the next.
I like your list of benefits of being cash poor though. It definitely helps with monitoring cash flow. I definitely notice when I get cash dividend deposits much more often when my cash balance is on the lower side versus higher side.
I think you’re taking all the right steps to manage your money addiction and it’s good you’re actually investing your cash into assets versus spending it on frivolous things with little to no value. You tend to be very methodical and thorough when making your investment selections, so that’s also good.
38-40 hours a week is A LOT! Just think about how much you could be producing each month if you flipped the switch from consumer to producer?
Glad you kicked the habit!
Addictions, are not bad as far as they are identified and mastered. Plus a bit of humor I think. I am also addicted to money, because I think that’s better than drug, tobacco or alcool. My best investment so far, due to my money addiction, is to have never married… (I am 56)
Sam, you sly dog with your bait and switch in the first few paragraphs! I was confused if that was you or your tennis partner!
Pretty insane to invest over $150k in one month, what is your record for an investment in a month?
In college, I was down to my last $40 at the end of the semester one time.. that was rough for me, but since I’d already paid for tuition, books, and the meal plan, I wasn’t in too bad of a situation. In the past year, I’ve been fluctuating between 5k and 20k in cash, paying down debt, improvements for my house, investing, etc.. I’m looking to invest in real estate so I’m trying to gauge what level of cash would be optimal and which investments I could leverage to grow my money wisely.
Sorry for the confusion. Didn’t realize it was confusing that I consulted w/ my friend about my money addiction, who proceeded to share and empathize with me about his gambling addiction. I thought it was a interesting way to weave in a parallel on how to fight financial related addictions.
Your feedback helps me strive to write more clearly. Any specific tips are always helpful .
Hey no worries. I’m glad your buddy was able to eliminate his debt and move on with life.
I enjoyed the parallel and thought it was intriguing; I’ve read your content for many years and it seemed oddly similar to the April Fools post you put out when you said you were done posting!