This is an interview with fellow Yakezie member Jacob. He is the author of My Personal Finance Journey, a source great personal finance information with Jacob's unique twist. If you like what you read here, be sure to give him a visit.
1) How did you get started in personal finance blogging? What was your inspiration?
From the age of 18, I have always been fascinated with the idea of starting and growing new businesses. Through my undergraduate college days, I started and successfully operated 1) an eBay selling business and 2) a pet waste removal service. I also attempted several network marketing gigs, but failed miserably in all of them. I most likely won’t be trying those again anytime soon!
At the same time that I was starting these different ventures, I also began reading any personal finance book that I could get my hands on. Several of the books that inspired me in my early days to learn more were David Bach’s “Automatic Millionaire” and Jeremy Siegel’s “Stocks for the Long Run.” I used the knowledge I gained from these books to begin investing my own money that I received from internships throughout college. By the time I finished school, I had been fully funding my Roth IRA for 2 years.
On a cold January day in 2010, I was reading a book about different businesses that could be started with little or no capital investment. Among the listing of businesses was the idea of starting your own blog. I knew the second that I read this page that writing a personal finance blog would be a perfect fit for me . Not only could I tie together two of my passions in life (personal finance and starting businesses), but it would also be contained in an omnipresent, searchable internet location that could make the information accessible to anyone in the world. Shortly after that day in January, I had my first several posts generated, and My Personal Finance Journey was born.
2) On your site, you mention that you hope to “Unravel some of the myths around investing and personal finance that are ever-present in today's society”. What is the biggest myth you have found since you started blogging? What is the real deal behind the myth?
The biggest myth that I’ve encountered since I started blogging is that people think/are told that active management (individual stock selection by “experts”) in the investing world will produce superior long-term returns. I consistently hear of investors throwing money at individual stocks touted by stock newsletters, bought through “hot” actively managed mutual funds, or simply by the financial advisor at their local Merrill Lynch or Edward Jones office. However, the truth is that these “experts” are often little more than salespeople trying to make money. The majority of investing books and research studies I have read have found that 70-80% of actively managed money (so money invested in individual stocks) fails to beat the return of the overall market.
Because of all of this misinformation, I attempt to unravel this myth by researching and posting about the benefits of low-cost, passively managed index mutual funds. Examples of the posts I’ve written can be found at the link below.
3) If you wish you knew one personal finance tip when you were 18, what would it be?
This one is easy! The one tip I wish I knew was to open a Roth IRA investing account at an early age. You can open a Roth IRA as soon as you have earned income, even if it is for side-jobs you have during the summer.
By opening up a Roth IRA at age 18 with $2000 and assuming you earn the long term market return of 10% until retirement at age 65, the $2000 alone would be worth ~$176,000 at retirement. It’s brilliant how powerful compounding interest is!
4) What is the biggest personal finance lesson you learned the hard way?
The biggest personal finance lesson that I learned the hard way was to be cautious about how I issue payments to parties I do business with on the Internet. While this may seem obvious, it sure cost me some money!
Several years ago (prior to my blogging days), I was very involved with running an eBay wholesale selling business. One day back in 2005-2006, I received an unsolicited email from a seemingly nice man representing a supplier that sold Canon CCD cameras to people with wholesale licenses (state sales tax IDs). His back-story, company description, and website all seemed to check out as being legit, so I began working through the details of a potential deal for him to sell me several CCD cameras that I would resell on eBay.
My contact was very responsive to any and all questions I had during the negotiations of price, delivery, etc, and we finally decided on the price of $1500 per camera. The only suspicion that I had during the negotiation was that he insisted on payment being made through Western Union, instead of using PayPal or a credit card like I would have preferred. He mentioned some technicality about how their company receives payment that I believed at the time (but looking back on it, I obviously shouldn’t have gone for it). Anyhow, I agreed to send him the money for one camera via Western Union in advance of receiving the product. I went to the grocery store that afternoon to make the transfer, and it went through with no problems. I then rushed home to tell my contact to confirm receipt of the money.
Well, he received it all right! So much so that he felt that he never had to talk to me again! He disconnected the phone number I was using to reach him, didn’t answer any emails, and I never heard from him again. Now, granted that I was a little less Internet savvy back then than I am now, but I really didn’t do much to try to track him down. I remember thinking that I didn’t believe there was anything I could do. I looked around at Western Union’s website, and couldn’t see any refund policies like the ones that credit cards or PayPal has. And, ultimately, I never saw that money (or the camera) again.
5) Outside of blogging, what has been the biggest change you made to your financial life that made a difference? (i.e. making more money, frugal changes, budgeting, investing)
Outside of blogging, there have been two changes I have made to my financial life that I believe had the most significant impact on my net worth and ability to manage money.
The first change is that whenever I move to a new location, I track my spending for one month to determine how my expenses have changed compared to where I lived previously. Doing this allows me to 1) put together a budget for the various categories of spending (entertainment, transportation, housing, etc) and more importantly, 2) know how much money should be left over at the end of the month that I can set aside for cash reserves or retirement account savings.
The second change that I’ve made is that I now track my net worth and asset allocation percentages once per month. This tracking exercise forces me to be objective in maintaining my asset allocation percentage targets (within a +/- 5% band) through rebalancing, regardless of what movements the markets has made. For example, if the world equity markets have gone up significantly, rebalancing forces me to sell some of my holdings and buy fixed income shares to maintain alignment with my targets.