How I Reduce Spending Every Month

I wrote a quick off the cuff comment on Quora which answered the question “Why are most people broke?” As of today, my answer has been viewed about 250,000 times. Since it’s received so much viewership, I decided to write a more expanded version of it.

There’s always been the two groups: “group save” vs. “group make more”. But today I want to focus on how we can get more efficient with our money and stretch it out a bit more. I’ve put together a quick list that I personally use to reduce my own expenses. Some of these may hit close to home for you and some may seem like an outlandish suggestion. Feel free to pick and choose:

Rent

This is the biggest expense item on everyone’s sheet. It’s also where you can save the biggest amount. Living in an affordable part of town, or outside of a gated community, or an expensive apartment means you can put back hundreds or even thousands of dollars back in your savings account. You can take the extra saved money and invest it, pay off debt or splurge on it.

Groceries

My shopping list predictably includes meat, nuts, coconut milk, veggies, milk, bread, eggs, sugar, cheese, coffee, and high quality ice cream. I have significantly reduced my bread, rice, sugar, and dessert intake. I rarely buy anything that is packaged so no $4 Kudos bars or $4 Tropicana Orange Juice. Buying raw food and non-packaged goods reduces my bill (also keeps my belly reduced too). I avoid high retail types of grocery stores like Safeway and Albertson and the ilk. They are there primarily to sell you pancake mix, sugary yogurts & cereals and granola bars. Thanks Safeway, but I’m on to you.

Cars

I’m a car guy. Over the last 15 years I’ve owned some nice machinery and have always paid for my cars on cash except for my latest which is financed. I’m not wasting money on cars for now. If I hit it big, I’ll be sure to park an Italian Stallion in my stable. But until then, no to fancy cars and cars that depreciate very quickly. Every time you go and sell your used fancy car you lose thousands of bucks. Also, I’m not buying a German car more than 5 years old and it’s also going to have an extended warranty. Stay safe and get a used Japanese car. Pay it in cash. 

Flying

I’ve been traveling international since I was 3 years old so it’s become a part of my identity to get on a plane and explore. Traveling is a splurge that I will never sacrifice. It’s what I live for. But there’s no way I would spend 3x or 5x the money flying business or first class. I would never use my credit card points on them either. I’d much rather spend the extra money at my destination. It’s way too much money for slightly more room and better food for a flight that lasts just a few hours. Economy class all day every day.

 

Hotels

Are you the Airbnb type or hotel type? There are pros and cons to both. But for a price conscious consumer like me, Airbnb is an option that has worked out more than a couple of times. Airbnb worked out for me in Austria, Italy and Switzerland. I got nice places at nice prices.  If I really want to live it up I go the hotel route. Airbnb gives you pretty good stuff in nice locations for not a lot of money. Try it.

Entertainment

I don’t go to live concerts (rarely), I don’t pay extra to watch movies in 3D or IMAX, unless they are truly amazing movies. And I definitely am not interested in purchasing to watch sports games at a stadium. And to add to that, you won’t see me paying $200 to watch an expensive play or a musical tour.  

Drink and Drugs

This is simple because I don’t indulge one bit in alcohol or any type of drug. They aren’t good for you and they drain your funds. More money in my bank please.

Clothing

As I get older I don’t want tons of clothes. I don’t need 9 pants, 20 dress shirts and 16 tshirts. What I do want is fewer clothes that are really higher in quality. For example, You can get a $9 tshirt from Old Navy. Or you can go to Banana Republic and get a $30 tshirt that has been made with a higher thread count of fabric. It will also last you thrice as long.

Owning fewer clothing means less confusion in the morning when running out the door. Branded clothing is more expensive and usually just a price gouge for no reason. I avoid brands and especially brands with massive logos. I actually hide clothing brands if I can. Buy less, but when you do, buy really high quality.

Toiletries

No fancy luxury cosmetic products for me that come in shiny beautiful packages. The point of soap is to break oil apart. Everything after that fact is a nice to have. I don’t buy fancy shampoos, fancy lotions, fancy hand soaps and no $25 hair pomade gels. The less products you douse your body with the better. A simple shampoo, body gel and basic conditioner are good for me. To be fair, I use a slightly upper scale shaving cream, because you know, Barbasol.

Credit

I never ever keep a revolving balance on my credit cards. I charge them and pay them off immediately. I do not carry credit card balances from month to month. Ever. When you do this you pay a toxic finance charge which is calculated using daily interest. You are better off taking cash, rolling it up, and torching it to warm your hands on a cold night. Complete waste. Say no to wasting money on interest.

Eating Out

This is a big one for everyone. I refuse to go to restaurants for the ambiance, or super upscale places. You won’t catch me dining at a place that is even $40/head. I skip appetizers and get the main course. I stick to simple places known for making excellent food at digestible prices. But I like my desserts so I’ll make a twice a month run to Cheese Cake Factory to try a new flavor.

Airplane Food

Being hungry on a plane is expensive. There was one time where I had to order food on a flight because I was feeling sick with hunger. Always eat beforehand. I personally have Priority Pass lounge access so I usually can eat at any airport in the world for free. In April 2017 I took a vacation to Iceland and Sweden. When we landed in Sweden, I found an amazing Priority Pass lounge and we went in. We must have eaten $100 worth of food before heading into the city, for free. Food in Sweden is slightly pricey, and food prices in Iceland are insanely pricely.

Gadgets

I don’t replace my phone frequently. Most smartphones purchased within the last 3 years are capable of doing everything that I need. 5G is coming out, and soon 6G, then 7G…it will never end. I’m using 4G today so I’m not going to refresh my phone for a 5G one. Forget it. Also say no to cheap gadgets that you play for a week and then throw away. Only buy the stuff that really really appeals to you.

 

Useful Gadgets On Amazon Worth Splurging On

If you’ve been following me on my journey so far you’ll know that I advocate of spending money on things you really love. It’s a tough deal to deny yourself all the things that you really want throughout your life. Man doesn’t live on water and bread only. Rather than buying mediocre nonsense across the board, figure out what you really can’t live without, then get it. If it’s painful to live without it, then go get it. For those folk who get what I’m saying, I’m not advocating purchasing a used Ferrari on a credit card on a $56k salary. Your splurge shouldn’t bankrupt you, or even hurt your financial position. If a splurge bankrupts you, then it’s not a splurge, it’s a suicide. No suicides please. 

And so today, I’ve put together a list of gadgets that are useful and that you can splurge on. No dumb trinkets that you use for two days and forget about. The word “gadget” usually implies a useless device that is sensational and not useful. But not today…today we are going for the useful stuff that can actually improve the quality of your life.

True Wireless Ear Buds (Earphones But Without Wires)

I think we are at a point in time in technology where we don’t have to put up with wires anymore. We’ve been tangled up in wires for the last 3 decades which started out with the walkman. Those days are long gone. It’s time to move to a slightly more refined way of living. Say no to cords and go wireless! Grab a wireless bluetooth connected ear bud. Once you try them it’s really hard to go back to the caveman days.

The Tranya T2  is the choice that I made for myself. It was like $40 and does the job just fine. You can use the earbud to control volume, skip songs and movies, activate Google Assistant etc. I also found out they were durable the hard way. I left them in my sweater pockets and sent them for a wash. Then to add insult to injury, I put it in intense heat in the dryer. Also, coincidentally while at the gym, I was walking up the stairs when the right ear piece popped off and went crashing 10 feet below to the bottom story. Still working like a champ and I recommend them.

Here are a few other options that aren’t crazy expensive but offer good value.

RAYCON E50 

G-WACK J29 

JBL 

SoundPeats

Pasonomi

For the most discerning and demanding customer there are premium options available like the WF-1000XM3 and Apple’s AirPods. The Sony will also offer noise cancelling functionality. But why spend 3x when you can get most of the benefit for 40% of the price? Save a few bucks and splurge on something else.

Tile Mate (Locate Your Lost Belongings With Your Phone)

Everyday, I spend a cumulative of 10 minutes searching for my TV remote, wallet, my watch, my keys and my phone. It’s gotten to a point where it’s driving me crazy. I know I should be more mindful of where I put stuff. But that’s where the Tile Mate helps out so much. It helps you locate your items.

AnkerPower Core (A Portable Battery To Charge Your Phone)

I don’t know what kept me so long from purchasing one of these. Again, my wife was ahead of the game and got to this before I could. It turned out to be an amazing buy when traveling, especially international trips. We could charge our phones up to 5 or 6 times without having to worry about finding a charging outlet in a random city. Here is the 10,000 miliAmp and the more powerful 20,000 miliAmp.

Samsung Micro SDXC (Give Your Phone More Storage When You Are Running Low)

One of the biggest issues I’ve had is to constantly dump all the photos off my phone to my laptop to free up memory. Or, if I am going on a long trip, I’m careful on how many pictures and videos I take for the fear of running out of space and being stranded. Call it storage anxiety. I solved this anxiety by just getting a micro storage card. It’s tons of extra space whenever you want it. You can get a card with 32G, 63GB, 128G, 256G, 512G. 

Amazon Echo Dot-3rd Gen (An Assistant To Help You Out)

I picked up an Echo Dot (3rd Gen) and I’m finding it more and more useful as I interact with the device over long periods of time You can ask it a variety of commands and questions:

Alexa, what is the Stock Price of Facebook?

Alexa, what will the weather be like tomorrow?

Alexa, read me the news headlines for today.

Alexa, play me a lullaby.

Alexa, can you set the temperature to 70 degrees?

Alexa, how many teaspoons are in a cup?

Alexa, please set a timer for 10 minutes.

Alexa, set my alarm for 6 am tomorrow.

Alexa, give me some ideas for breakfast.

Alexa, please call my phone.

You get the idea, this hockey puck looking device is getting super useful.

Yootech Wireless Phone Charger (Charge Your Phone Wirelessly)

Using a wireless charger is a quick way of charging your phone. You don’t have to fiddle with the wire to connect it. Just drop it on the charger and it starts charging. I usually use the Yootech Wireless Charger at night before heading to bed. It’s charge is on the slow side, but you don’t have to fiddle with cords and aligning the plug with the socket at night. 

Wireless Bluetooth Speaker (Powerful Speakers That are Controlled By Your Phone)

These bluetooth speakers provide a lot of sound power and can be used outside at the beach, at a park, at a picnic, or when your simply in your backyard entertaining and BBQ’ing. I also use these to listen to podcasts when I’m taking a shower. Super useful. Here are the most promising brands that give the most value.

Anker Bluetooth speaker

Ultimate Ears Boom 3

JBL

BOSE

SmartWatch (A Phone On Your Wrist, Almost)

Hardware devices are progressing as time passes. Technologically we are moving forward. We’ve gone from the PC to laptops to tablets to smartphones to wearables. Wearables undoubtedly is the future. I believe within the next 20 years we will be wearing glasses that act as an unifying device. Everything will be overlayed over your real vision. The device will become us. Augmented reality at its best.

Smartwatches are a step in this direction. When it comes to smartwatches, I don’t settle on the cheapest model, I would personally go for the best. As an android user the Galaxy gets my choice.

Samsung Galaxy SmartWatch

Apple Watch Series 3

Google Wifi Wall Mount-3 Pack (Increase Your Wifi Power Around The House)This is a great device to get strong wifi around your house. Just plug these puck looking devices into an outlet around your house and you should be covered by an invisible mesh of connectivity. No messy wires sticking behind your wifi hardware. It’s clean and simple. Check it out here.

Conveniences Worth Spending Money On

As we age we have more money and our savings account gets a bit more padded. But age also brings a certain level of jadedness and reduced patience in all of us. We’ve had the time to make plenty of mistakes, so we know what we really like or hate. The point that I really want to get across is that convenience has a cost that can absolutely be worth it. You just have to spend money on the things you really like, and forget the rest. Sounds familiar? Focused spending is what we need to do. Splurge on the stuff that you truly love and cut back on all the other junk. Let’s take a look at some things that might be worth spending money on.

Rideshare Services 

If you live in a metropolis, then using Uber and Lyft can be insanely useful. Just imagine all the benefits you get by getting someone else to drive. Avoid the stresses of driving, the frustrations of finding parking, the risk of getting parking tickets, the pain in stopping to pump gas. All of these are bad stressors. Instead, you can press one button on your phone and hail a driver to do the dirty work. It makes so much sense. 

For example, I have to sometimes pick up my wife from the train station during rush hour. Most of the time I do. But for those days that are hard, I just have her Lyft it. Just a few added bucks and that saves me a round trip ticket to the train station during rush hour. I used to land at SFO and bug my sister to come get me. Poor form, I should have taken a Lyft/Uber. Today, that’s exactly what I do. $10 gets me to her house so she doesn’t have to leave hers. As I get older and as life has its ways of getting more complicated, I just want something that can simplify it. You can save a few more bucks if you want to share your ride with other riders. The choice is yours.

Food Delivery

Spending money on apps that deliver food to your door is a new thing for me. And boy do I love using it when I really need it. My wife, being the proactive type, introduced me to the insane convenience of Postmates, Grubhub, UberEats, Doordash and the ilk. I remember one day I told her that I was craving a banana split as I lazily sat and watched a movie on the couch. I didn’t want to take out half an hour of my evening, walk down three flights of stairs and drive 3 miles to Baskin Robbins. So I passed on it. Twenty minutes later I get a random knock on my door. My wife covertly answers it, and accepts a vague brown bag from the delivery man. She magically pulls out a banana split and displays it with a “Tada!”. She had used technological trickery for this amazing convenience. Yes, this Banana Split cost me $14, but I got something that I wanted super badly without exerting any effort. It was 100% worth it.

Grocery delivery apps is another convenience to make your schedule less hectic. Uber has now gotten into the business of delivering food. Check out their Uber Eats Delivery Card. No hassle driving to the store, going up and down food aisles on an easter egg hunt, getting in the checkout line and then hauling yourself back home. Surely there is a cost to expending all that energy. At the minimum, it may make sense to deliver your cyclical purchases like milk, butter, eggs, bread and sugar. 

Subscription Services

Netflix gives us hundreds of movies, shows and documentaries at our disposal. To anyone who watches more than an hour a week, this is an awesome subscription. Sign up, and get access to a universe full of content. Check out the Netflix Gift Card here. If you prefer watching the latest shows right now this minute, then Hulu is an alternative. Check out the Hulu Gift Card.

But maybe you have a 90 minute commute each way. If so, why not join Scribd so you can listen to audiobooks on a variety of topics to learn and kill your commute at the same time. Just $9/month gives you access to a myriad of books. Remember, you can read books using Scribd too, not just audio books.

Texture was an amazing app for people who loved reading a variety of magazines but who didn’t want to manually subscribe to each one. A mobile app that allowed you to subscribe to multiple magazines all from one platform. My wife was crazy about this service until Apple acquired it.

Amazon Prime

Amazon Prime is a subscription service by Amazon that gives you free shipping and access to free movies, photo storage and music. It helps in getting your products from Amazon faster to your door. Take a look at the full list of perks here.

Non Stop Flights

As a dedicated flight hacker, I try to save on the airplane tickets first as they are usually the biggest or second biggest expense. My tactics involve flying in the off season (remember my $400 round trip to London in Feb?), choosing less busy days like Tuesday/Wednesday, leaving at odd hours (early, red eye), and making the additional stop.

But as I get older, and generally speaking less patient, I just want to get to my destination without the fuss. No crazy restrictions or extra stops. Gone are the days of going for the absolute cheapest prices. What’s important to me now is the duration of the entire trip, how many stops I have, and good take off times. I never book anything with two stops anymore. It is unbelievably tiring especially when you are coming back home. It saps my soul. Non-stop flights gives you back the most precious commodity: Time.

Premium Credit Cards

In my eBook, I talk about the benefits of using Premium Credit Cards. I literally couldn’t imagine my life without my premium credit card. This is a big one for me. Because of my 750 credit score, I was approved for the Chase Sapphire Reserve card. This card was the first one to give out an amazing 100,000 bonus points. With the Bonus points, I traveled with my wife from SFO to Europe for free. I even had enough points left over to travel to the east coast. When’s the last time you got anything for free, let alone thousands of dollars worth of flights? Another perk that I can’t live without are the airport lounges. Just a couple of days ago I was leaving SFO. We were hungry so we accessed the Priority Pass lounge in Terminal 3. We had access to two restaurants. We got $28/person allowance. I ordered $56 worth of food…for free. I think you are beginning to understand. My only fee is the $150/month annual membership fee. It’s a no brainer.

Think of something that could make your life convenient. Spending on it may be one of the best things you ever did.

The Ultimate Financial eBook

Hello Bay Area Guy Readers!

As you may know, we have finally launched The Ultimate Financial eBook. This is the most focused finance eBook available today geared to help people sort out their finances and get on track.

We are covering it all in this condensed book:

  • The Psychology of Money
  • Investing in Stocks
  • Buying A House
  • Buying A Car
  • Retirement Planning
  • Automation of Bills
  • Budgeting

This isn’t a 300 page traditional book with crazy graphs and complicated nonsense. It’s just the good stuff, straight to the point.

Click on the link below to get a closer look to see what this eBook is about.

The Ultimate Financial eBook

Bay Area Guy

Vacationing Cheaply In Europe

Traveling is definitely one of the luxuries of life and can be expensive. But it doesn’t have to be. I developed a penchant for being on a plane back when I was 8. My dad was always busy at work and so sending us along with mom out of the country always worked out. We had a ton of relatives to meet in different countries anyway. I quickly developed a love for jet fuel, airports, baggage claim, and eating food at 30,000 feet.

Fast forward 30 years and my appetite to fly hasn’t abated even one bit. Actually, my love for travel has become more obsessive with age. My wife and I came to the conclusion that we wanted to spend a good chunk on traveling since we craved to see new countries. During the typical year, we travel 4 times domestically and once internationally. After rent, traveling expense is our largest expenditure.

Choosing A Cheap Destination

The quickest and most logical way to save a buck on ticket prices is to travel during bad weather which is the least popular time to travel, hence when demand is low. There is a darn good reason why people avoid England in February. But that’s exactly when we decided to go. Europe is pretty cheap September to June and is really cheap December to March as the weather is fairly hopeless. And that’s why a round trip ticket from SFO to Heathrow set me back only $420 taxes included. The tradeoff was that it was a bit wet and grey, but we also lopped off $800 per ticket. This was our biggest savings of the trip.

Spending Money On Attractions

When we visit a new country, we spend our time checking out architecture, buildings, public squares, outdoor food markets, cafes, retail streets and general places to walk around. Most of this stuff is free so there is no outlay of cash. One of our favorites activities in a new country or city is to get on the double decker open air bus and just scope out the city to get the lay of the land. 

We aren’t big museum, art, theater or musical people so we save money on admission fees, museum fees and opera/theater costs. Going to a museum and looking at impressionist era paintings would be a total waste on us. Heck, I’m guilty of flying to Florence and coming back without seeing the Statue of David. 

Lodging

Before getting married the only lodging I was familiar with were traditional hotels, like the Marriott, Hilton, Holiday Inn, Best Western, Sheraton etc. Staying overnight meant staying in a proper hotel. There was no second option. But the internet has long changed that with the advent of AirBnB. I have to admit I started using this service very late in the game as the idea of living in someone’s house seemed way too intrusive. But I took the chance and let my wife book some spots. It turned out to be really good. We ended up getting legitimate rooms and most of the amenities you would expect in a hotel. It may have not been quite as polished of an experience, but then again you were paying half the price of a hotel. That’s a lot of savings over a 10 day trip.

Food

We are bona fide foodies and adore desserts. But spending $65/a head on esoteric fine dining is something we have never spent money on. We like good food, in good quantities at good prices. Good flavor is mandatory, fancy dining optional. Also, if you are traveling on a dime, a sure shot way of keeping expenses down is buying food at the super market. For breakfast you can get yogurt, croissant, coffee, milk and breakfast sandwiches. For lunch, there are tons of pre-made sandwiches or high quality frozen microwave meals. For example in Vienna, we grabbed breakfast and lunch items from Billa, and in Switzerland we went to Migros. Lunch ended up costing us eight bucks rather than thirty. You don’t have to do this for every meal. But eating out in Switzerland everyday is insanely expensive. We spent more on eating desserts frequently and venturing into nice cafes.

Transportation

Logic tells you that you don’t need to rent a car when visiting a major city center. London and Vienna both have excellent subway systems. It would be a major liability to rent a car. If you are city hopping or driving between countries or have a super customized travel schedule then renting a car makes a lot of sense. The downside is that driving in Europe is difficult for the average American. The streets are narrower, the street directions are reversed. If you are a nervous driver, then definitely not. 

Also another hassle with car rentals is crazy gas prices in Europe and tolls on the highway. Filling up my empty tank in an Audi A3 in the UK was around $70. I racked up $50 worth of tolls driving across Italy. Didn’t plan on that and I also didn’t plan on the speeding tickets that captured me speeding on camera. As a local, you won’t know where they are hidden so always check the speed limit. All these costs add up. But if you are a seasoned traveler then you know that renting a car gives you the ultimate flexibility.

What To Pack

Making a list solves many problems, including what to pack. For my 10 day trip to Europe I packed the following: 

  • 5 t-shirts / 2 shorts / 1 pant / 5 pairs of socks
  • Packing Cubes (roll-up your clothes to save space)
  • Phone / Charger / Universal Converter to plug in the walls (You HAVE to get this)
  • Toothbrush/paste, floss, shaving equipment, moisturizer and face wash
  • Sleeping pills for my flight, melatonin gummies, band aids
  • Laptop
  • One reading book
  • Slippers so I don’t have to walk barefoot in people’s bathrooms and houses
  • Eye mask for a nice sleep, neck pillow when in my long flights
  • Ear plugs so I don’t become deaf from the airplane engine and air friction noise
  • One swiss army backpack to put everything inside

We traveled with only one backpack per person which was super refreshing and light. It made the entire trip much more pleasant.

After spending a lot of time deciding on what to do and where to go our itinerary looked like this.

SFO–>Zurich–>Lucerne–>Interlaken–>Bern–>Luscherz–>Lausanne–>Annemasse–>Geneva–>Florence–>Bologna–>Venice–>Verona–>Milan–>Vienna–>Zurich–>SFO. 

15 CITIES, 10 DAYS, 700 MILES OF DRIVING, 6 AIRPORT CONNECTIONS AND 34 MILES OF CITY WALKING.

One epic trip.

My Favorite View In Switzerland
Saleve Mountain Geneva
Florence From Michelangelo Square
Our Airbnb In Switzerland

The Realities Of Living In Silicon Valley

It’s the amazing sliver of land that extends from San Francisco to South San Jose, nestled in between two big mountain ranges with a big body of water in the middle. Insanely great weather is virtually perennial. Access to the beach, access to the snow, access to the mountains, access to hiking…Silicon Valley is the place to be.

Twenty five years ago life in The Valley was peaceful as I remember the halcyon days of the 80s and 90s. But the landscape is completely unrecognizable from the past as everything is so much more developed now. The bay has undergone a nuclear tech explosion.

But as technology has grown, day to day life has become more unsustainable. I’ve come to the realization that the bay is a tough place to cut it. As much as I love the soil that I grew up on, I had to come up with a list of things that make it harder to thrive in the Valley.

Real Estate

Let’s just mention the obvious here, the big elephant sitting in the middle of the room. This place is punishingly expensive. This is single handedly the biggest drawback about this place. It’s a subject near and dear to any Siliconites heart. We’ve talked about it so much that we just don’t talk about it anymore. It’s trite to even mention it but the problem exists.

The median price for a home in Santa Clara County is slightly over $1M. That means 50% of the houses are even more expensive than that. Mind you, in the Bay Area a house at the $1M mark looks indistinguishable from a glorified hut. A 20% down payment on an entry level single family home in the South Bay would be a staggering $200k. That’s cold cash we are talking about guys. Just the mortgage and property tax alone on the house would be over $5,000/month. That’s just mortgage. Tack on another grand, or two, or three for other expenses.

According to Bankrate, here is what a mortgage looks like on a $1M house with $200K down:

Since many of the younger people and first timers can’t afford to buy here, we resort to renting. And we still blow a big part of our paycheck doing that. A rundown, two bedroom apartment in an average part of San Jose is going to cost you $2,500 per month. Paying top dollar for a dump gets old.

This is what a $1,000,000 “house” in Sunnyvale looks like. I don’t know whether to laugh or cry:

The Population Keeps Growing

I remember watching one of my many childhood videos as my family and uncle took a day trip to Monterey from San Jose. It was a weekend day circa 1985. We filmed the drive down. I think I counted 6 cars in the footage. Do that today and it’s more like sixteen thousand cars.

You will be severely penalized for doing basic daily errands if you do them at the wrong time. Watching movies on a Friday night? Have fun in the nosebleed seats if you don’t come 45 minutes earlier. Do you want to go to the mall at 2pm on a Saturday? Great, 8,000 people also had the same idea. Did you want to grab brunch Saturday morning? Have fun waiting in line for 25 minutes before you get seated. Want to play tennis at the courts at 7pm on Thursday night? So do 200 other people. Get in line. Interested in replenishing your kitchen on a Sunday evening at Costco? There’s a thousand other families who want to do the same thing. You will not escape this if you live in the Bay Area.

Traffic is another obvious issue linked to a bigger population. Usually the South bound highways are worse in the evenings and North bound worse in the mornings. Highways 880, 101, 85, 237 are all bad. 280 is somewhat decent but has started to become a parking lot about 7 years back.

The Employers Are Ridiculously Picky

Insane amounts of talent means that employers are picky. You can get a sense of this by checking how many people already applied for a position on LinkedIn. Any career fair, or corporate open house event is absolutely flooded with people.

You may be the best candidate but if you are not familiar with one software listed on the job description the employer won’t blink an eye before they toss your application in the trash. Being in the Bay Area means that your job is likely highly specialized and the requirements very specific. No corporation or startup needs to interview 30 candidates for a single position. Something seems broken here. Choices spoil people and choices have spoiled employers.

Interviewers will throw out obscure situational questions like what would you do if…such and such. One developer at a premier Bay Area hardware company asked me, “You are trying to figure out the breakdown of how the Marcom team spends their money on advertisements in China. This team is not open to disclosing this type of information to you. How do you get this data? ” My first thought was, how the hell do I know, and how will the answer to this question prove to you that I will do this job well? You can answer this question in so many ways. In another interview I had with a major company, I answered one question incorrectly. That was it. I had to pack my bags and go home. You’re getting the idea of how insane employers are here.

Once in a while employers have the gall to ask candidates to complete a project before being brought on for an onsite. This startup made me do a a tedious project after passing the phone screen. The task was to compile a database of AI employers in Atlanta. For each employer, I had to come up with a person to contact, list their name, and explain why would they would be a good resource to the company. This was essentially me doing free business development work for this company which was guised as an interview. That was the first and last time I ever agreed to do any type of project as part of an interview.

Lack Of Diverse Views

California is a blue state, and most people that are part of city centers are blue and democratic usually. Many people here are liberal, insanely liberal. SF is probably even more liberal than the South Bay. And so people here tend to have very similar beliefs. People here are not necessarily open to diversity of thought.

The Pressure To Perform Is Insane

Everything is a deal, everything is about funding, everything is about disruption, everything is about solving a problem, everything is about venture capital, everything is about seed money, everything is about growth, everything is about development, everything is about product roadmap, everything is about millions and billions, everything is about out bidding people on a house, everything is about stock price and most importantly everything is about yourself.

People are super absorbed in their first world problems. I have $400k in cash savings and I already own a home, should I buy a secondary property or buy stocks? That’s the type of conversations you have here. Whether you are sipping coffee at Starbucks or taking a walk in the park you will invariably hear people talking about their startups and funding or some deal. It all is a bit much sometimes.  

It’s hard to stand out when everyone is so well educated, accomplished and so brilliant. Whether someone is getting a PHD, seeking startup funding, selling their startup or just working at a FAANG, it’s hard to stand out. The bar is high. You are a small fish in a big pond here.

Public Transit Is Not Stellar

Bay Area is not known for its public transportation. That’s just how California is. We use our cars 95% of the time. Caltrain runs from San Francisco to Gilroy and we have BART that goes from Millbrae to SF and branches off to Richmond and Antioch. It is decades old and we are about 20 years behind on schedule. Both Caltrain and BART are connected to SF downtown. You just have to make sure you live close enough to one of these stations if you commute to the city.

Related: 15 interesting facts on the Bay Area.

Should I Invest My Money Or Use It To Pay Off Debt?

First of all, let me say that if you are a holder of school debt or credit card debt, my sincerest apologies go out to you. You see, I’ve had both of these types of debt. At one point, I had racked up $12K of credit card debt by eating out way too much. And then much later on in my career I decided to get a fancy Masters degree from a private university that set me back $40,000. Student debt for millennials is a killer, especially if you received a degree in underwater basket weaving that can’t get you a high paying job.. But that is a whole different discussion for another day (or rather, article).

But this brings us to an important question. Should you use your income and savings to pay off debt, or invest it instead? Like most questions in life, it depends…

Let’s look at credit card debt by itself. Credit cards these days charge at least 15% interest rate but usually are in the 20-something percent range. And if you miss a payment, the interest goes to an even higher rate. You would have to make a return greater than 15% to make sense for you to invest. This is nearly impossible. You won’t find any investment that gives you 15% to 20% a year.

Student loans are usually in the tens of thousands and are usually around 5%. As holders of school debt know it is very difficult to get rid of student loans via bankruptcy. Remember, filing for bankruptcy destroys your credit score. If you don’t pay your loan within 9 months, the government has the power to garnish your wages and intercept any tax returns that were coming your way.

So the question is what is the best use of your money: Which debt should you pay off first? Should you invest? Theoretically speaking, if your return is higher than your interest rate it makes sense to invest the money. But if your interest rate is higher, then pay off the debt. This is a simplified answer and doesn’t apply to every person. If you pay off the debt then the monthly payment you were making will cease. In a way, that is money back into your bank account. You can put that monthly amount into investing.

I am a single track mind guy and so that means I like to focus on one task and do it really well. I would target the highest interest rate debt and pay it off aggressively. You still want to make minimum payments on the other debts because you know what happens to your credit score when you don’t. I would also pause any IRA or 401k contributions temporarily and divert that money towards the debt.

If you have enough savings to get rid of the debt then please do so. Whatever you pay off is money back in your pocket immediately. If you have $150/month of credit card debt, and $400/month of school debt (like I did), that’s $550/month you can put back into your savings, or even invest it. Paying off debt also brings freedom, motivation and a peace of mind which should never be underestimated. It’s like you have a fresh start.

I am hoping that you have an emergency fund stashed away in case you lose your job or something disastrous happens. It would be wise to build this fund up especially if you are holding debt with low interest rate. Once you have a few months of emergency savings, you can aggressively start allocating money to pay off the toxic school or credit card debt.

Paying off debt is really about choosing a philosophy as much as it is about math and interest rates. For most of us, retirement is really far away, so it doesn’t make sense to pump money into your IRA or 401K if you are sitting on credit card debt at 24% APR.

So just a recap: Assess your situation. There are no rights and wrongs. High interest rate debt needs to be paid off, lower interest rate can be held longer. If you are holding a big amount of debt that is high in interest then you want to tackle this immediately. If you have a lump sum of cash to pay off the loan, then do so, as interest is always accruing. You can temporarily put a hold on retirement investing and aggressively pay off the loan with the highest interest rate.

Paying back debt is a numbers game as much as it is a philosophical game. Figure out the balance that works for you.

Is 2019 A Good Time To Buy A House In The Bay Area?

The Bay Area along with San Francisco has well over 40,000 companies and over 10,000 investors. The region is also home to over 80 Unicorns. In 2018 alone the Bay Area housed 18 Fortune 500 companies. Out of the FAANG grouping of stocks, Facebook, Apple, Netflix and Google are all based in the Bay Area. That’s right, 80% of the FAANG’s are located between San Mateo and Los Gatos. These companies have tens of thousands of employees making six figure salaries right here in the bay. Stock options and all. This precious sliver of land that reaches from SF to SJ is also home to Stanford and Cal blessed with the most perfect weather imaginable to a Homo Sapien.

Historically

Since around 1990 we have had 3 major busts: 1991, dot com bubble of 2000, and the September 2008 housing crisis. Even though predicting market movements is difficult we do know with certainty that markets crash from time to time. And even though markets do crash, they bounce back with vigor and then some. The SP500, Dow, NASDAQ and Bay Area housing markets all have a cyclical nature of growth and bust. It’s insane how prolonged the 2011 to 2018 bull market has been for Bay Area housing as seven years of appreciation seems like an eternity. It takes many months, and often over a year to have a subtle inflection point materialize into something that we can actually feel. March 2018 was an inflection point for the Bay Area as housing began to cool off. Bay prices stopped increasing at the rate they were increasing and housing has seen fewer multiple offers. Only in the Bay Area can we safely say that whatever goes down, must come up.

Below is one of my favorite charts about the housing boom and bust cycle. We can see that the Bay Area market has seen a few busts, but what’s amazing is that every single rebound has broken past previous highs. Look at the 2001 to 2008 growth. We saw prices increase 59% and then had a massive crash that reduced prices by 27%. One would think that this would be the end of growth for a very long time and that prices would stagnate for years. But in 2011 the Bay Area market did an 80% increase over the next 7 years. Where else in the world can we see a graph like this? Probably only a handful of cities. Most of the graphs resemble climbing Mount Everest. You have highs and dips, but the end destination is always the summit.

 

Mortgage Rates Are Generally On The Rise

I’ve noticed a lot of people rushing to buy houses because the interest rate is on the rise. That’s definitely a good reason to lock in a cheap rate. For example, if you are borrowing $500k, an increase from 4% to 5% interest rate will cause your mortgage to jump $300/month. That’s a decent difference, but not a life changing difference. Many of us guilty Siliconites spend that on lunch at work every month. Interest rates are creeping up but also note that housing prices are beginning to decline as well. You may come out further ahead if you buy a cheaper house with a slightly higher interest rate. Do a few calculations of buying now vs later at higher rates and see what you come up with.

This graph is from Jan 2016 to Feb 2019. You can see that the interest rates have started to go up since September 2016, but recently have been coming down since Nov 2018.

Bay Area Counties Performance

Santa Clara County and San Mateo County are the most desirable counties to purchase in. I would put San Mateo County ahead of Santa Clara County in terms of desirability which in turns makes it more expensive. Everyone wants to be on the Peninsula! The average median house in California is $538K, where as San Francisco County is more than thrice expensive. Remember median means half way, so 50% of the homes are cheaper, and 50% are more expensive than the figure below:

It’s 2019 Should I Buy?

If I have to make a call, I’m going to say that it’s not the best time to buy. Prices are not increasing at the same rate as they have been. Multiple offers have cooled down and the stock market has taken a dip but rebounded back to some extent.

I would say if you can fulfill all of the criteria below then it makes sense to make a purchase today. Still, I would really wait till the end of 2019 as I  don’t see prices increasing through the end of the year:

  • You plan to live in your house for the long haul, about 5 years or longer. This way if you buy at the dip, you can hold the house long enough to come out in the positive.
  • You can put at least 20% as a downpayment on your house/condo/townhouse. You don’t want to be stuck with PMI. Also, if you can’t put 20% down, you will need to borrow a huge sum which means a big mortgage and a lot of interest cost.
  • You have an emergency fund (remember this article?) that has at least 6 months worth of savings to pay all of your bills. You need to have this after putting your 20% down.
  • You can comfortably pay your mortgage, property tax, HOA, home repairs, and a million other necessary bills and still have some savings left every month.
  • You and your spouse have stable incomes that can pay for massive Bay Area mortgages

What Is An IRA?

A Quick Example

Let me first get your attention by using a simple example. If you are 30 years old with $0 in your retirement account, and you contribute $5,500 annually at a 7% return, how much money will you have when you hit retirement when you are 65? Using Bankrate’s Roth IRA calculator we can see below that your account would balloon to $813K.

Our principal contributions (the money you put in every month) itself is $192k, which helps us yield another $612k through growth.The monthly contribution comes down to about $458 every month. That’s not so bad.

The IRA

You probably have noticed but the talk about retirement planning is around us perennially. It’s nothing new as we are constantly reminded how underprepared we are on our retirement savings. Radio talk show hosts, webinars on YouTube, Finance experts on the news, the big brokerage firms and their advertising…all of them telling us the same thing: Open an IRA today and start contributing to it.

The IRA, pronounced eye-ruh, stands for Individual Retirement Account which is a special type of account that anyone can open for themselves. The ultimate purpose of this account is to help you live a cushier life after you have retired from your livelihood. You see, we spend on average 40 some years working from adolescence to retirement. We are focused on making money, spending money on ourselves and sometimes saving it if we are smart. But what about saving after you have retired from your livelihood? What about saving for when you need the money say 40 years from now? We will never save for retirement unless we have a structured way of approaching this problem.

So how does the IRA help us live a cushier life in our post-retirement world? Well, it’s an account that you create and fund on a monthly basis. If you reach into that account for a withdrawal you could get taxed and penalized (There’s some minutiae around this which we will touch ahead). An IRA will help you allocate (set aside) money early on. Basically every month, out of your paycheck, you will fund your IRA. You can choose to invest your paycheck in stocks, bonds, and other instruments and you can open one at any bank or online brokerage.

Let’s peel back a layer and get deeper into the details to see how this whole retirement planning thing works.

IRA’s generally come in two different flavors….

Traditional IRA vs Roth IRA

In a Traditional IRA you set aside a few bucks every month into your IRA account. One of the biggest benefits of doing this is that you can deduct this amount from your personal income, which means that your taxable income is reduced and you will ultimately pay less taxes.That’s definitely great. Your money will grow, year after year, and you don’t have to worry about paying capital gains on these when you do your yearly taxes. But….once you hit retirement age and withdraw the money is when you will be hit with taxes. So essentially you see your money grow tax free over the years, but you pay taxes at the end when you withdraw.

In a Roth IRA you also set aside a few bucks every month and deposit it into your Roth IRA. However, you can’t deduct these contributions from your taxable income like you did with the Traditional IRA. And so when you finally withdraw funds from your Roth you can do so without having to be pay tax. Why? Because your monthly contributions to your Roth IRA were taxed as you made the contributions.  Pay taxes now on your monthly contributions and withdraw tax free later without worry. This can be good because say, 40 years from now when you retire, the taxes may be super high. That way you can protect yourself against crazy high taxes in the future. Also it is generally easier to pay taxes when you have a job rather than paying taxes when you are retired. Another reason to go for the Roth.

The Devil Is In The Details

There are a myriad of detailed rules on the Traditional and Roth IRA accounts. They have to do with your age, the age of the account, and qualifying withdrawals you can make without penalty. We are going to keep it very high level so you can can focus on understanding the concept.

If you are under 50 you can contribute a maximum of $6,000 annually in your Roth or Traditional IRA. If you are over 70 you can contribute $7,000 annually. If you are married filing jointly you guys can’t make more than $203K, and if you are single the cutoff is $137K. If you are 59.5 yrs old and haven’t had your Roth opened for at least 5 years then you will owe taxes and a 10% penalty if you withdraw.

Regarding withdrawals from a Roth IRA: If you are at least 59.5 years old and have had the account for 5 years, you can withdraw unlimited without penalty or tax. You are allowed to take out $10k as a first time home buyer without penalty (taxes still apply).

Reasons To Open An IRA

The number one reason anyone opens an IRA is so that your money can grow. We all know that long term growth is really bolstered by big contributions at an earlier age. The goal is to have a nice pile of cash waiting to you by the time you hit retirement age.

Should You Open An IRA?

That’s the big question. We will reserve another separate article to answer just this question. But there’s no doubt that the Roth IRA seems to be a better deal than the Traditional IRA. You can grow your money in a separate account and not be tempted to touch it. Paying taxes in the beginning also seems to be beneficial. This is definitely a step towards creating a cushy post-retirement life.

 

 

 

 

 

 

 

How To Network in 2019

I’ll be straight up honest. Networking usually doesn’t work. Think about all the times you networked and all the awkward and forced conversations you had. How many of these networks worked out for you? Rarely, if any. The most difficult type of networking is when you need a job. You are desperate, but you are forced to go out and show your best even when you are at your lowest.

  1. Get Out Of The Networking Mindset. Stop being a salesperson. Stop pitching. Stop asking. Strive to meet many people, and keep attending events. Always make sincere conversations and don’t be overly focused on adding people to your network list. Focus on having a good conversation. Things will evolve naturally.
  2. Map Out Your Closest Friends And Colleagues. This is your core group. They will help you much more than a random LinkedIn contact. You know these people well and they know you. Be good to these people. Very good. They will listen to you.
  3. Be Clear On What You Want. Yes, I told you not to pitch. But if someone asks, you have to have an answer. Develop a clear and succinct pitch to the question “What do you do?” or “What are you looking for?”
  4. Ask What They Want. You are not the only one who needs a job, sale or a customer. Other people attend events for the same reason as you. Try to gauge what they are looking for and try to set them up with a contact they may need. Guarantee they will remember you next time ‘round.
  5. Do Not Be Dismissive. Status, title, wealth. Some people have it, most people don’t. It doesn’t matter. Enter relationships with a clean heart.
  6. Build Your Network Before You Need It. Network building is a long term play. You need to gently plant the seed before anything grows.
  7. Follow Through. If you promised to connect someone to another person, you better do it. Don’t break your promises. The only thing that matters is your reputation. Keep that intact.  

Remember, networking is a long term play. Keep conversations genuine and authentic. Also keep in touch when you don’t need anything.