I wasn’t always this way. I remember a carefree time during my profligate youth where I would happily spend all of my low-four-figure net worth on the latest fashions, nights out to boutique bars and the largest, most calorie-dense Starbucks spiced lattes they had; damn the expense.
No longer. I have surpassed the early twenties stage and entered… the realm of the responsible adult.
Once the prodigal son without a care in the world, I have since transmutated into a 28-year-old Ebenezer Scrooge, wincing at the mere prospect of spending on anything besides absolute essentials. Colleagues or friends proposing an expensive night out? Shudder. Multiple incoming birthdays and weddings to buy presents for? The horror. Toothpaste running low? Help me Jeff Bezos.
Goodbye piano, language learning and hiking. All hobbies with no opportunity for monetisation must be trebucheted into outer space and replaced with projects which can actually generate supplementary income. All routine daily activity must be monetised. That means you, breakfast. Any significant spending requires a lengthy period of rumination over how much that sum could have compounded to had I given it a 10-year time-horizon assuming a modest average annual interest rate of 5%. Select passages of Warren Buffett’s letters to Berkshire Hathaway shareholders now serve as Tinder pickup lines.
I am exaggerating a little; I don’t use Tinder. But I certainly doubt that I am alone in being obsessed with my finances and possessing the great looming feeling of financial insecurity. What with heavy student loan debt, salary rises which are just about in line with inflation and the full extent of the Covid fallout as yet unknown, it’s no wonder that hustle culture is all the rage.
So yes, I have anxiety about spending money on myself; an anticipatory buyer’s remorse which kicks in before I have even bought anything. Benjamin Graham on one shoulder and David L. Dodd on the other. On the bright side, they help me save money.
How Much Money Do You Need to Feel Secure?
This is more of an open question. I’ve done a little Googling on the topic and found this CNBC article, titled “how much millenials at every age need to have saved right now to retire at 67” which is quite interesting. If you couldn’t tell from the title, it’s aimed at millenials (boy, do I love that buzzword), a.k.a. individuals aged between 24 and 39.
According to the chart embedded therein (put together by Blacktower Financial Management Group), as a 28 year old with a company pension scheme it estimates that I should have $40,365 tucked away in investments which produce an annual average return of 6% if I want to be able to retire at 67 and take a pension of $35,100 per year from my savings (although note that it assumes that I’m going to be dead by 78).
On the basis of this chart, I’m actually slightly ahead of schedule in terms of the principal, although I definitely do not have anything like this amount in investments which achieve a 6% return on average per annum. My index-tracker type investments are closer to half that. I’d definitely have trouble sleeping to be all-in on stocks right now. So it looks like I’m behind schedule after all.
Either way, even if I was totally in line with the Blacktower estimates, I still don’t think that knowledge would put me at ease. This makes me wonder – at what level exactly would I feel content? Is there a magical figure am I striving toward which will calm my concern about the future and enable me to be a little less neurotic about non-essential spending?
Probably not, and I think having a defined number as the target is probably the wrong way of looking at this. I think the primary concern I can pinpoint is how dependent I am on the salary from my job (in the professional services industry). Besides minimal index fund investment dividends and savings interest, it is pretty much my sole source of income. As a result, it definitely feels as though I have all of my eggs in one basket, which seems to be a position at odds with the tenets espoused by sensible, intelligent investors. Having pinpointed this problem, I think that a possible solution to my financial unease would be to try to diversify my income a little.
The Action I’m Taking
Starting this website has been one of my first efforts in seeking to develop a side income (through advertising and affiliate marketing). Perhaps once I generate my first income from it I will track my performance over time and post about it which may serve as motivation to others who are also thinking about starting a blog as a source of income.
Besides this, I am also thinking about taking up freelance writing on the side as an income supplement (although I always hesitate to do so as I often think my time would be better spent on content for my own site!). I will keep you updated on that front.
Thinking long term, real estate also seems like an interesting avenue to pursue, but obviously at this stage in proceedings it feels a little out of reach. Perhaps in preparation for this I will pick up a few books on home renovation and plumbing, so by the time I am ready to get involved in property investment I will have the know-how ready to apply.
I’m also doing my best to cut down certain elements of my spending; for instance, my spending on routine grocery shopping. I recently posted an article on how to save money grocery shopping for one person if you’d like some ideas in this regard.
Besides these endeavours, I’m just trying to chill out on the subject of money as best I can. Preoccupying every waking moment with financial stress is not healthy, especially when it starts to compromise my sleep and my free time.
Of course I was joking at the outset of this post when I suggested that all hobbies which do not generate income must be catapulted into orbit. On the contrary, I’d always recommend maintaining a balance between your side-hustle endeavours and your less lucrative hobbies if the latter make you happy. I’m still practising piano and learning Mandarin, financial anxiety or no.
Obviously, I don’t have all the answers and I’m still at the very start of my journey to developing a worthwhile side income, so I’d love to hear from you in the comments if you share my anxiety about spending money on myself and any steps you have taken to worry less!