Millennial Spotlight: The Best Things in Life Come in Threes – Part 2
For those who did not get a chance to read it or need a quick refresher, please check out Part I.
Riley has graciously come back to continue the story of his financial journey and I will leave him to it:
The first part of my trilogy detailed how my wife and I came to learn about personal finance from our parents and formative experiences.
I went into greater detail about what more she learned during her time in medical school and residency and how this set her on an upward path going forward.
Each of us had the great fortune of having great parents guide us during our early years.
We wouldn’t be half the people we are without them.
She learned the importance of living within her means, managing her use of credit, and investing in her Roth IRA to set herself up for a bright future.
These lessons don’t always come naturally and yet she handled what life threw her way by applying what she knew to her advantage.
In this follow up post, I detail what I’ve learned during my college and graduate school experience and will follow with a final piece about what we have learned together since getting married.
Clearly, the best things in life come in threes.
These posts being no exception.
My Three Financial Lessons Learned in College and Graduate School
1. How to Control My Expenses and Adhere to a Budget
I received a full-ride to attend graduate school as well as compensation from serving as a graduate assistant.
The tuition remission saved me $80,000 of out-of-state tuition and the graduate assistantship stipend provided $8,000 my first year and $8,500 my second.
I topped up both years with some outside scholarships which brought my annual salary close to $13,000 both years.
After taxes, I brought home around $1,000 per month and had monthly living expenses of $800, leaving me with little wiggle room were something to go wrong.
Luckily, I had no car, relied on free public transportation, and walked most places.
I also only had to worry about myself.
I unofficially held my own No Spend Challenge during my two years because I knew I likely didn’t have room in my budget.
With Your Back Against the Wall, You Make Things Work
The best part about this forced frugality is it developed a strong sense of self-responsibility.
I had stepped into my own as an adult by assuming complete responsibility for my own finances.
A cross-country move put me as the only person who would truly look out for me.
My parents offered help when I needed to come home on school breaks, but otherwise, I would avoid asking them for money.
I wanted to use this experience to cultivate myself and trim away any excesses I didn’t absolutely need in my life.
I carried this mentality with me and still practice it to this day.
This required me to quit comparing myself to others who had more money or lived in nicer places.
In school, I had to realize their budget was not mine and yet we would both receive the same quality education.
2. I Am Responsible for My Own Decisions, Including My Own Education
Going into college, I saw myself leaving four years later as an engineer.
Why? Because my dad was an engineer.
However, after a semester of basic coursework, I didn’t feel like the engineering field suited me as a career.
Don’t get me wrong, I enjoy quantitative subjects, math especially, but I don’t know if I see myself designing systems, building structures, or maintaining machines.
I quickly transitioned to history and political science but didn’t find what I was looking for there, either.
I suppose it came to me while sitting in a dingy library basement and hearing a man squawk about the novelty of “faith-based initiatives” in government.
While educational, I doubted this subject matter would get me out of bed in the morning.
Immediately after this class in my course schedule came my Economics 101 course.
A survey class where I found myself reading beyond the assigned chapters and asking many questions of my professor.
A clue, Sherlock, a clue!
This led me to discover the field of economics and eventually finance, my two first loves.
In a way, I suppose I always knew I’d end up there.
I loved numbers and attempting to understand people’s motivations.
I was fortunate to attend schools with formidable programs and challenging coursework.
I can safely say the people I met there and the lessons I learned stick with me to this day.
Somewhere along the way, I suppose I realized how my life resided in my own hands and ultimately, I decide my own fate.
This knowledge added weight to my decisions and still does to this day.
It forces me to pursue things with purpose.
With dedication. With passion.
Inevitably, it allowed me to pick what I wanted to do with my life and it has made a difference ever since.
3. Learning to Distinguish Between My Contributions and the Market’s
You may have heard the phrase, “A rising tide lifts all boats.”
In general, the notion expresses the idea improvements in the general economy (or whatever environment you’re examining) will benefit all participants.
When it comes to investing, everyone stands to make money in a rising market and look like a genius on the ride up.
But when the champagne runs dry, you need to take account of how much responsibility you bear for your returns and the general gift given to you by the market.
When in graduate school, I made some spectacular investments which allowed me to buy my first home with the proceeds.
These returns came early in the current bull market and resulted from learning from my past mistakes.
I used my finance skills developed from my undergraduate coursework to root through the stock market bargain bin and find some diamonds in the rough.
Along the way, I had partly deluded myself into thinking investing was easy.
Old habits die hard.
My gains began to flounder as I moved into different investments and I couldn’t understand why these quality companies stopped providing such amazing performance.
As it turns out, when everything is cheap and valuations are at the bottom of the ocean, it’s important just to catch a fish.
Most any one will do.
If the business can survive the economic downturn and come through healthy on the other side, just buying stock in this company at an attractive valuation will provide wonderful returns.
It’s when you think any quality company will deliver the same outperformance you get into trouble.
I learned during a rising market just buying good things while avoiding bad things can’t be the secret to investing success.
More importantly, investing success requires paying attention to the price you pay.
Stated simply: it’s not what you buy, but what you pay.
There’s no asset that is so good that it can’t become overpriced.
There are few assets which are so bad they can’t be underpriced and become a bargain.
Learning how to manage this dynamic in a rising market is crucial.
Mastering this is the key to investing success.
I learned this lesson (and still am to this day) the hard way.
I mistook my previous performance as entirely a result of skill when in fact, these companies were underpriced and beneficiaries of a rising market.
Some of the stocks I purchased after also benefited from the market’s rising tide, but were overpriced and therefore underperformed.
Learning to distinguish between what you are responsible for and what the market gifts you is a valuable lesson.
I need to remind myself of it when I make investing decisions because being humble quite often leads to success.
Growing Up, One Mistake at a Time
I’m far from perfect.
There’s no sense in denying it because none of us are.
It’s much easier to write about and tell people the best thing to do than it is to follow your own advice.
Of the two of us, my wife has much better intuition.
She has been more consistently prudent in her financial decision-making.
This isn’t to say I’m imprudent.
I have had some wonderful, carefully-weighed decisions benefit me and I try not to take them for granted.
But I would be a fool to deny luck is partly responsible for my success.
My wife successfully manages to avoid making too many mistakes to achieve what she’s earned.
I need to accept her emotional intelligence is at a higher level than mine.
And it may always be.
But what gives me hope is knowing emotional intelligence can be improved through practice and dedication.
My wife does a wonderful job of managing her emotions and I’m so lucky to be able to learn from her.
I can’t express enough how grateful I am to have her support.
It’s cliché, but she makes me a better person.
If you’ve enjoyed the first two parts about each of us, you will enjoy reading more about the financial lessons we’ve learned together.
This third and final piece of the series will discuss how we’ve grown as a couple.
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