Just when the tech market was coming off of the virus high in 2022, I was entering the final phase of compensation discussion with my soon-to-be employer. We ended up with a number we were both satisfied with, and it was on! I was feeling good, and celebrated quite well with my family. First few months at the new job were great, the honeymoon phase went just as expected. Unfortunately, the tech giants started laying folks off left and right soon after that. Looking back, I'm quite impressed with the detachment and indifference I treated these pieces of news with. Why be worried about the neighbourhood burning down if my own house is fine? Soon enough, it was our turn. I'm thankful that I wasn't one of the casualties, but seeing it happen to some of the coworkers was a sobering experience.
I've never been big on finances, since tech pays a lot more than a single guy like me would need to live comfortably. But, this whole fiasco, added to the fact that the "cost optimisation" season is still not over, made sure that this changed. I'm not broke by any sense of the word, but that can change really quickly if this steady stream of cash stops coming in every month. It won't be the end of the world to me, but I'd much rather not bother my parents financially this close to retirement. I had to make myself financially secure, fast. So, I went to my favourite source of information - Youtube.
Going through finance youtube, my formula is quite similar to when I'm eating out. If you're lucky, the food looks nice, and tastes great as well, but you still don't know the quality of the food. Unless it's a live cooking experience, you probably don't get to see the kitchen. The hygiene levels, the ingredient quality and the cooking process are all things you have to estimate for yourself. Now, while this may not be an exact metric, they say that a restaurant's washrooms are generally as clean as their kitchens. Have I conducted an extensive survey to confirm this? Absolutely not! I have neither the time, nor the resources for such a project. But what I do have is common sense, and a couple of logical steps lead me to the conclusion that this sounds just about right. To recreate that logical journey has been left as an exercise to the reader.
Coming back to youtube, if something passes the common sense and logic check, I tentatively accept it and continue. Here's what I have for now -
- Money is value materialised - Why does money exist? I am of the opinion that it's mostly value created for society. Have some goods or services that might prove to be of value to someone? Sell them and get money - a voucher for value in exchange for the value provided. You can use those vouchers to consume something of equal value (considering a fair market) as needed.
- Always have a plan - If you don't know where you're going, you'll end up someplace else. Having a few plans - worst case, best case, and a 'most likely' plan, would do one wonders down the line. Today is probably the best time to start keeping a track of my current position, where I want to reach, and figuring out ways to get there.
- Have an emergency cash fund - A pot of cash you can fall back upon in case of emergencies (like losing your job) is something I doubt anyone can call a bad idea. But how much should this pot hold? There's folks who say it should be 3-6 months of your income, some recommend 6-12 months, and so on.. I personally like the idea of having a solid reserve on which you can survive frugally without breaking any financial commitments like loan payments or your dependant's tuition fees. For how long, you ask? For myself, I've arbitrarily set the number to 6 months, and don't have any arguments other than 'everyone else says 6 months is safe' for the case.
- Debt is not your friend - I've never been fond of debt anyway, and a lot of what I've encountered on youtube seems to agree with me. Just think of it as a sharp knife that you have to flip. If you know what you're doing, you'll probably look cool or intimidating. For an average Joe like me, it's just a ticket to hospital, and nothing else. Do keep a healthy credit score, though.
- Money saved is money earned - I don't need to spend all my earnings the moment I get paid. There's nothing wrong with living a humble lifestyle instead of the wild parties and extravagant trips everyone seems to romanticise. Advertisement industry will obviously try to push you into high spending behaviours, because that's literally their only job. That doesn't bring one happiness, just gives them the stimulus their brains have come to crave. I'll discuss this another time, but I find meditation to be a great medicine for the 'stimulus hunger'. Regardless, rather than throwing away money on things without any real value and then earning it back later, is it not better to just not spend that money?
- Inflation exists - Currencies lose their value, and having all your savings in cash is probably not a good idea. There's multiple asset classes that exist, each with different risk and return rate. There's equity, real estate, bonds, commodities, gold (a commodity still, but in my opinion, big enough to be mentioned separately), digital currencies, and so on. I'm investing mostly in equity right now, but I'm pretty sure reality will slap me in the face in some time and I'll realise there's a much better idea out there. I'll keep you updated when I figure it out.
- Free cheese always leads you into mouse traps - Someone comes to sell me the next big thing - it's got never before seen return rates, practically zero risk, and I'll be doing the environment a big favour by investing in this as well! I'd run as far as possible, because the odds are, it's a big old scam. I'm fine with missing the gravy train once instead of falling victim to 60 such scams hoping for one such thing to come up.
There's a lot more to take away from finance youtube, but we'll talk about that some other time.