Check out this 26-year-old’s spending in SF

Today I want to show you the surprising CSP from a reader who’s just getting started. Can't view this email properly? [View in Browser]() [Podcast Newsletter Header Final.png]() {NAME}, Today I want to show you the surprising spending — and investing! — from a reader who’s just getting started in their career and living in a very high cost of living area, San Francisco. Let’s see what we can find out below… --------------------------------------------------------------- Surround yourself with top performers There's a famous quote in self-development that goes, "You are the average of the five people you spend time with." It's a fun little quote. Most of us hear it and smile and think, "Oh yeah, that's great." But I’ve found it to be surprisingly true. For the last ~10 years, I’ve been part of a CEO council: Me and 5 other CEOs. We talk on Zoom every 6 weeks and once a year we get together in person to talk about our business and our personal lives. Before this, I was pretty hesitant to join similar groups — they’re a big commitment! But when I met the people in this small group, I could instantly tell these were great people I could learn a lot from — and have a lot of fun with. In these meetings, we challenge each other. We get to talk about something we might be frustrated with. Sometimes we're looking for solutions, sometimes we're just venting. It's made a huge impact on my business. It's incredibly valuable to be able to talk about these issues, which is especially rare for men. And it's made a huge impact on my personal life. Imagine being able to regularly learn from people who are more experienced than you. If you are looking for a group of peers to challenge you, check out this newsletter’s sponsor, [Sidebar](). [Sidebar]() Sidebar is an exclusive, highly curated leadership program where you can tap into a group of supportive peers (think Fortune 500 execs and innovative start-up CEOs) for expert advice, new perspectives, and raw feedback to help you in your professional growth. Members meet with their group of 8-10 people twice a month for 90-minute facilitated sessions and have real-time messaging access to the entire community [Learn how you can get matched with a group of 8-10 peers here.]() --------------------------------------------------------------- Check out the spending of a 26-year-old living in San Francisco What do you think their spending is like? Let’s find out… NET WORTH $ Assets (current value of car, home, property, business) $41,500 Investments (include 401K, non retirement — all investments) $107,662 Savings $21,000 Debt (student loans, credit card debt, mortgage) $11,000 TOTAL NET WORTH $159,562 INCOME Gross monthly income (all income before taxes added up) $8,000 Net monthly income (how much you take home after taxes) $5,500 FIXED COSTS (50-60% of take home) 75% Rent / Mortgage $1,500 Utilities (gas, water, electric, internet, cable, etc.) $120 Insurance (medical, auto, home / renters, etc.) $550 Car Payment / Transportation $435 Debt Payments $170 Groceries $400 Clothes $60 Phone $40 Subscriptions (Netflix, gym membership, meal services, Amazon, etc.) $300 Miscellaneous (automatically adds 15% for things you forgot) $536 FIXED COSTS TOTAL $4,111 INVESTMENTS (10% of take home) 20% Post-Tax Retirement Savings $800 Stocks $300 Add your own here INVESTMENTS TOTAL $1,100 SAVINGS GOALS (5-10% of take home) 7% Vacations $0 Gifts $0 Long Term Emergency Fund $0 Add your own here $400 SAVINGS TOTAL $400 GUILT-FREE SPENDING (20-35% of take home) -2% GUILT-FREE SPENDING TOTAL (Dining out, movies, anything you want!) -$111 My thoughts: Lol at some of the comments you send me - A lot of people ask me to analyze single people’s situations. One person recently left a comment saying, “Do you not value single people??” First, trying to guilt-trip me does not work. I grew up with Indian parents and at 41 years old, I’m literally impervious to some rando’s D+ attempt at guilt-tripping, which cannot hold a candle to an Indian mom’s natural ability. Keep trying for 3 more generations and you might have a chance. - If you’re single and want more help, [grab my book]() or [join my Money Coaching program](). Net worth - OK, this 26-year-old has $41,500 in assets and $107,000 in investments. This is very impressive. I’m guessing they have a high income, but even still that level of investment is surprising at such a young age, especially because they live in a VHCOL city. - Debt is $11,000. Minor and irrelevant, since they could pay it off today if they wanted to. No notes. Income - Income is $8,000/mo?? What? An annual income of $96,000 is not as high as I expected, which makes me wonder how they’ve invested so much. Fixed costs - As expected, living in a VHCOL city has very high expenses (75% Fixed Expenses). - But digging in, housing is quite low (20% of gross) for an expensive city. I typically see 32%, 35%, even 40% (this is very risky). - If housing isn’t that expensive, where is the rest of the money going in Fixed Costs? I see $550 for insurance (fairly pricey, especially for someone young — it’s possible they have special medical needs), then a car payment of $435, then subscriptions, and of course, misc. OK, that’s a lot of expenses that add up. - My assessment so far: Fixed Costs are too high, but they can make a few changes and knock that down to ~63-65%%. Cut the subscriptions, economize on car (take public transportation more and cut gas?), double-check if they can find less expensive insurance, and really dial in the misc expenses. One other thing: Their income will likely go up. If I had the chance to talk to this person, I’d ask how long since they negotiated their salary, what are the possibilities for growth, etc. For example, [here’s a student of mine who recently negotiated a $65,000 raise](). - All of that aside, I’m curious what the rest of the CSP will look like. 75% on Fixed is a lot. Where are they NOT spending? Usually it’s savings/investments, which is a costly mistake. Investments - 20% of net. Wow. This person is aggressive about investing. I admire it! But also, they probably can’t afford this. - I usually recommend investing about 10% of net income to start. I also recommend increasing that number by at least 1% every year. In this person’s case, they’re well above what I recommend. If you can afford it, fantastic. - But I can already tell something won’t fit in the next two categories based on how much they’re spending on Fixed Costs and investing. Saving - 7%. More than I thought considering their income and investment rate. - This tells me that the last section, Guilt-Free Spending, is going to be a disaster. - Let’s look…. Guilt-Free Spending - Uh...wtf? Do you have a life? - This person is spending, investing, and saving so much that they have NEGATIVE 2% EVERY MONTH to spend on anything fun. This is not​​ healthy, to put it bluntly. There are a couple of possibilities. - First, this person is living a monastic life where they commute to work and back ($435/mo), then they cook ramen noodles every single night ($400/mo). The only indulgence they have is buying two low-quality shirts from H&M each month ($60/mo, which should really be part of Guilt-Free Spending) and watching assorted shows in the dark on Netflix (including [my Netflix show, How To Get Rich]()), Hulu, Disney+, and Paramount+ ($300/mo). It's a bit of a dim reality, really. In the meantime, they pat themselves on the back because on a $96,000 salary, they have invested $107,662. Laudable, yes, but not my kind of life. - The second reality is they simply spend a lot more than they're actually recording here and then wonder why they are behind but reassure themselves by logging into their Vanguard account, which provides them a perverse feeling of comfort. Overall thoughts and recommendations - Overall, I'm impressed with this conscious spending plan because this young person has accumulated a considerable amount of investments at a young age. While the Fixed Costs are high, they can make a few changes to get them under control. They are over-investing, which they cannot afford to do, and neglecting covering the basic blocking and tackling of their expenses. - My suggestion: reduce the investments, potentially even reduce the savings in the short term. Pay off the debt (depending on interest rate), cut their expenses as indicated above, focus on earning more money, and build the skill of spending some money on things you enjoy every single month (being 26 and living in a city is an amazing experience you cannot recreate ever again). - The key here is not to invest less and simply spend more indiscriminately. The current CSP is not working as you’re in the red every single month already. This means you have to make a change. Might as well change to get your habits locked in right now, so that as your income increases, you can scale proportionally. - Remember at 26 years old with over $100,000 invested, you are already on a fantastic trajectory to have a lot of money down the road. For now, focus on getting your expenses under control and increasing your income. Nice work. Thanks for writing in. What was your biggest takeaway from this CSP? [Signature] P.S. New podcast: [“We make $245k. Why do I have to ask my wife for dinner money?”]() Brad and Angie, 55 and 56, are planning to buy an RV and tour the country in as little as two years. But with credit card debt, student loans, a HELOC, a mortgage, and only $3,000 saved — can they? [2024-02-24-Podcast-Check out this 26 year old’s spending in SF_Podcast.png]() [Programs]() [Podcast]() [Netflix show]() [Books]() [Website]() [IG]() [in]() [X]() [YT]() Was this forwarded to you? [Sign up here](). [Unsubscribe here](. 548 Market St #89946 San Francisco, CA 94104-5401