The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Deo on October 01, 2015, 02:13:58 PM
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Hello,
I just discovered this blog yesterday and although I'm a little put off by the boastful tone, I have to say that it is the most educational thing I've read in a very very long time!
I would like to ask for some advice on whether or not I should invest some time in learning how to invest my savings. Until now I've been ploughing it all into large mortgage overpayments and am on track to pay off my 25 year mortgage in about 7 years even if my salary remains constant and my wife stops working full time.
A bit about myself (this is an opportunity to get a few things off my chest, so bear with me!):
My parents are basically bankrupt. Despite being massive earners, they are about as far from frugal as can be imagined and have, in my view, made terrible terrible blunders regarding finance at every turn throughout their lives. Ironically, my dad is a Charted Accountant. Despite at one stage earning a combined total of £135k per year (close to $200k), my parents have just been forced to sell up and have just £50k to their names. My dad was diagnosed with Parkinsons disease and has been out of employment for the past 6 years. So, they are hitting 60 and the sum total of their savings is the 50k profit which will go as a deposit on a mortgage that will finish when my mum hits 75.
Within a year of starting my first job (around the time my dad lost his job), I was regularly bailing them out - sometimes as much as £700 a month. My attempts to curb their spending has resulted in my relationship with them breaking down. They still have three pets and indulge in all sorts of luxuries that I wouldn't dream of, despite being on a fraction of my household income. I have literally lost many many nights of sleep, been reduced to tears of frustration (and in some cases, blood-boiling anger) over their choices. A few months ago I discovered that they have had a £10k on a credit card for the past 7 years, and have probably racked up 20k in interest alone. All the money I've ever bailed them out with has basically just been paying off the interest on their credit card. The final straw was this: I had a premonition that they were about to take out a loan for a new car because their old car was costing a fortune to maintain. I had warned them that under no circumstances should they take out a loan, and asked them to talk to me and I would sort something out for them. I had even set aside 5k specifically for this purpose. However, one day I turned up at their house and discovered they had a brand new car. It was a deal costing £20k over 5 years, and was impossible to go back on. I flew into a rage in front of them and in front of my wife, for which I am ashamed. I have since decided to keep them at arms length because of the stress levels they are causing in my life. I have stopped bailing them out in a big way, but I still send them £100 each month. I probably shouldn't, but I love them dearly and I do owe them for an absolutely awesome childhood.
In contrast to my parents, I have always been frugal. Spending money generally makes me miserable. Most of my clothes are second-hand apart from my shoes. The most I have ever spent on a pair of shoes was £60, and that made me feel sick afterwards. I do all the building work in our home: I've installed a new bath, pulled down old ceilings, done the plastering, coving, painting, flooring etc. I'm a Software Engineer yet I haven't upgrade my PC in 6 years (seriously, a 6-year-old PC is absolutely fine for everything apart from top-end-gaming). My only luxury is an expensive gym membership; I have a body-builder physique (my brother is a semi-professional strong-man) and the expensive gym is the only one where the dumbbells go up to 50kg and I can get a decent workout. Okay, I concede that I sound like a boastful and hypocritical dick at this stage, sorry!
I have a fantastic job: I probably earn in the top 2% in the UK and work with amazing people at one of the best tech companies in the UK. I graduated top of the class (well second actually) from one of the best UK universities with a masters in Computer Science. I'm currently the head of a department of around 50 developers at age 30, and I work really hard at being a good leader, though the only thing I consider myself truly exceptional at is programming. In my free time I make computer games - I'm one of the rare engineers that is also blessed with artistic skills. My dream is an "early retirement" in which I have the freedom to do what I love most: being creative and making things. My dream also includes spending time with my wife and the children we plan to have soon. We both dream of going "off the grid" for a few years at some point.
Currently around 65% of what I take home each month goes into the aforementioned mortgage. I deliberately bought a house well below what I could afford on my salary because I'm perfectly comfortable in a smaller house.
Over and above the mortgage, my wife an I have also been saving for our first child. So, in total, I "stash" more than 70% of what I earn each month.
Up until now there hasn't really been a plan, I've just been nuking my mortgage.
There are a few reasons why this has made sense so far:
- I have zero knowledge of the stock market. I enjoy spending my free time making makes which brings me huge amounts of joy and has the real possibility of making money.
- My wife is originally from a country where the culture is such that no one takes out mortgages. You save for stuff and you pay for it. She hates the idea of being hundreds of thousands of pounds in debt, regardless of whether or not it is the norm
- I've seen the disastrous situation my parents have got themselves into, and being mortgage free would be a huge relief for me too.
- My parents are struggling, and some how paying off my mortgage instead of helping them seems "okay" whereas investing in shares seems slightly more morally questionable
All that being said, I've always been an extremely strong mathematician and my dream is to retire early, so I'm keen to do the smart thing.
Given my situation, what would you advise?
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It isn't the norm but I paid my home off entirely before entering the market (except for enough in retirement account to get company match). Full early retirement took almost no time at all since I didn't need to draw enough income to cover a mortgage. This was partly due to an aversion to debt like your SO. But it was also a calculated move as I wanted to be aggressive in the market and would leary while still making payments. Paying off the mortgage was a psychological ploy to stiffen my upper lip.
"Learning about the markets" is largely optional if you just adopt an indexing approach. You don't need to know any specific companies, any accounting, or financial statement analysis. You just make a bet that Western Civilization will not end before you retire.
HTH
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I would like to ask for some advice on whether or not I should invest some time in learning how to invest my savings.
Deo, welcome to the forum.
The short answer is "yes."
To do so, you might start with the following:
http://www.bogleheads.org/wiki/Category:Getting_started
http://jlcollinsnh.com/stock-series/
You should expect to spend hours reading these and other information linked therein, but it also should be time well spent.
For another chunk of time pertinent to your specific investment situation, you could read http://forum.mrmoneymustache.com/real-estate-and-landlording/the-great-'pay-off-mortage'-vs-'invest-in-stocks'-debate-possible-solution/.
Good luck!