92 | Debt as a Family Member

I once had a teacher who said that any customer who makes up 25% of your revenue is a member of your management team and a customer who makes up 50% of revenue is on your board of directors.

This concept captured the hidden costs that often accompany something that seems so good on the surface.

The big contract is awesome in all the ways that you can measure, but it’s often less awesome in the things that are hard to measure.

It seems like debt can play a similar role in our own finances.

The larger it grows the more pull it has on our decisions and the more it begins to resemble an unwelcome advisor or a demanding family member.

Debt can seem so innocent and convenient until you realize that you’re the only person that can make it go away.

Debt has a way of calcifying a certain level of income as the only one that can work for a household.

Debt loves to see the future self footing the bill for the past self.

Debt has a way of delaying plans or completely eliminating the opportunity to pursue something unique, new, or different.

Debt has a way of making peace, contentment, security, and flexibility seem always out of reach.

Debt has a way of snuffing out dreams before they’ve even crossed your mind.

Debt has a way of looking your good idea right in the eye and saying “Nice try, but I don’t think so.”

Debt is tricky because it’s a useful tool all the way up to the point that it grabs the pen and starts writing a different story than the one we would write for ourselves.

60 | It’s Just Not That Simple

The advice is simple - spend less than you make.

But it's just not that simple.

Time and time again we get confused and that relationship becomes harder to keep tabs on than we ever imagined.

All the "one time" things make it tricky, because we don't want to count the car repair or the vacation or the medical bill in our "normal spending".

If we've built up some amount of cash on hand, it's tricky to tell if the dollars spent came out of our paycheck or our savings account.

If we use debt, it's tricky because in spirit we've "spent" the full amount of the loan, but the monthly payments make it seem like we've spent much less.

If we use a credit card, the moment we've swiped the card the dollars are spent, but the statement 30 or 45 days later makes it seem like the swipe wasn't the real decision to spend.

If we receive a gift and spend it, it's tricky because there's a chance that we've increased our baseline spending expectation without the promise of a repeat gift.

The trouble is that even a simple financial household with one or two of these nuances makes it difficult for most folks to know how much they spend.

Because we assume that everyone knows how much they spend (they don't!), spending advice quickly gets reduced to categorizing transactions and the level of engagement for non-CPA- and non-engineer-types plummets to zero.

Instead, start with figuring out how much you spend.

That's it. Nothing else.

That alone will put you ahead of most of the population.

There's too much emotion tied to the categories, particularly if you're leaning into the exercise for the first time.

When we reduce it to the numbers, we temporarily take the emotion and personal preferences out of the "quality" of the spending that is or isn't happening.

Even the least financially savvy person knows that you can't spend more than you make forever, but too many spending conversations get stuck debating the merits of individual categories that we lose track of the bigger picture.

The reality is that if you don't know how much you spend, then you don't have a prayer of determining how much is enough.

Don't worry about the categories until you know how much.

59 | “Give Until It Hurts” is Bad Advice

It's too abstract.

It ignores the nuance of people's life experience and unique personality.

It ignores the nuance of different types of resources.

It lets some people with a low bar for "what hurts" off the hook.

It drives others with a high bar for "what hurts" into tough spots.

It's impossible to create any kind of accountability.

It pretends like it's black and white, and once "it hurts" you have arrived at a state of enlightenment.

The reality is that it's a lot grayer than that.

I think there are two spectrums that begin to provide some direction for where we're trying to go.

The first has to do with the resources that are being released or given away.

Relatively speaking, time and talents are typically easier to give away than financial resources.

Some percentage of your income (purple) is harder.

Some portion of what you have accumulated in cash, investments, and real estate (blue, gray, and yellow) is even harder.

With each step, you're releasing more power, control, discretion, authority, and optionality to someone else and that is a hard thing for most humans to do.

The second has to do with where or with whom the released resources land.

*This feels more personal to a person's specific worldview and faith convictions, but I am using our own personal Christian faith as the basis for this spectrum.*

Relatively speaking, releasing resources to your own personal interests is the lowest level of engagement or "others-centeredness”.

Giving that contributes to the common, social, or cultural good is a higher level of "others-centeredness".

Giving that reallocates financial wealth and repairs relationships with the most vulnerable members of our society is the highest level of "others-centeredness”. We typically view our traditional tithe as a component of this category.

Personally speaking, our aim with our finances is to continually move up each spectrum over our lifetime keeping in mind that...

Giving before death is greater than giving after death for refining our own relationship with money.

Giving relative to our own level of financial wealth is greater than the absolute amount of the gift for our own relationship with money.

My hope and belief are that this framework allows us to participate in the redemption of all things, refines our heart to be more like it was created to be, and in turn, plays a role in helping us clarify and discover "how much is enough".

Thanks to CC for helping clarify these thoughts!

48 | Pricing Land Mines

I took our two older kids to the movies for the first time. We ate more popcorn and drank more Sprite than we ever would at home. We experienced the magic of watching a movie in a theater. We took a picture beside the cut outs in the lobby. We had a shared experience that all three of us added to our memory buckets.

It doesn't really matter if the popcorn was $5 or $15 or $30 of the $45 that we spent for the experience.

The funny thing is that it's easier to say that than it can be to actually feel that way.

It's all too easy to focus on the specific price because it's easy to measure, while appreciating the general value is harder because it's impossible to measure.

Movies aren't the only place it's easy to get stuck on the price. There are little "pricing land mines" everywhere that can ruin an experience if we don't maneuver around them or disarm them ASAP.

A professional sporting event costs $20 to get in and sells a beer for $15. How different would it feel if you paid $35 at the door and received a free beer ticket?

An online retail item costs $70 and then on the next screen you realize that shipping costs another $10. How different would it feel if the list price was $80 and there was free shipping?

A hotel costs $300 for a night and then charges $30 for self-parking on-site. How different would it feel if the room cost $330 and the parking was complimentary?

It's hard to recognize when you might step on a "pricing land mine" until it has already exploded.

A few ways to navigate them are...

Observing how often you or someone you're around talks about the specific price of things - notice whether it emphasizes the price or the value received.

Zooming out and describing the experience as a whole instead of the individual components. Name the value of the things that you're getting - they're not always obvious and they are different for everyone.

Acknowledging that the "whats" are much easier to discuss than the "whys", but the "whys" are what actually drive contentment. Name the "whys" behind the decision to spend in the first place.

Remembering that someone else's price doesn't have to change your experience.

27 | Homebuying Series: The Features Always Sound Good

The features always sound good - a two-car garage, ample storage space, beautiful landscaping, extra bedrooms, etc. will sound convenient and comfortable to many people.

Zillow is going to highlight each of these wonderful features too.

In a sneaky way, this begs us to use the "features" to establish our preferences instead of establishing our preferences to evaluate the "features".

"This house has a beautiful front porch that might increase the chance we meet some neighbors" is wildly different from "We desire to rub shoulders with our neighbors on a daily basis, so we will look for a house that has a front porch”.

“This house has a large yard that will give our kids a chance to play outside" is wildly different from "We want our children to learn to play and enjoy outdoor spaces, so we will look for houses with large yards”.

"This house has tons of storage space that will be great to have in case we need it" is wildly different from "We need extra space to store things that are critical to our current and future well-being, so we will look for a house that has plenty of storage space”.

This might seem like splitting hairs, but when the house in reality is inevitably different from what it was in theory, the difference in intention dramatically impacts the odds of experiencing lasting contentment or lingering regret.

Simon Sinek says it in relation to business, but I think it applies to the modern-day homebuying experience too...

When you have a clear sense of your "why", you tend to ignore all the distracting features. When you have a fuzzy sense of your "why", you tend to obsess over all the features.

26 | Homebuying Series: The Discipline of Renting

I once heard someone say, "There are two forms of pain: discipline and regret. You get to pick one!"

To be clear, if we're searching for a home to purchase, "privilege" is a more accurate descriptor than "pain". With that said, I think the discipline/regret concept still applies to renting before buying in a new city.

Both times we have moved, we've rented for 9 to 12 months before landing in our first home in a "new" city. Ironically, my wife and I actually grew up in the two cities where we have moved!

I've heard other friends take a similar approach and say things like...

"I never knew that neighborhood existed and I grew up in this city."

"We've been able to see where our closest community actually lives and decide to find a home closer to them."

"We realized that there are a few wonderful neighborhoods that put a lot less strain on our finances than where we were initially looking."

---

As painful as it is to delay feeling settled in a home, this "pain" pales in comparison to settling in the wrong home.

As painful as it is to "move twice", this "pain" pales in comparison to moving once and second-guessing your decision until you move again.

As painful as it is to live in a "less-than-ideal neighborhood" for a year or two, this "pain" pales in comparison to locking in a mortgage in the wrong neighborhood.

As painful as it is to meet people while living in a temporary location, this "pain" pales in comparison to having your home limit who you will meet.

As painful as it is to "throw money down the drain" with a rent payment, this "pain" pales in comparison to building equity in a home that doesn't match the life you want to lead.

Because of the taboo nature of money and our feelings towards money, I suspect there are plenty of people who feel the regret side of all of these examples, but struggle to name it and certainly struggle to share it.

Renting doesn’t mean you can’t afford a home and I don't think it means your unsettled either.

In a sneaky way, renting buys time, options, and flexibility that ensure we're making decisions about our money instead of money (and our home purchase!) making our decisions for us.

24 | Homebuying Series: Zillow is Not Your Friend

Comedy is both useful and funny because it says things that can be incredibly challenging to say without humor.

Thanks to Saturday Night Live, the following video probably communicates enough on its own. Please note this video could be offensive to some people and perceived as NSFW.

Browsing Zillow, particularly if you’re not actually on a house hunt or haven’t defined what you’re looking for, is a slippery slope when it comes to our collective relationships with money and contentment.

Browser beware!

23 | Homebuying Series: Hospitality 101

My wife came across this incredible reflection on using a home and caring for others.

When someone leaves your home, will they feel better or worse about themselves?

This feels like a good litmus test for whether your home is an avenue for friendship or a barrier to friendship.

22 | Homebuying Series: Trading Floor Space for Friendship

“If you have a crisis in your life, you'll notice something. It won't be your Twitter followers who come to sit with you. It won't be your Facebook friends who help you turn it round. It'll be your flesh and blood friends who you have deep and nuanced and textured, face-to-face relationships with, and there's a study I learned about from Bill McKibben, the environmental writer, that I think tells us a lot about this. It looked at the number of close friends the average American believes they can call on in a crisis.That number has been declining steadily since the 1950s. The amount of floor space an individual has in their home has been steadily increasing, and I think that's like a metaphor for the choice we've made as a culture. We've traded floorspace for friends, we've traded stuff for connections, and the result is we are one of the loneliest societies there has ever been.” -Excerpt from this Ted Talk by Johann Hari

This felt heavy the first time I heard it, but if you look around, I think you might notice it too.

There are a bunch of big homes and there are a bunch of lonely people.

I don't believe this is a condemnation of big homes and I don't believe home size explains loneliness.

I do think it is a call to acknowledge that floor space does not correlate with quantity or depth of relationships and that the allure of a bigger home isn't always what it's cracked up to be.

A pastor friend of mine has observed a similar patter in countless families "searching for more space". Moves away from a specific neighborhood or community in search of square footage that have led to some mixture of increased loneliness, anxiety, and regret.

Because I want to be clear, I'll say it again - I don't believe this means big homes are bad and small homes are good, but double or triple checking our priorities with a home decision feels uber-critical.

If floor space is the primary driver behind a home decision, it might be a red flag worth noticing.

Instead of laboring over the ideal amount of floor space and how you'll use it, maybe time is better spent evaluating whether your home is an avenue for friendship or a barrier to friendship.

21 | Homebuying Series: 1 decision that makes 1,000 decisions

I first came across the concept of "1 decision that makes 1,000 decisions" reading the book Essentialism: The Disciplined Pursuit of Less by Greg McKeown.

I think there are at least two sides to this concept when it comes to buying a home.

The first side is related to relationships.

The proximity and convenience of interacting with neighbors is hard to beat and hard to avoid.

Whether you’re leaving in the morning, coming home in the evening, going for a walk, playing at the local park, or sitting on your porch, you’re going to see one another living ordinary, daily life.

Your neighbors will rub off on you in more ways than you can imagine – how they interact with you and others, how they spend money, where they go to school, and on and on.

Locking in one decision on a home is like locking in 1,000 decisions on who will influence your ordinary, daily life.

The second side is related to financial freedom and flexibility.

A house is one of a few big-ticket spending items that actually moves the needle on household cash flow.

For every $50,000 spent on a home, there are 10,000 lattes or 500 date nights or 100 UNC-Duke games or 50 weekend getaways or 5 trips of a lifetime that could be pursued instead.

I realize I am not accounting for financing a house over 30 years or the interest paid or the tax deduction. Please forgive me.

I don’t think that changes the point – one $50,000 decision on a home can be responsible for an abundance or scarcity mindset on 1,000 other decisions that add the color to life.

20 | Homebuying Series: The Myth of the “Perfect” Home

I don’t think it is possible to find a perfect home. I think homes begin to feel special, unique, and have hints of “perfection” after you have lived in them for many years and decades.

The attributes of a “perfect” home are not the features of the structure – the Instagram-able kitchen or master bath or the landscaped yard.

Beyond a relatively basic level of size and comfort, the attributes of a “perfect” home are only the memories that are created and the relationships that are nurtured within the home.

Social media, magazines, and people around us lead us to believe that the features enhance or accentuate memories and relationships, but I just don’t think that’s true.

If it were true, the people with the nicest homes would have the best memories, the healthiest relationships, and the most contentment. I don’t think it takes long to notice that this isn’t the case.

Think about it for yourself - are your fondest life memories and most formative experiences a result of the luxuriousness of the physical location where they happened?

7 | My Least Popular Belief

This won't be my most popular post, but it's still important to say out loud every so often so we keep ourselves honest.

Most (I want to say all!) personal finance tactics pale in comparison to having some way to consistently track your spending.

As a matter of fact, I think the other tactics are primarily trying to accommodate the fact that as humans we refuse to reflect on our spending.

Enormous levels of income can mask this reality for some period. Enormous levels of financial wealth can likely delay it a little longer, but eventually the conversation will end up in one of two places.

A question of viability - where's the money going?

Or a question of contentment - is the money going where you want it to go?

Honestly, I think this is a good thing, even if it doesn't seem like it on the surface.

I don't think we will ever define our lives by how much we earned or where we saved or how we invested.

I think our financial lives get defined by how we spend what has been earned, saved, and invested.

All the colorful pieces of life come back to the quality of our spending and yet we still avoid talking about or tracking our spending like it's the plague.

The very thing with the most impact is constantly pushed to the bottom of the list because it's too complicated and too hard.

The fact that it's hard and that most people don't do it might be a pretty good indicator that figuring it out is the secret.

Additional Resources

The Biggest Returns by Morgan Housel

Budgeting Equals Awareness by Carl Richards

Accounting (and small business) by Seth Godin

Intentional Observers instead of Anxious Critics

Recently, in a conversation with close friends, we got to the topic of finances.

The question was posed, "How do you make intentional decisions about your money?"

Maybe the question was too open-ended. Maybe we jumped at the opportunity to hear ourselves talk. Maybe we thought we knew more than we did.

It felt like we rambled for 30 minutes and by the end arrived at a point where tactical takeaways were the "solution".

Review the budget more closely. Give money away. Have an annual retreat to reflect on the past and craft the future. Ensure we're saving to some degree.

Nothing was inherently wrong with any of these takeaways, but each felt sort of abstract, stale, and aimless.

After a couple of days, I circled back via email to acknowledge my discontentment with how the conversation went. I clarified that doubling down on tactics was not the takeaway I envisioned from the conversation and concluded with...

"I think identifying, reflecting, and refining our “whys” over time is what we are trying to get better at doing."

With the help of our friends, the beauty of this framework was quickly revealed...

It provides freedom. Your whys can and will change over time and that is OK.

It provides an intentional and simple start. You can identify a single "why" and then refine it with time. Then apply the same framework to your second, third, and one hundredth "why".

It provides feedback. If you've been specific with your "why", it's easier to know when it is or is not being accomplished. It's also easier to realize that it has changed.

It fosters connection by allowing us to reflect on what matters to us and to those around us.

It helps establish values without using the word "value".

It helps us become "intentional observers" instead of "anxious critics" of ourselves.

Thanks to CB and KB for helping us connect the dots!

Love Letters to my Future Self: Why a 2022 RAV4 Hybrid XLE Premium?

Why RAV4?

• We have had great success with both Toyota and Honda over the last 10 to 12 years. Both of our extended families have experienced similar success. This filtered out a number of car options as we really didn't look beyond these two brands with the exception of gut checks to ensure other brands did not offer something dramatically different. Limiting the brands from the start, felt like it saved significant time in the evaluation process.
• Allen at TLC has been a trusted mechanic for the past 4 years and he only works on Toyota and Lexus cars. This all but eliminated Honda from contention for us.
• We liked the design of the RAV4. It is a good looking car and popular on the streets in 2022. Of course, since we decided to look for a RAV4 it seems like it has been the most frequently spotted car on the road.
• The size felt like it closely resembled our existing 2004 Highlander which has served us well as mid-size SUV for transporting a handful of people and surprisingly large amounts of boxes or furniture for moves or big purchases.
• The current Highlander feels like it is bigger than we need and the price tag was a lot more than we hoped to spend.
• The current Camry costs a little less than the RAV4, but not so much less that it convinced us to get a sedan over a mid-size SUV.

Why hybrid?

• The markup for a hybrid was ~$2,500. We were not strongly considering a hybrid until we saw what we felt was an immaterial markup.
• Part of our decision was a values-based decision of trying to be more conscious of gas consumption for environmental reasons
• Part of our decision was knowing that it would reduce the amount of gas paid for in our ongoing household budget
• In a conversation with Allen, our trusted independent mechanic at TLC, he acknowledged being hesitant to get a hybrid due to the maintenance costs on the latter half of a car's life (i.e. a hybrid battery currently costs ~$6,000 and is likely replaced somewhere between 10 and 15 years of ownership
• All things considered, we felt comfortable going hybrid knowing that we were controlling our ongoing cost of gas consumption and may or may not have maintenance costs late in life that might offset some of these cost savings. It also felt silly to save $2,500 today and then have a gas only car for the next 12 to 15 years. We are at a point in time where it feels like hybrid and electric must and will become more prevalent over the next decade.

Why XLE Premium?

• Primarily for the leather seats.
• There are a number of other convenient features that come with it, but the difference in models was relatively nominal for each level up and the leather seats were not a default option until the XLE Premium level.
• We have become a little self-conscious of the state of the fabric seats in our 2004 Highlander (i.e. stains, odor, stickiness, etc.) and felt like leather seats would be a significant value added throughout the entire life of the car.
• Ironically, the first evening I drove the car home, the kids were waiting out front to see me pull up. Excitedly, they hopped in the backseat to check it out for the first time. After a few minutes, we realized Charlie had a stubbed toe that was bleeding and leaving multiple blood spots on one of the backseats - with a wet paper towel it all disappeared!

Why new and not used?

• As absurd as it sounds, new cars are currently less expensive than used cars. Due to supply chain issues, new cars are typically taking 2 to 3 months to be delivered, while a limited number of used cars are available immediately if you can find them.
• It seems that another contributing factor is that manufacturers place a limit on the price that a new car can be sold for, but there is no limit on the price for a used car. It seems like dealerships would prefer to sell used cars more than new cars right now because they can charge based on demand instead of based on pricing rules.

Why now?

• Our 2004 Highlander has an active leak that we addressed 4+ years ago. Allen at TLC said it probably was not the kind of thing that would be worth fixing at this stage of the car's life. It is actively leaking transmission fluid, power steering fluid, and some oil. He suggested limiting the car's usage to daily commuting only. Since the recommendation, we have tried to limit but inevitably have needed the car to drive longer distances and this has started to feel a bit reckless from a safety standpoint.
• We have known the date to purchase a new car has been coming and 4 years ago would have been elated for it to last 3+ more years.
• Once the purchase felt imminent (i.e. within the next 6 to 12 months), the only reason to delay the purchase was to speculate/hope that car prices might go down or that we could wait out the crazy car market - when money is the only variable impacting the decision, it's good sign to think a little harder!
• We realized, though this was not a reason for the decision, that this car could end up being a great first car for our kids to drive. Sara Brooke will be 16 years old in 10 years. We would hope that this car could last well beyond that point in time even if it required some investment at that stage of its life. Ironically, the first night we had it at home, Sara Brooke said, "Daddy, I want to drive this car when I grow up!"

Why financed and not 100% cash?

• We have historically had a strong preference towards paying cash for cars. We have even referred to the ~$60k to ~$65k of cash that we have on hand as covering our emergency/opportunity fund as well as a car purchase in the next couple of years.
• Over the past 6 months, the possibility of starting a financial coaching/planning business on our own over the next 18 to 24 months has become much more likely than before. This has led to us wanting to build up cash on hand to be able to fund and manage the first few years of starting a business.
• Currently most of our traditional investments are down 25% to 30% from their most recent peaks in Summer 2021. We wanted to leave these investments, specifically our taxable account, alone so that they could recover and grow instead of selling them at depressed values and having $40,000 no longer invested for growth. We discussed using both cash flow surplus and even investment dividends or gains over the next couple of years to accelerate the repayment on the loan.
• Some part of me wanted to experience financing a car (and to some degree purchasing a new one!) to be able to relate to other friends and clients who finance their cars and to have firsthand experience both with financing and paying cash for cars as well as buying used and new cars.

In the end, when it comes to finances, our goal is to make many good decisions and not get lost trying to make perfect decisions. It feels like we have accomplished that goal with this purchase.