Personal Finance Archives

Effective Altruism

As readers of the website might know, I am an avid enthusiast and follower of the FI/RE movement (e.g., Financial Independence, Retire Early). If you want to read more about that, I suggest starting with this article here and follow it up with more of my favorites here.

There has been a complimentary theory that has started to revolutionize charitable giving that many FI/RE proponents have endorsed that is called Effective Altruism. The gist of Effective Altruism is that if you truly believe all lives are equal then you should focus your giving towards having the most impact with regards to saving lives. Oftentimes, this means donating towards health-related organizations that operate in under-developed countries as each donated dollar tends to go farther in those places.

The person most associated with the movement is popular philosopher Peter Singer. He’s written several books about the subject and put on a pretty convincing TED talk which you can watch below:

Singer has also set-up a website at https://www.thelifeyoucansave.org/ that encourages people to pledge towards Effective Altruism and highlights charities that tend to provide the most benefit for the donated dollar. My wife and I chose to donate our funds towards the Fistula Foundation, but you can take a look at other suggested charities here.

If you have the means, I highly encourage doing your own research about effective altruism (that includes reading-up on some of the nay-sayers as well) and come to your own conclusions on how and where to give.

Financial Independence // Mr. Money Mustache Favorites

I haven’t really talked about it much on this site, but I am a strong proponent of the idea of Financial Independence and the notion of retiring early (and by retirement, I don’t necessarily mean sitting on the beach sipping Mai Tai’s all day — more of an idea that you can choose what you want to do and not be beholden to “the man” for a paycheck).

Anyways, one of the most popular of the Financial Independence websites around is Mr. Money Mustache — a part-financial, part-self-help site of Longmont, Colorado resident Pete Adeney (you can read the story of his path to retirement in his early 30s from his post here). Mr. Money Mustache’s tone is definitely direct and to-the-point, but his message is clear and easily understandable to all: spend less than you earn (preferably by large margins), religiously avoid debt (with the possible exception of a mortgage), and save whatever the surplus is in investments which pay a return that will, eventually, cover your modest expenses. Oh yeah, and ditch you car and ride your bike to most places.

I’ve been reading his blog for a few years now — starting from the very beginning of his 400+ posts — and just this past week, I finally got all caught up. Oftentimes, I found myself e-mailing particularly useful posts to myself, amassing a library of about 40 of my favorite reads. They detail topics ranging from discussions on expenses, explanations of investment strategies, and storytelling of poignant life lessons. Below are links to my favorites, categorized by theme.

Reducing Expenses
Free Yourself From Having to Buy People Gifts
Giving Experiences Rather than Things
Great Ideas for (Nearly) Free Toys for Kids
Psychological Effect of New Things
On the Reduction of Cleaning
Changing Mobile Phone Service Plans
AWD Does Not Make You Safer

Generating Income
Culling Possessions and Selling Them Online
Sunk Cost Effect: How If You Wouldn’t Buy It, Sell It

Home Purchase and Improvement
How to Buy a House
How to Sell Your House
The Power of Not Having a Mortgage
On the Use of Air Conditioning
Getting Started with Carpentry
The Efficiency and Savings of Having a Metal Roof

Investment/Market Explanations
Tracking Price to Expense Ratios
Ways to Get Into Retirement Accounts Penalty-Free
Explanation of Managed Payout Funds
Thoughts on Market Cycles with Links to jlcollinsnh Stock Series
Handy Tool to View Market Returns Over Time
Calculating Your Net Worth and Savings Rate
Creative Ways of Giving Money

Life Lessons
The Value of Hard Work
Becoming an Efficient Person
To Achieve Greatness, You Must First Acknowledge that you Suck
Thoughts on How Amazing Current Life Is
If Everyone Followed Financial Independence Principles
The Power of a Reducing your News Consumption
Your Circles of Concern and Control
Why We are Irrational Consumers
Life is Not a Contest
Having Kids: Do Whatever Is Right for You
Getting Your Brain Back, Post-Retirement
What MMM is Teaching His Kid About Money
How Your 20s is the Best Time to Develop Financial Independence Habits
Thoughts on Education
2016 Talk at the World Domination Summit
Money and Confidence are Interchangeable

I know these are a lot of posts, but it’s only a sliver of what you can find on the site. By far, the most helpful ones to consider are the Life Lessons. Becoming Financial Independent is a rewarding journey that allows you to focus in on what really is important to you. For me, time spent with my daughter and wife are leaps and bounds more valuable than time spent in the office: why shouldn’t I try my hardest now to make that an actuality? A by-product of striving for a low consumption life also has the added effect of being great for the world, both from a moral and ecological perspective. Anyways, just some things to consider when evaluating your life and what you want to accomplish with your short time spent on Earth!

Reddit Post // US House of Representatives’ Tax Plan

My Top Reddit Post of All-Time

Funny thing happened earlier this past week: after being a relatively inactive user for the past 9 years, I decided to submit a recent NY Times piece outlining the proposed US House of Representatives’ Tax Plan to one of my favorite subreddits, /r/financialindependence.

Outside of the daily discussion threads, this subreddit’s typical activity is far less than what the 300,000+ subscribes would suggest. So it came as a little bit of a shock that my post garnered so much interest (almost 1000 “upvotes” and just as many comments).

Perusing the comments sections, I helped some people understand the US Tax Code a little bit better and outlined some obvious winners and losers of the proopsed changes. In a nutshell: if your household* taxable income (less your standard pre-tax contributions such as for 401(k) and HSA plans) is around $90,000 — enough to cap out the lowest proposed tax bracket of 12% — , you have children, and you have previously been filing using the standard deduction then, CONGRATULATIONS, you are the biggest winner of the new tax plan.**

As for the losers, if you are a dual-income household who make around $200,000 to $400,000, have children, and have previously heavily itemized, you are the biggest losers and will, most likely, be paying more for taxes. This mostly describes households in high-cost of living areas (California, New York City, etc…) that are traditionally blue-state stalwarts.

Anyways, I highly recommend people who pay taxes educate themselves on how exactly the bulk of the US Tax Code works (if you are a “normal person,” it’s actually not too complicated) and judge for yourself how the proposed changes would affect you.

* This is presuming you are married filing-jointly. If you are an individual, cut the income levels approximately in half for the big winners/losers.

** Note: the top 1% (or more specifically, the top 0.2%) are truly the biggest winners as the estate tax repeal would far exceed any modest benefits the “middle class” would get from the new plan (also the elimination of the Alternative Minimum Tax is a huge benefit to certain wealthy people who make specific types of income).

UIL / TMSCA Auto-Generated Number Sense Test 2 // Future Work

The question pool that my auto-generated Number Sense test relies on has swelled to 1200 questions and is growing at a rate of about 500 questions per week. There might be some weird artifacts — like two Roman Numeral questions or three integral questions within the same exam — but these are attributable to fact that you are randomly selecting problems from the pool and is not indicative of some problem with the program. As a whole, I’d say I am about 90-95% accurate in replicating a competition exam.

Here is the second exam and its answer key. As always, you can find all the practice exams from my repository here.

Currently, the difficultly in the auto-generated tests are comparable to UIL Invitational through District exams. I plan on, separately, creating harder practice tests that replicate Regional and State competitions for those who want more advanced practice. (I didn’t want to discourage novice competitors by incorporating very challenging problems into the question pool that could be randomly incorporated into the practice tests).

As this project moves into the “auto-pilot” phase, I’ve been thinking about what I want to do next. One topic I am very passionate about is personal finance and the journey towards Financial Independence (or more commonly know as FI). One thing that has been helpful to both myself and my friends is a more “real-world” mortgage amortization table that I created which aids a future-homeowner with their decision of finding the right house to buy and the type of loan to buy it with. I’m beginning work on developing python code to generate this table from basic loan/house information as well as output helpful statistics (e.g. the amount of time where a 15-year loan is preferred to a 30-year, assuming a particular market return, etc…).