The Life-Changing Magic of Saving Up

Photo by Michael Longmire on Unsplash

I’ve always been careful with money. It just fits my ethos. I’m an optimizer (at times to a fault) and good value genuinely brings me joy. Anyone who’s seen my eyes light up at the mention of free food can attest to this.

Where did this perspective come from?

This one’s simple — it’s how I was raised. Like most Americans who were raised by first-generation immigrants, being smart with your money was a matter of survival. Gratefully, I never had to worry about food on the table or a roof over my head. We had what we needed, but I almost always had to wait for anything that wasn’t related to nourishment or education.

How do I go about saving?

I follow a basic set of principles:

• Start early. I started investing early because I became financially literate early. My sister recommended reading I Will Teach You to Be Rich, which quickly whipped my financials into shape. Time does amazing things to money. As Albert Einstein supposedly said: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”
• Trim the fat. I don’t buy what I don’t need. And when I do need something, I look for a deal. Don’t get me wrong, I’m happy to invest in quality that lasts. But I’m not the kind of person that typically cares about new, luxury, or brand-name.
• Set and forget. I check my finances every two weeks to review transactions, pay bills, and allocate money across savings and investment accounts. I have a target allocation plan and it usually takes me 30 minutes to execute on it. I spend far more time following and buying individual stocks because I like being invested, so to say, in businesses I like. I don’t do it because I think I can get better returns — I won’t. Random darts and monkeys can do better than me.
• Diversify. I spread out my investments across various domestic and international asset classes: stocks, real estate, bonds, digital currencies, etc. ETFs and index funds are my best friends in hedging risk and maintaining upside.

A couple pitfalls to be mindful of:

• Be smart, not cheap. Early on, I learned the hard way that tradeoffs that come natural to me can easily be viewed as cheap by others. Be generous to and with others.
• Spend money to make money. Working at a startup taught me this. In my personal life, I don’t want to be viewed as cheap. Well, a startup doesn’t care about looking cheap. It’s worried about something far more consequential — life and death. Most startups live or die based on their ability to move fast and find product market fit. Saving time, accessing expertise, or making our customers happy is almost always a small price pay.

What am I really saving for?

Outside of the fact that I deeply enjoy this optimization problem, I do save money for a reason:

• Afford anything I could ever need or want. I think this would be a relatively modest sum to support a family, live comfortably, fully enjoy hobbies, and treat my friends.
• Help my parents live in comfort. They made sacrifices and worked so hard to study, work, and raise a family after immigrating to the US. They deserve to spend everything they earned, and then some. My dad recently said something that really stuck with me. He said it in Mandarin, but it effectively translates to: “It’s better to go to your grave without a penny to your name.” In the context of the conversation, it was a joke. But inside, I thought, “Amen”.