Monday, August 12, 2013

My Techie Peers

A fascinating article that came from the fine folks at Reuters was recently brought to my attention and I am giddy with delight to address and unpack the details of this article here on this forum. In summary, the article profiled a specific sect of my fellow Generation Y’ers that have broken the chains of their student loans and kicked Sallie Mae to the curb. But there were a few details within the article that for better or for worse rubbed me in the wrong sort of ways.

Entrepreneurial Spirit

Statistically speaking I absolutely believe that entrepreneurs and small businesses are the back bone of the American economy. These innovative problem solvers bring ideas, concepts and talents to the market place and they can be generously rewarded for their contribution to the economy. But the shape and tone of this article implied that in order to be free of your student loans and to build a path towards financial wealth, that one must be an entrepreneur, specifically in the tech field.

I can confidently report to you that at this point in my life I have not started my own company, I know very little about tech (seriously, I don’t even own a cell phone) and I am not nor have I been a manager for a company like Google. Yet my household was able to pay off $80,000 of student loan debt in 3 years and build a portfolio that currently is in the low six figure range.  While it’s inherently true that if I had created and developed Instagram, then it would have not taken my wife and I 3 years to pay off our student loans, it would have been more like 3 seconds after the sale to Facebook. But you don’t have to be the latest and greatest tech geek to be able to pay off your student loans, I was able to do it by geeking out on by budget, working as much over time as I could,  living on less than I made and my wife selling so much stuff I thought I was next.

Avoiding the stock market like it’s the plague

And this point may not just be true with tech nerds as I anticipate this may be an attitude affliction that has infected many of my peers. The article hinted that many of the entrepreneurs in my age demographic opt instead to re-invest their funds to their own companies or invest in others through mediums such as angel investing. I can understand the artificial reluctance to instinctively avoid the stock market. We came out of college and were greeted with the Great Recession and witnessed our parents/older colleagues/wacky media outlets report that 401ks became 201ks overnight. But in my humble opinion the stark realization that we’ve come to over the last five years that sub-prime lending is stupid is no reason to avoid the stock market and its historically proven track record.

I am aware of my own capabilities and limits. I do not know who will be the next Wal-Mart or Google. But historically proven stock mutual funds give me excellent diversification across different industries and with companies of all sizes all over the world and within the US. My portfolio has been kicking inflation square in the junk and my average annualized returns that flirt with 20% barely bat an eye at being invested in actively managed higher cost funds against low cost passive index funds.

Yes it’s important (and vital) for entrepreneurs to reinvest in your own business, but this angel investing stuff has really gone awry in the last few years and I have a reason to believe Facebook is to blame. Unless you do a thorough bottom to top, top to bottom fundamental analysis of a company, meet its leaders and innovators, have been in the company evaluation business and have successfully done it for several years if not decades and make a well thought through decision after months of meticulous examination, angel investing can be just as bad, if not worse, than trying to invest in penny stocks in the hopes for “brilliant” returns. And yes I groaned out loud when reading about a tech dork that refused and fought his wife on opening a college savings account for his child. ARRGH!


Now this was something I could get behind.

With the exception of intergalactic travel, the message of spending budgeted entertainment cash on experiences such as travel, food and wine definitely resonated with me. Just this past weekend my wife and I spent our weekend taking in the nostalgic 90s rhythms of Wilson Phillips at Market Days (my favorite summer fest in the city), laying on the beach in Edgewater, catching up with friends at church, eating some great Mediterranean food and splurging (dietetically speaking) at George's the best damn ice cream shop on the North Side. And we did all of it while coming under our allotted weekend budget by $60. Experiences, especially in my post debt life, have been the driving force behind a lot of the decisions I make day in and day out as well as for weekends, holidays and vacations. The best part about debt free is being able to set goals like travel in the horizon, save up for a month or two and be able to take that trip/make that experience without batting an eye at the cost.   

So in conclusion I’ll assert this. It takes a ton of work and is really tough to focus in and get gazelle intense to pay off your student loans. Whether you are squeezing your budget, working extra hours or selling everything you can like we did, or if you truly are developing the next Facebook, it takes a ton of work, blood, sweat and tears. But you don’t need to have invented Java or have dropped out of an Ivy league college –started a company and moved to the Silicon Valley – to pay off your student loans and find financial peace. If that was the defining criteria, I for one would never have had the hope I held while climbing out of my self-made mountain of debt.

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