A letter to my 18 year old self

Listen to this post using this link: https://anchor.fm/sean-guerrero-mccormick/episodes/Season-1–Episode-1-A-letter-to-my-18-year-old-self-e4opnh

Sean,

Young Sean gazing into his future.

Greetings from the dawn of your thirties. You’ve got 10 East Coast winters, 8 years of college, and 1 wedding to plan before we meet, but I’d like to share some suggestions that will deepen your pockets and expand your perspective before that day arrives. These next twelve years will be the best of times and the worst of times: you will have a beautiful daughter and lose your godfather; you will marry the woman of your dreams and watch your parents slowly separate; through all of it, you will transform from boy to man, and it is my hope that I can make this journey a little easier and more rewarding.

And hey, you’ve got a lot to look forward to. You own a 3 bedroom home in Sonoma County; you were just invited to play in an adult basketball league in San Quentin with Matt; you make a fresh Americano every morning using your Breville machine that Mom gave you…life is good.

For reasons beyond me, you are going to work very hard for your money for the next 9 years. From spending the summer in Alaska power washing a 200 foot deck and running errands for wealthy guests, to working overnights at Sullivan Street Bakery in Hell’s Kitchen, you will be like the Saints of old lashing their backs to find meaning and purpose. I’m here to let you know, it doesn’t have to be this way. Let your money work hard while you take it easy and not the opposite. I’m not saying be lazy; rather, take that management position at Sullivan Street Bakery when George offers it to you. And before that, take a teaching methods class at City College and become a teacher right out the graduation gate.

Nine years into your journey to meet me, the light bulb really goes off when Mom sends you that article from Money Magazine about Vicki Robinson. Vicki’s story, about buying a duplex and paying off her mortgage with her rental income, while conveniently living rent-free, comes at the zenith of your frustration. You’ve just been evicted from your apartment in Buffalo and are seeking a new place to live, without a vehicle to facilitate the search. You’ve become tired of the nobility of poverty narrative that somehow infiltrated your mind, and you are ripe for change.

Now, I’m really hoping this letter does not have some unforeseen consequences like in the Butterfly Effect, but nevertheless here are my recommendations:

First, you need to use your creative genius to save at least 10% of your income, every single month. By the time you finish college in 2012, you will have $42,410.00 of taxed social security earnings on record, yet less than $1000 to your name. With the same industry of spirit that led you to scan the walls of your college’s halls for scholarship offers and apply for every one that you were eligible for, figure out a way to save as much of that $42,410.00 as you can. This starts with learning how to track your income and expenses.

To do this, identify exactly how much income you bring to the table each month, and how much you are spending. Anything that is left over, ask Mom to show you how to invest in an index fund. She’ll want you to buy Apple, so do a little bit of that, but with the rest, go for a boring index fund like the Schwab 1000. If you really want to play your cards right, save up all your left over income, then wait until the stock market drops to its nadir on March 6, 2009 and invest everything in that index fund. Like Andrew told you, “When there is blood in the streets, that is when you buy.”

Next, focus on increasing your income. Learning how to leverage your unique talents for profit is one of the most intelligent, creative and fun things you can do. It doesn’t mean your a sell-out; it means you understand how to see things from the perspective of others and provide a meaningful service or product. You could start a tutoring business by posting on Craigslist; do informational interviews with authors, speech writers, and screen writers to learn about how they arrived at where they are at. Find stories of people who inspire you and figure out what steps you can take to move the ball forward in your own life.

And just for fun, don’t quit the City College basketball team. I know it sucks to get made fun of by your teammates, but you are a freshman in college and that is what happens. They aren’t hazing you and you do not need to take it personally. In this case, take it as a sign that they like you and you need to earn your spot in the lineup. And I acknowledge, it is a new feeling to be the only white kid on the team, however it is a vital opportunity for you to experience a minuscule fraction of what people of color feel like everyday. Learning how to move beyond your feelings and look at outcomes is going to be a big challenge for you.

I can’t wait to meet you! You have so many good things going. You’re curious, you’re in love, and you do so many things right. Stick with the Bronx Budgeteer, invest in your education and index funds, and don’t take anything personally. You are your own man.

With love,

Sean.

The unassuming power of the carpool: part 1

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20190204_073926Its 2019 in the Bay Area. Everyday, two southbound lanes of highway from Sonoma County hemorrhage out hundreds of thousands of commuters into the expansive Golden Gate. Like the opening scene in Office Space, thousands of commuters inch forward toward their destination, occupying themselves with podcasts, cigarettes, road rage, or whatever else fills that tiny space between bumpers. 

Amidst this Sisyphean slog, my co-worker and I maintain a travelling speed between 50 and 60 miles per hour, discussing what choice cuts of beef we will purchase from Coscto following the work day and how to approach different issues that naturally arise in the work place. 

But how did you gain the privilege of bypassing our fellow commuters? Were you born of noble blood? Or did you gain this power through surreptitious means? My answer to your inquisition is “neither”. 

To gain this unique privilege, all we had to do was the absolute unthinkable — commit to sharing our private resources for the mutual benefit of each other’s pocket book (and the larger environment). 

Here is how I did it.

When I caught wind that my colleague, Ben, also lived in Petaluma, I approached him and proposed the idea. We agreed to switch driving each day and what benefits we have enjoyed. Let me share them with you: 

Primarily, the carpool lane shaves off a minimum of fifteen minutes from my journey to work, but more closer to 25 to 35 minutes on most days. Because Google Maps has yet to find a way to account for the carpool lane, when says it takes 50 minutes to get to work, my co-worker and I usually arrive in 35 minutes. At minimum, let’s say that I am saving 20 minutes a day by carpooling (15 minutes southbound, 5 minutes northbound). 20 minutes multiplied by 20 work days equals 400 minutes per month. 

400 minutes divided by 60 minutes = 6.67 hours. 

That’s 6.67 hours of my life I just clawed back from the system to move me closer to my goal of financial freed. Time is money and I aim to take full control of my time in the coming years. 

Second, my gas bill has literally been sawed in half. I’m talking a rusty, back and forth, obliteration of my gas bill, turning that thing into straight confetti. Let’s break this savings down into the numbers: 

  1. To determine how much gas I used for work:
    I used Google Maps to calculate the number of miles it is from my house to work (25 miles) and multiplied this times two for my commute home from work. 
  2. Next, I Googled, “2007 Toyota corolla fuel efficiency for highway traffic” and found out it is 37 mpg. 
  3. I then Googled, “What is the average price of gasoline in California?” and found out it is $3.16. 
  4. I punched all that information into this fuel cost calculator 

And from this process I learned that “This trip will require 1.47 gallons of gas, which amounts to a fuel cost of $4.65.”

My daily fuel cost of driving to and from work is $4.65 and I drive to work on average 20 days each month.

20 days x $4.65 = $93 dollars a month in fuel 

And since Ben drives every other day, I am now only spending half that $93, which is about $46.50 a month on gas. 

But wait, what about the cost of wear and tear to your vehicle? Driving everyday, working that engine, starting and stopping for 100 minutes, and going over potholes here and there has to cost something. Luckily there is a website dedicated to evaluating those costs.

I punched in all my data again and came up with a monthly cost of $241.08 for the wear and tear on my vehicle. Once again, I grab that monthly cost, set it on the chopping block in my back yard, and BAM! 

Now my wear and tear expense when carpooling are $120.54

So as you can see, I just reduced my commuting expenses from $334.08 a month for 10 months a year (teachers have a 2 month convalescent period to regain their grip on life), to $167.04 a month. 

For the ten-month school year it went from $3,340.08 to $1670.40 per year. 

And for the big picture planning, I will invest that $1670.40 I am no longer spending (but had account for in my budget) into my SWTSX fund. SWTSX has a historical 15 year average rate of return of 8.4%. I’ll continue to dump a monthly contribution of that $1670.40 into SWTSX each month for the next 15 years (when $1670.40 is divided by 12 months, it comes out to $139.20 per month). 

Using a simple compound interest calculator to see what I have after 15 years of my initial $1670.40 contribution with $139.20 a month after that, and I will have $52,392.88 in 2034. 

chart

Action step: Ask a trusted co-worker if they know anyone who commutes from where you live to the same working location.