• Daniel Snitkovskiy

Josh: Know Your Spending and the Power of Saving

Photo by Micheile Henderson on Unsplash

This week we have Josh, who shares his thoughts about saving early and how to think about your expenses so you aren't wasting valuable $$ on things that aren't bringing you value!


Occupation: Software Engineer

Age: 24

Location: San Francisco

Monthly Expenses: Rent, Food, Travel, Cell Phone


Daniel: Could you give the people a quick self-intro?

Josh: I grew up in Toronto and Canada. I went to Waterloo, did a bunch of internships, graduated in 2018, and currently, I'm a software engineer working at a {tech-company} for about two years.

Daniel: So what has life been like post-graduation?

Josh: It's been interesting post-graduation. I think all the challenges change. In school, everything is very well structured where you get told which assignments you have to do when. At work, it's kind of a "Choose Your Own Adventure" and you don't really have to do anything. Outside of work, you get a lot more time, but you also have a lot more responsibilities.

Daniel: Thinking back to college, and maybe even before that, when was the first time you seriously thought about personal finances?

Josh: I think I started using Quicken probably midway through high school to track my spending. Quicken allows you to input transactions and it'll show you categorized spending charts. You can pull analytical data on your spending, basically. And so I was doing all manual entry. I think basically as soon as I got a credit card. As soon as there was a log of my transaction and it wasn't just cash, I was tracking every dollar I spent.

Daniel: What made you get into it tracking your spending so meticulously?

Josh: My dad pushed it from a really young age. It's just like "know where all your money's going" because even though you get rich by making money you really get rich by saving that money. So it's important to understand where you're spending your money. The other thing is, every once in a while you'll catch mistakes and you don't necessarily find them on your credit card statements if you even look at those. I don't think most folks do this these days. You're like "oh I got billed for this thing and it's either a service I forgot to cancel or they double charged me". So it's just good to understand where your money's going and review it and make sure that you actually want to buy those things.

Daniel: Cool, so a big reason is preventing fraud?

Josh: Yeah, I think less about fraud because it's not super common although it is important. It's more just spending responsibly so you don't get a $1,000 credit card bill every month and wonder where all your money is going. The other thing is if you're paying rent out of the checking account and you're paying your credit cards out of your credit card accounts, you got to kind of make sure you always have enough money in the various accounts. Forecasting out bills makes that substantially easier.

Daniel: That makes a lot of sense. Going back to the transition into post-grad, how has your relationship with money changed after you finished college?

Josh: I think the expectation really changes. In college, I wasn't earning a huge amount. I got a decent amount from my internships, but there's also the expectation that most of that is going to go to school and you're going to go out with your friends and have fun and so you don't really expect to come out with much. Now, there's a lot of opportunity to save and so it's important to be smart. Are you going to hit 30 and wonder where all your money's gone? Or are you going to hit 30 and be very comfortable on your path to retirement? And every decision you make affects that.

So it's important to think deeply about "Do you want to spend this money? How is it impacting your future child's college fund? How is it impacting your ability to buy a house?". I mean spend responsibly and you'd be amazed at how far it can take you. And so I think setting aggressive savings goals is important these days because it really matters. I don't fully understand how it will matter in the future, so it feels important to be conservative so that when it does eventually add up and I need whatever I need, I have the money there and don't feel stressed.

Daniel: It seems like a lot of it has to do with financial security. So if anything were to happen, you know you'd be covered!

Josh: Yeah, but these are things you know that are going to happen. Maybe you're going to have kids, maybe you're going to buy a house, maybe you're going to want to travel. You might need to go into a home when you're 65-70. There are a lot of unknowns, but you know you're going to have expenses. So it's better to be ready than not ready. And all it takes is a little discipline to put yourself in a much much better situation.

Daniel: You mentioned setting savings goals. Can you tell me a little bit about your savings goals and what informed how and how much you're saving?

Josh: So really, the opportunity for saving is how much money is actually hitting your bank account from your paycheck. And then how much of that is required expenses. So for example, I kind of assume that my cell phone bill is just not going to get any lower, it's already extremely low. Rent is pretty cheap I'm not going to save anything there.

Daniel: How much do you pay for cellphone and rent?

Josh: I pay $25 a month for cellphone and $1,350 a month for rent. Okay, I live in San Francisco, I don't know, really anyone paying less than I do in rent. So, yeah, I think, those are kind of areas where I decided I have to spend this money, there's no room to shrink that further.

But then, there's eating out where I looked at how much I spent on restaurants, but if I got groceries here's how much it would be. So here's kind of the trade-off I'm making. And so, taking into account all the things you have to spend on and then making aggressive, but reasonable concessions on the things you choose to spend on, you're left with some amount, and then I just set a recurring withdrawal from my checking account. So I basically don't have a choice; I have to hit those savings goals.

I decidedly did not just look at my salary and say "I'm going to keep 75% of it or whatever in savings", because that's just not reasonable. Things come up. I have to go visit family every year and I'm not gonna sacrifice that for savings. I need rent and so looking at my salary was just really not useful in figuring out how much to save. Looking at disposable income was really useful in terms of I could effectively save all of this and so: What am I happy with? What's a good trade-off?

Daniel: How did you get to understand your disposable income?

Josh: So I built a system, sort of like Mint, but I had all my transactions automatically piping into a Google Sheet, and I categorize them. So it's really easy to look back and see, what was I spending money on and tag things as required or not required. A night out at the bar is not required but rent is required. That gave me visibility very quickly into like "Oh yeah I do spend a lot of money on these things and don't really derive much value from them", such as ordering useless stuff off Amazon. Everyone does this but it turns out you can cut a decent amount of spending by just not doing that. Getting food late. Whatever you do that is unnecessary, kind of gaining visibility into it, then you can figure out what you have to spend vs. what you don't.

Daniel: Wow that sounds like a really neat system! Can other people use this?

Yeah, hit up bankhooks.com, you can get webhooks for any financial transactions going through your bank accounts. And so you can respond in any way you want. Things that I've set up: my utility bills get automatically posted to Splitwise every month so my roommates and I split them. All of my transactions go into Google Sheets. Transactions over 50 bucks I get emails for. On a lot of my dormant accounts any activity I get an email for. So for example, if something shows up on my Canadian credit card that's not Spotify, it's unexpected and I get an email. So really you can write lambda functions to do whatever you want. So you get webhooks, you can define conditions on when you want to get webhooks and then you can even hook in Twilio to call you or something; the world's your oyster.

Daniel: Pivoting a little bit. So, in your experience, what is kind of the biggest misconception that you see in personal finances in your opinion?

Josh: I think humans don't understand compounding interest or earnings. There's been a lot of studies that just show we don't conceptualize if you have $100 and you're getting 6% interest, in 20 years you have some enormous amount. So let your money do the work for you and the most valuable money you'll ever make is the money you make today because you invested it and you get a modest 2-8% return, whatever it is average. That's going to grow every year enormously. And so by the time you retire, it's actually a lot of money.

And so when you are buying that useless stuff off Amazon, it's not the hundred dollars today it's the thousand dollars in a couple of years or however long it is, I don't know the numbers, but it grows way faster than you think. So, savings matter, get it early while you're still young - you'll thank yourself in the future.

Daniel: Wow, it's almost like you read our article on Compound Interest 😉😉. Last question: if you were to give a piece of advice for somebody in college about personal finance, what would it be?

Josh: Know where your money's going. Always understand what you're spending on and how much because you don't realize that every time you swipe your card it adds up at the end of the month, so chart it out, use something like Mint.

Rapid Fire

What credit cards do you own? Why did you get these ones? Chase Sapphire Reserve because I did the math and the rewards were worth it. In my specific case, I do a lot of business travel. City DoubleCash for things not covered by that.

How much of your income do you save annually? Can you break it down amongst different financial vehicles? I follow the Bogleheads Three Fund portfolio, so I own VTI, some bond, and some international fund. VTI is a total market index fund by Vanguard; it's an ETF. I allocate it based on the recommendations. I take it fairly risky because I'm still young. I hold bonds in a tax-efficient account. I hold a bunch in Schwab's 2060 target retirement fund. Hold that in my retirement accounts because tax-efficiency doesn't matter there.

What tools/apps/services do you use to manage your money? I use BankHooks to get notified and know where my money is. For investing, I use a Schwab brokerage account. I have to have my HSA at a different bank (for reasons). I have to have my 401k at a different bank (also for reasons). But most of my personal stuff is through Schwab. I have a little bit in Wealthfront from back-in-the-day, but I don't use them much anymore. Mainly because you can do things a lot more tax-efficiently if you do them yourself, but, if you're not researching this stuff as a hobby, you shouldn't be doing it yourself. It's very unlikely that you'll beat robo-advisors. But if you're willing to do a bit of research, then you can actually do really well.

Any resources you recommend? Predictably Irrational by Dan Ariely is really neat. It talks about how you get gamed by menus: restaurants know what you're going to order, they'll shift you to certain items.

Dollars and Sense is also a interesting read.

A Random Walk Down Wallstreet is an amazing book. Basically about how you're dumb and don't try to do better than index funds.

Warren Buffet's essays are also really, really good.

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Most personal finance blogs only share stories of the people who have it all under control, save 50% of their income, and retire early. While that is impressive, some of us want a career and some of us just need our almond matcha latte every morning. However, we all still face the same woes when it comes to managing our personal finances. MoneyStories is a series of interviews with young professionals and recent graduates sharing their stories on how they have and are navigating their personal finances.

Disclaimer: Views, thoughts, and opinions expressed in the text belong solely to the interviewee, not the author, and not necessarily to the author’s employer, organization, committee or any other group or individual.

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