I am very excited to welcome Karl to this week's Let's Talk Money interview! Karl spends a great deal of time each week writing an incredibly successful blog. He also spends a lot of time networking with fellow bloggers.
I met Karl through the Yakezie forums shortly after I joined. I am sure anyone who knows Karl will agree that he is a very helpful, very supportive and friendly person. I really enjoy getting to know him through his blog posts and comments.
Karl has a lot of financial strategies in place to ensure that he and his wife, and 2 cats, are happy and comfortable now, as well as happy and comfortable in their retirement at age 67. So just a couple of years from now.
Let’s take a closer look at Karl’s personal view points on money.
Please provide a brief introduction about yourself and your personal finance blog including when you created your blog. If comfortable, please share if you are married and how many children you have.
First off, I’m honored to be part of your Money Talks Series, I think it’s a wonderful topic! I started my blog, CultOfMoney in mid January of this year. I didn’t know what I was doing, and in fact don’t know today either.
I wanted to bring my background of finance, budgeting, and business to others interested in the same topics. My experience in financial consulting and business school help me communicate about complex business topics in an easy to understand manner, and what better platform to yell into the internet than a blog?
I am married, and have been for almost 10 years. We are DINKs (Dual Income, No Kids) and will stay that way for as long as we can.
What is your view point regarding money? Money is meant to be saved? Money is meant to be spent?
My feeling is that money is simply a mechanism of exchange. The decision that you need to make is what trade-offs are you willing to make with the goal of making yourself happy. When I’m old, I can’t take care of myself. I don’t have kids, so I’ll need to pay someone to do so. I need to trade-off my future care with my desires today. That’s saving.
But, I could eat nothing but ramen noodles and trade-off long-term health and the things I enjoy today in order to save bundles of cash. I won’t go that far. I strive for balance, ideally having a nice smooth consumption curve throughout life. To answer directly, we save approximately 40% of our after-tax income.
Have you ever lost a large amount of money in investments?
I have, and this is directly responsible for my investment plan of only using ETFs or other low-cost funds in order to remove single-company risk. I was burned by a company making an earnings announcement, and held too much of a single stock.
It was 7 or 8 years ago now. I’ve spread the word on diversification ever sense. It’s hard when you’re starting out and don’t think you have enough money to invest in a large number of companies. But this is more like gambling, and on that particular bet I had too much risk and lost.
Do you utilize an employer retirement plan?
Both my wife and I use retirement plans provided by our employers, and we both have sweet-ass government jobs. I have a dual-track plan. I put 10% of my pay into a tax deferred account, plus if I work at my current employer long enough, I will get a pension equal to 1% of my income for each year I work there.
The pension is inflation adjusted, so the value of this, assuming I can put in the 10 year minimum, is around 10k a year.
My wife has a more traditional 401k setup, and the employer matches her contributions one for one up to 7.5% of her income. So if you count the pension (which is well funded at this point) we effectively put away about 17% of our income directly to retirement. This doesn’t count other savings or investment vehicles like IRAs or other retirement savings, what I refer to as indirect retirement.
How important is planning for retirement to you?
This is probably the thing I focus on most when it comes to the financial balance question. When planning for an uncertain future, it’s always nice to have a buffer to compensate for the errors in your plan and the assumptions that underlie your plan.
So I work hard at coming up with a plan that will let my wife and I retire comfortably. Ideally this will involve some international travel, hobbies, and other activities, so I need to make sure that I can support my plan.
So I try and over-save a bit, with the knowledge that I am trading off some pleasures now, but hopefully won’t need to eat cat food when I’m older.
Most people retire at 65. Is that your target or do you and your wife have plans to retire early? And if so, at what age?
Given that “official” retirement age is still 30+ years away, it’s a bit hard to decide. My retirement calculations end at age 67, which is my full retirement age for social security.
I could see some part-time retirement and work hybrid.
Given that I want to travel, I could see taking some extended vacations, or sabbaticals which would be a sort of semi-retirement.
Do you own or rent your current living accommodations? Why?
We currently own our home, or at least a part of it since the bank has a pretty hefty claim on it also. We purchased our home (our first) 5 years ago. Yes at the top of the real estate market. We had held off for quite a while, but at some point the desire to have your own place without sharing walls with neighbors wins out.
We put 20% down, which in retrospect makes me feel a bit ill, but that is water down the drain at this point.
My wife likes to garden and our cats like the extra room they have compared to an apartment. The trade-off here was comfort and control for more cash than we paid to rent. At this point, we’ll probably never sell as we refinanced into a 3.875% 30 year mortgage, which would allow us to rent the place if we ever moved.
As a homeowner do you find that you spend much money on renovations and decorating each year?
We don’t any more. We got a lot of the renovations done in the first couple of years of ownership and we had saved up a significant chunk for our down payment and furnishings, so we only buy a very few decorations or furniture. Granted I did recently get a new sideboard, but that was the first item in a few years.
When it comes to money what stresses you out? IE: not enough money, no fun money, too much debt, no retirement money, have so much money I don’t know what to do with it all?
I think my biggest stress with money is where to best allocate what I have so that it grows effectively and safely. Saving a million dollars can be done, but if it only has the purchasing power of $250,000 then that’s not nearly as impressive. Nor will that last the time I’d like to spend in retirement.
So I work hard at investing my money and have 2 primary strategies that I use for stock market investments. I don’t own rental property but I’m open to it. I’m also constantly looking for some place with better returns combined with safety, whether that is P2P investing, rental property, the market, or starting my own business.
I believe I read somewhere that you use to operate your own consulting business. Is that the type of business you would start up again if you had the opportunity?
It is certainly a possibility, but not necessarily. I’ve done both local consulting and travel-based consulting, and there is certainly more business available if you’re willing to travel to clients, but it’s also much harder.
Additionally, as a small consulting business, it is difficult to both perform the actual work and do enough marketing and research in order to find new business at the same time. I’d like to find something a bit more passive.
Karl, thank you very much for participating in Let's Talk Money! I know that your schedule is quite busy each week, and I really appreciate you taking the time to share your personal view points on money with all of us. I wish you lots of on-going success with your PF blog.