[기고문] Financial Advice for Young Adult

If I may, let me share my ideas (or ideas I’ve learned) about financial growth. I’m not selling, just sharing.

We put/spend our money into three buckets. A, B, and C.
• Bucket A is our necessities – Food (groceries), Rent, Clothes, and Transportation (Used, basic car)
• Bucket B is our discretionary – Food (restaurants, tea/coffee shops), Rent (luxury), Clothes (brand name, luxury car), Transportation (new, luxury). Vacations
• Bucket C is our Savings or Investing Money.

Bucket A – We have no choice but to spend to survive. We need to eat and a place to stay.
Bucket B – We have a choice. Spending here makes us “feel good” for the present. This bucket allows us to show our money to others, but not necessarily wealth. Sometimes this image is needed to help our career (then it’s an investment). This bucket allows us to post our spending on Facebook. But…. it can be 200% paid by debt.
Bucket C – This is what nobody sees. There is little immediate pleasure. There is nothing here if you have a net worth of Zero or less. But this is the source of your passive income. No bucket C, no passive income.

Maybe this information is obvious, but Robert K. from “Rich Dad, Poor Dad” made millions writing a fun story about this.
The trouble is Bucket B and thinking most of that is Bucket A, Basically, thinking our discretionaries are necessities.
If you are like most people (no income loss due to Pandemic) and look at your expenses during this Pandemic, your savings for Bucket C should have went up at the expense of Bucket B. It’s because you were not allowed to go shopping or eat at restaurants or you had to keep your old car longer. Now you should know what it takes to increase Bucket C going forward.

BUT IF EVERYONE DID THIS, THE PLAN DOESN’T WORK.

You can see this from the stay at home orders for this Pandemic, and the fight to open the economy back up to prevent a major recession. What needs to happen is that you keep living like you are in a Pandemic, and EVERYONE else goes back out there and spend to keep the economy running. The money will move, and you should try to do more than others to keep some of it and put it Bucket C.
This is why only SOME get richer. Not everyone can do it at the same time (i.e. Pandemic example). But it is your individual choice to get richer. There is no unfair rule (racism, etc.) preventing you from making this choice and taking this path of putting more into Bucket C. The stock market is colorblind.
This is why the government can not make the masses wealthier. We can not expect anything like that from the government, as some try, protest… and wait.
The role of the government is to keep the economy running. Hopefully with increased tax dollars, the government can help those in need.
As you measure your financial success, I would suggest your measuring system be that of “passive income”. It indicates your actual net worth. A fancy car or house does not measure your net worth because it can all be 100% debt, so try not to confuse the two. As I recently read in this forum, Money “talks”, but Wealth “whispers”
Sure, you can make your money through “Active” means, but there is a lot of luck involved and timing. Not everyone is successful. But anyone can do the “Passive” way. (i.e. The book, ‘The Millionaire Next Door’)
So, when you are young, focus on “Active” income with the vision for “Passive” income.
Look, you work 40 years (active 25-65 yrs old) to create a passive income (65+ years old). That can be another 30 years in retirement, especially if your Asian, lol. If you are lucky, you can work 20 years, and have enough passive income for the rest of your life.
I speak from the perspective as you as an individual. There may be some of you, that want to speak for a group and improve its situation. I respect that. One benefit of wealth is to be able to give back to the community. I lead a non-profit, an elected position, and have collected and distributed funds to help undocumented Asians, who have not received any government aid during this Pandemic. Passive income, gives me the time to be able to volunteer to help people.
“Life is a marathon, not a sprint.” I have run 6 marathons (after the age of 46). If I kept comparing myself with the other runners at mile 5 or 10, it would have taken me off my personal ideal pace and discouraged me most of the way. It doesn’t matter who finished ahead of me, only that I finished. It doesn’t matter how big your Bucket C is, only that you have one.
Good Luck everyone.

David Shin,
President of KAACCH
(휴스턴한인회)
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