After my sophomore year in college, I mailed two 40 pound boxes home full of essentially everything I owned for the summer. I thought I’d take the stress out of moving and just fly with a backpack. A few days after I landed, the boxes arrived….empty. I was so confused, heartbroken and angry I didn’t know what to do. I was literally outside my house screaming and crying while my mom watched from the stairs wondering what the heck was happening. I eventually just sat down and my mom sat in silence with me and waited till I was ready to go inside. It took a few hours, but I finally asked,
“What am I gonna do?”
“We’re gonna start with the basics and work our way up”
Funny enough, the start to my investing journey was almost the same story. When I finally graduated college, I came to the abrupt realization that I owed $140k in student loans, had no real savings, didn’t have a credit card (nonetheless a credit score), and I had no idea what to do. I then had a horrific meltdown in front of my roommate and (ironically) threw all my clothes out of the closet in a panic and asked him,
“What am I gonna do?”
“We’re gonna start with the basics and work our way up”
WTF Are You Talking About?
Investing and portfolio construction is a lot like building a wardrobe. You have to start with the basics, invest in staples and top it off with some accessories to make it complete. AND, it’s okay to freak out a little before starting the journey because it can be a little overwhelming.
Start at the Bottom - When I was first rebuilding my closet, I had to start from the bottom. And by bottom, I mean - I needed underwear. And if there is anything that’s essential, IMO, it's underwear. You can think about your savings like underwear. They should always be there, protect you in sticky situations and without them, you’re exposed. As a rule of thumb, you should have enough savings to last you 3-6 months before you even start investing. Have you ever worn a pair of jeans without underwear? Yeah, I regretted it too.
** Make sure you know your savings rate!! Some banks only give you pennies year over year while others offer high yield savings accounts (aka they pay you more for holding balances with them. Go check what you’re earning right now and see if there might be a better deal out there.
Build the Basics - Once you have your undies, you gotta buy your tees, jeans, sweats, leggings, and sweatshirts. These are the things you wear everyday, aren’t that memorable, but you love them anyway. Your basics are: paying down debt, maxing out your 401k (or any retirement fund), and building a credit score. When paying down debt, pay down the highest interest rate loan first (this will USUALLY be credit card debt). Maxing out your 401k is also super important because oftentimes, your employer may match your contribution which is literally like free money. It’s kind of like accessing your best friend’s closet - those jeans you’ve been eyeing are there but they are $300, just borrow hers. And finally, building your credit score is so important because it can help future you with getting that dreamy apartment, a heavier credit card, or even that house you’ve been stalking on Zillow for 3 years (eff the family that bought it without your permission).
Now time for Staples - Once you have enough clothes to get you through the week, you need to start investing in staples. I’m talking blouses, jackets, raincoats, blazers, dresses and bathing suits. Your closet wouldn’t be complete without them, but you’ve got to think about what you need before you buy them. For example, if you live in Anchorage, you probably don’t need a ton of bathing suits. Just like you think about your staples, you need to think about stocks and bonds based on your time horizon, risk tolerance, and investment goals. For me, I have a more aggressive investment portfolio because I’m in my 20s, have no dependents and have a hopefully long time horizon in front of me. If you have big life events coming up like buying a home, going back to school, or putting a down payment on a home, you may want to rethink your portfolio allocation.
** If you want to invest in stocks and bonds, but aren’t sure how to start, robo advisors are a great intro. They automatically invest and allocate your portfolio based on your needs. Kind of like what Stitch Fix does if you want to look cute but don’t want to spend the time shopping. Also, don’t forget to check out the management fee before investing with a robo advisor. Typically, you’ll be charged a small percentage of the invested money but it can vary. Make sure you feel comfortable, as no one likes to get blindsided with 20 dollar shipping at checkout.
Accessorize - Accessories are my favorite part of my closet but I’d be lying if I said they were the majority. Accessories are exactly like alternative investments such as crypto, real estate, art, NFTs, and private equity. Sure they are fun to buy, but most certainly should not take up the majority of your wardrobe. If you own more sunglasses than you do underwear, I would kindly ask you to check yourself. This might sound harsh, but accessories are often more expensive, can quickly go out of style, and should require more thought before swiping the card. So before you start investing in crypto with no rainy day fund, remind yourself how many pairs of sunglasses you’ve lost over the years.
Other Things to be Mindful of
Clothes (and assets) can go out of style - Remember gauchos? You know, the wide-leg capris made out of yoga pant fabric? They were a major trend in the early 2010s and I felt fab in them. However, as the years have gone by, those gauchos went from the front of my closet to the top of my Depop pile, because - they went out of style. The same thing can happen in the investing world, so it’s important to stay up to date on trends.
Your Closet May Need Updates - As time goes by, your needs may change. I once thought the majority of my closet should be Paul Frank tees (I was 10 at the time) and now I’m more focused on tiny sunglasses and wide leg jeans. Updating your portfolio if you experience life changes and as you mature is just as important.
Show that Shit Off - Let’s all be real - we don’t just buy clothes to only wear them in the comfort of our homes. We dress up so we can feel confident, show off to our friends, and express ourselves. I feel the same about money. Talk to your friends about investment trends, tell them what you like/what you don’t like, tell them where you got your insight from and share financial thoughts and ideas like you talk about fashion. Real friends talk about money like they talk about shopping. And at the end of the day, it’s just buying shit to benefit our future selves.
Whats Next?
Stay tuned for next week’s article (I’ll be dropping hints on my IG @notyourbfsinvestmentadvice). If there is a topic you want to discuss, please DM me or email me at kelsey.willock@tardiapp.com. I also host a weekly Clubhouse room on Tuesdays at 9:30am PST/12:30pm EST called Not Your Boyfriend’s Investment Advice, so you can ask me anything live. See you next week lover.