Hey everyone, it’s Finance Fridays again. Today, we’re going to take a trip down memory lane and look at some my financial decisions, just remember “Hindsight is 20/20“.

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Hindsight is 20/20? What do you mean?

It’s an idiom, and it means ” In hindsight things are obvious that were not obvious from the outset; one is able to evaluate past choices more clearly than at the time of the choice.”

Please note that I would not change anything in my life. My life is a series of very fortunate events. I’ve met a lot of great people, my wife – the love of my life, and I have beautiful children and a good job. However, if we are strictly looking at finances then it’s worth looking at, for learning purposes. This is primarily an exercise to look back as objectively as you can about financial decisions you’ve made. Here are mine:

So let’s begin…

For me, we need to go way back to when I was in high school…

I was all set to go to UC Berkeley and essentially my destiny starts there. However, what if I didn’t go to UC Berkeley? What if instead I went to UCLA or UCSD? They’re both pretty good schools and costs would have been the same. However, my family support system would have a lot closer, since Berkeley is about 6 hours away by car, versus 30 minutes for UCLA or 2 hours for UCSD.

Would going to UCLA or UCSD have changed my life? Maybe. Maybe not. However, if you recall, this post is about financial decisions. In terms of finances, it probably would have been cheaper for me to go to UCLA or UCSD, although not by very much. Additionally, going to UC Berkeley made me feel very uncomfortable, but in a good way. I had no one to rely on and I grew up a lot that first year in college. People will disagree with me, but I think going to UC Berkeley was still the right choice, even in hindsight.

Now let’s move on.

I chose to work part time at UC Berkeley starting in my 2nd semester. In hindsight, this was a bad idea. When you have more you spend more. Don’t get the wrong idea, I wasn’t wasting a ton of money, but having a job did provide me with a little more spending money. However, this part-time job was 20 hours a week, which was way too much while carrying a pre-med courseload.

During my 1st semester of sophomore year with Organic Chemistry and Biology, AND the job, I added on a shadowing opportunity. Don’t get me wrong, I was very lucky for this opportunity to shadow a pediatrician in Pinole. Unfortunately, it required me to come to the office 3 times a week for a few hours. This, in additional to difficult coursework and working 20 hours a week was just not smart planning on my part – a recipe for disaster. I attribute this bad decision to both arrogance and ignorance. I should have stopped working part-time but instead I just kept working and well, we know how that semester went for me.

Dissecting that job some more, if I was smart, I would have put any money I made during college toward a Roth 401k. Of course, at that time, I had no idea what any of that stuff was and wouldn’t learn about it for a very long time. However, if my daughter or son do plan to work during college (which I am against), I will make them put any money they get into a Roth 401k, perhaps with some sort of a match from my wife and I.

Continuing on…

I went to a Caribbean Medical School. I made that choice, but it was a horribly expensive one. If possible, I would have preferred to stay at a state school. Of course, that wasn’t possible for me, and isn’t possible for many other California undergrads. To be honest, I did try to limit the amount of loans I was taking out. However, I probably could have done a better job. There are things I could have done during medical school to save more money, like having a roommate or renting a studio instead of a 1 bedroom apartment. While these choices may seem small, they do make a difference over a 4 year period. I think that’s kind of the point, any smart financial decision, no matter how small, can have significant impact over a long arc of time.

During internship and residency it was more of the same. I could have tried to rent a studio instead of a 1 bedroom apartment. I also made the mistake of buying a new car. Don’t get me wrong, I had the right idea in mind. I wanted a reliable car that could get me to and from work safely even during a Northeast Winter. However, I probably didn’t need a new car. In hindsight, I should have bought a used Subaru or something for those Northeast winters. Then of course I really should have utilized a Roth 401k/403b in residency. It’s one of my biggest regrets. When I think back on how much money I could have saved into a Roth 401k/403b it makes me cringe. However, like I said, Hindsight is 20/20.

On to fellowship…

Fellowship was the first time that my wife and I could live together. Having to live apart as medical students was really a killer in terms of finances. However, instead of living together and saving money with an inexpensive apartment, we instead chose to live in a pretty expensive apartment together during fellowship. While this technically was a bad financial decision, this is one I do not regret. For those who don’t know, Baltimore can be a dangerous city. It was important to me that my wife had some degree of safety. However, finance wise, it was a pretty big hit. We could have saved a lot more money, and once again, neither of us utilized a Roth 401k.

Attendinghood…

Our first job(s) were in the Rhode Island area. I really harp on “The Biggest Mistake of Your Life” alot, because I made it — but mostly because I didn’t have a choice. As a first year attending I didn’t have access to the company 401k as an associate. However, my wife did have access to her 401k at her new job. For some reason I decided it was better to just bank that money for an eventual downpayment on a house instead of maximizing it during those 6 months.

I think I was just overwhelmed with being a fellow and working and worried about money in general. As such I just went with the “better safe than sorry” attitude. That was a mistake, a big one, and I take full responsibility for it. I just didn’t realize how big a mistake it was until it was already too late. That said, we did do a good job in finding a relatively cheap apartment to live in, so at least that was a good financial decision.

Moving on…

As you know, I live in Hawaii. I moved out here in April 2014. Realizing my huge mistake from the previous year, I made it a point to maximize my TSP contributions (and match) in the 8 months available to me. Additionally, when my wife came out in July and started working in August, we maximized her contributions to both her 403b AND 457 in those 5 months. Those were difficult months for us because we were living primarily off my salary. However, it was a great lesson. After coming to Hawaii we were able to firmly grasp the lifestyle available to us and adapt to the significant change in the cost of living.

However, I made a big mistake in regards to renting an apartment. Our rent was very, very high. It was very convenient to both of our work places as well as my daughter’s preschool, but man was it expensive. If I had it to do over again, I think I would have tried to look harder to find a slightly cheaper alternative. We really did not need a 2 bedroom 2 bathroom apartment. I attribute this decision to “thinking like a mainlander”. In Hawaii, since space comes as a premium, you don’t have space for “what if”. For example, if you’re a young couple with a baby, all you need is a 1 bedroom apartment. However, on the  mainland you think, oh what if so and so comes over and needs somewhere to stay. Since our apartment was 2 bedroom in Rhode Island, it should be 2 bedroom in Hawaii right?

No.

You don’t pay for space you don’t need. I could have saved so much money if I had just rented a 1 bedroom apartment instead of the 2 bedroom. I’m guessing it would have cost at least $1000 less a month. We stayed at that apartment was 2 years, so that’s $24,000 (post tax!) that I’ll never see again. That said, my wife and daughter really did love that apartment and the fact that they could walk everywhere. Of course, it was also very convenient being close to work for both of us. However, based on finances, it’s hard to justify that difference in price.

What about the house?

Oh yes… the house. While I consider the house to be a good purchase overall, it still was not optimal. Being locked into a 30 year loan is not fun and closing costs hurt. If you take in to account that I’ve had to put money into the house already for both a new roof and solar panels, then you can see it’s a pretty big liability. However, as I’ve explained before, we chose this house primarily for its school district and because it allows my in-laws to live with us.

We were well aware that the first 2-3 years would be pretty difficult, and they have been. Additionally, the house itself needs some fixing over the next year. My plans include renovating the lanai, repainting the house, and putting on a new garage door. After that the house will look pretty good from the outside. Then after that I have plans to fix the screendoors and redo the bathrooms. Eventually, we’ll need to renovate the kitchen too. So yea, a house is a liability.

That said, it does provide my daughter and son a good public school district. Additionally we are lucky in that the preschool near our house is very good and not too expensive. The preschool also has an afterschool care program as well. This makes it convenient that both my daughter and son can be picked up together everyday. As a special benefit, the afterschool program even take the kids over to Kumon as well – Score!

So was it a mistake or not?

If you asked me whether the house was a good purchase right when we did it, I would have been hesitant. After we closed, I was worried we had made the wrong decision. It was so expensive and what if X, Y, or Z happened? However, now that my daughter has started school, I’m pretty sure we made the right decision. It’s a good school and she’s around good kids.

Additionally, I’ve kept tabs on the housing market since buying this house. While there are houses I like that have come on the market since then, they’ve all been considerably more expensive. The houses that have come on the market in the same price range would not have provided everything we wanted. More so than that, I really wanted to be a good school district before my daughter started school, rather than starting school somewhere and moving her later.

Someday when we have enough money in the house, I believe it will become an asset. However, for now, it’s a still a liability.

TL;DR

Hindsight is 20/20.

You can’t change the past, but you can learn from it.

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

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