Tag Archives: Financially Fearless

Buying the first home means not buying the sports car

Screen Shot 2015-09-03 at 9.29.22 PMThe explosive growth of the Internet brought a lot of money to the San Francisco Bay Area and the Silicon Valley in the late 1990s. Many of my work colleagues and friends cashed in their stock options and bought high-end cars or lived BIG in San Francisco during those go-go years. Many of us younger employees did not know the difference between paper wealth and actual wealth. Unfortunately, the paper wealth quickly disappeared as pro-forma balance sheets fell out of fashion and stocks plummeted. Easy come, easy go.

Fortunately for me I did not get sucked into the craze of buying a BMW M5 and renting an apartment in the Marina. My Mid-West style upbringing made me far too frugal (or cheap!) for such “extravagance.” Fortunately I was able to same-day sell a chunk of my ISO options and chose to just sit on the cash. I continued to drive the 1988 Toyota Carolla I owned in college and rented with a roommate a two-bedroom apartment in less than trendy Sunnyvale. I was also able to have my company pay for a good portion of the MBA program I attended to avoid taking on massive student loan debt.

Yes, I experienced a ton of peer pressure for not living in the city. “Come on, Dunstan! Move up to the Marina with us. You won’t have to make the long drive home to Sunnyvale late at night…and “Social Safeway” is just crawling with honeys.” Many a tale has been told about love found in the produce aisle.

Screen Shot 2015-09-03 at 9.43.19 PMWhy didn’t I cave to the peer pressure or buy-in to the spendy trends at that time? I wanted to buy a house. That was my goal. Even back then, living in San Francisco was expensive and many of my friends there lived paycheck to paycheck. Several work colleagues graduated with an MBA and $100K+ in student debt. I graduated with no debt. Shortly after I started my first job after business school I was able to purchase my first house. Goal accomplished.

The San Francisco Bay Area housing market is even more competitive (read “expensive”) now than it was in the early 2000s. Buying a home or condo takes a significant cash down payment to meet the more stringent lending requirements. A hefty monthly cash flow is also required to take care of the trappings of ownership…namely property taxes, insurance and then basic living expenses. Home ownership gets expensive. Fast. But I think it’s SO worth it!

First time home ownership is still possible in the Bay Area despite the gloom and doom affordability market data. Sacrifices have to be made and savings goals have to be achieved. Life style choices have to be made too. The process of saving for the first home may take some time and may require renting with a roommate in a less fashionable area to amass cash. Building a monthly and annual budget is a great tool to help analyze where the monthly paycheck goes and decide what changes are to be made to funnel more cash to savings. I highly recommend Alexa von Tobel’s book, “Financially Fearless” to help with building a budget and savings plan.

Buying what type of house and in what neighborhood will also be defined by company stock performance and salary compensation. People make a lot of money in the Bay Area. However, how well one manages money will play a key role in the home purchasing power of the individual. Keep in mind that most first time home buyers will NOT be able to buy a home in a top neighborhood. Be OK with that. Buy what you can afford in the best neighborhood possible. How this is done will be discussed in future posts. Start small and gain equity to then move up to the next house/neighborhood. This is all very possible. It takes time, commitment and money management. I did it. So can you.

Please send me a note on Twitter (@ericdunstan) if you have any questions.

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Fitness apps are great model to help consumers talk about money

Eric DunstanThis past weekend I attended a beach wedding in Santa Cruz, CA. I played the role of husband to the matron of honor and father to the ring bearer. I spent a lot of time with the groom and groomsmen as we waded through the schedule from taking pictures to the bride walking down the sandy aisle. Having never met 90% of these people, most of the idle conversation topics focused on how long we’ve know the groom/bride, where we’re from, the weather, sports and physical fitness.  The wedding party was a very physically fit group and a lot of time was spent discussing work out routines, fitness goals, injuries, metrics for measuruing those goals and what mobile fitness applications were used. One groomsman was a tri-athlete, another a cyclist and several runners…me included. Even though we all did different sports, we all shared a common language around how we set goals and measured success; how many reps/sets, timed distances, time splits, calories burned. Of course, as the day wore on and the drinks flowed, these reported metrics achieved super human status. “I ran a marathon in under two hours, backwards…uphill both ways. In the snow. Waiter, can I have another Grey Goose?” The common interest and shared vocabulary of fitness enabled 8 guys to have a great time at a wedding.

There continues to be a lot of media coverage about our lack luster economy and the fear that many people have about their financial fitness. The fear has grown to a level where many books, websites and personal finance management services have emerged to meet the demand. Clearly, money and sound financial management is top of mind for most people. Unfortunately, talking about ones financial health is a taboo that it is never discussed openly even with close friends or a spouse. I openly discussed my physical health at the wedding last weekend…but it would be WEIRD and AWKWARD if I discussed my financial goals and health with the other groomsman. Why? Isn’t financial health just as important as physical health? We ask others for suggestions on improving our physical fitness.  Why not our financial fitness?

Alexa von Tobel, CEO of LearnVest, addresses the taboo of talking about personal finance in her book, “Financially Fearless“. “We openly talk about everything else, from sex to diets to politics, yet when was the last time you spoke with your friends about money?” I think Alexa is spot on. We as a US society DON’T talk about money and how to manage it well. Most Americans prefer to put their heads in the sand and not think about financial planning for it’s too scary or confusing. One of the biggest reasons we don’t talk about money is that we don’t know how and we don’t have a common vocabulary or framework to pull from.

Eric Dunstan

Flexscore is working to provide that financial framework to enable the conversation. They have developed a methodology that helps consumers assess their financial health through a score and provides support for how to improve. The score measures factors including assets, debt, savings, cost of living, retirement savings…and weights them against a goal. Goals include by what age to retire, buying a vacation home, or sending a kid to college. Flexscore users can compare their goals, expenses, and scores against others within their peer group.

What Flexscore is developing sounds a lot like a fitness app! I am an avid user of the Nike+ iPhone app where I set goals, track fitness activity, achieve milestones…and compare against others. The Nike application also let’s me challenge others to a race or to ask others for coaching advice. Wow, this is a fun way to track fitness activity and engage with friends. Can the same level of engagement be achieved with a financial fitness application? Through the right approach, I think a financial fitness application can be very powerful in helping others discuss money, goals and questions they may have about improving compared to their peers. A scoring system, such as Flexscore, will be a key engagement element that makes measurement informative, fun and something that can be easily discussed with others.

I don’t think it’s a stretch to envision similar personal finance discussions happening with the right measurement tools and applications developed on mobile devices. Going back to the wedding I attended, the wedding party was quick to whip out their phones and show off their fitness data on Nike+ or RunKeeper. The application UI makes the data visually fun to show off and discuss. I can easily envision the same conversation happening around finance applications. The conversation could start with a groomsman saying, “We are really trying to pay down our credit card debt, but it’s not happening fast enough.”  Another groomsman could respond, “I’ve been using this great finance app that scores my financial health. It’s helped me A LOT.”  The conversation goes on from there.

Driving adoption of these finance apps by going direct to consumer will be quite expensive and the marketplace is crowded. However, I think the right strategy for Flexscore is to white label their solution to financial institutions and advisors. A similar platform, Set for Life,  takes another approach by white labeling financial education and money management tools to corporations as a benefits program to get employees to start talking about their money. Flexscore and Set for Life hope to pull through a solid customer base through these white labeled partnerships …while receiving a monthly per user fee. Smart…and this strategy does not require aggressive and expensive direct to consumer acquisition programs. The right clients and partnerships will build a large and highly engaged consumer base for both companies.

As Gen X , Gen Y and Millennials age, the greater the momentum around having financial oriented conversations. The key play for companies like Flexscore or Set For Life is to be the platform that these users engage on to discuss and engage with their finance. Consumers will benefit and so will financial institutions and advisors who are looking for opportunities to engage customers. Consumers will be drawn to the banks and providers who do this best.  Those who don’t engage at this level will watch  their consumer base walk out the door.


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