Today’s installment of our Afraid To Ask: TFD’s expert interview series, is all about personal finance questions for a professional financial advisor. The Afraid To Ask series is meant to provide a deeper insight into a variety of subjects, and shed light on topics people are sometimes ignorant about (myself included in every topic I cover!).
This week I interviewed Jane Hwangbo, a former investment analyst and portfolio manager who founded Money School with Jane, a personal coaching program designed to change the way individuals see and interact with money. I was delighted to be able to interview her because she seems like she has an insane arsenal of knowledge that she feels passionate about sharing. Take a look at our interview below! You’re bound to walk away with a few invaluable insights!
1. First off, can you tell me a little bit about Money School With Jane?
It’s the answer I created for all of us who feel a vague pit at the bottom of our stomachs as soon as the topic turns to money. It’s a taboo, and we generally want to run. I felt that our relationship with our finances reflected some fundamental confusions that had been passed on through generations about what money is. A lot of us were making financial decisions without even realizing it before we were out of college. I thought it would be good if I could help raise self-awareness and real knowledge before people got to a point where they were really stuck. Finance isn’t fun, and I think we need to make it fun.
2. How long have you been working in finance? What does your background look like, and how did you get started?
I started working in finance as an analyst on Wall Street, and then as a portfolio manager for multi-billion dollar hedge funds in my twenties, so it’s been a long time. I took a break from finance as an official job in my thirties in order to have two kids and learn how to manage a family (I’m still learning). I’m now in my forties, so you can do the math. I left “spring chicken” status a good decade ago!
I grew up as an immigrant child, which meant that money in our family was always defined within a framework of great scarcity. In these types of situations, you usually feel a lot of pressure to live up to match the level of sacrifice your parents made for you. This meant that I needed to go to the “right” schools, graduate with the “right” degrees, and work in the “right” careers, or success would slip through my fingers into the abyss. So, I did all of those things. I did them so well that I was a rarity – a young female in my highly technical field of research in semiconductor securities. I moved market prices by the second for publicly-traded companies. As successful as I was, there was something always missing. I didn’t know what it was at the time, but I just knew I wanted something else.
But how did I really get into the field? A college girlfriend of mine who was working for a fund saw that I was lost after my graduate work. I thought I was going to save the world by working at an NGO as a lawyer, but the daily grind wasn’t my kind of daily grind, so I was open to anything. She encouraged me to apply for Wall Street positions, so I did, and to my great amazement, someone actually called me for an interview. I got the job, and I guess the rest is history. What I’ve found is that very few of us know what we want right off the bat. Life and your career is a journey.
3. What are the most rewarding aspects of helping people figure out their finances?
There are a lot of people who contribute to the discussion of how to help others with their finances. I enjoy adding to the discussion with my own take on what finance and money is, especially coming from an institutional finance background. I feel like I can break down difficult need-to-know financial concepts for young people in a language that truly shares the knowledge with no BS or intimidation. But, in the end, it’s the light I see in someone’s eyes when they get something, or they feel encouraged that they can do something they hadn’t thought about before — that makes my day. A lot of our readers are investment newbies who truly believe that investing smart has the power to shape their future in a positive way.
4. What would your advice to someone looking to start investing in their mid-to-late twenties be? What are the first small steps they should take?
I’ll say this over and over again to anyone who will listen. Investing is risk-taking. Your life is also risk-taking. They are one and the same in concept and in many ways, practice. If you want to begin to take risks by investing, which I very much encourage people to begin to do when they’re young, the first step is to be sure you can “afford” the risk. Practically speaking, this means having an emergency fund and a healthy savings account lined up. Look into setting up your tax-deferred retirement accounts next – these are your 401k’s and IRA’s. Just remember, investing is about the long term. Don’t freak out – freaking out in life and in the markets will rarely do much but bring you losses. And lastly, do your homework. Make sure you understand what you’re investing in and the fees involved, whether you’re considering pre-made baskets or stocks called “ETF’s” or mutual funds. Hint: ETF’s tend to be cheaper. Go to our website, and submit questions to me through our general mailbox. They’ll get to me, and I’ll answer you back.
5. Obviously, it’s a case-by-case situation, but do you have a suggestion as to what percentage of someone’s income should be portioned out for investing?
No, because everyone has different goals, and everyone needs a different amount of money to fund their dreams. Personal finance is truly personal in every sense of the word. However, the first investment you should make is in your financial safety, which means that you sock away 5-10% of your net earnings into a no-touch savings account until you have six months of living expenses lined up. If you can do more, great, it just gets you there faster. If you have debt with a high interest rate, like credit card debt, you need to take care of that first, because that’s a spiraling disaster. Now, let’s say you’re clear of high-interest debt and have your emergency fund tucked away. Then, you try to squirrel away the maximum amount you can contribute into a tax-deferred retirement account, like a 401(k) or IRA. Be aware of the tax-deductible limits to the contributions you make every year to these accounts. They’re currently $5,500 for IRA’s and $18,000 for 401K’s (401K’s can be especially useful for retirement planning because employers often match a portion of your contributions, which means free money for the future you!). The key is consistency. You want to get into the habit of putting away money before you spend it all elsewhere.
6. Where do you start when creating concrete financial goals for yourself? What factors should one consider when creating those goals?
The reason you may be confused about how you can go about making financial goals is that you probably aren’t sure about what you want to do with your life. Figure out what makes you happy. Defining the requisite financial goals will come more naturally after that. It’s the order of things.
7. How far out should you plan your financial goals? One year? Five years? Ten years?
Yes, yes, and yes. You should have a short-term goal (at the end of year one), a medium-term goal (at the end of five years), and a long-term goal (10 to 20 years). Each of the goals should look different because they are meant to satisfy a different stage in your life.
8. Is there more value in creating short-terms or long-term financial goals? Do you think meeting very short-term goals propels people forward to achieve much bigger ones?
Consistency in meeting doable, bite-sized goals, I’ve found, is more effective in emotionally training yourself for financial success than having a big, ambitious money goal. Besides, do any of us really know where we’ll be in the long, long term? No, but we plan anyway. And that’s a good thing!
9. Are there any online resources that your average twenty-something should look into to help understand the basics of personal finance and financial jargon. Is there anyone (or any large organization) doing a particularly good job making personal finance feel inclusive and relatable?
Obviously, since we’re building our online presence, I would recommend that readers check out our new website, Get Your Money Brain On and our Twitter handle @MSchoolWithJane. We’re constantly adding content to keep it informative and fun. We’re also not that PC, and proudly so. There are some cool tips on websites that offer a service, like Personal Capital, or the Learning Center/Personal Finance page of Fidelity.
10. Finally, how has your relationship with money changed as you’ve gotten older? Are there any pieces of advice you can give to our readers that you wish someone gave to you when you were younger?
When I was younger, I worked for the money, but I was mistaken. Almost none of us actually work for the money – we’re working or looking to work for something else. Something deeper, something that drives us crazy in a good way. I’ve met people who have tons of money but miss the point – you’ll never have enough if money is your end goal. There will always be people who have more. Get comfortable with who you are and who you really want to be, and organize your finances so that your money becomes a powerful weapon in your quest to live your version of the good life.
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