How to Stack Cheddar: A Rant on Money, Investing and Cheese

James Titchener / @mistertitchener

Cheddar cheese was founded in the early 12th century in the village of Cheddar in Somerset, England. King Henry II’s obsession with cheddar reached such deranged proportions that he bought 10,000 pounds of it in 1107 and he personally ballooned to 460 pounds in the span of months [1]. I made that last part up, but it is reported that the street word “cheddar” was coined as money by Evan Jones in his academy award winning role as Cheddar Bob in the blockbuster film 8 Mile [2]. Also a complete lie, but to make a painfully long and cringey “joke” short, cheddar means money.

Young Cheddar Bobby, in a moment that will forever live in cinematic history, as he shoots his own leg. Or is this when he creams his pants... Does he cream his pants in 8-mile? I haven't seen it yet.

But enough about cheese. Let’s talk about money. I should start this by saying that I’m no expert (in case I haven’t made that obvious already). I have, however, put a lot of time into researching and thinking about personal finance, investing and the value of money. Not to make this post a downer, but I was sort of forced to learn on the fly when my parents unexpectedly in 2016. At 23, I inherited a house, a small commercial warehouse, a life insurance claim, and a lifetime of pure and utter despair as I wake up every day only to remember that I'll never see my parents again. Lol just playing. My parents are really dead, but after some therapy, a shit ton of journaling, 1,000 or so hours of meditation and a couple adventures on LSD, I'm in a better place now than I've ever been.

ANYWAYS... this financial windfall sparked a deep dive into investing. It started with the simple desire to not fuck it up like so many seem to do when they find fortune. But after learning the basics of investing and personal finance, I began to spend time reflecting on money’s real value. Because it quickly became clear that buying shit wasn’t doing anything for me. So here’s a few lessons that I've learned and opinions that I've formed. Hope they help. 

Avoid debt

Credit card debt and student loans need to be paid off before any saving or investing is done. Frankly, you shouldn’t be buying much of anything outside of essentials if you still have credit card debt or student loans. 

I think too that most people are too aggressive when it comes to buying a house. A mortgage could be easily rebranded to “huge amounts of undiversified, risky debt”. To make a comparison that I don't think is all that unfair, would you go into hundreds of thousands of dollars of debt to invest in a single public company? That's not far from what you're doing when you get a mortgage for a house. Unless you have a wife, kids and absolute certainty that you’re going to be living in an area for close to the rest of your life and you don't care much about the property's fluctuating financial value, just rent. If you do decide to buy, pick a place that is well beneath your financial means.

Avoid financial advisers and mutual Funds (mostly)

Financial advisers and mutual funds simply cost too much in fees and fail to beat the market (S&P 500) reliably. Funny enough, I think the best resource for understanding the danger of financial advisers and mutual funds is a book promoting their own financial advisory services, Unshakeable: Your Financial Freedom Playbook. In the book, Tony Robbins points out a few scary data points:

I will say, however, that financial advisers will help you pick an investing plan and stick with it. One of the most costly mistakes you can make is getting cold feet and selling when the stock market drops 50% or more (not at all impossible or unlikely). So if you're nervous about making a mistake, or this all seems overwhelming, consider using a fiduciary financial adviser like the guys at Creative Planning or...

Consider using RoboAdvisers

RoboAdvisers make investing super easy. RoboAdvisers pick a diversified portfolio of stocks and bonds based on your (estimated) taste for risk. They then automatically invest your funds and rebalance your portfolio. They basically act as a financial adviser, but without the whole people thing. The best part is that they're often more than 1/3 of the price of traditional financial advisers. If this sounds interesting, I'd recommend the Trinity Portfolio from Betterment and Cambria Investments.

DON'T TRY TO BEAT THE MARKET

Stop. You are playing against professional investing firms with endless amounts of experience, data, algorithms and computing power. Thinking you got what it takes to beat these sharks is like sitting on your couch thinking, "Ya know... I think I could put a move on this LeBron fella." Just stop. Buy low cost ETFs and just accept that you don't know what you're doing. The market gains value in the long run. That's all you need to know.

Diversify

Diversifying your portfolio across asset classes and geographies increases your returns and lowers your portfolio's volatility and risk. Read this free e-book for more.

Use 401k and IRA matching from your company

They are giving you free money. Take advantage of it. Be weary of the fees on your company's 401K though. Use this free online fee checker to see how yours stacks up. If it's above 2%, it's time to start bitching to the boss man.

Step up your credit card and savings account game

Assuming you pay your credit card bills on time, I like the Amazon Prime card for that 5% cash back on purchases from Bezosland. If that's not your speed, try the recommendations at NerdWallet. For savings accounts, I'm using Betterment's for the ~1.8% variable APY.

Keep an emergency fund

Most people don't have enough money to pay for an expected expense like an injury, illness, car trouble or being fired or laid off. Don't be most people. Try to save up for at least 1 year of living costs in cash. That means money in a high-yield savings account like the one mentioned above or something like a US Treasury Bill.

Save for Retirement

I've got more to say about retirement, but I promised to post every Friday and it's Friday. For now, when investing for retirement, use IRAs to cut down your tax bill.

RANT TIME BABY

Now for the part where I, the 26-year-old-boy-genius, yell at you about your stupid, stupid lifestyle choices :)

You can probably skip this if you're not looking to be lectured. But I think I may have a unique perspective on money given that I got it dropped into my lap at a young age without working for it. Although my therapist assures me that I've "earned it in other ways". So before you unjustly label me as another spoiled-white-trustfund-manbaby, I'll rebut to say... NUH-UH MY THERAPIST SAYS I EARNED IT.

But the reality is, I've been #blessed with some cheddar. And I'm not gonna lie. Money is pretty great. But not because I can buy all the Capri Suns my little heart desires. Buying shit simply doesn't bring happiness. If you ask me, it just brings added complication and the never-ending desire for MORE. Peep this graph.

Study done by Daniel Kahneman (READ HIS BOOK RIGHT NOW) and Angus Deaton. Image taken from this article by 80000hours.org.

Poll of Americans were asked how they felt in the following ways:

To sum it up, money has close to no effect on day-to-day happiness, stress and sadness after about $60,000/y in income. "Life satisfaction" rises more significantly with an increase in income, but in his book Thinking, Fast and Slow, Kahneman points to the unreliability of split-second-evaluations of literally the cumulative satisfaction of all of our life's prior moments up until that point. Keep in mind though, this graph is sampling Americans. And we only know one thing to do with our money... CONSUME. I'd also imagine that those who are earning more money trade the stresses of bills to pay and the such with the stresses of more demanding work, longer hours, and bigger bills to pay.

I think money can buy some happiness. Just not how most of us our using it. Money buys freedom. It buys the freedom to say fuck you to your boss who me-too's you. The freedom to quit your shitty job and start a business. The freedom to invest in yourself and your mental health. The freedom to take risks in your life and career knowing that you have cash in the bank waiting for you in case you goof up. I can say from my own experience, that using money in this way has brought about emotional healing, educational and career opportunities, and peace-of-mind that I would have never found in an expensive bottle of wine.

So stop spending money on dumb shit and start saving. And if you save enough for a safety net of 1-2+ years of living expenses in cash, paid off your debt, and you're saving for your retirement, consider donating. Donating to highly effective charities like these will have a much higher return on the world's wellbeing than buying a phone with 6 extra cameras on it. And it will probably make you feel better too.

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