Managing Income Risk
I believe that I have taken very adequate measures to combat income risk in the future and create financial well being for myself. I am a senior, and I do know where I will work, what salary I will earn, and most of the conditions that will impact me. For the past two years, I have tracked and measured my spending very carefully- I know my monthly outputs and how much I have to, and can, spend. I have gone through various spending patterns- I know how much I spend when I travel more than usual, when I eat out more than usual, etc. I have a fixed range which I can allocate to monthly spending for most months, given all my fixed and variable expenditures. I have made lifestyle changes, mostly simplifying my life, which required initial investment in things which last me for a long time- for example, I purchase clothes of very high quality which require a higher initial investment, but last longer. I do not shop frequently and thus clothes for me are often a "one-time" cost, at least for a few years.
Cost of living is of course higher in the city of Chicago and surrounding suburbs, where I will live after I graduate. I will have to adjust my numbers to allow for this higher price of living. However, because my habits are mostly the same, and I will not change them, I understand that once stabilized I will be able to have a concrete range for consumption in the city too. For example, I spend most of my money on quality consumables- due to my vigorous workout plans, I consume high quality food and coffee and that is the largest expense for me. I drive a reliable American car with a hundred thousand mile warranty, and I restrict "extravagant" expenditures on meals and/or entertainment.
At the beginning of my high school career, I had my eye on reducing income risk- hence I began to accumulate as much experience as possible, wanting to get started on work. I interned at a structured finance firm, then Silicon Valley venture capital firm, and finally a real estate development firm, where I was able to launch the business I currently run. I realized after my freshman year at the University of Virginia, that in order to manage my future income risk more aptly I would like to be in control of my own income. I transferred from UVa. to Illinois to be closer to home, so as to be able to be closer to home, and around people I knew- it would help me be in greater control of my business. By trading sweat equity initiatives for portions of development deals- I was able to do a lot of the leg work for very small percentages of large developments. I leveraged my connections from my internships to bring attention to what I was doing, and I relied heavily on guidance and introduction from my mentor, the man I first worked for at my internship. I have created a path of repeated growth which I can duplicated in order to increase my income flow. I have taken measures to make sure that opportunistic actions that I will take in business will be hedged by "basic", low risk investments. I have been able to make this a sustainable source of income by keeping my spending so low- I have accumulated little to no debt in this process, thanks mainly to my parents paying for my college tuition. That would far and above be my largest expense if I had to pay for it, and for it being taken care of I am utterly grateful. I take great pride in making every decision with an eye to the future- I decided to continue pursuing my degree so that I can learn and educate myself more, as even though I may think I am educated enough to run my business, I never want to regret it in the future.
Cost of living is of course higher in the city of Chicago and surrounding suburbs, where I will live after I graduate. I will have to adjust my numbers to allow for this higher price of living. However, because my habits are mostly the same, and I will not change them, I understand that once stabilized I will be able to have a concrete range for consumption in the city too. For example, I spend most of my money on quality consumables- due to my vigorous workout plans, I consume high quality food and coffee and that is the largest expense for me. I drive a reliable American car with a hundred thousand mile warranty, and I restrict "extravagant" expenditures on meals and/or entertainment.
At the beginning of my high school career, I had my eye on reducing income risk- hence I began to accumulate as much experience as possible, wanting to get started on work. I interned at a structured finance firm, then Silicon Valley venture capital firm, and finally a real estate development firm, where I was able to launch the business I currently run. I realized after my freshman year at the University of Virginia, that in order to manage my future income risk more aptly I would like to be in control of my own income. I transferred from UVa. to Illinois to be closer to home, so as to be able to be closer to home, and around people I knew- it would help me be in greater control of my business. By trading sweat equity initiatives for portions of development deals- I was able to do a lot of the leg work for very small percentages of large developments. I leveraged my connections from my internships to bring attention to what I was doing, and I relied heavily on guidance and introduction from my mentor, the man I first worked for at my internship. I have created a path of repeated growth which I can duplicated in order to increase my income flow. I have taken measures to make sure that opportunistic actions that I will take in business will be hedged by "basic", low risk investments. I have been able to make this a sustainable source of income by keeping my spending so low- I have accumulated little to no debt in this process, thanks mainly to my parents paying for my college tuition. That would far and above be my largest expense if I had to pay for it, and for it being taken care of I am utterly grateful. I take great pride in making every decision with an eye to the future- I decided to continue pursuing my degree so that I can learn and educate myself more, as even though I may think I am educated enough to run my business, I never want to regret it in the future.
I wonder, considering your last paragraph, whether there is some implicit contract with your parents, and if so whether that impacted your decisions in some ways - which schools to attend, your choice of major, internships, etc. Or would you have made the same choices if somehow your tuition had been paid (say by a merit scholarship) without your parents involvement? My parents also paid for my undergraduate education, but the world was quite different then.
ReplyDeleteI thought it interesting that you talked about purchases of quality things and then mentioned clothes in that area. So, it is worth asking whether you appearance matters for your opportunities - in student to student interactions, in internships, and in other possible settings. Ethos, I think, matters. When I was an undergrad at Cornell, there were some fraction of students from quite wealthy families. At the time, the ethos was to dress down and not display wealth overtly. Is that different now? You presented this more as a matter of managing durability of the clothes you wear, and with regard to the car you drive I gathered that it isn't a fancy vehicle. I wonder if you might consider your choices along that dimension.
You didn't really consider social interaction, though you did say that in transferring to the U of I there would be people you knew. I wonder if you could work through the social life part of school into your narrative. Also, whether it is as planned as your expenditure part seems to be. I'm under the impression that students nowadays are over programmed, so don't attend to their social life as much as they might. On the other hand, social life may be more spontaneous than other aspects of your life. How do you see that?
It is nice to know you have a job waiting for you. I've found in the past that students in that situation get a pretty strong case of senioritis. How are you doing on that score? Must you maintain some minimum GPA to keep that job? Or is getting the degree sufficient. Conversely, assuming you are graduating after the spring semester - that wasn't clear to me, having the job security it might be possible for you to be experimental with regard to some of the courses you take next semester - you can afford to take on risk in that dimension. Has that thought occurred to you?
Implicit contract with my parents may have been simply the idea that I need to graduate college. I had told them that I really did not want to go to college and I wanted to simply get started with my business, and perhaps their money could be used more effectively elsewhere. Social life is definitely very spontaneous for me, and its funny you brought that up. I really have zero control over my social life and it has taken me very far- in terms of relationships, friendships, etc. I have had no path, and thus I've gotten to really experience a lot. I have had breakups and fights, but also long lasting friendships and gotten to experience a lot of love. I'm glad I haven't exacted control on my social life like everything else. I am definitely ready to graduate- although I want to learn, some classes, like Calculus 2, seem to be rather tedious and I just want to graduate. I have too many requirements to fulfill to be able to experiment much, but maybe next semester.
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