This week I am very pleased to bring you an exciting interview with a climber and young professional that you don’t know: Neil Phillips.
As a matter of fact, I’m 100% positive that you don’t know Neil Phillips, because that’s not his real name. And I get that too, because I also don’t use my name. Money and jobs and the internet are like oil and vinegar. They don’t mix. As a matter of fact, we’ll discuss a bit about the taboo of money, and why Neil and I think it’s so damn hard to discuss personal finance.
Neil is a young professional, rock climber, and has many interesting stories and suggestions for anyone trying to get the upper hand with their money.
In this interview we discuss Neil’s desire for financial strength, his story of eliminating debt, pursuing financial independence, and preparing for a year-long road trip. And of course, we even have some good-ole-fashioned climbing talk.
Let’s go!
Neil Phillips: Introduction
Neil Phillips, now 28, knew from an early age that he wanted financial security. After watching his father struggle though the 2008 financial crisis, Neil resolved to find a career that would pay reasonably well and provide a sense of comfort lacking from his childhood. With that in mind, Neil first secured a degree in Chemical Engineering from Clemson University, and then went on to a Master’s of Supply Chain Management from Penn State.
After finishing his degrees and landing a good job as a Sourcing Quality Engineer at a very large mega-corp (that shall not be named), Neil found himself in a sizable debt hole. Along the way, he became a rock climber too.
Neil now lives with his girlfriend Ally in Albany, New York, where they’ve resided since 2017. We begin this interview with a scenario familiar to so many: a rock climber buried in the debt of their costly education. What’s different though is that Neil is taking the upper hand on his finances and his future.
Neil Phillips: Important Climbing Achievements
CC: Can you give me some background on you as a climber? What is a proud climbing achievement that really meant something for you, not necessarily a hardest grade?
Neil: I started climbing almost a decade ago in college. The school I went to had a huge Greek life and college football scene that I really wasn’t into. In search of something different, I went to check out the campus climbing wall with a couple friends and was instantly hooked. A challenging sport that brought me to beautiful places while being surrounded by an amazing community of goofballs was exactly what I was looking for.
Since then, I’ve primarily focused on sport climbing. However, since Albany is sandwiched between the Gunks and the Adirondacks, I find myself trad climbing a fair amount too.
One of my recent proud climbing achievements was actually in bouldering. This year I have been trying to consistently boulder outside to improve my weaknesses in climbing. I try to pick projects that are not my style and that feel impossible to me at first. One of those projects was a problem called Origin at Nine Corner in the Southern Adirondacks. At V5, it is not my hardest grade, but the boulder is my anti-style, requiring heel hooks and compression strength. It felt super good to finally send after about five full sessions of working it.
Neil Phillips on Family History and Financial Independence
CC: Can you tell me about your discovery of the financial independence movement? Elaborate on your family history and how that experience shaped your outlook on personal finance.
Neil: I grew up in a family of seven where money was always a struggle. My dad worked hard, but did a lot of job hopping, and even had to collect unemployment for some time during the height of the 2008 recession. I’m thankful we always had food on our plate and a roof over our heads, even if that roof came in the form of five different houses over a 10-year period.
(Related Post: The Shocking Headlines of the 2008 Financial Crisis, and Why They Are So Important Now)
Anything I wanted apart from food and lodging was up to me to finance. I started walking dogs and mowing lawns at age 10 in order to fund my extravagant middle school life of drinking Mountain Dew and going to movies with my friends. I fund-raised like crazy to pay for any extracurriculars I wanted to participate in. In high school, I worked at a pizza place and then as a lifeguard and swim instructor.
Choosing a College Major for Financial Stability
When it came time to decide what I wanted my college major to be, I did a lot of research to find something that could provide me with the financial stability I never had growing up. I didn’t want something that would make me rich necessarily, but I wanted something where I just didn’t have to worry about money.
(Related Post: Chasing Your Dreams is Probably a Bad Idea)
I looked at salaries and job growth data and eventually settled on a degree in Chemical Engineering. It proved to be a good choice as I had no problem getting a decent paying job right out of school.
At that point, I knew a lot about chemical reactions and how to operate a chemical manufacturing factory. The problem was that my first job out of school was in Strategic Sourcing, a role that required much more financial acumen than I had. So, I started reading a lot about business finance which eventually led me to personal finance. It wasn’t for another six months into learning as much as I could about personal finance that I finally started acting on what I had learned.
The more I learned about financial independence, the less satisfied I was with having interesting-accumulating debt hanging over my head for 20 years.
Neil Phillips
A Journey to Becoming Debt-Free
Neil: I came out of school with $50k worth of debt. I had automated payments set up that would put me on track to pay it off in 20 years. The more I learned about financial independence, the less satisfied I was with having interest-accumulating debt hanging over my head for 20 years.
I realized I could pay off my debt much quicker if I prioritized a little better. At this point, my job had sent me to Houston for an eight-month rotation. This position had an opportunity for me to make overtime pay. I wasn’t a fan of Houston in the summer, so I took that opportunity to work as much overtime as I could and threw every bit of surplus at my student loans. Any extra money that came in, like work bonuses or tax returns, also went towards loans.
Motivation to Pay Down Debt
I found that the lower I drove the principle down, the more motivated I was to pay even more off. I targeted the loans with the highest interest rates first and tried to pay off one at a time.
While in Houston, I also bought a car that required a loan. I whittled away at the car loan while still prioritizing the higher interest student loans. Finally, in November 2019, I made my last student loan payment. Six months after that, my car was paid off and I was totally debt free. An amazing feeling!
(Related Post: How to Get a Fantastic Deal on a New Car)
One of the biggest motivators for becoming debt free was so that I can put more money towards savings and investments. I was trying to save and invest a decent amount while I was still in debt, but now I can watch my savings and investments grow so much faster without loan payments to worry about.
(Related Post: The Simple Systems to Kicking Monetary Ass)
Neil Phillips’ Systems for Saving More Money
CC: Can you describe your system for saving more of each paycheck? Do you know your approximate savings rate? Was there an evolution in your own personal habits to enable this kind of savings?
Neil: I think one of the easiest things I did to start increasing my savings rate was to just start tracking my spending. I’m a little embarrassed to admit that I only recently started doing that in the last year.
(Related Post: Tracking Your Spending: The Ultimate Task)
I have long been a fan of the “pay yourself first” mentality. Every month I first pull out what I need to hit my saving, investment, and loan payment targets. However, until recently, I did not pay too much attention to the “discretionary” money that was left over.
I would keep a loose eye on my checking account to make sure I wasn’t spending too much on food, gear, and beer. If I noticed there was a bit of a surplus accumulating, I would throw that towards loans.
Tracking Discretionary Spending for the Win
Recently, however, I have been tracking my discretionary spending and have seen definite savings improvements. I still pay myself first, but now I try to see how much leftover discretionary money I can end each month with. All the leftovers get added to the money I pay myself at the beginning of the next month. On a good month I save more than 50% of my paycheck. My “pay myself” savings baseline is currently about 40%.
Neil Phillips on Investing
CC: What are your systems for investing? Where are you investing?
Neil: I set aside enough each month to stay on track to max out my 401(k) and a Roth IRA.
Since I am no longer in debt, this is the first year I will be able to dedicate the maximum allowed in both of those tax advantaged accounts*.
*CC Interjection: the contribution limits for a 401(k) and Roth IRA in 2020 are $19,500 and $6,000, respectively.
In addition to those, I also have a classic brokerage and a high-interest savings account. These are smaller than the tax-advantaged accounts but are more liquid and are a good place to keep savings that I will want to tap into relatively soon.
I also keep about $5k in a debit account for immediate use, if need be. The bulk of my investments are in low-cost index funds and ETFs. They are a pretty even split of the major market indexes (S&P, Dow, Nasdaq), an overall market index, and a global market index. All of my investment accounts are through Fidelity. Although most index fund trades through Fidelity are commission free, it wasn’t always like that, so I mostly own Fidelity index funds to avoid commission charges.
CC: If you have no idea what Neil is talking about but want to learn more, I recommend you check out our article: The CC Family Investment Strategy, Part 1 and Part 2)
Or better yet, I recommend this must-have and easily digestible book by JL Collins: The Simple Path to Wealth.
Planning for a Year on the Road
CC: Instead of choosing to directly pursue full financial independence, you and your girlfriend are using the same saving and investing methods to plan for a year-long road trip. Can you give me some color on your plans for this trip?
Neil: Currently, our goal is to put ourselves in a position where we are financially independent for at least a year. We’re both aware that taking time off during our prime earning years will delay full financial independence, but to us it’s worth it.
We are young and healthy and want to take advantage of that to see and experience parts of the USA and world we haven’t yet had a chance to visit.
The plan is to buy and build out a van, live in it and travel full time. We’re both climbers, so we will spend a lot of time crag hopping. We don’t have an agenda yet. However, since we’ve spent most of our lives living and climbing in the East, we plan to spend a good deal of time in the West. We have taken short vacations out there, but it would be great to spend a lot more time in places like Red Rocks, Bishop, Smith Rock, etc. We also have a young dog who’s proving to be an awesome hiker, so it will be fun to get her out onto some big mountains.
(Related Post: Van Life: The Economics and Trade-Offs)
For more on our road trip so far, check out : One Month on the Road: Getting a Groove
Neil Phillips: Financial Security for a Road Trip
CC: You mentioned that your girlfriend was originally more excited to start the trip soon, whereas you prefer more financial backing. Can you describe what qualitative or quantitative metrics you are using to achieve a sense of financial security for this trip?
Neil: Ally has spent time working seasonally as a guide, so I think she’s better equipped to jump into a life where valuable outdoor experiences are a certainty but your financial future may not be.
On the other hand, I have usually been super conservative when it comes to money. I have always envied those who can set off on a trip like this with little financial cushioning and just make it work. Luckily it didn’t take Ally long to be convinced we should delay the instant gratification for financial peace of mind.
Sorting out the Costs of Life on the Road
We put together an estimation of what we would need to make this work. Obviously, we will need to have enough funds to buy and build out a van. We are using our current cost of living, excluding rent, to estimate the cost of living on the road. We can likely get by on less than our current “non-mobile” life, but it’s safer to over-estimate wherever possible.
Then there are the road trip-specific costs like insurance (vehicle and health), gas, maintenance, and camping. A little internet research gave us some good estimations for these values. One of my favorite van-specific resources are the folks at Far Out Ride. They’re a couple of mountain bikers living on the road and they give an insane amount of detail about every aspect of van life, costs included.
On top of all of that, we want to make sure we’re still putting away some savings for that year. Baked into our goal is enough wiggle room that we can max out our Roth IRA contributions for the year. We also want to have a few months of living expenses left over.
Income on the Road
CC: Do you plan to make income on the road? Will you leave your job before the start of this trip?
Neil: We are doing all of our saving and planning under the assumption that we will make no income for the entire year.
We want our time to be as flexible and relaxed as possible. But, knowing how those rest days can be a real grind, it is likely we will both try to find some contract work that we can do when convenient for us. We’ve both been working to develop aspects of our current skill sets that could find us some remote odd jobs here and there.
True to the spirit of financial independence, we won’t need jobs. However, it won’t hurt if we can make some extra money on our own terms. Any extra income could provide the opportunity to extend our time on the road as well.
Right now, the plan is to leave our jobs before the trip. There’s a chance one or both of us asks for a company sanctioned sabbatical. We are not counting on it, though.
Neil Phillips: Life and Career After Extended Travel
CC: Knowing that we really never know, how do you anticipate life and career following your planned road trip?
Neil: You’re right that we never really know!
We have a few options that we’re pondering.
Option 1: We use our travel time to scope out a new area that we want to settle in post-trip. Because we have established careers, we will still have the credentials and experience to find decent jobs afterwards. We could get jobs in the same field or try to pivot and try something new.
Option 2: We begin to make enough money while on the road. We decide to travel indefinitely and ride it out as long as we want.
Option 3: We return to the same life we had. Move back to the same area and either try to get our old jobs back or something similar.
Regardless, the pursuit for financial independence will always be part of the plan. We will continue to save and invest as much as possible to free ourselves from the 9-5 ASAP.
Like giving unsolicited beta at the crag, I find it hard to give financial advice without feeling like it rubs some people the wrong way.
Neil Phillips
Neil Phillips: The Difficulty of Discussing Money
CC: Can you elaborate on the difficulty of discussing money with others? What is the most common pitfall you witness regarding personal finances?
Neil: Unfortunately, money is still a super taboo subject that can be touchy to discuss even with close friends and family. Like giving unsolicited beta at the crag, I find it hard to give financial advice without feeling like it rubs some people the wrong way. That should not be the case.
In climbing, if you take the extra time to figure out the beta for yourself, it makes you a better climber. This process puts you in a better position to send harder in the future. But in finance, taking the time to sort all the financial beta for yourself will cost you years of lost compounding interest gains.
(Related Post: Holier Than Thou: Why It’s Hard to Talk About Money)
I challenge anyone who thinks they don’t make enough to invest to track their spending and try to find $100/month of excess.
Neil Phillips
Neil Phillips on the Common Pitfalls of Money Mismanagement
There are two pitfalls that I see the most with folks I’ve talked to. One is the “I don’t make enough” excuse. I totally understand that there are people out there who work long hours and can barely make enough for their family. I get that, but that’s not who I am talking about. Most who I’ve talked to with that excuse have excess. However, they just prefer to spend it on instant gratification: beers, tacos, shiny new gear. I challenge anyone who thinks they don’t make enough to invest to track their spending and try to find $100/month of excess. Some will be surprised that they spend more than $100/month drinking and eating out.
The other pitfall I’ve seen with people is that this stuff is confusing and entirely overwhelming. They are under the impression that the investing world is wildly complicated. They will never be able to understand, so they don’t even try. Combine this with a healthy dose of pride, and you get someone who does not want to talk or even think on the subject. I understand this, as I was intimidated at first too and it’s hard to admit that you know nothing. That’s why blogs like yours are so valuable. The investing basics really are simple and you do a great job of laying it out so it’s easily understood.
Neil Phillips on Advice for Building Wealth and Improving Work/Life Balance
Neil: Set incremental goals and celebrate them when achieved. This same principle is what makes climbing so addictive. Most climbers have experienced the feeling when you send a long-term project. It’s exciting and you celebrate, but quickly your mind goes to what’s next. You get stoked to start working something harder and the process begins again.
I remember the day my net worth became positive. I took myself and a buddy out for beers to celebrate. It was a great feeling. But quickly my sights were set on a $10k net worth, and then $100k. Each achievement will drive the stoke to keep doing better.
Summary
Stories of eliminating debt and pursuing financial freedom need not be rare. Neil Phillips shows us how simple choices, a bit of research, and even simpler systems can be used to start some damn good habits.
As Dave MacLeod tells us, we have to be willing to do what others are not. Others aren’t willing to give up all the nights out, or the trendy apartment. Others aren’t willing to aggressively pay down debt, and settle instead for the middle road. Neil, however, and perhaps you too, recognize the value in going against the grain.
If you have any questions for Neil, drop them in the comments or send me an email on the Contact Page. We’ll get them answered for you.
Remember, the best laid plans mean nothing if you can’t take action today. Have questions? Need some feedback? Hit us up on the Contact page.
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Thanks guys, see you next week.