AAR36 - (How) Do Hobbies Fit Into Financial Success?

0:00Evan Raidt:You can also find, you know, if you know your stuff, you can find a$20,$30 bottle of wine that's fantastic. And you can really, really enjoy that. And then you can save up for the bigger splurge and do it once in a while, depending on where you are with your budgets and things like that. So, you know, if you collect guitars, you can do the same thing. Yes, you can save up for, you know, a super expensive Martin acoustic guitar that's thousands of dollars. Or you can buy a cheaper, you know, maybe Ovation or you can buy. This show is sponsored by Liquid IV. As we finally transition out of the indoor hibernation and start spending more time outside, staying hydrated is huge.

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4:13Dave Ahern:Good day and welcome back to At Any Rate. My name is Evan Ray and we are here to help you make sustainable financial changes without breaking a sweat. And on this lovely day, I am joined by the always lovely Portfolio Manager of Value Spotlight, Dave Ahern. How are you doing tonight, Dave?

4:29Evan Raidt:I'm doing great, Evan. Thank you for having me back. And yeah, it's a great, lovely day and it's warm here in North Carolina.

4:36Dave Ahern:It is warming up here in Florida, but for us, it's still freaking cold, but whatever. You can always put on coats, but it's still, it's not something we're exactly used to. But today's episode is going to be a little near and dear to my heart because we're going to be focusing on hobbies and how to fit them into your financial life or whether they even can fit into your financial life. And many of you listeners, especially long-time listeners, might know about my love or obsession with coffee. For me, it's a hobby. it's a landmark of my day it's peace it's ritual um and it's also like a nice complexity to try and learn about and uh and grow tastes within and few of you may know about dave's hobby as well as a near sommelier when it comes to wine i actually don't even know what originally got you into that since i know it's not something a lot of people do past having a few favorites at public right so

5:30Evan Raidt:So it was kind of a circuitous path. So I worked in the restaurant business for a long time, and I started kind of in the kitchen, waited tables for a long time. And while I was waiting tables, I got introduced to the world of wine. We had a wine contest one week, and I ended up being the winner of that particular wine. I even remember the name. It was the Walnut Creek Cabernet. and uh so i really like the wine and i was able to sell a lot of it to our guests at the restaurant and it really kind of got me into it so i became the air quote a wine guy at the restaurant i was working at and so whenever they would have wine reps come in or we would do any sort of contest they would always you know include me in anything so when i moved to another restaurant became the general manager, we had decided that we were going to have a larger wine list as part of the menu offerings.

6:29Evan Raidt:And so that really put me down even a bigger rabbit hole because I had to meet with all the vendors and talk to them about building the wine list because I knew enough to be dangerous, but I really wasn't that steeped in the knowledge. And so then I just really had to go down a rabbit hole and read and study and of course drink a lot. And that's really kind of how I got into it. I got bit early and once I got really got into it, it really became a hobby or an obsession.

7:01Dave Ahern:Was it something that at first felt like a, I mean, it obviously was your job or a portion of your job, but did it initially feel like a job learning about it or was it immediately? Once you started learning ins and outs, it was.

7:12Evan Raidt:No, no, never. It was, it was, it was a part of my day, part of my job, uh, that I loved, uh, the most, uh, it never, it never became drudgery. I mean, occasionally it would when, you know, a wine rep would bring 15 merlots in and I had to, you know, they'd just push them in front of me and say, I don't know much about these. You want to, you want to tell me about them? And that was kind of torture. uh but uh but no but it was it was for sure a love and a passion and it was the one of the main parts of the job that i never found work that is sick now i'm going to start an immediate rivalry at

7:49Dave Ahern:the beginning of this episode because i read something i did not fact check it so let's start that off but i read something that there is more flavor complexity and more flavor compounds in

7:59Evan Raidt:coffee than there is in wine how do you feel about that i'm gonna call bs on that um yeah i don't uh i i would admit that i am not a near sommelier in coffee uh like you are so but i can say from a limited uh exposure to coffee and coffee geeks i don't think they're talking about the same kinds of extensions of flavor profiles that wine nerds do. It can get pretty intense with the wine nerds. A lot of people, a little sidetrack here, in Italy alone, just in Italy alone, there are 40 ,000 different wine varietals. Holy crap. Here in the United States, we have more than five or six, but we don't have that much more.

8:54Evan Raidt:Cabernet, Chardonnay, Pinot Grigio, Pinot Noir, the things that people are most familiar with. In Italy, they have 40 ,000 of them. And there's no way in heck that all 40 ,000 of those have the same six or seven flavor characteristics. And so, yeah, I don't know where you read that, but I will, until I learn otherwise, I'm going to call it BS on that.

9:20Dave Ahern:I would absolutely die to be able to send you to some kind of a, what would you call it? Like, I guess a small school equivalent for coffee, like a tasting school for coffee or something like that. And see if you're just sitting there the whole time twiddling your thumbs like, this is absolute BS. Or whether you're like, oh, heck, this is interesting.

9:40Evan Raidt:Right, yeah. And, you know, honestly, I never really embraced coffee in large part because I know that I am a beverage enthusiast, shall we say. and I was afraid of going down another rabbit hole like I did with wine. And so I just kind of held, I've held off on becoming a coffee nerd for many years simply because I don't want to, I don't want to go down that rabbit hole.

10:10Dave Ahern:Yeah, yeah, this is definitely a whole nother rabbit hole. So I definitely get that. But today we want to discuss how we can fit hobbies like this, like Dave and I's hobbies as well, as I'm sure we each have others, how we can fit those kinds of hobbies and enjoyable things to do into a healthy financial lifestyle. So Dave, I want to start off with, do you even find it necessary to have hobbies and interests or do you think that's something that, you know, if you're really trying to tighten down your financial buckle, then just cut that already because you can live without it?

10:38Evan Raidt:No, I strongly believe you should have hobbies or interests because that's what makes life interesting and exciting. There's, you know, was it Ramit Sethi always talks about this rich life idea. And I kind of, I kind of agree with him in that the idea of denying yourself pleasures or things that you enjoy until you get to your, uh, goal, I think is, you know, for me, it would be a miserable way to live. Uh, I think there's ways that we'll talk about this. I think there's ways you can fit these things into your life. And, But I think it's the joy of life is having things you're interested in, want to learn and try and explore.

11:24Evan Raidt:And that's what makes it life fun.

11:28Dave Ahern:One million percent agreed. Yeah, for me, it gives life a direction of some kind. A lot of us have jobs that we don't love. Or obviously, some people have worse jobs than others. But a lot of us have jobs that we do because we have to. and something like a hobby is something that you can put that same kind of energy and attention towards but is a direction that you want to head even if there's no financial compensation for it or anything like that it's still something that you want to do and enjoy doing it's something you can you can learn about and grow within and share experiences with others who are into the same thing and learn from others who have completely different backgrounds just because they're into the same thing as you and and for me one of the biggest things when it comes to a big focus of this podcasts is sustainable financial changes is that if you try to cut all of that out of your life and say you know i need to save money no more coffee whatsoever i don't get to enjoy any of this or for you no more wine you don't get to enjoy any of that it's not going to be sustainable we're going to after you know a week it could be or a couple months start thinking wow this freaking sucks is this even worth it anymore and so the the long and short of the of the whole title of the podcast of this episode is going to be no it is it is not sustainable to go without it and it is something that is best for you to have.

12:43Dave Ahern:But there are still definitely some downfalls and some dangers in it. And at least for me, there are two main ways that it comes about tripping up your finances. And the first one is that it's not budgeted for. If you have a hobby, especially one that's going to cost you any money, which unless your hobby is just going out and running, I mean, even then running shoes can be pretty expensive if you're wearing through them pretty quickly. But whatever you're doing, your hobby likely costs you some amount of money. And if that money isn't budgeted for and you don't account for it when you lay down your needs, wants, and savings and don't put it in any of those buckets, then that is money that is supposed to essentially come out of nowhere and that is not going to happen.

13:19Dave Ahern:It's going to come from somewhere and it's going to degrade some part of your finances. And for a lot of people, that is where even a marginal, relatively small amount of spending can add up over time. And they don't even realize it is because they might not even realize that they didn't budget for it or they might not have even done the budget up front. So the first step is definitely having a budget. And the second step is accounting for it in your budget. And the second point for me is that it's often one of the first things that gets cut when people talk about cutting back on their spending.

13:50Dave Ahern:And like I mentioned before, this is just not sustainable. So for me, and I know that this can happen to me personally, and I know a lot of other people that it's happened to as well, where they try to cut back on something like a hobby too far, and it just causes them to splurge a month or two down the road. Because they're like, well, I've been holding back for so long, so now I get to spend 10 times as much as I wanted to because I've held off for two months. and obviously that math does not add up and it puts people in worse situations than they would be if they had given themselves some kind of an allotment along the way to be able to enjoy it time after time instead of just saying well i'll you know i'll put it off for now because i can and sure you technically can but it's just going to lead you to to bounce back really really hard later on but what are some other ways you think of dave that come to mind where hobbies can ruin your finances if not handled correctly is your wardrobe well stocked for the

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17:27Evan Raidt:So, for example, for me, I love obviously wine and we're kind of focusing on wine today and I have other things that I'm interested in. But if you're really into wine and the thing is you have to learn how to, you have to learn the, you can't go out and buy a$100 bottle of wine, for example, every single time you go out to eat. And because if it doesn't fit in your budget, then that's how you can get in a lot of trouble. And so the thing that I have seen people do is try to adjust. So for example, if you want a really nice bottle of wine, for example, and you want to spend, I'll just use$100, for example, then the other times that you go out, you don't spend$100 on the bottle.

18:17Evan Raidt:You downshift. and one of the things about real wine geeks is that they get more excited about uh i guess you would say more affordable bottles of wine that we think are really good it's easy it's easy to go out and spend a lot of money anybody can do that oh yeah i spent three hundred dollars on a bottle of wine okay great that's you know that's easy yeah i'm not necessarily and that's the that's That's the trick. But you can also find, if you know your stuff, you can find a$20,$30 bottle wine that's fantastic. And you can really, really enjoy that. And then you can save up for the bigger splurge and do it once in a while, depending on where you are with your budgets and things like that.

19:05Evan Raidt:So if you collect guitars, you can do the same thing. Yes, you can save up for a super expensive Martin acoustic guitar that's thousands of dollars. Or you can buy a cheaper maybe Ovation or you can buy a Fender or something like that that's cheaper that's still going to get you where you want to go. And you can save the big shekels for the big outweigh. So if it's not in your budget, you can't just go willy-nilly and run up credit card debt buying the most expensive thing that's in whatever it is that your hobby is. You have to try to do it within reason.

19:43Dave Ahern:Yeah, I absolutely agree with that. And this is going to vary how you do it, like you were talking about, whether it's guitars or wine or coffee or whatever it is. It's going to vary how you specifically do it based on whatever your specific hobby is. but whatever it is i would put a big emphasis on trying to find enjoyment from the process of whatever that hobby is instead of solely enjoyment based on the spending towards that hobby i think that can easily like for example i also very recently got a 3d printer and i've been going down the rabbit hole of 3d printers sure i could go blow ten thousand dollars on a crazy 3d printer and i bet it's going to work really freaking well and it's going to be really cool it's going to print crazy crap but that is not the right way to go about it for most people's finances and that's also in a lot of ways not the most fun way to go about it a more fun way to go about it can be having a more reasonable amount of money to spend on it and finding ways to make that work and whether mod it or upgrade it or just try to fit within the parameters of whatever you have access to that can be a lot more enjoyable than just going out and splurging a ton of money on it And then that makes it more sustainable in the long run for you to be able to keep up and never feel like you're drowning in your finances because of your spending on it.

20:55Dave Ahern:That's a much more holistic way to look at your finances and having a hobby as a part of those finances. So I personally, how I budget in my spending towards my hobbies is I put it in my wants column of spending. So if you look at our budgeting spreadsheet or a lot of other budgeting spreadsheets out there, we break it up between wants, needs, and savings. And so for me, I know that a hobby isn't a need. And in a very worst case scenario, it is something that I could cut temporarily. But it's not something that I just want to cut because I want to save a little bit more money or something like that.

21:31Dave Ahern:But I put it in my wants column, and I just include it in my discretionary spending total number. That's how I personally handle it. I know that for a lot of people out there that want to break it up a little bit more, you can always break it up into a separate entry in the budgeting spreadsheet. So instead of just being part of your discretionary spending, you can have discretionary spending that's for whatever random stuff you run across. You find a pair of shoes that you really like, you could buy that, and then have a separate column for coffee or for wine or whatever it is. And also when you calculate that number, I would recommend making it a realistic number.

22:03Dave Ahern:Don't lie to yourself about how much you spend on whatever that thing is. Be honest with yourself. and I would also add a little bit of extra padding to it. I would much rather that you underspend on the hobby that month for whatever reason and have a little bit more left over in your checking account or wherever your money lands at the end of the month than underestimate it and slowly be bleeding away at your finances, potentially without even realizing it. Plus, having it in those buckets for me avoids surprises. I'm not spending and then again bleeding away finances and get surprised by it later down the line.

22:36Dave Ahern:and one big place that i feel like a lot of people trip up and this goes for a ton of other spending not just hobbies is including ongoing costs so for example if it's coffee or whatever cool you bought a new machine you budgeted in the spending for that new machine fantastic you could afford it it's still going to cost you money to get the coffee over time or maybe little maintenance pieces that you need to get or something like that there will of course be ongoing costs for something like that or a 3d printer to get filament over time is going to be an ongoing cost and even though that may seem very obvious up front for a lot of people if you want to get into a hobby or something again you see okay this machine's five hundred dollars i can afford that five hundred that's fantastic but can you afford the you know just making up a number hundred bucks a month that you're going to be spending on the beans to go with it or something like that that's something that's very easy to miss that i've seen people miss with their own spending and can definitely be missed when it comes to hobbies but how do you dave personally account for hobbies in your budget or in your spending?

23:34Evan Raidt:Well, I definitely try to have a little bit of padding for things. For example, in the case of the wine, maybe having extra glasses or finding nicer glassware to drink the wine out of. Having different wine keys, maybe having a decanter or two. What is a wine key? I'm just completely at your house. Yeah, that's the device that has a little corkscrew and a little knife on it. Okay, I never knew what that was called. Yeah, to open the bottles of wine. You could never have enough of them, and it always seems like you're always losing one. So it's, you know, they don't generally cost a lot, but they are things that you need to kind of keep track of.

24:19Evan Raidt:And if you are in the process of building up a wine inventory, for example, maybe you're one of those people that likes to buy maybe a case of wine at a time or a couple cases of wine and are trying to build up an inventory of wine, then you need a place to store them. And generally, those wine refrigerators can be$200,$300,$400 or more, depending on how big you want to get. Some people build their own wine coolers in their homes. So like this, you know, basically a closet that they can store that is temperature controlled, that they can store all their bottles of wine in. And those can get as big or, you know, small as you want.

24:56Evan Raidt:You know, it's kind of like, I think they call them wine caves now. But, you know, if you want to build something like that, then you got to definitely budget for that because it's not cheap. And so those are, but those are things that people will do. or if you're looking for a special collector bottle of wine, those kinds of things, then you need to have some discretionary money set aside if something comes along for kind of that rainy day idea.