Today Chelsea Brennan from Smart Money Mamas and creator of the Family Emergency Binder is here to talk about her unconventional choices that led to a happier life.
Smart Money Mamas
Before she left her hedge fund job, she had started Smart Money Mamas. Although it did not make any money yet, it did receive traffic so she decided to give it a shot.
The website had all started through a Facebook group of moms with children born in the same month as her first son. Within that group, Chelsea had become the personal finance expert and realized that most of the moms had very similar questions. The blog was started to answer 65 original questions from that group. Chelsea started with the basics and then expanded into more about FI, career development, stress management, and more.
One of the most exciting things available through her blog is the Family Emergency Binder. Chelsea was kind enough to offer our community a 20% off coupon if you use the code “CHOOSEFI.”
What Is A Family Emergency Binder?
The family emergency binder is full of detailed information that is intended to help in a true emergency situation. In 170 pages, Chelsea has covered absolutely everything that your family will need to know if the unthinkable happens.
Don’t panic! You do not have to physically fill out 170 pages. The last 35 pages are duplicates, plus there are some dividers.
A few of the things included in the binder are:
- The information a family number would need to close out an employee benefits account.
- Documents for military families to gain access to benefits.
- Basic investment information, plus steps on what to do with a life insurance payout.
- Burial requests – which may also be included in your will.
The information in the book is not just for if or when someone passes away. It can also be useful for minor emergencies like if a guardian needs to take your child to the doctor while you are on a business trip. Basic information about your kids, like their favorite food or best friend’s parent’s phone number, can be really useful in emergencies of all kinds.
Should You Also Have A Will?
Yes. If you have kids, then you should absolutely have a will and life insurance. The will is the best place to name guardians for your children. Most people assume that the closest family members will take care of the kids, but in reality, it is the loudest member that gets the kids. You need to legally name those people to make sure your wishes are heard.
You do not need to get an expensive will. A good place to start is at tomorrow.me. You can create a free will and trust here to get started. In the future, you have the ability to upgrade your will, but this is a good place to start.
A will is for letting the courts where the money needs to go, but the family emergency binder will help your family get a rhythm back to their house. Just think about all of the random bill payment steps and investment information that is locked up in your brain. It could take years of effort for your family to track that down after you are gone. Making an effort to put this all in one place will help to get your family through an obviously difficult time.
Related: Why You Need A Legacy Binder
Where To Store Your Family Emergency Binder
Chelsea keeps two physical copies of the document. The first is split into the basic family information and estate planning sections. The basic family information sits in her office in case anyone needs it. The estate planning information is in a fireproof safe.
A second copy is at her mother’s house, just in case.
How To Tackle Your Family Emergency Binder
The best thing to do is just get started. Chelsea recommends starting with the basic family section because you can do most of this off the top of your head. After that, just choose one chapter a week and work through it.
Divide and conquer with your spouse. Plus, review each other’s information to keep everything as accurate as possible.
As you work through it, remember how valuable this will be to your family. If the worst happens, this could help to make their lives easier.
Both Brad and Jonathan are making it a priority to go through their Family Emergency Binders with their wives. Although it is a long process, Chelsea’s binder could save you months of time. Instead of starting from scratch, you just need to fill out the emergency binder.
If you are interested in learning more, then check out the Family Emergency Binder. Reminder: 20% off coupon if you use the code “CHOOSEFI.”
Other Emergency Life Savers
Lastpass is a great place to store all of your passwords. You can set up a next-of-kin security feature in LastPass. So if something happened to you, then your spouse would be able to access all of your passwords within a couple of days.
How To Connect With Chelsea
You can connect with Chelsea through Smart Money Mamas or across all social media channels @smartmoneymamas.
The Hot Seat
Favorite blog: The Financial Diet
Favorite Article of All Time: How the Diagnosis of Postpartum Depression Changed My Life by Mrs. Frugalwoods
Favorite Life Hack: Meal prep Sundays. She only cooks on Sundays for her family’s Monday through Friday meals. The goal is to cook 2 or 3 meals and plan for leftovers.
Biggest financial mistake: Not telling my husband to not buy an engagement ring. He spent a chunk of change on the ring, but she doesn’t like it. It just sits in a box and she wears a $30 ring that he bought off of Etsy.
The advice you would give your younger self: Don’t be so hard on yourself. Live a little bit more in the moment. Don’t try to plan where you will be 10 years from now.
Bonus! What purchase have you made in the last 12 months that has brought the most value to your life? The desk lamp in her office.
How Chelsea Became A Hedge Fund Manager
As a hedge fund manager, Chelsea worked her way into a $450,000 per year salary and managed $1.4 billion for a hedge fund. If your goal is to increase the income side of the equation on the path to FI, then that sounds like a dream come true. Chelsea walks us through how she got to that level within the industry.
When she left college, she held degrees in both economics and mathematics. Her first job was with Goldman Sachs on a metals and mining team as a research analyst. She warns that no first-year employee is allowed to have a say in which team they join. With her potentially boring assignment, she decided to make the best of it. With that first position, she made $60,000 with additional bonuses of $30,000.
Throughout her position, she got to know people in hedge funds and built a deep knowledge of metals and mining companies. Over time, she built relationships with hedge funds. Within a few years, a position opened up for a hedge fund manager with specific knowledge of metals and mining companies and Chelsea was the perfect fit.
Advice To Anyone That Wants To Work For A Hedge Fund
If you want to work for a hedge fund immediately after graduation, then you will need to go to a top tier name-brand school. However, larger banks like Goldman Sachs will recruit from a wider range of colleges because they have wider needs.
If you are not at a big name school, then the best thing to do is to network as much as possible. Go to any career days or finance days that your school offers. Show to the recruiters that you have an interest and it will pay off. Network as much as possible to get your foot in the door.
Also, you should be open to the jobs that are available. Your dream hedge fund manager job may not be available for your right away. Instead, you need to keep your options within the field open.
The reality is that you don’t actually know what you like yet. So if you want to get into the field, that’s the first step. And be open to learning and experiencing in the space. It’s easier to move laterally once you are in the field.
If you are at a big name school, then connect with hedge funds that recruit from that school. Either reach out through your college’s career department or through the HR department of the hedge fund. The important thing is to make contact early in your college career. Learn as much as possible about the space and why you want to get into this space. The beginning will likely not be fascinating, but you need to put in the time to move up the ranks.
Finally, in order to be successful in the long term, you need to be willing to constantly learn. In this field, there is no stability in your day-to-day activities because markets are always changing. You need to have a real curiosity about businesses and the ability to think creatively about these companies.
Life As A Hedge Fund Manager
Chelsea was great at her job and made the move to a hedge fund when the right associate position opened up. When she moved to the hedge fund, it took around 1.5 years to be promoted to a VP with her own book to invest. The last two years she was with Bain, her salary was in the $400,000 to $450,000 range. In her own words, it was “stupid money.”
However, that salary did not come without tradeoffs. The field is known for punishing jobs that demand around 60 to 80 hours a week.
Even with these high salaries and punishing schedules, the FIRE movement was rarely talked about. In fact, most people worked for around 20 years in the space before taking a short break. After the break, they would usually come back and work on the corporate side of things.
This idea of early retirement, financial independence really wasn’t there and it was something that, I think, the companies actively didn’t want talked about. This idea that at that salary level you really could retire quite quickly if you kept your expenses in check. They wanted people to stick around. Especially on the hedge fund investment side because you’re grooming knowledge, teaching people how to manage and you don’t want a lot of turnover in your managers because then you have to explain that to your investors.
Although FIRE could be reached with relative ease, the company wanted people to stick around so the culture encouraged inflated lifestyles. The “work hard, play hard” attitude was extremely common among coworkers.
It’s also interesting to note Chelsea and most of her colleagues invested heavily in index funds. Even though they spend their days choosing individual investments they knew that their choices came from a deep knowledge of one particular industry. Knowledge that was cultivated over many years. They knew they didn’t have the knowledge base or time, to maintain their own personal investments.
We know that any ability that we have to pick stocks and bonds… we knew it came from deep deep expertise of that one market… We know we can’t know everything about all the markets and it was just easier both mentally, and to maximize long term returns to be mostly index funds… Most of us were almost entirely index funds.
How To Walk Away From Being A Hedge Fund Manager
Even with an amazingly high salary and the potential to move up the pay scale, Chelsea chose to walk away from this career. However, it was an incredibly difficult choice to make.
As a compulsive saver, Chelsea was consistently saving throughout her career. She did not come from a wealthy background, so she was constantly waiting for the other shoe to drop. Unlike most in the space that were accustomed to this level of wealth, Chelsea was forced to wonder “what is enough money?”
[There was a senior partner] who had been making seven figures for multiple years and he resigned… and I made a comment to some other VP’s like ‘Oh, he’s retiring’ and the reaction was visceral, of like, ‘Oh no, he couldn’t afford to retire! He’s just taking a couple of years off’… and I remember standing there thinking ‘He can’t afford to retire! What has he been doing?!’
Chelsea chose to save 20-30% of her base salary. Plus, almost all of her bonus, which was 66% of her total compensation. The spending gap between her and her coworkers was extremely obvious.
She had always known that she did not want to pursue finance for the long-term. Back in college, she had made a choice between finance and becoming a teacher. She considers herself a compulsive saver and the need for financial security outweighed the desire to have an impact as a teacher. So she made the decision to pursue finance with the idea that if she did this for 10 years, then she could do whatever she wanted.
However, she chose to leave the world of finance slightly ahead of schedule. When her first child was born, she was affected by postpartum depression that went unrecognized. By the time she was pregnant with her second child, she was absolutely miserable at work and experiencing complications with the pregnancy due to stress. The paycheck was no longer worth it.
It didn’t seem worth it anymore. We are talking tears on the train every single morning when I had to go. I was feeling completely unfulfilled and I hated leaving my oldest. At 32 weeks [pregnant] my water broke and I was in the hospital and we were preparing for my son to be born early, and a NICU stay and the whole thing, and I just said ‘I can’t do this.’
At 32 weeks, her water broke. In the hospital, she decided that she could simply not return to her former role as a hedge fund manager. She knew that she needed to make a change to bring her more happiness and better mental health. Those two things were vastly more important than a number in her bank account. When she told her decision to HR, she knew that there was no number in the world that could keep her there.
Once she reached that conclusion, she sat down with a spreadsheet. She knew that the family was still 4-5 years away from full FI. But she figured out that as long as she could earn enough to cover her living expenses, and they didn’t have to touch any money invested, they would be FI between 40 and 45.
Her end of the year bonus would give them two years to live without touching any of their retirement accounts. Her plan for those two years was to build a business and she did just that!
Although the decision wasn’t easy, it did change Chelsea’s life. The stress of living on such a reduced income was uncomfortable but she still thinks this was the right choice for her and her family.
- Estate Planning: Wills Vs. Trusts
- 5 Estate Planning Documents Every Family Needs
- Podcast Episode: Setting Up A Special Needs Trust
New to FI? Be sure to check out Episode 100: Welcome To The FI Community!
Doug Nordman and Carol Pittner show you how to validate your childs feelings about money, talk through mistakes, and think of better ways to manage their money the next time.