Kyle Harrison
talk

Speaker Salon — Jessica Riolfi (Uprise) on Optimizing Your Finances

Jessica Riolfi September 14, 2022

Speaker Salon — Jessica Riolfi (Uprise) on Optimizing Your Finances

A Contrary Speaker Salon talk by Jessica Riolfi, founder of Uprise, on personal finance for people early in their careers.

Why it was kept

Kyle’s notes from the talk: why early career is the underserved window, Uprise’s hybrid of human advice and software, personal finance as a waterfall, rethinking the ‘emergency fund’, dollar-cost averaging and low-fee index funds, treating your career and startup equity as part of your portfolio, when an LLC is worth it, and renting versus buying — plus the questions fellows sent in ahead of time.

As Kyle captured it

  • Speaker Salon ft. Jessica Riolfi of Uprise: How to Optimize Your Finances
    • Background
      • Chief of Staff to Head of Product at Robinhood and then was at Earnin before that. Previously was a TransferWise
    • Why Consumer Fintech?
      • Careers are just not intentional! Wanted to do international expansion for startups, and did that at eBay but getting into startups
    • Why Personal Finance?
      • There have been a lot of apps in this space like Credit Karma, and Mint.com, and Wealthfront, and NerdWallet
      • A lot of personal finance apps assume the tech is ready to just spit out the right answer but its just not (garbage in / garbage out)
      • LearnVest, Ro, etc. have focused on private wealth management but they were too human; they picked an older, more complex audience, and then couldn’t scale that engine
      • Early career is a window where you can build a lot of scalable tech, they’re not being targeted by traditional wealth management
    • Financial Goals
      • How do you balance “Financially Independent Retired Early” (FIRE) vs. being ambitious and building startups?
      • Those aren’t necessarily opposed
      • One thing about personal finance: The people in the FIRE community think of it like a hobby; it’s their interest.
      • Save for your most important goals and then spend whats left over. Be very deliberate
      • People will say they want “XYZ” and they don’t appreciate what they have to prioritize to get those goals
      • Biggest problem is people don’t take a drivers seat in their finances;
    • Differentiation
      • Hybrid human / robo solution
      • Other solutions are either (1) fully automated (garbage in / out), or (2) very human, and therefore very expensive
      • They’re trying to skate to where the puck is going to be
      • Start with a heavy human component
      • In the last 1.5 years they’ve built a lot of automation. But the human will never go away because they’re (1) checking their understanding of the customer’s situation, and (2) make sure that their solutions are on-point
    • What mistake are most folks making?
      • Some very common things, like overpaying for health insurance or under saving
      • There are all these things that make up your “core basis”
      • They see personal finance as a waterfall
        • Most important thing? Good credit.
        • Get rid of high interest debt
        • Do you have enough cash saved in a high-yield savings account?
        • Tax-advantaged stuff (401K, HSA, etc.)
        • Diversified portfolio? Tech people are heavily overexposed to tech (often your job / career is tech, S&P 500 is heavily tech, and your stock options are tech)
    • Savings
      • 3-6 months of monthly expenses in cash (rent, food, transportation, etc.) depending on what kind of situation you’re in (e.g. do you have your parent’s support?)
      • One strong belief: this is called your “emergency savings fund,” and they hate that name. They think they’re never going to have an emergency
      • But its for all one-time lump sums that are very common (e.g. one-month deposit for rent, cost for moving, etc.)
      • You don’t want to pull money out of the market for these kinds of expenses. The whole point of investing in the market is all about time in the market
      • Any time you take margin loans there is a risk of the value of the underlying stocks to go down in value, and then forcing more cash from you. So that all depends on risk tolerance.
      • Having a good credit score comes first, even before building up cash or paying down debt because if you HAVE an emergency you can more easily borrow money
    • Investing Strategies
      • Dollar cost average on the way down. You should do that anyways, but if you have extra cash don’t try and time the market. Just invest consistently
      • You should be excited when the market goes down
      • You shouldn’t be trying to short-term invest. Do all the right things by matching risk of your portfolio to when you need the cash.
      • So if you need to go to grad school in a few years? Then prepare for that in terms of your personal liquidity.
      • When you’re thinking through crypto vs. secondaries vs. employee stock vs. money in the market, you sort of have to look at all of that together. You shouldn’t look at it as individual things
      • Even your career exposure is an element of your “portfolio.”
      • If anything represents 5-10% of your portfolio you need to know that there is a risk that even if it goes to zero you’ll be fine.
      • Exposure to really high up-side needs to be risk you’re comfortable with
      • Index Funds
        • Really low-fee, total market, diversified funds = subscribe to this!
        • John Fogel subscribed to this idea; the biggest drag to your financial returns are fees (transaction fees, portfolio fees, etc.)
        • To the extent you can bet on the US / global economy without paying people to help you do that, the better off you are
      • Getting Started
        • Doesn’t matter what your situation is.
        • Uprise is built to meet you where you are
        • Even figuring out your cash savings, they’re tracking money yields so you can maximize the cash you have.
      • Bonds
        • That’s the very personalized kind of stuff they’ll do
        • They’re only now starting to offer very specific asset allocation and getting registered to help people do that
        • For people who are risk-averse, or have very short-term cash needs bonds can be great
        • But for most early career people building up wealth, bonds usually don’t make sense
    • Secondary / Side Income
      • For people who do things like buy cars or houses, registering an LLC, writing things off, etc.
      • All of that is something Uprise is building out right now
      • If you have consistent and sizable side income then having an LLC does make sense because not only does it allow you to put business expenses against that income, but it also protects you from liability
      • Some of that is really painful, so you just have to make sure the payoff is worth the administrative burden
      • Its fit based and then they have a premium tier for $200 a year, but the value can be thousands per year
      • But even the more expensive financial advisors are worth it, its just harder to pay for those
    • Large Asset Purchases
      • Real estate falls into two buckets: (1) primary residence, and (2) investment purpose
      • People inappropriately conflate the two. Buying a home to live in is a big purchase, and its like buying a Tesla. You have to feel comfortable with that outlay even if you don’t get huge returns
      • So its really based on what you want to buy.
      • Given the cost of buying a house vs. renting and just invested the difference, you’d be better off renting forever
      • Another piece of this equation is the down payment (e.g. rental property requires 20-30% down). So if you’re going to do that, do you STILL have a diversified portfolio? Can your portfolio sustain something like that?
      • People often say renting is just throwing away money; but that isn’t always true. You have to look at the numbers.
    • Questions
      • What is Uprise?
        • Curious to see how Uprise is different from traditional knowledge (invest early and often, invest in index funds, max out 401k, etc.); want to know if the problem is that most people don’t know what to do, or if there are actual loopholes the average person can take advantage of
        • How do you ensure you’re giving top notch advice to everyone?
      • Building in Consumer Fintech
        • As someone with experience in consumer Fintech, what are some lessons you have learned in the field?
        • What is the most difficult part about personalizing each person’s financial plan yet being able to scale Uprise?
        • Considering that you’ve had many different roles within the financial system, what ultimately led you to developing a passion for helping consumers optimize their portfolios? Were you always looking to solve a problem in this space with a company or did you have a strong passion for solving this problem?
      • Savings
        • What are the percentages of money you’d recommend saving vs using to spend especially at the beginning of your career?
        • What’s the difference between Roth vs normal IRA, and how should I think about selecting one?
        • What is a good rule of thumb for how much cash to keep uninvested at a given point in time?
        • How do you think about the conventional advice of having enough cash on hand to cover 3-6 months of expenses, especially if you have easy access to large amounts of credit?
      • Wealth Strategies
        • What is the biggest thing you can do as a college student with little disposable income to set yourself up for success?
        • How should I start investing in the US as an international?
        • How can I get started with managing my finances as an international student?
        • As a student, what are the top things I should be prioritizing financially?
        • Re: Investment automation - I know robo advisors underperform S&P500 Index Funds but they’re so easy…any tips on how to automate my dollar cost averaging without giving away a fee?
      • Investing
        • How can I restructure my investments to better take advantage of the bear market?
        • How to think about investing during down markets (dollar cost avg, timing things), tax considerations for students, how to invest a Roth IRA (robo advising)
        • Equity:
          • How to think about startup equity for Seed/Series A employees (if and when to exercise options), whether there’s ways to liquidate pre-exit
          • Any advice around buying startup equity that’s affordable? Is using stuff like EquityBee safe?
        • Crypto: Thoughts on crypto? Should it be part of a young person’s portfolio? What about other alternatives?
      • Spending Habits
        • How to think about big spend items (like purchasing a house) for earners in tech, when is a good time, etc.
        • How do you think about home buying as an asset purchase - either as a primary residence or a rental property? Specifically, what are the long term economics around buying a home vs renting and investing your money in the market instead?
        • When is it worth it to buy a home v rent, especially if renting gets to be very expensive, but you can invest the money you don’t have tied up in a home?
      • Taxes
        • How do I optimize my taxes via self-employment income? (i.e. write-offs) Is it worth funneling self-employment income through an LLC or S-corp?