What I am consuming… (March 2019)

Here is the latest installment of my discussion on the various media items I am consuming.  Some of you might note that my last entry in this series came in January.  Yes, I missed a month on this.  I have a few series that I have been writing about that have a monthly component and that just doesn’t leave much room to include everything that I want to write about unless I start to publish more frequently.  This is something I am strongly considering but since I am currently working full time and raising two very busy children and managing my rental real estate investments, I will proceed with caution on any ideas to increase my publishing schedule.  So, for now, please accept my apology for missing a month in this series.  

What am I reading?

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Last installment I mentioned that I have been enjoying Fiction more than usual lately.  I have become engrossed in the John Rain series of books.  I am still enjoying this character and this series.  However, in the past month I have also been reading non-fiction again as well.  The non-fiction book that I have enjoyed the most in the past month was Belichick:  The Making of the Greatest Football Coach of All Time by Ian O’Connor.  I really enjoyed this book.  It details Belichick’s journey as an over-achieving prep football player through his path as an unknown assistant coach.  There is quite a bit of discussion about this relationship with Bill Parcells and the success that they had together and then their ultimate break-up and Belichick’s roller coaster ride as the head coach of the Cleveland Browns and then his path to resurrect his career after that perceived failure.  I think this book had a little bit of everything.  As a sports fan, I enjoyed the peek behind the NFL coaching curtain.  I found that the book worked just as well for someone who is interested in business and management.  

What am I listening to?

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I have found that my podcast list is quite long and perhaps needs to be trimmed a bit.  With this in mind, I have paid much attention to what I am listening to and ensuring that I find value in each podcast that I commit my time to.  There are quite a few podcasts that I am no longer enjoying for various reasons and I have begun to pare my list down.  One podcast that I have reviewed and decided to keep on my list is The Money Nerds hosted by Whitney Hansen.  This is a pretty light and easy listening podcast on the topic of personal finance.  There is typically a mid-week podcast of anywhere from 30 minutes to one hour followed up by a Friday entry called “Five Tip Friday” which is a short-form episode that gives 5 tips on a specific topic for the week.  Whitney Hansen has tremendous energy and that is contagious.  She does not try to promote herself as a guru or expert in the space, but simply discusses her journey in becoming more responsible with her finances.  She explores most of the standard fare in this space—spending, saving, investing, side hustles, etc.—but she does so in a very approachable way.  I come away from each episode feeling more like I was having a conversation with a friend rather than feeling like I was sitting in a classroom being lectured to.  I think it is worth a listen, especially for folks on the beginning of their journey.

What am I watching?

Lately, I have found myself attracted to stand-up comedy specials.  This began when my daughter introduced me to John Mulaney.  We enjoyed his specials as a family, and this led me to search for other stand-ups that were family friendly.  Lately we have watched various specials from comedians such as Jim Gaffigan and Kevin James.  This has led to some fun family time.  I have always enjoyed stand-up specials with one of my favorites being Bill Burr.  I have also re-watched several of his specials, but this is when we have time for adult-only viewing as his material and language is not what I would consider appropriate for my children.  If you have not given a stand-up special a chance before, or haven’t done so in a while, I highly encourage it.  I have found that in this era of video on demand, there are many more outlets competing for content and as such, there are many more opportunities for comics to put out specials.  

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What are you consuming these days?  I am always curious to hear what others are reading, listening to or watching.  It gives me great ideas on things to add to my future consumption list.  Let me know in the comments!

Should You Pay Off Your Mortgage?

A quick trip through the personal finance universe will lead to many contradictory articles discussing whether you should pay off your mortgage early.  Some argue that you cannot be truly financially independent if you still have a large debt hanging over your head.  Others argue that the low interest rates coupled with tax write-offs built in to carrying a mortgage have their own benefits that outweigh having one last debt.  I am not interested in joining the argument on one side or the other.  All I can do it discuss my own intentions and desires.  My feelings on personal finance are that there are no hard and fast rules that can be applied to everyone equally.  It is called “personal” finance for a reason.  Each person much come to their own conclusions as to what is the best option for them.

Over the past few years, I have vigorously attacked consumer debts that I had accumulated before taking control of my finances.  I started by paying off high-interest credit card debt as quickly as I could.  I then turned my attention to a car loan and took care of that much more quickly than I expected.  

Each time I set my sights on tackling a new debt, I approached it in a similar fashion.  I reviewed my current budget to determine the amount that I could apply to this debt.  Using that information, I crafted a payoff plan.  Then I fought any urges to stray from that plan.  Additionally, I looked for any additional monies in the budget or monies I could make outside of my normal budget and applied that to the debt as well.  I found that this activity was somewhat addictive and took on a momentum all its own and the result in each case was the ability to pay off each debt ahead of the planned schedule.

At present, the only debt I have left is housing debt.  This includes my primary mortgage and a home equity line of credit (HELOC).  I have started to attack the HELOC first in the manner described above.  I have found that this time around, the momentum is slow to come.  I have made the scheduled payments each month but when it has come to additional monies, I have not been applying those to this debt as regularly as I had with the credit cards or car loan.  When I have been able to come up with additional money, I have diverted it to my taxable investment account.  I am not sure why I have made these decisions, but I must guess that it is psychology at play.  Psychology similar to the arguments mentioned in the opening to this article.  Perhaps subconsciously I have had this argument as to which is more important or the better use to money.  This realization has led me to seek out information on this topic and brought my own decision making to the forefront of my consciousness.  It has forced to me ask myself where I fall on the “To Pay or not To Pay” spectrum.

As I mentioned, I am currently carrying two housing debts.  While they are against the same property, I consider them as separate and am attacking them as such.  My current plan is to pay off the HELOC first.  During the accelerated payoff period, I will pay my normal monthly mortgage payment on my primary note.  Just to feel like I am doing more, I have added an additional $100 to my monthly payment each of the past 3 months to apply to principal.  It is not a large amount but it is also one that doesn’t bust my budget so I hope to continue that additional payment until the time when I can turn all my attention to this note.

I did set a goal for 2019 of reducing my balance of the HELOC by a certain amount.  After reviewing my progress in last week’s article, I realized that only two months into the new year I have nearly hit this goal.  Obviously, my goal was not aggressive enough.  So as of today, I am adding a “stretch goal” component to that item.  I had previously said that my goal for 2019 was to get the balance of that debt under $30,000.  Now that I have almost reached that amount, I will now attempt to get that balance under $20,000 by years end.  This may be a little too aggressive but after veering too conservatively originally, I will try to push myself in the other direction.  With 10 months remaining in 2019, this works out to a net reduction of approximately $1000 per month.  I believe I have achieved this without any dramatic changes to my budget and without any negative impact on my current savings and investing plans.

With that goal being attacked, I will then attempt to pay the debt in full by the end of 2020.  At that point, I will turn my attention to my primary mortgage.  I have a strong desire to retire “early” but at present I don’t know what that looks like.  When I started on this path, I superficially threw out the target of 10 years.  That was 2 years ago.  I have not yet figured out exactly if that is the date I should be targeting.  I have not fully worked out the financial or emotional details of that type of decision.  But at this point in time, I can safely say that my current plan is to pay off all debts—including my mortgage—before I pull the trigger on retirement.  

I fully understand the arguments on both sides of this discussion.  I believe each have merit.  But for my personal situation and based on my personal mental make-up, I think the comfort of knowing that I am debt free will far outweigh any additional financial gains I can make by keeping a management debt load and using that money for alternative investments.

Where do you fall on this spectrum?  Will you pay off your mortgage sooner rather than later?  I would love to hear from you.

2019 Goals- Two Month Check-Up

In order to keep myself accountable, I will continue to perform a monthly check-up on my published goals for 2019.  Now that February has come and gone, it is time for the next review.  Here is where I stand, for better or for worse.

  1. 1. Keep Weight under 235 (see above for incremental goals):

I broke this goal down in the first few months of the year to make it slightly more achievable.  My goal was to get my weight down to 240 by end of January, then down further to under 235 by end of February.  From that point, it is my goal to maintain that weight level for the rest of the year.  Unfortunately, I have failed in this goal so far.  I was close to hitting the January milestone but have not come close in February.  In fact, I have slipped slightly.  As of this morning I tipped the scales at 243.  I continue to exercise regularly and drink plenty of water.  However, my eating habits have slipped tremendously.  I have blamed this on the number of snacks and junk food available at the office but to be perfectly honest, those things have always been present.  I have just done a poor job with the willpower to say no to these items.  I need to buckle down further and get back to the habits that allowed me to drop almost 50 pounds previously.

  1. 2. Max my 401K contributions:

Based on my current withdrawal percentage, I am on track to max out my 401K again this year.  The allowable amount was increased in 2019 to $19,000 from last year’s $18,500.  Even with this increase, my percentage will max this out at some point in the 4th quarter of 2019.

  1. 3. Fully Fund Wife’s ROTH IRA (Stretch Goal:  Fully Fund my ROTH IRA as well):

The primary goal of maxing out my wife’s ROTH IRA has been completed.  In January I met with my financial planner and we discussed and then executed this move.  The reason we moved forward with my wife’s and not mine is because we are unsure if we are eligible to contribute to ROTH accounts.  Since my wife only has a ROTH account and not a traditional IRA, we are able to fund a newly set up traditional IRA for her and then do what is called a back-door ROTH conversion.  Since I have a traditional IRA as well as a ROTH, a similar move would be more complicated since we would only be able to move a portion of the traditional monies over in the back-door conversion and if that needed to be reversed for any reason, it could get quite complicated.  I am meeting with my accountant this week to review taxes for 2018 and one thing I will be anxious to learn is whether I can contribute to the ROTH.

  1. 4. Read at least 24 Books & Listen to at least 24 audio books:

This goal is very much ahead of schedule.  In the first 2 months of the year I have read 8 books and listened to 9 audio books.  I have found my interest in reading to be increased lately and have found myself grabbing a book in the evenings rather than reaching for the TV remote.  If this pace can continue, I will shatter my stated reading/listening goals.  I think a big reason for the increased interest in reading is simply that I have found things I am quite interested in.  This has come in the form of both Fiction and Non-Fiction books.  On the Fiction front, I was recommended a new series of books by a friend and constant reader, Pete (shout out Pete!).  I gave the series a shot and really liked the first book.  I quickly read the second book in the series and I currently have the third book checked out of the library and will begin that as soon as I complete the book I am reading.  As for Non-Fiction, two bloggers that I enjoy have recently released books.  I was bombarded with information on each since they went on what seemed like EVERY podcast I listen to promoting their books.  Regardless, I gave each a try and found them to be very interesting and quick reads.  The first was Financial Freedom by Grant Sabatier, author of the blog https://millennialmoney.com/blog/ and the second is Work Optional by Tanja Hester, author of https://ournextlife.com/.  I have enjoyed each of these and found the writers to be very approachable and easy-to-read. 

  1. 5. Re-read “The Millionaire Fastlane” by MJ DeMarco & “Set for Life” by Scott Trench:

I have still not picked up either of these books for a re-read yet.  I have each sitting on my night stand and will work them into the mix soon.

  1. 6. Get Vanguard Taxable Investment Account over $55k

At present, my Vanguard account has a total value of $48,479.39.  I continue with my automatic bi-weekly investments.  Additionally, I have been using various apps to make a little extra money on the side.  I discuss this in more detail below, but I mention it here because I have set each up to pay out in PayPal gift cards.  Once I receive the award, I transfer the money from PayPal into my checking account and then immediately send that money to my taxable investment account.  This adds a little extra to my investment account each month on top of the regular transfers.  Based on the current balance, I feel confident that I will hit my goal.  

  1. 7. Pay Credit Cards in full each month:

Thus far, I have paid all credit cards in full each month of 2019.

  1. 8. Get HELOC Balance under $30K:

The current balance on my HELOC is: $30,176.39.  I am super close to meeting my goal and we are only two months into the year.  Perhaps my target was not very aggressive, but it was based on the previous pace that I was paying this debt down.  However, by tracking this as a 2019 goal, I have put more focus on this item, and I have been able to “find” extra money to pay on this account.  This goal list has had a strong impact in this area in more than one way.  By tracking my goals so closely, I have put focus on my credit card spending.  I have been able to keep that in check as of late.  Since fewer of my dollars were going to pay off credit card debt each month, I have been able to divert those extra dollars to paying extra on my HELOC.  I will continue to attack this debt and my even go as far as revising this debt goal to keep myself pushing on this.

  1. 9. Continue to Blog weekly:

So far, I have maintained a weekly publishing schedule.  Last month, I mentioned possibly writing more often.  I continue to consider this option.  This post is an example of a few items that I had committed to produce monthly.  Since I have been writing posts about my media consumption monthly along with updates on my goals and finances, that does leave much time for other types of posts in a weekly publishing schedule.  My work and family schedules are quite busy so I am unsure if I can commit to a more frequent publishing schedule, but it is something that I am considering.  Let me know if you would like to see more posts.  

  1. 10. Earn additional $100 per month in income through various side hustles:

Last month I mentioned my use of the website Swagbucks.com.  Mentioning it here led me to double down on my efforts to fully utilize this site.  I also learned through a friend that there are other similar sites.  I have since tried a few and found one that I have enjoyed.  It is called MyPoints.com.  I find I am able to use this in the same way as SwagBucks.  I open each of these up and can review videos, etc. while I watch television or do other mindless tasks.  It can be time consuming if it is something that you sit and focus on but by doing it in the background while doing other tasks, I find that it is quite easy to accumulate points.  As I mentioned above, I have set up these sites to pay out in PayPal gift cards which I then send to my investment account.

 For February, I was able to make a total of $338.72 from various sources, including the above.  Here is a breakdown of the ways I was able to do this.

  • Swagbucks.com:  $50
  • MyPoints.com:  $25
  • Sell Books at Half Price Books:  $6.40
  • Sell Used Items:  $50
  • Fantasy Football winnings:  $207.32

Monthly Update – January 2019

I am a little behind schedule on this post but here is my analysis of my monthly income and expenses for January 2019.  As per usual, below I have listed a running three month look for comparative purposes.

First, here are the numbers:

Category: Nov 2018 Dec 2018 Jan 2019
Total Monthly Gross Pay: 100% 100% 100%
Taxes Withheld: 20.69% 15.96% 23.02%
Other Withholdings: 5.53% 3.82% 4.85%
401K Withholdings: 1.06% 0% 12%
Diverted to Investments Account: 4.92% 27.14% 36.2%
Diverted to Savings Account: 0% 24.34% 0%

So, looking at this month’s numbers, there are a few things for discussion.  First are the taxes withheld jumping from the previous month.  This is due to the fact that the calendar turned to a new year and therefore, I must contribute to Social Security withholdings once again.  This contribution has a maximum value per year and once you hit that, money is no longer diverted to this fund for the remainder of the year.  Late last year I hit that limit and therefore in December I did not have these monies removed from my paycheck.

Also, of note is the jump of 401K withholdings.  Once again, last year I was able to max out my 401K contribution.  This occurred in early November.  That can be seen by looking at this line above.  In November I had a small contribution that topped of that contribution for the year and then in December there were no contributions.  Now that we are into a new year, those contributions start back up again.  At present I am contributing 12%, but I will look for opportunity to increase this in small increments any time that I think I can do so without impacting my monthly budget.

Lastly, I was able to divert quite a bit to investments this past month.  I have regular automated contributions that are scheduled to occur on the same day as I receive my paycheck.  I was contributing $525 per pay period to start December but by the time of the second period, I had moved that up to $550.  I will continue to look for opportunities to increase this amount anytime I can permanently eliminate a recurring expense to ensure that I can lock in those savings for the long term.  In addition to my regular automated contributions, I found I had more cash in my checking account than I needed for my regular budgeted expenses.  I took advantage of this by diverting that additional money to my taxable investment account.  I am working on creating a more comprehensive budget and once I get to that, this type of situation will be eliminated since my plan is to use a zero-sum budget where every dollar is accounted for.  At present, while I do “budget” for most of my monthly expenses, I still feel that I am mostly reactive and increase payments to savings or investing vehicles based on the balance in my checking account.  In the future I plan to be much more deliberate to ensure that I can capture all savings and ensure that each dollar is put to the best use.

Addressing the Internet Trolls

It never ceases to amaze me how negative folks can be.  Especially on the internet where you can hide behind anonymity or you write something outrageous just to ensure clicks to your site.  As an avid consumer of personal finance information, I have come across many of these people, whether in the comments or their own sites.  Today I would like to address of few of the bigger ones that I have seen.  I would have to turn in my personal finance blogger membership card if I didn’t weigh in on these topics (haha).

Topic #1- Suze Orman’s take on Financial Independence

You cannot call yourself a consumer of personal finance information without having come across the controversy stirred up by an interview on Paula Pant’s Afford Anything podcast with the self-proclaimed matriarch of personal finance, Suze Orman.  Ms. Orman has made a career of giving personal finance guidance and advice.  Her style is to be in your face and bombastic.  Therefore, I was a little surprised to see people get so up in arms about her comments surrounding her hatred for the financial independence community.  I consider myself a small part of this community and I heard the comments and my initial reaction was …. “meh.”  First, Suze Orman is in the business of being extreme and over-the-top, which she was here.  Second, she lives a current lifestyle that is VERY different than most in this community.  She made a statement that you cannot retire without at least $10 million saved up.  Well, since the FI community views FI or retirement readiness through a lens of math, namely that you need 25 X your current expenses, then why would it be such a stretch to believe that Suze needed such a high figure to reach her version of FI?  I think the problem lay in the fact that she has a large audience and people in this community fear that her communicating such a thing would be detrimental to the FI movement.  My take on this is…. “So, What?”  Suze has her audience.  They are not necessarily part of the FI community.  Allow her to preach to her followers in any way that she wishes.  Secondly, if she didn’t find value in the FI community, she would not have come on a podcast that is firmly a part of the FI community in order to push her latest book.  Finally, she was also smart enough to recognize that her comments were not met well in our community and has since backtracked

Topic #2- The “Latte Factor”

Another topic that seems to get much ink (can you call it ink if it is all electronic?) is people weighing in on David Bach’s overall premise that has been dubbed the “Latte Factor.”  The concept is that you can dramatically change your financial situation if you cut out that daily latte.  Personal finance bloggers across the internet seem to take this quite literally and love to criticize this idea or say that it simply won’t get the job done.  My take is that the “Latte Factor” is not about saving that $3.00 per day, but it is about the behavior surrounding that.  If you can ween yourself off the daily coffee purchase by making coffee at home, then that is a behavioral change that will be replicated across other aspects of your life.  I can’t understand why people are ready and willing to discount all of Bach’s writings based on the fact that they simply don’t see the impact of saving such a small amount.  There is no silver bullet that will automatically change your financial life short of winning the lottery.  I think the “Latte Factor” is a vital mental shift required to change anyone’s situation.  If that coffee brings you tremendous joy and satisfaction, then go ahead and keep on buying it.  But even that decision has embraced the “Latte Factor” since you viewed it through the lens of weighing its value against its cost.

Topic #3- Dave Ramsey

The third topic that seems to be a requirement for personal finance bloggers to attack is the Dave Ramsey method.  This one is somewhat tricky since most PF bloggers will go out of their way to talk up Dave Ramsey and his work in helping millions of people get out of debt but they also all seem to have an obsessive need to bash one aspect of Dave’s teachings.  This is Dave’s assumption that followers of his path can earn 12% returns annually on mutual fund investing.  Personally, I disagree with this assumption myself.  I tend to have a much more conservative approach to projections and tend to go lower.  The same people who bash Dave’s assumptions of 12% with go on to use a number themselves in the 7-8% range.  Even that is a guess rooted in that person’s experiences and personal thoughts.  All these figures are assumptions, they are not set in stone.  Dave’s numbers come from his experiences and beliefs.  Honestly, if you were to follow all of Dave Ramsey’s famous Baby Steps and get out of debt, stay out of debt and set up investments, the performance on those investments will dictate how you behave in the future.  Dave is not someone advocating for an extremely early retirement where your investment returns may impact your ability to support yourself for many decades.  At the point where followers will be impacted by their investment returns, they have already educated themselves and cleaned up their personal financial picture and therefore should be in a better place to self-manage their finances whether the projections play themselves out according to someone else’s ideas.

These are just a few of the common trolling topics that I constantly come across as I dive deeper into personal finance content.  I am sure there are other topics that impact each of you as well.  Feel free to discuss them in the comments.  I would love to hear from you.

What I am consuming… (January 2019)

This is a continuation of a monthly theme where I document what media I am currently consuming.  In addition to sharing books, articles, and podcasts that some may not be aware of, it will help keep me honest and ensure that I continue to consume more and more information myself.  Here is this month’s entry.

What am I reading?

In January I have swerved a little and have been reading fiction.  I recently put a poll on Facebook asking for book recommendations from friends.  Out of that exercise, a friend mentioned a fiction series featuring the main character John Rain.  This character is a Japanese-American assassin with something of a moral compass.  I read a few things online about the series and quickly determined that I would like this type of book.  I quickly reserved the first book in the series, Rain FallSince this was not a newer book, I received it quickly.  This was a very quick moving and interesting book.  I enjoyed it a lot and have since reserved the second book in the series as well.  This first entry introduces the character and thrusts him into action almost immediately.  It opens with him stalking a target and eventually overtaking him.  John Rain’s specialty is to perform the assassination while making it look like a death by natural causes.  His moral compass comes into play when he describes his internal code which dictates that he will not accept a job unless 1) he is the only team hired for this job, 2) the target is not a woman or child or 3) the target is the target and not a family member or other target designed to send a message to the primary.  The book is filled with plenty of action and intrigue.  If you like action and espionage stories, this one will not disappoint.

What am I listening to?

Another podcast that I been listening to is Founders hosted by David Senra. The host is a student of business, specifically business founders.  Each episode of this podcast surrounds a biography of a business founder that the host has read.  He reviews the book, highlighting specific passages or chapters that he felt were key to the story.  I enjoy this podcast as the host’s enthusiasm is very evident.  Additionally, he is quite approachable.  He will often mispronounce words and will be quick to laugh at this own expense on this.  Another factor that makes me enjoy this podcast is that the host is a podcast listener and as such understands that excessive advertising can really take away from the subject.  This is something that has been bothering me quite a bit lately and the user feels the same way.  He does not use any advertising inside his podcast.  He tries to support the podcast by creating a subscriber model where listeners can voluntarily donate money to keep the podcast going.  He will also use affiliate links for each book so that if any listener orders the book through his links, he gets a small commission on that sale.  Listening to this podcast has introduced me to many business founders and leaders that I was previously not familiar with and this has led me to read several new books that I have enjoyed tremendously. 

What am I watching?

With the weather turning extremely wintery in January, I have been forced to walk on a treadmill instead of being able to go outside.  I find walking on a treadmill to be very boring and the way I survive this is to watch shows or movies while I walk.  In January I have been watching the series Boardwalk Empire.  This is a series that lasted 5 seasons and ran from 200-2014.  The series centered on the character Enoch “Nucky” Thompson, who is loosely based on the real-life Politician and reputed kingpin of the same name.  I had started the series a few years ago and never finished it.  So, I recently picked up where I left off, which was in season 4.  I have since finished that season and am almost finished with the final season as well.  I have really enjoyed the various storylines and characters in this show.  If you are a fan of gangster films or shows, this is one that will not disappoint you.  I will give fair warning, however, there is quite a bit of graphic violence so any viewer should be prepared.

A 401K Story

When I started my first full-time job and was offered entry into the company’s 401K retirement savings program, I immediately diverted 10% of my salary.  At that time, my annual salary was an amount that today’s 20-somethings would consider below the poverty line.  I was coming from an upbringing where my parents had no savings, let alone retirement savings, and I was highly motivated to not repeat the mistakes I witnessed.  It did not occur to me that others did not feel this way.

Now that I am in the middle (or hopefully later) years of my working life, I have tried to evangelize the importance of retirement planning to the younger workers in my company.  I recently had a conversation with a 24-year old co-worker about this.  I made a flippant comment acknowledging that they had obviously opened their 401K retirement savings account upon hiring.  This person did all but laugh at me.  They commented that they couldn’t afford to save.  This person and I were close, so they had shared certain details of their income and expenses with me.  I knew that this person’s salary was more than double what mine was when I began investing in my 401K.  I understand that many years have passed between these two events but regardless, all numbers are relative.  

When I continued to harp of the need to start a retirement savings plan, this co-worker asked me to help them better understand their finances and find a way that they could afford such a savings plan.

My first approach was to try to explain the tax advantages of such a savings plan.  I asked them if they could afford $100 per month.  They explained that they could not.  I then tried to draw on the white-board to show that $100 per month diverted to a 401K was only approximately $65 out of their monthly pay.  Since our company pays twice per month, this was less than $35 per pay check.  They acknowledged that this was definitely more affordable but that they still didn’t think they could afford it.

They then went on to explain that their take home pay was approximately $2,600 per month.  Of that amount, $700 went to rent, $700 went to student loan payments, $400 went to a car payment, $110 went to monthly subscriptions and the rest went to utilities, lunches, happy hours and other general spending.

We agreed to tackle this from the highest monthly responsibility.  The first was $700 per month in rent.  This person had a smaller apartment that was shared with a roommate.  I asked if they could add a third person and therefore split the rent 3-ways instead of two.  They didn’t not feel comfortable with even considering this option.  I asked if they could move back in with parents for a year or two in order to get a financial foundation set.  They were not even willing to consider this option either.  They felt that they were an adult and should not have to live with parents.  I did not push.

Next, we looked at student loan payments.  While this person knew they paid approximately $700 per month on various loans, they were not aware of the overall balances or interest rates associated with those loans.  They simply knew the monthly payment requirement and assumed that this payment would always be part of their monthly budget.  I tried to encourage them to research these loans and talk to someone who is an expert in student loans to see if there were opportunities to refinance or consolidate those loans to ensure that this obligation was being repaid in the most efficient way possible.  My co-worker agreed to do so but there was a slight roll of the eyes as they agreed to this.

We next discussed their car payment.  This person was driving an economy car, not a luxury model and felt that by doing so, they were being fiscally responsible.  However, they purchased car new and carried a sizable debt on the vehicle.  Their monthly payment was $400 per month and they owed a total of almost $23,000 on the vehicle.  By doing a quick search on Kelly Blue Book, we learned that the value of the vehicle was a little more than $15,000.  My co-worker simply wrote this off as “unfair” instead of acknowledging that perhaps they had made a bad decision on purchasing a vehicle in such a fashion.  Once again, they simply focused on the monthly payment, rather than the overall financials.  I explored the option of selling the car, paying off the remaining loan and buying a lesser vehicle for all cash.  I quickly learned that this was not something they would be willing to consider.  Again, a comment about being an adult came out.

The last spending category that we explored was subscriptions.  This person was spending $60 per month on a monthly subscription that sent new clothes each month.  In addition to the $60 per month paid for the subscription, if you decide to keep any of the clothing sent, you can purchase it at a discount.  They also spend $40 per month on a service that sends dog treats and toys.  Lastly, there was $10 per month spent on Netflix.   We finally found an area that I felt even the stubborn adult could not deny could be trimmed.  Well, I was wrong.  This person dug in their heels and refused to even consider that these subscriptions were expensive and unnecessary.  

My first reaction at this point was to be exasperated.  I simply could not understand someone who put a higher amount of value on shipped dog toys than their own future.  I quickly realized that this person was having trouble putting value on retirement savings because it was just so far away for them.  They felt that there would be so much time between today and retirement that they could wait to get started.  They will make more money in the future and can start saving later.  Once I realized this stark difference in mindset, I tried to approach this conversation in a different way.  I took one item—the dog toy subscription—and asked them to cancel the subscription but still put that $40 per month aside in an envelope.  I asked them to commit to this for 3-months.  I told them to continue to spend that money on their pet.  I explained that this would be even better than the subscription since they would handpick the treats and toys that their pet received.  They were skeptical but agreed to this.  

After three months, we spoke again and they acknowledged that while they did go shopping the first month and purchased treats and toys for their pet, they had not done so since.  Even during the first month, they admitted that they did not spend the full $40 on these items.  They were now ready to commit these funds to starting a 401K account.  I then revisited the tax discussion and showed them that $40 in after-tax money was the rough equivalent of $60 per month in pre-tax money.  They agreed to set up a 401K account and divert $60 per month into this account.  The last thing I asked of my co-worker was to revisit this conversation after 6 months to see if they have suffered monthly and decide if the amount needed to be adjusted.  While I phrased it as a safety net, hinting that we could adjust the amount downward, my real intent is to show how little they even noticed the money being diverted and at that point we could discuss increasing the amount.

My biggest takeaway from this whole encounter was that you cannot force others to think or feel a certain way.  My firm belief in retirement savings comes from the whole of my life experiences and those are going to be different from everyone else’s.  However, I do truly believe that such a thing is more important to your future than making sure you rush to “grow up” and fall directly into the lifestyle inflation traps that most of us have fallen into… getting into a housing situation that we cannot comfortably afford or buying more car than we need or can afford.  In order to help others, you must meet them on their own terms and perhaps more importantly, you must realize that sometimes others will have to make their own mistakes before they understand that they are in fact mistakes.  After all, I only know these things because I made (and continue to make) those mistakes.

2019 Goals- One Month Check-Up

As the calendar turned to 2019, I listed my goals for the upcoming year.  Now that the first month is coming to a close, I thought it would make sense to do a check-up and see how I am doing on my goals so far.  I tried to break down a few of my goals into smaller, more achievable chunks that would be easier to track along the way so this would be a good time to see if I am on track.  If I am behind, I will need to alter my behavior and play catch-up.  If I am on track or even ahead of the game, I can analyze whether it would make sense to alter my goals upward and shoot for something higher than I originally thought.

1. Keep Weight under 235 (see above for incremental goals):

I further broke this goal down to say that I hoped to be down to 240 by February 1st and then 235 by March 1st before remaining in that range the remainder of the year.  As of this morning, the evil scale spit out a number of 241.5.  This is a bit short of my goal, but I do have to admit that I have not been as dedicated as I should have been.  Just in the past week, I have caught a bug of some sort and have not been exercising as I normally do.  Since today is not February 1st yet, I am not officially behind schedule but regardless, it is a signal that I need to buckle down and re-dedicate myself.  

2. Max my 401K contributions:

Based on my current withdrawal percentage, I am on track to max out my 401K again this year.  The allowable amount was increased in 2019 to $19,000 from last year’s $18,500.  Even with this increase, my percentage will max this out at some point in the 4th quarter of 2019.

3. Fully Fund Wife’s ROTH IRA (Stretch Goal:  Fully Fund my ROTH IRA as well):

I have no yet contributed to either ROTH IRA. 

4. Read at least 24 Books & Listen to at least 24 audio books:

As of this writing, I have completed 3 books and 4 audio books.  If this pace continues, I should reach 36 books and 48 audio books, which would destroy my goal.  While my pace is way ahead of schedule, I will leave my goal where it is until a few more months of data collection.  I have noticed that my reading can come in waves.  If this faster pace holds for another month or two, I will adjust my goal upward.

5. Re-read “The Millionaire Fastlane” by MJ DeMarco & “Set for Life” by Scott Trench:

I have not yet re-read either of these books.  Last year, I targeted two previous books for a re-read and had to rush at the end of the year to meet this goal.  My plan for this year is to read this years target books earlier in the year so I do not fall into this same predicament.

6. Get Vanguard Taxable Investment Account over $55k

At present, my Vanguard account has a total value of:  $44,520.10.  I have upped my regular bi-weekly auto-savings from $525 to $550 so I will be adding approximately $1,100 more per month.  That contribution alone should help me to reach my goal.  However, the market is the market so being on track to hit that goal does not guarantee that it will happen.  

7. Pay Credit Cards in full each month:

Thus far, I have paid both credit cards in full each month of 2019.

8. Get HELOC Balance under $30K:

The current balance on my HELOC is: $34,270.93.  I have been paying a low amount on this debt monthly as I work to build a robust emergency fund.  Now that my emergency fund is nearing full funding, I plan to increase my payments on the HELOC debt so later in the year, this balance should be paid down at a faster pace than it has been thus far.

9. Continue to Blog weekly:

So far, I have maintained a weekly publishing schedule.  I plan to continue this pace and possible even add to this with additional irregular posts about topics that I find interesting and would like to write about.

10. Earn additional $100 per month in income through various side hustles:

In January 2019, I was able to “find” an additional $200.  Most of this, $150, came in the form of credit card points.  My primary credit card offers reward points.  I have not yet researched more robust credit card rewards and that is something that I plan to do in the future but I did check the website for my current card and realized that I had accumulated a nice amount of points.  In reviewing the options on what I could do with those points, I decided to cash them in for Amazon gift cards.  I had enough points for 3 $50 gift cards.  The remaining $50 came in another Amazon gift card that I received as a redemption from Swagbucks.com.   This is a site where users can answer surveys or watch videos, among other tasks, to earn rewards points.  I had accumulated enough points to redeem for a $50 Amazon gift card.  If anyone would like to check out Swagbucks, you can do so by following this link:  http://www.swagbucks.com/refer/tomfalz.  (NOTE: This link is a referral link and if you use the link and use the site, I may receive some small reward for any activity you have)

Adventures in Real Estate

I have gotten a few requests to discuss my real estate investing.  It is a very robust topic and not one that I can capture in a single blog post but today I will talk about my first real estate purchase.  If this is well received, I can discuss other purchases or stories from my experiences with this subject in the future.

I have always had a fascination with Real Estate.  It probably took hold with my first home purchase.  I was living in New York and the real estate market was going through one of the occasional irrational periods.  My fiancé and I started searching for our newlywed home.  I was working in New York City and living on Long Island.  For those not from the area, this meant a LONG day.  I would leave my house around 5am, commute for two hours to work, work a full day, then commute back home.  I would arrive home by around 8pm, eat a quick dinner and then basically go to bed and be ready to do it all again.  With this schedule, it was not easy to fit a house search into my weekdays.  

My fiancé had a more traditional schedule at the time.  She was working and going to school, but both were located in close proximity to where she lived so her days fit closer into the normal schedule.  So, the system we devised was that she would go see many houses and determine those that were worth seeing.  We would then schedule showings on the weekends and her and I would go to those together.  We would usually end our day at a diner or restaurant and discuss the various properties that we saw.  I call this a system because it was something that lasted almost a full year.  We probably looked at over 100 houses.  The typical house sale at that time consisted on a one-day listing followed by multiple offers, all above the asking price.  Sellers got lazy and would not even prep their houses for sale, they would just put a sign out and see what happened.  There was one day that we pulled up in front of our 8th or 10th house in a single day, took one look and both said at the same time “move on.”  We were getting discouraged and considered giving up.  We talked about all our options including living with one of our parents, renting an apartment, etc.

My soon to be father-in-law was a police detective and this caused him to be out and about quite a bit.  He came across a house that was for sale by owner.  He brought my fiancé to see it and later that night, the two of them told me about it.  There was plenty wrong with this house.  Mostly it was that it had a very awkward layout and the current owners had a very eclectic (read STRANGE) style and made some interesting décor decisions.  My partner did not think it was a good option and did not want to even bring me to see it.  Since we had been looking for so long and had looked at so many houses, I said “what the heck?  What is one more house to look at?”  

We went to see the house and while she saw all the flaws, somehow all I could see were the possibilities.  I walked the awkward floor plan with my soon to be father in law and started saying things like “we could knock down this wall and open things up” or “we can take these trees down for more curb appeal.”  Anyone who knows me might laugh at this since I am NOT usually a glass is half full type.  Also, casually throwing out somewhat major construction ideas is also comical since I could not pick a hammer out of a lineup.  But once the three of us put our heads together about what the house COULD be, we decided to move forward.  

Being for sale by the owner was considered a positive but I found this not to be the case.  As I alluded to above, the sellers sort of marched to the beat of their own drummer so having an advisor on their side might have made for a quicker and smoother transaction but I had a realtor to work with that was a seasoned veteran and a family friend, so we were coached through the process very well.  It came down to price at that point.  Having made many offers over the past year, only to lose out to higher ones, you would think that I would throw caution to the wind and make sure I got this house at all costs.  This is not the case.  Although I had no experience negotiating on houses (or anything else at that time), I had a number in my mind that I was not going to cross.  Once we laid all cards on the table, us and the sellers were $3,000 apart and neither of us would budge.  After some time of playing chicken with one another, I had a personal conversation with the seller, and he asked me the most important question in this transaction.  He asked, “if this is the house you really want, are you willing to lose it over $3,000?”  I quickly realized that I was simply trying to “win” the negotiation and that $3,000 over a 30-year mortgage was really not going to make much of a difference at all.  I agreed to the price and we became homeowners.

We put in quite a bit of work that make that house our home.  This included some of those fairly significant construction projects I mentioned.  We depleted just about all our savings and called in every favor in the book but at the end of it all, we had replaced the roof, all windows, paved the driveway, updated landscaping and updated the electric.  The house was perfect for us.  We lived there for almost three years before my job took us out of that area and we had to sell the house.  The housing boom had continued through those three years and we wound up selling that house for a 63% premium over the purchase price.  

The profit was great, but I think the part that solidified my love of real estate was the fact that we were able to take an ugly duckling of a house and turn it into a beautiful home that a newly married couple was able to enjoy.   At that point I was hooked and knew that not only would my next home search going to incorporate the lessons I learned during this process but that I would also use these experiences to learn as much as I could about real estate as an investment vehicle.

Monthly Update – December 2018

Now that I have all documentation necessary to review December’s finances, it is time to report on how I did.  Going into this post, I am somewhat nervous since December includes various holidays and those seem to always include additional spending, whether on gifts, supplies for parties, or any other holiday related things.  Additionally, as I noted in a previous post, my discipline surrounding my spending has been wavering as the calendar turned toward the end of the year.  I have committed to get back on track in 2019, but this review will show just how bad I may have set myself back in December.

As mentioned last month, as I post my monthly numbers, I will look backward and display a total of a 3-month window so I can keep focused on the trend as well as the overall numbers.  Last month, I listed entries for September, October and November.  Now that I am adding December numbers, September’s numbers will drop off.  If you want to see a long timeline of these numbers, you can look back at previous posts.

On to the numbers:

Category:Oct. 2018Nov. 2018Dec. 2018
Total Monthly Gross Pay:100%100%100%
Taxes Withheld:17.25%20.69%15.96%
Other Withholdings:5.00%5.53%3.82%
401K Withholdings:11.99%1.06%0%
Diverted to Investment Account:6.75%4.92%27.14%
Diverted to Savings Account:22.52%0%24.34%

In analyzing the numbers, there are a few things of note.  First and foremost is that my spending was not as out of control as I feared.  As a percentage of overall income, it actually dropped.  The drop was quite significant when compared to November.  Perhaps the feared over-spending on holidays was realized in November instead of my fear of it hitting in December.  

Another item of note was the very high percentage I was able to divert to savings and investment account.  Part of this was attributable to some additional income I was able to realize in the month of December.  This came in the form of a distribution from rental real estate.  I was able to move that distribution directly to savings.  Additionally, since I budget based on two paydays per month and the fact that November contained three paydays, I had additional unbudgeted monies sitting in my checking account going into December and was able to divert a nice amount of this to my investment account. 

 The challenge will be to keep a sufficiently high savings rate in the coming months when I cannot rely on unbudgeted paychecks or additional side income.  However, with the calendar turning to 2019, I will now begin contributing to my company-sponsored 401K account again so that will help me in my quest.

How were your numbers for the month?  Did the holidays get the best of you?  How are you challenging yourself in the new year?