Investing And Building Wealth

[jsphlynch]

For me it's been a combination of thrift and luck.

The thrift was ingrained in me by my upbringing. We weren't very well off, but thanks to my parents habits (I kid you not, McDonald's was a rare, special dinner out) we always seemed to have what we needed.

Thanks to a whole lot of scholarships, grants, and federally subsidized loans (more on the loans in a bit), I was able to go to college. However, thanks to a combination of a miscalculation and a miscommunication, both by me, I accidently took out a slightly larger than necessary loan my senior year, with the extra sitting in my savings account. I entered grad school the fall after graduating, thus qualifying for an interest free deferment on my loans. Worked a nice paying job and lived with my parents between graduation and grad school, so was able to further pad my savings account. Grad school was paid for by an assistantship, which included a small living stipend, so I didn't have to take on more loans.

Now here's where the luck comes in. Spring of my first year of grad school, I did something really stupid: I put nearly all of my savings in the stock market. I had been watching trends and I guessed that we were do for a bit of a rally, so I just went for it. This was early 2009 and, well, you all know what happened next. Incidentally one of the stocks was "F", which I believe I bought at $1.42.

After grad school I got a crappy paying job in a college town with really high rent prices relative to purchase price, so I sold nearly all my stocks, which more than tripled my initial investment, and used that as a pretty substantial down payment on a house. House payments were low and we didn't have car payments (instead driving well-loved vehicles which I learned to repair as needed with the help of Haynes and YouTube), so we were able to pay off the student loans well ahead of time with a little bit of sacrifice*.

After that, owning our home and not having other debts has really kept us on a good trajectory.

*Do NOT get me started on student loan forgiveness votebuying gimmicks

Above was my big-picture how I got here. For the day-to-day financial management, our approach follows a lot of the same themes I'm seeing over and over again on this thread:

We keep a readily available emergency fund that could sustain us for a minimum of 6 months if our income was suddenly zero. This is a laddered 12-month CD, maturing on a monthly basis with the idea that for smaller "emergencies" we can pay the cost on a credit card and pay it off with the CD that matures that month. If we have a bigger emergency than that, it's only a 2-month interest penalty.

We keep a monthly budget. Included in the budget is monthly savings for short (vacations, Christmas/birthdays), medium (new cars), and long-term (retirement, kids' college). For the most part, expenses are agreed upon by both the wife and I, though the budget includes a small "allowance" for each of us that we can spend on anything we want and other person can't complain about it. There's also an automatic 10% charitable giving category on every month's budget, which gets split between church, local community charitable funds, and larger national/international charities. Our "eating out" budget is pretty small, and we stick to it.

Since I grew up with little means and my parents were religious about living within those means, I'm naturally averse to spending much, and my wife is the same way. This is a double-edged sword, as it keeps us away from irresponsible splurging, but can also make us forgo some of the finer things in life even if they are well within our responsible reach. Having a budget and a long-term financial plan helps with this latter issue, as we can simply look at our budget and accumulated savings and clearly see that yes, we can afford to spend a bunch of money to buy something special or go on a unique vacation.

We avoid debt as much as possible. I view debt as tool: the right tool in the right place is invaluable, but using a tool improperly can lead to disaster. We use our credit cards for the rewards and convenience, but they get paid off every month. I've only ever paid credit card interest once, and that was when I lost track of the date and was two days late paying the bill. I did finance a small part of my Ranger, but paid it off within just a few months (the final payment being the 1st COVID stimulus). We're on track for that to be our last car loan.

We do have a mortgage. When we bought our current house, there was very little difference between the interest rate on a 15, 20, or 30 year loan, so we got the 30-year to ensure flexibility but base our monthly payments on a 20-year schedule, plus make bonus payments with things like the tax return or windfalls. I highly recommend that anybody with a mortgage plays with a mortgage calculator to see how much money you can save long-term by paying a little extra, which will hopefully encourage you to do so.

Related to making extra mortgage payments, we are ever-aware of the power of compounding interest. When I was in college, I took accounting classes as electives just because I had space in my schedule. When my financial accounting prof was explaining future values, he gave the following example: let's say in college you visit some sort of espresso shop on a near-daily basis (average of 300 days a year), and do so until you retire at 65. If you average $5 per visit (at the time, enough for a drink and a tip or an occasional pastry), that's $1500 per year, or a little short of $70,000 by the time you retire if we assume no inflation. However, if you instead put that $1500/year in conservative long-term investments that return 5%, by retirement you'll be nearly a quarter million dollars richer than you would have been with that daily espresso drink. At 8% returns, it's over a half million dollars. For coffee.

Our primary investments (including retirement) is in the stock market for now. As we approach retirement, we'll shift that to be "safer". I used to, with great success, pick individual stocks, but now most of the investments are broader ETFs. The recent inflation burst has convinced me that I-bonds are also a valuable investment.

I work with a CPA to figure out how to keep things smart from a tax standpoint. I know it's a lot more expensive to pay a CPA than it is to just have H&R file your taxes each year, but if you find a good CPA it is totally worth it.

I want to close by bringing up Dave Ramsey. I know he sometimes gets (and deserves) some strong criticism, and if you review my above information you'll see that I don't strictly follow his rules, but his advice does have value especially for people who are struggling financially. Just keep in mind that his advice is not about the math of money, but rather the emotion of money. If you have the self-discipline to stick to what mathematically makes sense, go for it. If you don't, maybe start working through his baby steps and see how it works out for you. A friend of mine went through the Financial Peace University program and said in the end he suddenly had an extra thousand dollars per month, just by straightening out his finances in the Dave Ramsey way.

Sponsored

 

[AzScorpion]

This is the reason why I never seriously considered going into business for myself. I've done some side-work and contracting over the years but preferred the semi-set hours and someone else handling all the payroll, insurance, planning while I had some time form myself and family.
I do admire all those who have gone into business for themselves and know the dedication it takes to be successful.
I have a few thoughts for businesses when I retire and may give it a go, we'll see when the time comes.

It's good that you did this because now you know what's involved. It is very time consuming and if you're married with a family it's very hard to balance the two. I've seen many guys through the years lose their marriage because their wife couldn't put up with the long hours. I had a failed engagement because of this which now turns out to be a blessing.

I never complained about it because it all comes with the territory. Sure I could've hired a payroll company and even an estimator but I'm to OCD and if there's a mistake at least I can only blame myself. I do recommend getting a really good CPA and I can't stress this enough! He/she will be the one to keep the IRS off your back and possibly out of jail. My only gripe is when some would say "it must be nice you're rolling in it" meaning money but they never saw what else goes on. Those who have tried it have a better appreciation of what's involved.

 

[AzScorpion]

I came along late in my parents life, Dad was 44, Mom was 42. Pop always said I was what you get when you go to bed with your motor running. He was born in 1908, went to the 4 grade, then started work. But, he was the smartest man I've ever known. He told me, "Son, a credit card is made by the Devils own hand. If you can't pay cash for something you want, then don't buy it. Carrying to much debt will get you nowhere". And, I heeded his advise. As some know I've lived two life work scenarios, one public service that pays you just enough to live on, and one with a Fortune 500 company that paid me more than I was worth.

Luckily I got in that Fortune 500 company when there was still a company retirement, and they also offered a 401K. Added to that I had profit sharing with the company. That's when my wealth started to climb. My dearest, and I grew up without much. However we didn't know it, because everyone around us had the same thing. Even though I was making more money, we still lived/spent on only what was needed, and saved the rest. I maxed out my 401K contributions early on, and left it there until I retired. When we got our house paid for (thankfully a few years before I retired), we put those monthly payments in our credit union acct. We did enjoy some of the money, but it wasn't on lavish crap that means nothing in the long run.

When the Company decided they would consolidate their operations, and move everything to Richmond, VA I had a choice. Move to Richmond, or retire as luckily I had enough time to be vested. I had been to the Richmond operations many times, and knew that wasn't for me. So, my dear CFO and I sat down, ran the numbers, and I decided to retire at the ripe old age of 55. God is good, life is good, and we are now enjoying the fruits of our labor.

@KJRR said it, and it's true. Living life modestly the wife, and I have also found that it's hard to just spend money on crap. Growing up the way we did, it's hard to change that mind set. But, I'm doing pretty good at changing. I want the last check written to the funeral home, and it bounce.

@AzScorpion Dave, as far as Social Security, the wife and I saved like it wasn't going to be there when we retired.. Another thing my dear old Dad told me was to "never depend on the Grovernment to help you in anything. Do it yourself".

Jim, I know you and I have had several discussion like this and it was another thing that made me start this thread. One thing I always ask all my fully retired (I'm semi retired) friends is how do you go from being a saver to a spender? I know we've joked and you've said "you've never seen a Brinks truck following a hearse" but damn it seems like it's going to be so hard to do this once I fully retire. I mean I could retire right now but I just work because it gives me money for the toys I buy and the larger bills around here like the truck insurance and property taxes which aren't really that expensive to begin with. Plus it's good exercise and gets me out of Annies hair a few days a week. lol

 

[wanted33]

Jim, I know you and I have had several discussion like this and it was another thing that made me start this thread. One thing I always ask all my fully retired (I'm semi retired) friends is how do you go from being a saver to a spender? I know we've joked and you've said "you've never seen a Brinks truck following a hearse" but damn it seems like it's going to be so hard to do this once I fully retire. I mean I could retire right now but I just work because it gives me money for the toys I buy and the larger bills around here like the truck insurance and property taxes which aren't really that expensive to begin with. Plus it's good exercise and gets me out of Annies hair a few days a week. lol

It's not easy brother. As it's said it's hard to teach an old dog new tricks. We still don't buy a lot of things we think we would like to have, or do some of the things we want to do. I have always, and still do, think "does it have the value for the money". A small example is say going to an expensive restaurant. It's hard for me to see the value in paying twice the money for the same food I can get at a more resonably priced restaurant down the street. And even though I can afford the "twice the price meal" we always go down the street. But, I think of my old saying about the armored car many times. An example is our '19 Corvette GS. I've owned older Vettes for years, because of the price of a new one. But, the wife and I thought about it and came to the conclusion that we don't want to be sitting on the porch in our 80's saying we wish we would have bought that new Vette. I guess it's more like a shell game in our minds.

If we think about it there are those old sages we meet in life that drove us to do thing different than we would had we not met them. I had three of those wise men in my life. Of course one was my Dad, and his advise about credit cards. And, that still stands today. The second was an old Police Chief I was talking to at a get together. I mentioned to him I was paying my way through college (no student loans back then thank goodness), and working full time. The old Chief who went to the school of hard knocks said, "Boy, a college education ain't worth a damn if you don't have any common sense". And the third was an old Asst. Manager at the company I went with later. He stopped me in the hall one day. Knowing my background we talked about this, that and the other thing for awhile. Before he left he say, "Now, you'll be making more money than you ever have. But, if you spend one dollar more you'll always be in debt". All of those old boys were wise beyond their years.

BTW, believe me, you will know when it's time to retire. You'll get up one day, and your mind will say to you "that's it, I'm done". That's how it was with me. Even after the wife, and I decided we weren't going to Richmond I stayed on as it was approx. a year before the move would be complete. One day I got up, and it was damned hard to make myself go to work. Before I even got to the plant I knew that it was going to be my last day. I went in, signed the paperwork, and didn't return the next day. That was a glorious day my friend.

 

[wanted33]

What you say is so true! My second oldest son decided he wanted to be a plumber. In Massachusetts that’s a 5 year ordeal to get licensed. Last year he got his certificate and also bought his first house a duplex. He’s 27 years old. His tenants are pretty much paying his mortgage. Owns 1000’s of dollars of tools for his trade and makes obscene amounts of money. But, guess who’s dropping by today with his F150 to do a brake job. He says he values my teaching him how to do things automotive and it’s also fun to do it with dad. Ya I’m blessed too with 4 amazing kids.

I know you're proud of that young man Rick, and his successes are your successes as he learned from you. I grew up in a small Textile town in North Carolina. If you've ever heard of "Cannon Mills" towels, sheets, etc. the man that was Mr. Cannon lived up the street from where I live now. When I graduated from high school you either worked for Cannon, or one of the supporting company's in the area. My Dad told me he didn't care what I did, but he didn't want me to work for Cannon. It wasn't a good job, nor did it pay well. I graduated in 1971, and was offered a job with our Police force in 1972, and jumped on it. In a small town where everone knows everybody my Pop knew the then Police Chief most all of his life. And that old Chief knew of me through my Dad, so I guess he thought I was a good bet.

 

[AzScorpion]

I've had a few good "mentors" in my life who've given me very good advise too. Unfortunately my dad wasn't one of them (except for starting an IRA at 18) and sad to say whatever he told me I'd do the opposite and came out better. lol He made a lot of money but just wasn't good at investing it and saving it. Thank God I take after mom! ?

I remember when I told him I was going to build my first house and he told me it was a dumb idea to just find one already built. Meh, I like new and subbed it all out myself and built it in 5 months. Turned around and sold it 3 years later making $60K and built another on 3 acres. Bought serval lots in FL and flipped those then bought this house I'm in now on a short sale when the '08 crash happened. There's a ton of money to be made (and lost) in real estate but you sometimes have to be lucky timing the market or it'll burn you big time.

I guess one thing this forum has taught me is how to spend money. I mean I've never modded or accessorized my trucks before going here. Maybe this forum really will ease me into full retirement.?

 

[deleriumtremor]

I've had a few good "mentors" in my life who've given me very good advise too. Unfortunately my dad wasn't one of them (except for starting an IRA at 18) and sad to say whatever he told me I'd do the opposite and came out better. lol He made a lot of money but just wasn't good at investing it and saving it. Thank God I take after mom! ?

I remember when I told him I was going to build my first house and he told me it was a dumb idea to just find one already built. Meh, I like new and subbed it all out myself and built it in 5 months. Turned around and sold it 3 years later making $60K and built another on 3 acres. Bought serval lots in FL and flipped those then bought this house I'm in now on a short sale when the '08 crash happened. There's a ton of money to be made (and lost) in real estate but you sometimes have to be lucky timing the market or it'll burn you big time.

I guess one thing this forum has taught me is how to spend money. I mean I've never modded or accessorized my trucks before going here. Maybe this forum really will ease me into full retirement.?

Or drive you out once there.

 

[AzScorpion]

Or drive you out once there.

lol That's what I told David @subquark the other day. I think he's bought every single accessory and mod that others have posted in the "What did you receive in the mail" thread. ? Let's see what he gets this week??

?Come to think of it he hasn't been around in the past couple days. The last time I saw him he was going out back to drink beer with Cheech and bark at the neighbors.?

 

[deleriumtremor]

lol That's what I told David @subquark the other day. I think he's bought every single accessory and mod that others have posted in the "What did you receive in the mail" thread. ? Let's see what he get this week??

I won’t lie, even though I am navigationally challenged on this site, due to old guy syndrome, small screen syndrome, Tramadol syndrome and maybe a couple other I don’t know about, I alway look for his latest, shame I can’t find it again after I stumble upon it.

 

[AzScorpion]

I won’t lie, even though I am navigationally challenged on this site, due to old guy syndrome, small screen syndrome, Tramadol syndrome and maybe a couple other I don’t know about, I alway look for his latest, shame I can’t find it again after I stumble upon it.

I look forward to his posts too, they're always entertaining. ? You can just go to the search bar (might be harder on a phone) and search for his name then look at Find all posts. ?

 

[Tracy Bowman]

Great thread and lots of useful information here!

 

[AzScorpion]

Great thread and lots of useful information here!

Thanks Tracy and we're waiting for your contribution to it but I understand if you opt out. You know with your career ( ahem, bank robber) it might not be such a good idea.

Now about that 0% loan we were discussing earlier ?

 

[deleriumtremor]

Potentially my favorite thread ever. I’m 28 and just got laid off three weeks ago - as much as it sucks, it’s definitely forced me to evaluate my expenses and where I want to go with my career. I was never a huge spender but little things do add up. Taking a few weeks break and heading back to work hopefully with an even better focus on my finances. Excited for the next chapter.
Admire all of you working your own business, wish I could do the same

Hey Gibran,

I am sure lots of people have told you everything works out for the best (with regard to being laid off). Truth is, almost without fail, they are right. It might not become apparent for a while and things may even be tough right now, but honestly, it almost always ends up better.

I started a company after leaving an incredibly lucrative and very easy (for me) job. I had accumulated a pretty sizable nest egg (which would have been much bigger if I wasn’t such a profligate during the foregoing years).

When I told my wife about the business plan she was stunned. Her first response was, Why? We were really comfortable, I had great job security, benefits, well into six figures annually, she was working at a goofy little company called Apple, that while seemingly doing pretty well at that time and she had a good income but anything but a sure thing, I said to her “because it is a really good idea, I have a really good feeling about this idea.”

Much to her distress I pushed on and we (my partner and I) proceeded to quit our jobs, find an office and set up our lemonade stand… (kind of joke, but not totally off the mark, we had no business plan, didn’t know about such things, etc.).

We started the company in early 1987. We didn’t have any income, so we funded everything from our nest eggs. While we didn’t have many employees early on, it didn’t take many, coupled with rent, startup costs like building out the office with computers, local area networks, etc., to make our “burn rate” actually live up to that term.

We were peddling pretty fast working on getting contracts with a few giant companies that were our prospects, getting all the legal work done so we could actually start signing contracts if we were so lucky as to get a return call.

In my past life, before we quit our jobs, we both (partners) had been kind of rolling it. In 1987, the stock market seemed to be on a one way street, kind of like (pick any year after 2009, until Covid for reference) and I thought I kind of knew all there was to know about buying stocks successfully (like any other cash rich 30 something master of the universe who discovered the stock market in that kind of bull market). I had invested in individual stocks of tech companies that were growing really fast (we lived in the Bay Area) and my stock broker had introduced me to the concept of buying on margin, which for an overconfident putz, seemed like shooting fish in a barrel.

The Friday before 10/19 came along and the market was really down. A few friends I bumped into asked me if I had seen the sell off and I told them I hadn’t, too busy working.

On Monday October 19th, the market crashed. I didn’t realize it had as again, I was at work early that day. When my partner came into the office, he was white as a sheet, he said, “did you see the news?” I said, “no, what is going on?” He said, “I think we both lost a lot of money.”

We turned on the news. There wasn’t a CNBC or any other business channel if I can recall, but that didn’t matter because it was big enough news the regular news channels were going full tilt on the coverage.

After an hour or so of just watching stunned, we both kind of turned it off and understood, our motivation just got fortified, but the other shoe hadn’t dropped yet.

I think it was Tuesday (might have been Wednesday), my stock broker called and asked what I wanted to do with the account (meaning my stock brokerage account). He said I needed to send in some money if I wanted to keep it open and I was like, “what’s wrong with all the money, I have in it now?”. Then the other shoe dropped, he said, “we closed you account, the margin calls netted you out.” I said, “I will get back to you.” My nest egg was gone and we were pretty far from anything representing solid stable income for the business.

Those were some really tough days, not the least of which was explaining my stupidity to my wife.

In the end, we went into overdrive, I called everyone I had ever met in my previous line of work and scraped enough income together to keep the lights on in the new business, having a few payroll cycles where I had to borrow for friends and family to fulfill and we just scraped through.

That experience taught me so much. For you, I mainly wanted to say that 28 is really young, you have so many options, never get daunted when setbacks occur. There is NO place on earth with as much opportunity as the US. You have plenty of time to make 3 fortunes, just set a plan, track your goals, suit up every day and come to play your hardest and success will follow.

 

[OneMore]

My path was different.

I am an only child of an only child.
With the example that my Grandmother and Dad provided as a template, I learned to live within my means.
Both of them paved the way for me to live a comfortable life from the day I was born that will see me to the end of life.
Credit is also due to my late wife that had her life taken from her through no fault of her own too early in life.

My Dad owned his business. A local glass company in the town we lived in.
He had worked for two large national companies after being released from the Army Air Corp in 1946.
He wanted to control his path and opened for business May 1st, 1956.
I would go to work on Saturdays and do clean up work around the shop.
Was paid one dollar for around six hours of chores.
From grades 6-12 I went to work after school.
My Dad and I got along very well. Never butted heads.
Collage was not for me as I knew my career path was with my Dad.
Joined the Naval Air Reserve two weeks after graduating HS.
Came back after basic and rate training.
Went to work with my Dad for the next 28 years.

But this is about money. How to get, grow, save and preserve.

In many ways I was lucky.
As an only child of an only child with only my Grandmother and Dad as family, I knew I would inherit in time.

As I mentioned above, my Dad and I got along wonderfully.
I lived at home until age 25.
By that time I had saved enough for a large down payment on my first home.
One of the best investments I ever made. I have never paid rent.
Lived in that home for 25 years. Paid it off early. Then rented it for 2.5 years. Earned $48k in rent. Sold it in one day for seven times what I paid for it.
The money from the sale allowed me to purchase a small vacant lot in town that provided more profit years later.

My Dad sold the building the glass company was operated from in 1996.
He was 75 and had done his time. Someone came along and made him an offer that worked for him.
The business was closed.
This was the third location on the same street. But this one he owned. He bought the land in 1964. Built his own building, two story with underground parking.
It was a steel framed structure. He bought left over steel from the construction of Standford Linear Accelerator project for $600. Built a crane truck to raise the posts and beams. Did the welding for the steel structure himself. Sold what steel he didn't use for $150.
Other than excavating the underground parking earth, erecting one fire wall and installation of the fire sprinkler system, my Dad, one skilled carpenter and two laborers Built a 7,000 square foot building. This building is still standing and in use today.

In 1994 my wife and I were driving on CA hwy 5 heading home on a Sunday.
The radio was tuned to KGO 810. Major bay area station. The program was Money Talk with Bob Brinker.
That opened up the world of financial investing in the market to me.
Bob talked in a manner that was easy to understand.
When we arrived home I signed up to receive his monthly news letter, Bob Brinker's Marketimer.
Bob hasn't been on the radio for about ten years but still publishes his insightful news letter. Still subscribe.
I read the suggested books from Bob's website, www.brinker.com.
This encounter having the radio station tuned in while Bob's program was airing was pure luck.

Now I had a foundation to build upon.
My Grandmother and Dad did not invest in the markets.
They did not have the mindset to show me this form of wealth building.
My Grandmother was a contractor that built homes and sold them.
My Dad ran his business and invested in real estate.

I choose my own investments. At one time I sought help. That didn't work for me.
I would make a suggestion to my broker and they would say "You don't want to invest in that". Only to have that suggestion turn out to be what I should have done.
I do make mistakes at times but I sleep very well knowing that I made the mistake, not someone else.

Save as best you can.
Only speculate with money you can afford to lose.
Have cash available for emergencies. They always come up.
Buy quality items that last.
Enjoy life and those you share it with.

Thank you Dave for starting this thread.

 

[deleriumtremor]

Yes, people would actually be far worse off without SS. One thing I hate is when some (not you) call it an entitlement. We've paid for this out of our paychecks our whole life so all we're asking is we get back what we put into it. I'll never get what I put in as my rates are double being self employed. Like you I never drew my retirement plan around SS and anything I receive from it is an added bonus. It's not going away like some say but It does need some restructuring as people are living a lot longer and drawing off it longer too.

I read a lot about how people don’t care about SS because it won’t be there when the time comes. My opinion is that SS will always be there. I think where people will likely be disappointed is that as you say, the rules will change. My opinion is the really big change coming first will be means testing. That is, if you have worked hard, done everything you and the other successful people say, you will almost certainly be at risk to lowered or no SS benefits. It will start with people who absolutely don’t need it, Mark Z, Jeff B, Elon M., etc. and may get to yours truly pretty soon after that when the laws are changed.

For us (Mary and I) may skate by as we try hard to avoid regular income. There seems to be a hole in the way the fiscal authorities figure out who gets what when handing out free stuff. For instance, Mary and I got every single Covid stimulus check, full amounts. There was no way we needed that money and it did end up at a couple of our favorite charities, but I thought, hmmm, we might end up getting back everything we paid in tonSocial Security after all.

Something to consider as the years roll on and you are doing the next year tax/income plan. Regular income changes who the fiscal authorities think you are.

Sponsored