Archives for July 2018

There’s Nothing New Under The Sun

July 30, 2018 By Deanna 17 Comments

Everything I’ve ever done or thought has been explored and contemplated by someone else who came before me. What makes me unique is the meandering path I choose.

Just like snowflakes, not one of us is exactly alike but yet we are all so similar. I find people simply fascinating. In particular, I marvel when reading about the ways people have achieved Financial Independence (FI) and/or are working towards it.

There aren’t too many novel ideas. We all have access to the same levers:

Eliminate debt
Embrace frugal living
Discover what you value in life
Practice minimalism
Drive down your monthly expenses
Develop a high savings rate
Invest in low-cost index funds
Study and choose to allocate a small percentage of your investments to single stocks
Diversify with real estate and business investments
Start a side hustle
Embark in Geo Arbitrage

What makes each of our journeys unique is how/when we pull said levers and what happens to us in the process. Personally what I find the most enjoyable to read is the transformation that occurs in our lives. Many of us discover more joy, focus on strengthening our relationships, find more time for loved ones, and develop a sense of extreme gratitude.

I would like to take some time to talk about five characteristics that can be developed in a person through intentional financial living.

Patience

This is a hard one to develop. I don’t like sitting in rush hour traffic or waiting in long lines any more than the next person. Which, BTW, I try to avoid by my lifestyle choices. However, I know patience to be a virtue and the way to get it is through being in such situations.

It took me 3 & ½ years to pay off my debt and in the process, I lost a house to foreclosure. I paid off a total of $46,763 and at the start of the journey I was making $40K annually and by the time I paid it off, my salary was $60k annually. I just kept my nose to the grindstone and persevered. I wasn’t willing to think of the albatross around my neck (my debt) as a fixture in my life. I attacked it, I worked hard, I made sacrifices, I stayed the course, I paid it off, and became free.

And what do I have to show for it? Well, I now own my entire paycheck but also, much to my surprise, I’ve developed some patience. I was once told never to pray for patience because you’ll be given all kinds of opportunities to work on it.

I didn’t go into this thinking I wanted to become a patient person. Actually, quite the opposite, I thought I’d like to get this done as quickly as possible. I guess it’s relative if 3 & ½ years is long or short but I’ll tell you this, there were plenty of opportunities to give up and pay the minimum for the duration of the loan. Alas, I chose to be patient and you can too.

Self-Control

You Know He Wanted to Go In After That Fish

Aah, another hard one to achieve. I practice fasting occasionally and always think that helps develop my self-control muscles. Also, not buying everything that catches my fancy does the same.

This year, I moved into a little apartment and could have spent a lot of money furnishing it but I chose to utilize what I already had and was very selective about what I purchased.

I’d also argue that market investing requires self-control. To not panic and sell when the media is reporting a downturn in the market, requires discipline. With market investing it is best to just stay the course. Are you sensing a theme here?

Joy

You know how I said I sacrificed a lot during my debt pay off phase? Initially, it felt like I was making sacrifices when I:

Moved in with my parents
Consistently packed my lunch every day
Limited the number of times I went out to eat
Stopped highlighting my hair
Stopped skiing (okay this one was a sacrifice)

However, as I continued down this road, I realized I wasn’t less happy. In fact, I even found more joy in the journey. Why? I think that reason is twofold.

Firstly, I loved working towards a goal and seeing the finish line get closer and closer. There was great satisfaction in staying the course.

Secondly, I learned to focus on the relationships I wanted to foster. I had to be creative in how to do this without spending a lot of money. Cooking dinner with friends, playing board games or taking hikes is just as much fun as spending a night on the town which costs a lot more.

Turns out that living with my folks was not a sacrifice at all. It actually was a gift. For one I realized the last time I had lived with them, I was pretty rebellious. Getting a second chance in my 40’s allowed me the opportunity to submit respectfully. It was kinda like a do-over.

Additionally, I utilized the library and started listening to podcasts which, BTW is totally free. Actually, that is how I discovered FI. A colleague turned me onto the ChooseFI radio podcast. We can all figure out the influence that one had on my life 😉

Peace

Oh yes, this is something I believe we all want in our lives. It’s an attractive concept. Heck, Dave Ramsey named his course after it, Financial Peace University.

Financial peace is something that eluded me for many years. I believe when we are lacking peace in one area, it spills out into other areas.

Inversely, when we gain peace in one area of our life, it starts to spread out into other aspects.

So what kind of peace came first in my life? Well, I got sober 8 & ½ years ago and undoubtedly that needed to happen before anything else could happen. Simultaneously I returned to faith. Through these choices, I found a new peace.

Eventually, I became ready to work on my fiances because once I had tasted peace, I wanted it in all areas of my life!

Faithfulness

At first blush, this one may not seem so obvious but let me define it according to Merriam-Webster:

Faithful –

1: steadfast in affection or allegiance: loyal

a faithful friend

2: firm in adherence to promises or in observance of duty: conscientious

a faithful employee

3: given with strong assurance: binding

a faithful promise

4: true to the facts, to a standard, or to an original

a faithful copy

So when you make a financial plan and stick to it, you are being faithful. When you put up an investment policy statement because you want accountability in staying true to your plan, you are being faithful. When you pay off your debt because you made a promise, you are being faithful.

Closing

So there you have it, 5 characteristics that can be developed by taking control of your finances. And when you develop these characteristics financially, they’ll spill out into other facets of your life. Trust me, it’s inevitable.

What characteristics have you developed in your personal finance journey?

Breaking The Circuit

July 26, 2018 By Deanna 6 Comments

So I had my first podcast interview with Jason on the Everyday Money Show, which BTW is a great new podcast that I highly recommend you check out! Here is my takeaway…

My Testimony

I’ve shared my testimony many times before in the rooms of recovery but this whole financial recovery is kinda a new thing for me. Yeah, I shared it on the Dave Ramsey show, but a podcast interview is a bit more detailed. The questions swimming around in my head went something like:

Do I talk about my bottom?
Should I share the deep-rooted reasons I discovered why I fell into addiction?
Will people want to hear that stuff?
Is it too personal?
Do I glaze over the fact that I got sober?
Should I focus solely on my financial story?
Do I share my faith?

Yeah, there’s an overactive mind up in here! I tend to over-analyze everything. While this can be a useful trait in my job, it can be unnecessary in my social life. Ugh! But alas and alack I am who I am for better or for worse and I’ve learned to embrace it.

I settled on my story is a testimony to how amazing God is and just how miraculous the transformation has been. That is worthy of a share.

Sure this is a personal finance blog and I was on a personal finance podcast but heck if I’m keeping it only to money, you’ll miss out on a lot of good stuff. Plus it’s my story to tell 🙂

Nervousness? Who Me?

I wrote a post over at ChooseFI where I talked about Terry Crew’s interview on the Tim Ferris podcast. Terry reflected on the nervousness he felt in his acting career and he came to the conclusion, “if you care, you’re going to be nervous.”

Yep, I got nervous. Yep, I care. And if the day comes when I’m not nervous anymore, I need to reevaluate why I’m doing this.

Fortunately, podcasting is not live so things can be edited out. Jason set me at ease from the start by letting me know that if I didn’t like how something came out, I could stop and say it again. #powerofediting

Going Deep

While I was raw and honest about the dark and lonely place of addiction, I didn’t go too deep into why I believe I fell so hard. Do people want to hear this? Probably. People like to stare at car crashes.

And as I reflect back on this interview and feel I left the most crucial part of my story out, I wonder who it’s really crucial for. It was for me. But is it crucial for you to know?

In recovery, I uncovered the wounds of my past and it hurt. I cried a lot. Anger rose to the surface. I pushed through because it was healing I was after and not just for me but for all involved. My entire family found healing in my recovery.

I was able to reconcile with my past and find a better future.

Do I have to reveal it all? Probably not and certainly not if it will cause further hurt to others who may hear/read it.

The Whole Picture

My whole story is about the little girl who was too insecure to believe she could do anything successfully. This little girl who thought the whole world received a manual to life and she was passed by. The girl who believed a great many false things for many years and learned to hide behind a drink, a drug, a relationship or a pretty face.

You can’t tell part of my story (success with money) without telling the backdrop. I want to preface this by saying my entire past was not bad. However, here is the negative circuit that became evident to me upon getting sober.

I believed lies about myself
I drank/drug to escape
I sought negative attention
I made the outside look good
Rinse
Repeat

Circuit Breaker

I fell so hard something had to give
I surrendered and asked for help
I recognized God is bigger than me
The lies were exposed
Truth became the new norm
Relationships took a healthy turn
Money problems were faced
My Debt was paid off
Wealth is being built

Plain and simple. Solid truth. I couldn’t have done it alone. Christ is my Savior.

It’s no longer about me.

Now it’s about you and how I can help.

So You Want To Be An Investor

July 23, 2018 By Deanna 9 Comments

There is nothing wrong with hiring a Certified Financial Planner (CFP) and if you do I’d recommend one with a fiduciary responsibility.

What I’m not okay with is hiring a CFP because of a lack of investment knowledge. If hiring a CFP is in your best interest, you should hire someone who shares your beliefs/strategies about investing. That means first you’ll need to understand the basics of investing. My advice is to NEVER invest in something you don’t understand. It’s your money and you want it to work for you.

You took the time to make it, now take the time to learn what it can do for you.

Gaining Knowledge

I’d say the main key to gaining knowledge on investing 101 is a genuine curiosity. There are a plethora of resources out there in the form of books, articles, and podcasts. Google personal finance and/or search personal finance in your podcast app. Find one that speaks to you and dive in! Here are two I recommend to get started:

The best book I’ve read on investing is JL Collins, A Simple Path to Wealth.

A lot of my knowledge has been self-taught through reading, listening, calling Vanguard, and just trying stuff out. My hope is that my writing can help make this stuff less intimidating.

In this article, I’ll share how I’ve settled on passive investing and have learned to navigate Vanguard’s options of funds. My research has been specific to Vanguard because that is what I have available through my employer. However, there are other venues out there, so I’ll try to keep some of my suggestions general so they can be applied to other platforms.

Funds Versus Single Stocks

I don’t know about you but I don’t have too much extra time to study stocks and time the market, which BTW is impossible. Part of me is interested is studying single stocks but, for now, I’ve decided that my time is better served elsewhere.

That being said I’m choosing to buy mutual funds or Exchange-Traded Funds (ETFs). The glory of these funds is you gain ownership in a bunch of companies and get some diversity.

A good way to think about this diversity is to imagine this simple example. Let’s say you buy 100 shares of a particular mutual fund which is made up of 20 companies and so you now own a little bit of each company. Perhaps two companies fail and so you lose 100% of those shares. Maybe 15 companies succeed averagely but 3 companies really flourish. The most you can lose on the ones that fail is 100%, but the sky is the limit on the growth of companies which are doing well!

When you own shares of multiple companies you can stomach the risk of a few failures.

Passive Investing

Actively managed funds are often more complex and certainly, have a higher expense ratio as you are paying someone to manage your fund.

Index funds are simple, have a lower expense ratio and often out-perform actively managed funds. Index funds are what Waren Buffet is advising his heirs to do with his estate. He is a smart man. Index funds are my choice.

According to Wikipedia, An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that the fund can track a specified basket of underlying investments.^[1] Those rules may include tracking prominent indexes like the S&P 500 or the Dow Jones Industrial Average or implementation rules, such as tax-management, tracking error minimization, large block trading or patient/flexible trading strategies that allows for greater tracking error, but lower market impact costs. Index funds may also have rules that screen for social and sustainable criteria.

Check out this lesson from David over at Fiology.com for more resources on passive investing.

Equities and Bonds

You can buy funds solely comprised of equities or bonds. You can also buy funds comprised of both such as Target Retirement Funds (TRFs). TRFs are the simplest form of passive investing as they rebalance to be more conservative as you approach your retirement age.

Equity (or stock) is defined as the value of the shares issued by a company. When you buy an equity you own a share of the company.

Bond is defined as a debt. As an investor buying a bond you are loaning your money to an entity for a defined period of time at a variable or fixed rate of interest.

Equities or stocks provide more aggressive growth but that also means they include more risk. Equity index funds are investments for the long haul. You can expect to see many dips, but as history has shown, over the long run they grow.

Bond funds can smooth the wild ride of market investing. Typically bonds and stocks are inversely related, meaning when one goes up the other goes down. The thing to keep in mind about bonds is that they go down when interest rates are rising or during an inflationary market decline. As a matter of fact, both stocks and bonds can go down during times of inflation.

Some ways to hedge against inflation are real estate investments, business investments, and cash. But this is a topic for another article.

What Phase Are You In?

Typically there are two phases when it comes to investments:

Wealth Accumulation
Wealth Preservation

Know where you are at and invest accordingly. I’m currently in the peak of my wealth accumulation phase and so I’m willing to be more aggressive and equity index funds are my jam. As I approach the wealth preservation phase, I will allocate more of my money to bond funds as well as cash.

Picking Funds

This week I received an email from Vanguard about 119 Vanguard products earning top Morningstar ratings. This is a good place to start.

Otherwise here is a quick and dirty lesson on how to view Vanguard funds and what to look at:

Click here
Click on the tab titled, “Investing”
Choose Vanguard Mutual Funds
Browse Vanguard funds by asset class
You can view mutual funds (default tab) or ETFs by choosing the ETF tab (which we’ll talk about in a bit)

The categories I recommend you pay attention to (don’t worry a picture will follow):

Asset class
Expense ratio
Price
Average annual returns (1 yr, 5 yr, 10 yr & since inception)

Things to keep in mind:

You can filter out certain things
You can click on a fund to see it’s full profile

Here are a bunch of Vanguard’s Target Retirement Funds (TRFs) that I talked about earlier:

Once you know what you are looking at, it makes choosing much simpler!

ETF Versus Mutual Funds

What is the diff here? Not too much as they both represent a collection of individual stocks or bonds. Vanguard does a great job breaking down the difference so let me point you here first. Go ahead and read the chart, I’ll wait.

Okay, so I have an employer-sponsored Simple IRA and in it, I had a choice of many different mutual funds. For now, I have chosen 100% in Vanguard Total Stock Market Index Fund Investor Shares (VTSMX).

I also opened a Roth IRA and debated between mutual funds and ETFs. Ultimately I chose ETFs and here is why:

Lower expense ratios
Lower investment minimums

Mutual funds have a minimum initial investment. When purchasing mutual funds with Vanguard you can either buy Admiral shares or investor shares. Admiral shares have a higher minimum investment. For example, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) has a minimum of $10k and its expense ratio is 0.04%. That is low! The same fund in investor shares has a minimum of $3k and its expense ratio is 0.14%. Still pretty low!

Well check out the ETF of this fund with the ticker VTI:

Its expense ratio is as low as the Admiral Shares but it does not have the same minimum investment. You can buy an ETF for the price of a share. Low barrier to entry and low expense ratio – sold!

With ETFs, you cannot make automatic investments like you can with a mutual fund; however, it’s not hard to transfer the money and buy the ETF. I called Vanguard and they walked me through it.

I actually bought the Vanguard FTSE Developed Markets ETF (VEA) in my Roth IRA as I was interested in having some international funds. As I continue to max out my Roth IRA for 2018, I will choose some other funds.

Here is a picture of VEA’s portfolio composition. This level of information can be found by clicking on the actual fund. Follow the directions above and click on a fund that interests you.

Closing Thoughts

I think TRFs are a really great method of passive investing. You can set it and forget it. I’ve been enjoying picking the different funds so I have chosen to go this route but who knows I may switch to TRFs at some point.

You can switch your funds fairly easily without creating a taxable event. I’ve always called Vanguard to have them do this when I’ve switched funds.

It really doesn’t take a lot of time to understand the basics of investing. I think what held me back for a while was a fear of the unknown. However, once I dove in and asked questions, the mystery dissipated.

Certainly, I am not a financial expert and I’m writing from my personal experience. Please see my disclosure statement. Once you’ve taken some time to understand the basics, consult with a professional.

Alright, did you find this helpful? Do you feel less intimidated? I’d love to hear any questions you may have…

Happy Investing!

Introducing Bite-Sized Thursdays

July 19, 2018 By Deanna 8 Comments

Hey all, I had to build up my confidence as well as become more efficient at editing my posts before I could think about publishing twice a week. I believe I’m ready and/or at least I am ready to try.

For now, my Thursday posts will be more bite-sized but I still plan on producing quality writing. Feel free to give me feedback in the comments.

Discipline and Schedules

I have a full-time career as an Account Manager for a Broker/TPA. Now I spend part of my time blogging. Additionally, I help women in recovery and women who want accountability with their finances. Then there are the things I consider high priorities: prayer time, exercise, family time, friend time and having fun. Life is good!

Anyways, I am feeling a bit overwhelmed and so I decided to employ some accountability to my schedule. I am creating time blocking specific to my mornings. The first thing I want to acknowledge is that waking up every day at the same time is an act of discipline. I was inspired by reading this article by 5 am Joel. I do wake up early on the weekends, but necessarily at 5:00 AM 🙂

If you want more details into getting started doing time blocking, I recommend this article by Paul Minors.

I lived in a ministry house for one and a half years where we were expected to participate in community prayer time. This occurred in the mornings (including weekends). Additionally, we got together in the evenings to share gratitude. These practices built up a lot of discipline and certainly broke me of the habit of sleeping in on the weekends. Now my body automatically wakes up early every day.

The next step in being strategic with my time is to block it off in the morning when I feel I can be most productive before I begin the workday.

My Proposed Weekday AM Schedule

I typically do fitness classes after work in the evening but there are a few good classes that I like to participate in the morning at 6:00 AM. I certainly reserve the right to do that and on those days I will still be getting up at 5 but will shuffle a few things to the evening.

It All Starts In the Evening

The key to an early morning starts in the evening. The problem I have been facing is that I’m staying up too late working on my blog and then I still wake up early. That being said, I am commencing a no screen policy before bed. I read about Erin’s challenge to not look at any screens 1 hour before bed and thought that may be wise.

My goal is to aim to be asleep by 10:00 PM and so I know that means winding down around 9:00 – 9:30 PM. You heard it here first so let’s see if I can stick to this!

I will save the early part of my evenings for exercise, working with others and/or social activities.

Flexibility

Could I start this and fail? Sure, things may not work out exactly as I laid out but I won’t consider that a failure. This is the model I’ll strive for but I remain open to adjustments and improvements.

There it is! I am already feeling a sense of peace about a plan and for time efficiency. What are your thoughts? Do you employ time-blocking? How do you get all that you want to accomplish done in your day?