Tag Archives: Walmart

Investing, Retirement, Wealth

Can anyone retire a millionaire?

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One word: Yes.

I know there are some skeptics out there, but I am here to assure you that it can happen to anyone. How so? Let me explain.

We just got to do some math.

Historically the stock market has returned at least ~10% over the last 30 years vs. real estate that has only returned about ~4%.

If you stick with the market over the course of that time, you can make it into millionaire status.

Compound interest is our friend. If you want to get to 1,000,000, then you just have to set aside some funds every year and then let compound interest do its thing.

If you invest $5,600 a year, over 30 years, you will have over a million saved ($1,013,283.18). Not too shabby.

If 30 years is too long for you, then just play with the numbers.

Investing $9,300 over 25 years, would net you ($1,006,090.42).

Investing $16,000 over 20 years, will net you ($1,008,039.99).

So you see, it is possible.

You just have to be willing and able to put the money aside.

Even after the dot-com bust of the 2000’s, the Great Recession, wars, 9/11, the search for capturing Bin Laden and 6 presidents the market has continued to rise.

After doing some research, the best place to park this money, water it and watch it grow seems to be the Vanguard index fund VTSAX. Why you ask? Basically, this index fund is not only low in cost at ~0.04%, but it includes the entire US equity market with over 3600 stocks!

It is your one stop shop for investing.

It’s the super Walmart of stocks. And like Walmart, it is open and working for you 24/7.

Why not the Vanguard 500 index fund VFIAX? Well this fund is limited in scope as it only includes the 500 largest companies in America. The VTSAX has them all.

In addition, the best part about an index fund is that if a company starts to slide due to bad management, scandal, hostile takeover or a combination of the three, then they are cut form the index and another company that has a stellar performance and track record takes its place.

Thereby, making sure your fund never goes to $0 and you continue to make money no matter whether or not a business goes bankrupt or sells to a competitor.

Meaning you will not ever lose all of your money.

Simply put, it is like if this fund plays in the mud with the other kids, gets dirty, then it will take itself to the car wash and start fresh playing with a new group of kids.

I think the reason most folks don’t get to this level is because they are too busy focusing on today instead of on tomorrow. I remember reading a quote that still has a profound effect on me today.

It went like this: The wealthy plan for three generations. The poor plan for Saturday night.

I get chills every time I think about it.

As humans, we are hard-wired to focus on what is right in front of us. It is difficult to see and plan for something that is years or even decades away.

However, we must. Our future selves are depending on us to do so.

Those years are going to go by anyway so why get so caught up in how long it will take you to save a million. Why not just do it.

I feel too many folks get caught up thinking that they need a high income to get rich.

Hate to break it to you, but tons of high earners go broke!

Folks are so busy worrying about what doctors, lawyers, sports stars or entertainers are making, that they forget what really matters isn’t what you make, it’s what you keep.

I’ve heard of couples making $250k a year saying they broke! What gives? That is more than ~96% of Americans. An income that size puts them in the top ~4% of income. But most folks do not eve have that amount in retirement savings, let alone making it as an annual income.

According to Business Insider, The average 401(k) balance is $92,148, according to a 2019 Vanguard analysis of over 5 million 401(k) plans issued by the company. But most people don’t have that amount of retirement savings. The median 401(k) balance is $22,217, a better indicator of what the majority of Americans have saved for retirement.

So a high income don’t mean squat if you squander it.

Don’t let this be you.

Change the conversation and get your spending under control so you can put that $6,000, $9,300 or $16,000 in your retirement account every year and earn your way to a fortune.

Bankruptcy

Retail Apocalypse Coming To A Storefront Near You

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It was a regular Monday.

Or so I thought.

The birds were chirping, car horns were blaring and then the news hit **BAM!! POW!** kind of like in those Batman Comics.

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Spread all over the news was that Retailer Forever 21 had filed for chapter 11 bankruptcy.

The US is now on pace to having a record 12,000 store closures by the end of 2019.

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The reason Forever 21 bankruptcy filing stings so much is that the retail sector has lost nearly 200,000 jobs since the start of 2017.

It seems as if the retail sector is having its own market correction. So many businesses were in a constant state of new store openings, ribbon cutting, and champagne toasts that they failed to stockpile any cash for a rainy day.

With many consumers maxed out after all that easy credit flowed like champagne, it is now time for companies to pay the piper.

However, it not just that companies are bleeding cash due to heavy rents and debt obligations. There also is this little thing called a trade war going on. The trade war between the United States and China isn’t helping any. But if we really think back, most retailers put themselves in this vulnerable position by spreading themselves too thin.

Chasing after never ending profits in the quest for the retail equivalent of the holy grail: increased annual revenues.

Think Subway’s $5 footlong. The world’s largest fast-food chain closed more than 1,000 stores last year (Subway closed 1,100). Subway started its restaurant purge in full force in 2016, when it had more US closures than openings for the first time in its history. It said it plans to keep closing restaurants as it tries to become more profitable.

There is also a restaurant apocalypse going on as many as closing including Pizza Hut, as they are getting out of the sit-down restaurant business. It’s becoming a strictly carryout and delivery pizza chain, like Domino’s and Papa John’s.

However, these companies boxed themselves into a corner. What happens when easy credit dries up and customers are no longer willing and able to shop? It’s kind of like that scene in Indiana Jones. You know the one I’m talking about.

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As most companies have no leverage with creditors after a bankruptcy filing, in many cases they lose equity or control over their companies.

Like what happened to American Apparel. The owner went public and was rewarded handsomely with hundreds of millions in stock. Once the company filed bankruptcy in 2011, share prices went from as high as $15.80 in 2007 to being worth less than 80 cents. The owner had over 800,000 shares of his stock and pretty much 100 percent of his net worth locked up in the company. I’m guessing he never heard of a company called Enron. If so, I doubt he would have so much of his fortune in just one stock. Anyway, what happened next is just heinous. The owner went from $500 million to $0 in net worth once the company went bust.

Some people have no idea how invested an owner is in a company until the tide goes out and see who is swimming naked, which basically means in heavy debt.

In recent retail headlines, stores such as Gap, Charlotte Russe, WetSeal, DEB, Rue 21, Gymboree, Charming Charlie, and Toys’R’Us have all thrown in the towel. What makes Forever 21 stand out in this sea of closures is that the retailer is still owned by the founders. However, they too are having profits squeezed by online shopping and e-commerce giants Amazon and Walmart.

Most retailers in these modern times in the age of Instagram are turning more to debt and becoming highly leveraged as a result. This hurts businesses in the long run. Those who manage to avoid piling on too much debt and stay lean are the ones who manage to stay open and profit.

According to Jeff Spross, avoiding the clutches of private equity can make or break a company. For example, after being bought by a trio of private equity companies in 2004, Toys ‘R’ Us’ debt burden rose from $2.3 billion to $5.2 billion in 2017, while its cash stockpile shrank from $2.2 billion to $301 million.

Simply put, private equity firms take the companies cash in the form of fees and replaces it with debt. Once retailers are unable to sustain the high interest payments on this new debt that was supposedly needed in order to expand operations, then the business goes under.

This wave of bankruptcies is therefore not a coincidence as many retailers were highly leveraged but didn’t file for bankruptcy until the interest kicked in and the bills came due starting in 2019, which will continue through 2025.

The retail chopping block is brutal as store closures can hurt stock prices, brand loyalty, consumer confidence, and retailers bottom lines. For instance, many companies are notifying employees in some cases only days before store closures.

That was the case with Dean & DeLuca in Georgetown as they were riddled with debt and couldn’t pay their vendors. The company was so backed up on rent that it racked up $96,000 in back rent and started get hit by lawsuits from angry suppliers. One funny line in this NY Post article read “Can’t afford that $45 box of cookies at Dean & DeLuca? Neither can Dean & DeLuca.” The domino effect and trickle-down economics also lies in the fact that vendors may go out of business due to Dean & DeLuca’s failure to pay them thus putting more employees out of work and out of a job. The company knew it was bleeding money for years, but only informed employees of its closure less than 72 hours before closing up shop for good. Some of these employees had been with the store since it opened in 1993. After 25 years, these employees got no severance. To add insult to injury, they also defaulted on some employee salaries, which is a double-whammy; no paycheck and no job.

This let’s you know that the employee is the sacrificial lamb that gets slaughtered when a retailer takes all the money out of a company. This feels reminiscent of the rumblings I heard about WeWork before their failed IPO.

According to Scott Galloway, WeWork had numerous red flags:

My goddaughter informed me she’s dating a club promoter, a red flag. Occasionally, red flags marry each other, the Biebs and Hailey Baldwin — what could go wrong? So now, imagine red flags the dimensions of Kansas. Buckle up:

— Adam Neumann has sold $700 million in stock. As a founder, I’ve sold shares into a secondary offering to get some liquidity and diversify holdings. Ok, I get it. But 3/4 of a billion dollars? This is 700 million red flags that spell words on the field of a football field at halftime: “Get me the hell out of this stock, but YOU should buy some.”

— Gross margins are a pretty decent proxy for how good or bad a business is. And this is a sh**ty business.

When the CEO (Neumann) wants to sale so many shares, it gives me pause to wonder why? If you don’t believe in your business (they never turned a profit), then why should I?

One retailer that managed to avoid debt, store closures, and heavy job losses due to avoiding debt and private equity is Best Buy.

Therefore, it is a simple recipe, kind of like KFC’s Kentucky Fried Chicken 11 herbs and spices with a secret ingredient (white pepper in case you were wondering), that will keep retailers or yourself out of the evil clutches of debt. I will share it with you. No debt + tons of cash = solvency.

You cannot go bankrupt if you owe no one.

You can put that last sentence on my tombstone. Like Drake and 2 Chainz, when I die bury me inside the casket that paid for with cash, put my money in the grave because in the next life I’m trying to stay paid. But seriously, I’d rather you expand your business or wealth portfolio slowly with cash than quickly with debt.

Always remember that patience is not only a virtue, but it is how you can avoid debt through delayed instead of instant gratification, which is how you get and stay rich.

My goal here is to help you along your wealth journey. I hope this post helps you do just that. You are not alone. Have a question? Drop me a line.

And as always, if the retail apocalypse comes…

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Financial Freedom

Are car loans worth giving up $1 million dollars?

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Ferrari 458, Ferrari, 458, Spider, Red, Sports Car

If you have seen the news headlines recently, then you know many people are in debt up to their eyeballs.

What you may not have known is that car loans are starting to become an even bigger drain on finances than people ever thought possible.

It was reported that 7 million Americans are 90 days delinquent on auto loans. It was even in the news that in the UK financing is become all the norm and putting lots of people in debt. Similar to American consumers, British consumers are driving themselves into the red.

It makes you wonder if financing or leasing a vehicle the fast lane to debt?

Many seem to think so. Myself included.

If you have been reading my posts, you know how I feel about cars. They put you on the fast track to bebtville, if you are not careful.

So, how can financing cars cost you $1 million dollars?

I’ll show you.

A LOOK BACK THROUGH TIME

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I may not be able to take you back in time by going 88 miles an hour like in the movie Back to the Future, but I can give you a glimpse into what things cost by providing you the data here.

Back when Henry Ford was working on the Model T vehicle for the Ford dealership, he believed in pricing his vehicles at a rate that even his employees could afford. He said to pay a fair wage good enough so that his factory workers could afford to buy his car. Oh how things have changed.

CEO’s used to make 20 times their employees wages on average, now they make 300 times more.

As wages have stagnated since the 1970’s, but the cost of everything has gone up, it has made it very difficult for people to afford the price of a vehicle today.

Let’s talk about the average cost of a car in 2019.

COMPARISON SHOPPING

I will give you a quick rundown of the average cost of homes and cars over the last few decades.

This is a comparison of prices over the last 70 years.

Average Cost Of New Home Homes
1930 $3,845.00 , 1940 $3,920.00, 1950 $8,450.00 , 1960 $12,700.00 , 1970 $23,450.00 , 1980 $68,700.00 , 1990 $123,000.00 , 2008 $238,880 , 2013 $289,500 ,
Average Wages 
1930 $1,970.00 , 1940 $1,725.00, 1950 $3,210.00 , 1960 $5,315.00, 1970 $9,400.00 , 1980 $19,500.00 , 1990 $28,960.00 , 2008 $40,523 , 2012 $44,321 ,
Average Cost of New Car Cars 
1930 $600.00 , 1940 $850.00, 1950 $1,510.00 , 1960 $2,600.00 , 
1970 $3,450.00 , 1980 $7,200.00 , 1990 $16,950.00 , 2008 $27,958 , 2013 $31,352 ,
Average Cost Gallon Of Gas 
1930 10 cents , 1940 11 cents , 1950 18 cents , 1960 25 cents , 
1970 36 cents , 1980 $1.19 , 1990 $1.34 , 2009 $2.051 , 2013 $3.80,
Average Cost Loaf of Bread Food 
1930 9 cents , 1940 10 cents , 1950 12 cents , 1960 22 cents , 
1970 25 cents , 1980 50 cents , 1990 70 cents , 2008 $2.79 , 2013 $1.98 ,
Average Cost 1lb Hamburger Meat 
1930 12 cents , 1940 20 cents , 1950 30 cents , 1960 45 cents , 
1970 70 cents , 1980 99 cents , 1990 89 cents , 2009 $3.99 , 2013 $4.68

Prices retrieved from http://www.thepeoplehistory.com/70yearsofpricechange.html

If you focus just on the average cost of new cars, you will notice that a car that was $600 in 1930 is now $31,352 in 2013. The cost of a car has gone up over 5000% in 90 years. Wages have gone up 2250% in the same amount of time.

According to the U.S. Census Bureau, median household income in the United States is $56,516 in 2015. The price of cars have outpaced the increase in wages.

That’s something to think about right there.

WHY SHOULD I FINANCE OR LEASE A CAR?

People used to get around by horse and buggy until the combustion engine was invented around 1885. Before that, people would rarely go more than 10 miles from home. That meant you worked, lived, and played within a 10-mile radius of home for your entire life.

Once the automobile was introduced, people were then able to work further from home. This provided more opportunities.

However, the price of cars has become so inflated that people are having to decide between paying for utilities or car payments.

If having a car was so great, then why have wages not kept up with inflation enough for people to truly be able to continue to afford and enjoy them. I feel the same way about clothes. If your job wanted you to dress in couture, then they should pay you couture wages.

My sister once said that if a job wanted you to dress in suits, then they would pay you enough for that. If they want you to wear designer clothes, but only pay minimum wage, then they get Target and Walmart. Haha. I laughed so hard at that. Cause it’s true.

When you find yourself needing a car, why not buy what is affordable?

You could finance a car that you plan to own or lease a car you plan to trade-in and trade-up in a few years. Either way, it’s going to cost you.

I say finance to own. Actually, if you can, I prefer you pay cash for all appliances and that includes a car.

HOW TO SAVE $1 MILLION DOLLARS BY NOT BUYING A CAR

Let me tell you story.

I’ll paint you a picture, like Sophia would in Golden Girls.

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Picture it: Washington DC 2003…

It was a brisk day in early Spring. A car salesman was trying to sell me a more expensive model of the car I wanted, but I declined.

While I waited to sign on the dotted line, I was so nervous my hands were sweating. It took all day, but I finally got my new car. Sticker price: $24,000.

I was informed that I would be paying $450 a month. I walked out and was happy to have a brand new car. Skipping merrily along my way before reality would sink in.

A mere three years later, as I wrote out that check, I was sick of writing it by then and told myself NEVER again!

I finally paid that car off in 2009. And am happy to report I have not had a car loan since. I spent about 6 years of my adult life paying car notes. I promised myself never again. I have not had a car payment in a decade. I used that money to pay off debt, save, and invest. I turned that car payment into $100,000 in the stock market.

See my post How I turned a $450 car payment into $100,000

And check out my other posts on cars.

A car and nothing more

I won’t stop now, cause it’s Ford cars for life

If you want to be wealthy, drive a Ford

I also started saving thousands of dollars in a rainy day fund.

Check out my ebook and See my post How Millennial Money inspired me to start saving $13,333.06 a year

After doing some math, I found out that $100,000 invested in the stock market could turn into $1 million dollars in 30 years. In addition, if you were to put $5,500 in a Roth IRA for 35 years at an 8% return, you could net a $1 million-dollar portfolio.

Don’t think you can swing that? I think you can. I’ll tell you why.

You could spend a couple hundred grand on cars in a lifetime.

Let me show you how.

The average car payment is over $500 a month. According to Nerdwallet, the average is $530 a month for a car note. That is $6,000 a year. If you are paying that, then that is your retirement money right there.

If you buy a new car every 5 years, at $34,000, then over 30 years you would have spent $204,000. And that is just the sticker price! That does not include interest, gas, maintenance, car washes or accessories like a steering wheel cover.

If you can just save a few thousand dollars and buy a car for cash, then you can save yourself thousands of dollars in interest and more. You could slowly trade up every couple of years as you save more cash and upgrade your car.

Do not give up potentially $1 million dollars on cars because no vehicle is worth giving up that.  

Financial Freedom, Financial Independence, Retirement, Saving, Wealth

How do you play with FIRE?

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“It is so liberating to really know what I want, what truly makes me happy, what I will not tolerate. I have learned that it is no one else’s job to take care of me but me.” – Beyoncé

Many of you may have heard of the FIRE movement (financial independence, retire early). However, what some of you may not know is that there are different ways to FIRE.

Let’s explore some of those ways shall we.

WHAT IS FIRE?

According to Camp Fire Finance, the elevator pitch for FIRE is this, “When your investments generate enough money to cover your annual expenses you’re financially independent (FI). At that point work is optional and you can retire early (RE) if you want to.”

Basically, you have more than enough money coming in to stop working. Usually, this requires anywhere from $1 million to $5 million dollars depending on what you want or need to spend to maintain your lifestyle or that of the one you dream of having.

For example, if you decide you want to withdraw at least $80,000 a year, you would need to have a $2-million-dollar portfolio.

HOW DO YOU BUILD A $2 MILLION DOLLAR PORTFOLIO?

“Don’t focus on getting to $1 million; focus on getting to $2 million.” – Arnold Schwarzenegger

I heard that little gem when Mr. Schwarzenegger was doing a radio interview.

So, one word: invest.

Property, stocks, art, and stamps can all help you build your net worth.

“Market crashes are the best times to buy,” he said. “When Walmart has a sale, everybody would run in to buy. But when the stock market has a sale, or the real estate market has a sale, everybody runs away. That’s why there’s a difference between rich and poor today because they don’t know a good thing when they see one.” – Robert Kiyosaki quoted from a MarketWatch interview

Do not focus on your income; focus on your net worth.

Earning a high income means nothing, if you spend it all. If you make $85,000, but spend $86,000 you’re in the red. You can blow through just about any paycheck.

PURSUIT OF LIFE, LIBERTY, HAPPINESS AND FINANCIAL FREEDOM

The pursuit of financial freedom takes work and time. I thought this post from Apathy Ends, hit the nail on the financial head on why people are not rich, yet. See my post on Patience is the key to wealth.

I will never forget that episode of America’s Next Top Model (ANTM) when Ms. J was teaching the girls how to walk down the runway. He was fierce and determined.  What he got from the girls was gentle and undetermined or undefined and lazy.

He commented to them, while slapping his hands together, with one palm face up against the other hand palm down for emphasis: “I want you to walk like you’re selling it and the rent is due tomorrow.”

I could think of no better way to tell someone that is how you approach your money and your life’s work. Either be all in or don’t do it at all. Passion is what separates the have’s from the have not’s. And in that case, it was a $100,000 prize and modeling contract.

Get a financial education. Learn all you can about money. Make a plan or a budget for your money, but make it sexy. I know for some people talking about interest rates puts them to sleep, but how about we think of the subject differently and come at it from another angle.

I went to a meetup in DC and heard J. Money of BudgetsareSexy say this, “Do you want to learn how to balance a check book? Boring. Or do you want to learn how to save a million dollars?” WHAT?!!!

Did you also know reducing your 401(k) investment fee by 1% can provide you with 10 years of income? Shocking? Yes, I know. I can teach you how to save $1 million and keep $100,000!

Now, those things sound sexy and exciting. Yes,  please tell me more.

Once you have a question. Start looking for answers.

THE RULE OF 25

“I can never be safe; I always try and go against the grain. As soon as I accomplish one thing, I just set a higher goal. That’s how I’ve gotten to where I am.” – Beyoncé

If your annual expenses are $55,000 a year, then you need $1.375 million to retire (55,000 x 25) and then this should last you for the next 25 years.

The formula used to calculate your 25 years of expenses is this (expenses x 25 years).

Estimate your FIRE number.

You want more money to retire on? Like Beyoncé says, set a higher goal.

For $100,000 in income, you would need a $2.5-million-dollar portfolio to generate that kind of cash.

See chart.

Source: Camp Fire Finance 

THE RULE OF 300

Say your monthly expenses are $3,500, then you need $1.05 million to retire (3,500 x 300) and that should last you for the next 25 years.

As you can see, it is similar to the Rule of 25. It only differs slightly in we use monthly expenses versus annual expenses in this calculation.

Source: Four Percent Rule

THE FOUR PERCENT RULE

The 4% rule refers to your withdrawal rate: the annual percentage amount you can safely withdraw from your investment portfolio when you retire.

Therefore, if you want to withdraw $200,000, then you need a $5-million-dollar portfolio.

Source: Camp Fire Finance

THE THREE PERCENT RULE

“Keep your feet on the ground and keep reaching for the stars.” – Casey Kasem

The 3% rule refers to your withdrawal rate: the annual percentage amount you can safely withdraw from your investment portfolio when you retire.

This allows you to touch your interest earned at a slower pace. Since, you are withdrawing 3% instead of 4%. Meaning your draw down the principal more slowly, if ever. The more you have squirreled away and the less you take, you may not even touch the principal at all.

I know that is really shooting for the stars, but that really is the goal. You never want to touch principal. That way, you live only off the interest forever!

I got this chart from doing another online search and the best I came across was from the blog Financially Alert.

Source: Financially Alert 

LEVELS OF WEALTH

Only you can decide how much money is enough. However, if we go by Rockefeller, enough is always a little more. Basically, how much money is enough?

For purposes of simplicity, we will use the examples of enough money given by billionaire Mark Cuban.

Mark Cuban on enough money:

“‘Enough’ is what it takes to not worry about the bills.”

“‘A lot’ is enough that you never have to worry about working again.”

“‘F you’ money means you can rent a jet to go wherever you want, whenever you want, and no party is out of reach.”

“‘F everyone’ money means you can have your favorite band in your backyard, not care how much it costs, and lend them your jet to get there.”

We’re not talking about rich; talking about wealthy. Chris Rock once said, “Shaquille O’Neal is rich. The guy who pays his salary is wealthy.” He also said comfort is the poison. Too much of it can slow down your progress on the road to wealth. All I mean is to stay hungry. I’m just saying there are different levels of wealth.

FIRE IT UP

“Focus on all four of your net worth factors: increasing your income, increasing your savings, increasing your investment returns, and decreasing your cost of living by simplifying your lifestyle.” – T. Harv Eker

Simple math can help you retire rich.

Unfortunately, many people think of math as a foreign language and say it’s too hard to learn.

In my experience, to build wealth you need to know addition, subtraction, division, and multiplication. And that’s about it.

Why FIRE AT ALL?

More control and satisfaction over how you spend your time and money. Finding something you love to do and are passionate about is life changing and fulfilling. What you want is…FREEDOM. Waste less money and work with what you’ve got. Do more with what you have.

What do you want out of life? Write it down. Go seek answers. They say seek and you shall find.

According to Mr. Money Mustache, you should focus more on you than your bank account. Get wiser and healthier so you can increase your probability to get wealthier. My favorite quote of his is this: “Salads and barbells every day.” Become your best self with hard work, dedication, and consistency. Be the Boss.

READY, AIM…FIRE!!!

According to an article by Physician on Fire (POF), called What is fatFIRE?, a Facebook group defined FIRE as the following:

FIRE = Financial Independence. Retire Early.

leanFIRE = FIRE on a shoestring budget.

fatFIRE = FIRE on a generous budget.

Most aspiring to fatFIRE have a target of $2.5 Million or more or the equivalent annual budget of $100,000 or more based on a 4% withdrawal rate.

I found a breakdown of the terms financially speaking on Miniafi on the difference between lean and fat FIRE under the title So Many Terms!

I break it down like this:

LEAN FIRE = $1 million dollar or less portfolio

FIRE = $1.25 to 2-million-dollar portfolio

FAT FIRE = $2.5 million dollar or more portfolio

FIRE is about having enough passive income flows to never work again or to decrease the amount of time you spend doing work you don’t want to do and increasing it on the work you do want to do.