Tag Archives: Warren Buffet

Investing, Retirement

Stock CEO

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Merriam-Webster definition: Rockstar: a famous and successful singer or performer of rock music.

Greenbacks Magnet definition: Stockstar: a successful investor of stocks and index funds.

I knew there were only six ways to get rich rich: marry money, inherit money, build a successful business, exploit a talent, get lucky i.e. win the lottery, and spend less than you make and invest your savings wisely over a long period of time. That is basically it. The rest are details.

There are many roads and paths to wealth, but all of them come down to six once you weed out all the details. Wealth has to be pursued. It will not just fall into your lap. You have to work for it. The result of hard work is success. The success is measured in dollars. Even though money is just a tool and one barometer for measuring success it is the yardstick that lets you keep tabs on how far you can come in a job done well.

But as we all know building wealth is easier said than done.

It can be as elusive as getting those Taylor Swift Eras tour concert tickets! And like her, I have a blank space and I’ll plan to write millionaire after my name. Ha!

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After reading books like The Automatic Millionaire, The Simple Path to Wealth, Your Money or Your Life and a ton of celebrity autobiographies, it occurred to me that even on a modest income, you can rise out of the poverty ashes and rise like the phoenix to wealth.

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You just need a plan. If you tried your hand at the first five ways to wealth and failed, you could always be working on the sixth path of saving and investing your way there simultaneously.

If I could not be a ballplayer, rapper, or business owner, I could always invest my money and be the CEO of my stock portfolio. I could be a stock CEO. I could be a stockstar. No college diploma required.

There are 5.3 million millionaires and 770 billionaires living in the United States. Millionaires make up about 2% of the U.S. adult population. Therefore, if you make it to $1 million in investable assets, you are wealthier than 98% of the U.S. population.

Statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich. Having $1 million will put you in a very exclusive club. The double comma club.

Although, the top 1% can earn as much as $955,000. Those annual earnings can seem far out of reach in a country where less than 10% of all households earn more than $200,000, according to the U.S. Census Bureau.

Working toward $1 million is still a lofty and worthy goal. Forbes reported in 2022 that the bracket’s minimum net worth is much higher — a cool $11.1 million. That would mean to be in the top 10% would be a minimum net worth of $1.1 million. This is an achievable goal. See some of my investments below.

My index funds are shown in dollar and my individual stocks are shown in shares.

Stock Portfolio

Investments2012201820202022/23
VTSAX$20,000$100,000$158,000$220,000
Amazon102
Apple2050100
Google330

Over time, I have increased my exposure in individual stocks while also investing in my index funds. I also decided to open up four different retirement accounts: Traditional IRA (Rollover from a previous job), Roth IRA, 401k and Roth 401k. I was able to get both the Roth and regular 401k from my employer(s) over the years. The IRA’s are what just happened over time.

Each retirement vehicle offers different benefits. In order to have more flexibility with my money I have two of each IRA and 401k. See below for definitions and pros and cons or the Roth 401k and IRA and more her from Empower.

What is a Roth 401k?
A Roth 401k is an employer-sponsored retirement plan. But unlike a traditional 401k, contributions are made with after-tax dollars.

The Roth 401k was introduced in 2006 to give Americans a new type of retirement savings vehicle to complement the popular Roth IRA, which was introduced in 1997. Roth IRAs and Roth 401ks are similar, but there are some pretty significant differences you should understand when deciding which one is right for you.

Pros and cons of a Roth 401k
A big advantage that the Roth 401k has over the Roth IRA is the possibility of an employer matching your contributions up to a certain percentage. Employer matches are the closest thing there is to “free money,” so if you’re deciding between a Roth 401k vs. a Roth IRA — keep this in mind. It’s also important to note here, though, that if you receive an employer Roth 401k match, the matching funds could also go into a traditional 401k.

A con, however, is that a Roth 401k account can sometimes have fewer investment options than a Roth IRA.

Pros and cons of a Roth IRA
On the flip side, Roth IRAs generally offer more investment options than Roth 401ks. With a Roth IRA, you generally have a large number of investments to choose from, including stocks, bonds, cash alternatives, and alternative investments. With a Roth 401k, you are limited to the investment options offered by your employer’s 401k plan.

However, one con of a Roth IRA is the income limit associated with this type of account. If you earn too much money, you won’t be able to contribute to this option. Roth IRAs also aren’t sponsored by an employer, which means that there is no employee contribution match.

The most distinguishing characteristic of 401(k)s, whether Roth or traditional, is the high contribution limit, allowing employees to save up to $22,500 per year in 2023. For workers over age 50, the ceiling is $30,000.

Meanwhile, annual IRA contribution limits are $6,500, while workers over 50 years old may contribute up to $7,500 per year.

A Roth 401(k) has a required minimum distribution beginning at age 73, but starting in 2024, the minimum distribution requirement will be eliminated entirely for Roth 401(k)s thanks to the SECURE Act 2.0, which was passed at the end of 2022. Previously, Roth 401(k) account holders could roll their plans into a Roth IRA and avoid the requirement entirely.

That means if you are one of the lucky ones with access to the Roth 401k, then you can essentially put money away for retirement with after-tax dollars and pay nothing on the earnings when you begin your withdrawals and no tax period in your retirement.

I knew that if I could make sure to always focus on investing a portion of my income that I could build wealth no matter what.

My definition of a stockstar is listed above. However, I have a barometer to measure my goal as well.

In order to be a Stock CEO and be one of the big boys, I looked at the compensation packages of CEOs in America. And CEOs are paid! The average salary of a Fortune 500 CEO is $15.9 million per year. The highest-paid Fortune 500 CEO is Elon Musk. In 2021, Musk saw compensation worth around $23.5 billion. He achieved this by exercising Tesla stock options given in a 2018 multiyear moonshot grant.

CEO pay has skyrocketed 1,460% since 1978.

CEOs were paid 399 times as much as a typical worker in 2021; that is up from 366-to-1 in 2020 and a big increase from 20-to-1 in 1965 and 59-to-1 in 1989.

The average CEO salary in the United States is $821,100 as of May 25, 2023, but the range typically falls between $620,600 and $1,057,900.

However, some CEOs like Warren Buffet accept a salary of $100,000. Some have gone so far as to take a salary of $1. For example, in 2010–11 Oracle’s founder and CEO Larry Ellison made only $1 in salary, but earned over $77 million in other forms of compensation. In some cases, in lieu of a salary, the executives receive stock options. Top CEOs like Elon Musk & Mark Zuckerberg take 1 dollar salary. and know the history of a $1 salary & perks that comes with a one-dollar salary.

Why do CEOs make $1?

The CEOs can afford to earn $1 as they make money through other ways like stocks and equity. This also helps them in avoiding taxes.

Who are the CEOs in the $1 salary club?

Some of the CEOs who take a $1 dollar salary are: Elon Musk (Tesla), Mark Zuckerberg (Meta formerly Facebook), Meg Whitman (Quibi), Larry Page Sergey Brin (Google).

Once I did my homework, I decided that I was going to be a stock CEO.

I may not be running a billion-dollar Fortune 500 company, but could manage a million-dollar stock portfolio.

Every dollar I invest would be my employee.

I would unleash these little worker bees to do their thing and help me build wealth with the power of compounding. That would be my equity pay package and golden parachute when I left work behind.

For example, Presidents / CEOs at companies that have raised Over 30M typically get between 250K and 5M+ shares. However, smaller companies that have raised Under 1M are more generous with their stock compensation as it ranges between 2 and 40%+ for Presidents / CEOs.

Therefore, I could reckon that a CEO of a small firm could get around 100K and between 10K-200K shares. Let’s say a small cap company like Ethan Allen, which has a share rice of $26.40 and a market cap of $667M, then a CEO would have between $263K and $5.28M in stock.

This image has an empty alt attribute; its file name is image-1.png

Therefore, if I had bewteen1K and 10K in stocks or index funds such as GOOGL at $125 a share or the VTSAX at $101 a share, I would have $100K to 1.25M in investments. This is a CEO stock equity level right there. Having 10K in shares or $100K-1M in investments means you are a stockstar.

At 550K in investable assets, you are in the top 20% in net worth. At $1.1M, you are in the top 10% of net worth individuals. Think of it like this, if you can’t be a rap star, baller, or Rockstar, you can be a financial Rockstar. Just keep investing.

Like Rihanna, said:

To be what you wish
You gotta be what you are
Only thing I’m missin’
Is a black guitar index fund

hey baby I’m a Rockstar stockstar!

Financial Independence, Investing, Real Estate

Reading the Stock Market Tea Leaves

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“Patience and perseverance have a magical effect before which difficulties disappear and obstacles vanish.” —John Quincy Adams

Stocks are down and housing prices are up. We have seen a shift in way consumers are spending. Mortgages are in. High-priced stocks are out.

Although the stock market has had an astounding run since the Pandemic began in March 2020, it is the acquisition of housing has most Americans chomping at the bit.

The US has minted more than half the world’s new millionaires over the last few years as investments in equities and tech stocks propelled assets higher. Real estate, is generally considered to be a more stable investment than volatile stocks or fluctuation cryptocurrencies and is a tangible asset. Real estate investing has also created 90% of the world’s millionaires.

However, not too far behind is stocks as nearly 70% of their wealth gains over the past year and a half have come from market gains. The wealthiest 1% know this. That is why they own 89% of all US stocks.

Those at the top of the economic food chain know the wealth comes from the owning of assets. The top 1% own a lot of stock my friends. And those at the bottom of the economic pyramid own so little. Meaning they are not keeping up with the rise of inflation and their purchasing power is steadily decreasing.

The dollar in their pocket is worth less now than it was yesterday. This means you are able to afford less at the grocery market and to purchase other consumer goods. For example, the cost of a pound of brisket was listed as $9 a pound. My sister sent me a screenshot of a 9.67 pound of brisket in her grocery store. The cost: $87.

I am sure somewhere my grandmother is looking down upon us and thinking that the family may very well have to turn vegetarian or severely cut back on meat consumption. I know grandma, I know.

According to Pew Research, the Consumer Price Index, the most widely followed inflation gauge, increased 7.0% from December 2020 to December 2021 – its highest rate in nearly 40 years. Families are spending $30 more per week at the local grocery store or farmer’s market. An increase in prices also mean less that is being invested and saved.

The price of lumber has increased by 288% making the cost of homes go up by an average of $36,000. The average new car price is now $47,000. As of 2021, the average monthly car payment in the US is $575 for new vehicles and $430 for used vehicles.

newcarprice

When I put these numbers in my compound interest calculator, it informs me that if I can invest either one of these amounts monthly for 30 years, I can become a millionaire. Therefore, I have come to the conclusion that new cars are wealth stealers and must be avoided at all costs. Rejecting new cars has made me richer. Things have gotten so far out of whack for the average household that people have begun to put groceries and gas on credit! This an absolute no-no. Building wealth requires cash.

Even if using OPM – other people’s money – you still have to bring some cash to the table to invest in index funds or put a down payment on a home. You must have capital to work with if you want to build wealth.

And companies are all too happy to part you from this wealth whether you have some or not. Case in point, I recently looked up the Kelley Blue Book value of my car. I just wanted to know what it was worth. Little did I know that this information gets sent over to local car dealerships who within mere seconds of me inquiring started sending me a barrage of solicitations for my business to put me into a new car.

I know very well that the average car payment is over $500.

These salespeople are looking to increase their monthly sales quota. I continue to get offers to get me into a new car by email, phone and text over the next week.

At this point, my Spider-sense is tingling. Why are folks still calling me after a week? I get it. Business is all about sales. They make fat commissions of us folks once we sign on the dotted line.

I prefer to keep my money where it is; in my pocket.

Just for kicks, I decide to look up the cost of food, housing and cars from the last 30 years.

Solved: Cost of Living The table at the right shows the average pr... | Chegg.com

After doing all of this research, I have come to the conclusion that the future is going to be expensive.

THE COST OF BUYING A HOUSE OVER 30 YEARS | Bike Friday

Therefore, it is unwise to use credit for present consumption with yet unearned future dollars.

We can prepare for the increases in living expenses by investing our dollars today. Don’t believe me. Just take a look at all the charts I provide in this article.

Numbers don’t lie.

The constant outflow of discretionary dollars on basic cost of living has consistently gone up. The cost of homes, education, cars, gas, and food are going through the roof!

I truly feel that incomes have not kept pace with the cost of homes and education. Equity may have increased, but so has the cost of homes.

In 1976, the cost of Harvard University tuition was $3,740. In 2019, it was $54,002. How can they justify it? It is almost like that owl in the how do we get to the center of a Tootsie Pop commercial: the world may never know.

r/Damnthatsinteresting - 1976 cost of living.

This is a mystery that I do not even think Scooby-Doo and the gang could solve no matter how many Scooby snacks Velma has in her back pocket.

Scoobydoo Whereareyou GIF - Scoobydoo Whereareyou Thegang - Discover & Share GIFs

I do not say these things to scare you. I am merely your jedi money guide on this journey. I want you to invest.

Own your primary residence and buy those index funds.

As the stock market goes down, buy the dip. Buy low. Get those high returns to sell high.

I did this back in 2013 when I bought shares of Apple (AAPL) for $258. The stock went on to split twice. Once for a 4-for-1 basis on August 28, 2020, a 7-for-1 basis on June 9, 2014. Prior to each split the stock was trading well over $500. It was $656 in 2014 and $656 in 2020.

It went from a billion-dollar company to a $2 trillion-dollar one. At the time of this writing, it is hovering around a $3 trillion-dollar market cap. Off a small one-time investment, I made tens of thousands of dollars.

And that small home that was purchased years ago. It has increased in value over $100k. The equity has gone up by over $100,000 and counting. That is why we invest my friends. So we can keep earning money in our sleep. Our money can work without taking vacations or sick leave. We can’t.

So here is your homework for this evening. I want you to find a home you would like to buy and a stock you would like to purchase. Figure out how much of a down payment or initial but in you will need. Divide this amount by how long you think it will take you to save up these funds.

For example, the VTSAX has a minimum initial investment of $3k. You decide you want to but this investment in a year. Therefore, you divide $3,000/12 months = $250. That is how much you must save every month to but this index fund. Doing the math will allow you to slowly build your dreams.

Let us not forget the wisdom of one of the greatest investors of all time: Warren Buffet. He reminded us that American living standards advanced seven fold in the 1900s, while the Dow rose from 66 to over 11,000. The Dow now stands at 34,934.27 today in 2022. “The model has worked well for America. If you look at all these disparate businesses, such as if you looked at the Dow Jones as a single entity… (though it rotated)… but going from 66 to 11,000 is doing something right. Owning a group of good business isn’t a bad plan.” Yes, owning is good for your pocketbook in the long run. Now I want you to go out and get some assets.

But before you do here is some more Buffet wisdom, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” And lastly, “The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch.” Patience is key. It will take you to the promised land of financial independence.

When I read the tea leaves on the stock market, I see it rising to 100,000.

Why you ask? A little research.

The Dow Jones industrial average index (DJIA) opened in 2018 just shy of 25,000 on Jan. 2, and a little over two weeks later it already had topped 26,000. The DJIA would need to rise by 20% to hit 30,000. We did that. As reported by Kigplinger, the DJIA has enjoyed an annualized increase of 7.33% since 1950, based on Yahoo Finance historical data. Therefore, the DJIA will double every 10 years (9.82 years, to be exact). If we continue at our 1950-2017 pace, the DJIA index will double, or hit 50,000, in 10 years.

If a $100,000 in the market at a 10% return will net you $1,000,000 in 30 years, then you can become a multi-millionaire with help of the stock market. And that excludes housing equity. So get out there and start putting your dollars to work.

Millionaires know that you get rich by saving $20 bucks at a time.

Credit Cards, Retirement

Credit Cards the silent wealth sucker

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Credit Card, Master Card, Visa Card

The world is in love with credit cards. – Warren Buffet

I’ve heard it so many times before.

Your favorite sports team is coming to town. You have wanted to go see them play live for years, but you don’t want the nosebleed seats. You want to be close to where the action is.

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So close that you can almost touch your favorite player and shake their hands or pat them on the back while their names are announced as they come out of the tunnel.

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This year you have decided to treat yourself and will go see your team play.

However, tickets aren’t cheap.

After reviewing information on ESPN.com, you will see that watching James Harden dunk on LeBron James comes at a hefty price.

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The average ticket in the NBA now costs $51.02, according to the Team Marketing Report, which monitors the business of sports leagues. Add charges for food, drinks and parking, and that cost rises to $72.53 per person.

And if you want to sit front row, the range for a courtside seat in the NBA is generally anywhere from $300-$20,000 just from a quick price check on Ticketmaster.

See my post How buying Super Bowl tickets could cost you $2 million dollars

Since almost everything in America costs more than the federal minimum wage of $7.25 that millions of low-wage workers are earning; Americans are turning to plastic to fund clothing, doctor fees, college, medical bills, furniture, cars, excursions, and jewelry. You name it, then folks are dropping down their American Express to make a purchase faster than The Rock can put out another film!

The problem with that is pretty obvious. You don’t have the money to go to the game so you put it on plastic instead. This can have serious consequences down the line. If you are unable to pay off the balance, now you have to pay interest on this purchase.

With the average credit card interest rate hovering around 18 percent, you could end up paying double or triple the cost of this little excursion to go see the LA Lakers play at Staples Center over the next several years!

In the book American Plastic, the author stated she saw consumers going into debt to pay for cosmetic surgery, which could cost you $7,000 for one procedure. Putting many Americans further behind in their wealth building.

The book Credit Card Nation by economist Robert D. Manning, published in 2000, provides a comprehensive overview of a social and economic crisis going on in America-escalating dependence on credit. The deregulation of financial services in 1980 paved the wave for Americans to become dependent on credit cards.

According to CNBC and USA Today, the average credit card debt in Americans held is approximately $6,200. And Alaska topped the 50 United States with the most credit card debt at $8,026. This is also the state that gives all its residents annual checks from its rich oil supply. Just something to chew on right there.

Meanwhile, the average credit card debt is now becoming a major wealth killer. Those households with it and more likely to have lower 401(k) balances, less in savings and investments, and less home equity.

Billionaire investor Warren Buffet says you should avoid using credit cards like a piggybank; it doesn’t work because a piggybank is filled with cash and credit cards are not cash. Credit cards funnel all your cash that should be used for wealth building into the banks coffers. Banks are now making a billion dollars a month thanks to easy credit access!

The credit card love affair usually ends in trail of past due bills.

Game, Game Over, End, Hand

Once the minimum payment (usually a paltry one percent of the balance) becomes unmanageable, you can get into serious trouble. Instead of making minimum payments are paying interest, you should be earning it instead in Mr. Market.

The one percent you are paying could be going to your retirement accounts or toward the down-payment of a home. How important is once percent really? It is enough that if you subtract that amount from the expense ratio of a mutual fund, then that one percent difference can be enough to fund 10 years of retirement. Very important in my book.

Forget credit card debt. Go max out that 401(k) at $19,500 annually and/or a Roth IRA at $6,000 per year and $7,000 if you are 50 and over.

This will of course take discipline, but so what. If you are willing to fork over $10,000 for season tickets to see the San Francisco 49’s play, why can’t you put away $100 a month for your future?

Maxing out a 401(k) over 20 years with a 9 percent return would net you 1,087,408.34. Don’t let credit card debt take this away.

Just my 2 cents.

Retirement, Saving, Wealth

Forget being broke, go for the money

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grayscale photography of human holding coins

I’m going to star this blog post with some words of wisdom that my dad text my sister.

The text my sister sent me went down like this: Dad said f*** poor go for the money lol 😂.

That ladies and gentleman was my father in a nutshell.

Girl, Father, Portrait, Eyes, People

Growing up my father was always telling it like it was and giving it to people straight. He didn’t really play around with or mince words. He was just raised that way.

My father grew up in the Washington DC area. He was born and raised there. Worked there all his life and retired at the age of 55.

Many of my money habits, I got from my dad. I watched him as a kid be very careful with his money and spending. He always made sure the rent or mortgage was paid first before spending on anything else. He would pay cash for everything.

One of the reasons he was able to retire was because he had a pension.

My father would brown bag it to work for lunch and believed in cooking and eating at home. I always loved watching him make breakfast in the morning. He always seemed so content when he was making breakfast and just doing the simplest of things.

That’s when I also learned the simple things seemed to make people the happiest. Therefore, I made sure to always lead a simple life. However, I also knew that I didn’t want to be broke.

I saw the difference it made to have some money in your pocket. People treat you better, they like you more, and you get better service.

I once read a book called You’re broke because you want to be and it described some sad tales of broke people.

One of the ones that really hit home for me was when a bus driver looked at a person crazy for saying the couldn’t afford the $1 bus fare.

Bus, Transportation, People, Aisle

It reminded me of the time I accidently let slip while I was in a cab “oh crap, where’s my wallet!” When the cab driver heard that he hit the brakes so hard, I almost hit the seat in front of me.

Fortunately, I did have my wallet. So the cab driver stopped looking at me like I was crazy and gave me a ride home.

Traffic, Manhattan, New York

That little episode taught me to keep some money on me at all times including a credit card for emergencies. You don’t want to be stuck in the middle of no where with no cash and no credit because everywhere you go, the first sign you read on any business we accept cash or credit.

I also learned not only from my father, but from Warren Buffet to pay attention to the bottom line.

Buffet knew from a young age that he should focus and surround his life on the flow of money. Therefore, he learned about investing and building businesses. If you want to have money, you need to know how to earn it and how to make it grow. So that’s what I decided to do too.

Now one thing I will tell you is that my preferred method of building wealth is to own stocks. That’s just me. After, reading tons of books and blogs about building wealth, that was my conclusion.

At this point in my life, I want less time focused on working and more time focused on enjoying the fruits of my labor!

Relaxing, Lounging, Saturday, Cozy

I have been blogging for almost 5 years and it’s still one of the most fun things I do. I just combined my passions, talking finance and writing.

I remember when no one read my blog. Now I get hundreds of readers a week from all over the world from as far away as India!

However, everyone is not a fan. I actually had a reader that made a comment that I have a limited knowledge of money. Really? After reading hundreds of books on personal finance, business, and building wealth, I think I am pretty well versed in the subject.

Considering that I have been blogging about money for over four years; I think me and the topic of money are very intimately acquainted with one another.

That being said, everyone is entitled to their opinions. Maybe because I am not constantly quoting stock market gyrations or the yield curve, that individual was not impressed.

Image result for yield curve inversion

What is the yield curve? In finance, the yield curve is a curve showing several yields to maturity or interest rates across different contract lengths for a similar debt contract. The curve shows the relation between the interest rate and the time to maturity, known as the “term”, of the debt for a given borrower in a given currency.

The federal reserve has also dropped its interest rate to 0.00%. That means borrowing will become cheaper and why mortgage interest rates are so low. You know. Stuff like that.

Well guess what? That ain’t my style. And I gotta be me. This is my blog after all.

I am her to give it to you simple in terms you can understand without all the money jargon. If you’re eyes are glazing over when you read my blog, then I ain’t doing my job right.

I want to educate, but I also like to entertain because I know if I can keep you engaged, then you will come back for more and learn something along the way.

What I will say to that person is this, there are tons of blogs out there that do talk in more technical terms and this blog has named many of them here so you are always welcome to check them out too!

The reason I like to keep it so basic is that is how I like people to break things down to me. The reason I have chosen to build my wealth with stocks is because it is the simplest path to wealth.

Treasure Map, Navigation, Map

When I did some research, I found that investing in housing only returned ~4% over 30 years. Over that same period, stocks had returned ~10%. So would you rather earn 4% on your money or ~10%?

Also with real estate, there are lots of carrying costs such as repairs and maintenance of the property, insurance, taxes, and fees. I do not have to water the plants in front of my stocks, or do any repair work to it. There is no private mortgage insurance with stocks either as you only have to pay a small expense for owning it. Therefore, I chose stocks.

Take It Easy, Without Having To Worry

Every time you buy a stock, you become an owner in that company. You now have an ownership stake and that company wants to reward you with dividends.

When you put your money to work for you instead of you working for it, you end up making way more. There are only so many hours in the day for you to work physically, but money that is invested has no such limitations.

The money you invest does not call in sick, get tired, take breaks, or even take vacations. It is working for you every single day.

And the earlier you start investing, the more money you can make.

I started investing with $50. I continued to invest aggressively. Then one day I woke up and had $100,000 in my retirement account less than 9 years later.

Interest also compounds. Meaning your money earns money. That is how wealth is made.

I also didn’t want to own 100 stocks. Who wants to manage that? I found that I could own a piece of the entire market by investing in index funds.

You can do this by investing in any fund that says total stock market index like the VTSAX at Vanguard or a 500 index fund like the S&P 500.

You can start small like I did and work your way up. The point is just to start.

Why is investing so important? It’s simple: To beat inflation.

You do not want to keep all your money in the bank and over 30 years later find out your $1 is now only worth the equivalent of 50 cents! That is inflation my friends. It erodes the value of money over time.

You need your money to keep its purchasing power by always earning more of it.

It always puts money into perspective for me on why we need it, when I wake up seeing recent headlines that people’s electricity bills in Texas were skyrocketing to the cost of $10,000! That’s insane. Some families’ emergency fund were being wiped out overnight! That could take many folks years to save. One emergency can set you back years. That is why you plan, save, and invest.

And forget rich quick. Most people I saw try to build wealth on this path ended up broke and worse off than they started. I chose to get rich slow.

If my $100,000 earns ~10% annually, then I would become a millionaire in 30 years. If that’s too long for you, then you must invest more of what you currently make, earn more money or both. I did both! And so can you.

Regardless of your method, just get started. Do a little math. I use a retirement calculator to see how much I need to save to be a millionaire in 10 years. It would take time, perseverance, and sacrifice on my part, but it’s worth it! The money in my retirement account is a scorecard. It shows me all the progress I have made along the way.

That cab driver slamming down his brakes on me and looking to put me out on the street made me realize something. I needed money to live. I needed money for the privilege and convenience of taking a cab and not the bus. That is the reason I say forget broke. Go out there, get to work, and get this money.

Legally and safely, while being socially distanced and 6 feet apart of course.

Financial Freedom, Financial Independence, Investing, Retirement

Smarter Than The Average Bear Market

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Bear, Grizzly Bear, Brown Bear, Zoo

Please excuse the clickety-clack of my keyboard while I type ferociously thus, breaking the eloquent silence of God and nature.

As I write this the U.S. is in the midst of a global health pandemic. The Coronavirus has caused worldwide panic the likes of which I have never seen.

What is being labeled as Black Monday 2020, March 9, the Dow’s worst single-day point drop in U.S. market history. A record $20.2 billion has been pulled from stocks on March 13, the largest daily outflow ever.

This is different from the financial crisis of 2008-09, as it was a mortgage crisis not a health crisis then, but this is now what will likely lead to a financial and housing crisis. The economy has gone into a recession.

There were 3.3 million unemployment applications submitted last week alone. They are estimating 3.5 million submissions next week.

Over 500,000 workers across the hospitality, retail, and restaurant sectors have been furloughed indefinitely.

Store shelves are bare and low on necessities. Milk, bread, and eggs are some of the first items to go. Toilet paper is now the currency of the realm.

Schools, churches, libraries and hair salons are closed. It is pretty certain that millions of small businesses will close and never open their doors again.

Many large retailers may become insolvent and close their doors permanently.

Rent strikes are popping up all over the country in response to stay-at-home and shelter-in-place orders from state governors. However, it is April 1st and the rent is due.

As all of this is going on around me, I have to make a judgment call.

My hand is hovering over the buy button in my 401(k) account. My inner voice is saying go for it. You did the math. You did like financial blogger FIREcracker said and I mathed shit up! I knew I could come out ahead when the markets rebound. Stocks are on sale. I’m going down to the mat with the bear market. I’ve been here before and come back up every time. I take a deep breath and hit submit.

I have now bought over a hundred shares of various stocks as of March 31. Before, the market started crashing I transferred over $84,000 out of multiple stock funds and placed my bet on one Vanguard 500 index fund over the last two years. Why you ask? I’m taking my cues from a historical data approach and a sprinkle of Buffet wisdom.

Back in 2013, in a letter to shareholders, Buffet gave a piece of advice to the trustee of his estate after he passes, “wife’s inheritance has been told to put 90% of her money into a stock index fund and 10% into short-term government bonds.”

A portfolio set for a 90/10 allocation over a period from 1900-2014 had a fail rate of 2.3%. That means a success rate of 97.7%! Therefore, I am not scared.

Others are panicking, but I choose to keep a cool head. My investing advice is sprinkle some Buffet on it. It’s the wild west out here. I could place a huge bet and get my wings clipped like Icarus for traveling too close to the fire of the market. After all, it is a fire sale on stocks going on right now.

However, I can’t let fear stop me. I have weighed the risks. And decided to take those calculated risks.

You see I have 100 years of stock market knowledge behind me. Past results do not guarantee future results, but whenever history turns it backs on the market, then during the rally the market turns it back on you.

Those who do not feed the beast are later consumed by it. Financial literacy has been my guiding light in these dark times we suddenly found ourselves in.

I have been thrown in a cave with the bear market, but like Yogi, I have learned to be smarter than the average bear.

Some of you may be surprised that I am using Yogi Bear as inspiration to invest, but let’s not forget he always seemed to outsmart Ranger Smith and get that coveted picnic basket.

Yogi Bear - Wikipedia
Image from Wikipedia

Therefore, fear will not take me under for I have knowledge my friends. And knowledge is the slayer of fear. While Buffy slays vampires, I slay market gyrations.

I like to take Buffet’s advice to bet on America. He says, “From a standing start 240 years ago — a span of time less than triple my days on earth — Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers.”

Yes, indeed America has.

That is incredible growth for a country that was just started with 13 original colonies in 1607 to become the biggest economy in the world, as other civilizations are far older than America.

It must have felt the same way for Neal Armstrong when he took those first steps on the moon for mankind in 1968.

That is incredible growth to go from walking on the ground, to the rocket, to the moon considering less than 70 years ago man had just learned how to fly in a little place called Kitty Hawk.

And when I threw open my personal finance go-to book, it looks as if I am not the only one who calls on the sage advice of the finance world’s Obi-Wan.

I found that financial blogger J.D. Roth of Get Rich Slowly also listens to the man they call “The Oracle of Omaha” Warren Buffet.

Here is an excerpt from the 2009 New York Times best-selling book I Will Teach You to be Rich: No Guilt. No Excuses. No BS. Just a 6-Week Program That Works by Ramit Sethi. The blog post was titled: HOW TO WRESTLE WITH A BEAR—AND WIN Why I’m Not Worried About the Economy.

Wall Street is fear-stricken it will have banks and businesses go under and lose countless millions in the process.

Main Street is panicked that it can’t make rent to pay Wall Street.

When Wall Street head honcho and real estate billionaire Thomas Barrack Jr. speaks of commercial mortgages being on the brink of collapse, you spark panic all around you.

Mr. Barrack of Colony Capital predicts a “domino effect” of catastrophic economic consequences without prompt action to keep borrowers from defaulting.

I know that may keep some people on the bench, but I prefer to keep swinging for the fences.

You’ll never get a hit from the dugout.

Millionaires are made of Teflon. They keep betting when the house is cleaning up. They just keep on swinging. You miss 100% of every shot you don’t take.

I once remember reading that millionaire’s know they are made by saving ten bucks at a time.

Pundits are instilling fear when they should be telling long-term investors to stay the course. The wealthy know better. They keep investing because that’s what winners do.

Millionaires are smarter than the average bear.

Investing

Don’t Let The Coronavirus Stop You From Investing

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Coronavirus, Virus, Mouth Guard

If you were part of the millions who lost a small fortune in the 2008-2009 financial crisis, then this Coronvirus fear and stock market shocks should be a cakewalk for you.

It felt just like this a decade ago, but it lasted for like 15 months.

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But I’m here to tell you, “Don’t panic.” Since the Great Depression, America has survived World War II, The Cuban Missile Crisis, SARS, 9/11, and the Great Financial Crisis.

As Annie once sang: The sun will come out Tomorrow Bet your bottom dollar That tomorrow There’ll be sun!

We will get through this. You just have to buckle up and get through the ride like any rollercoaster; it has to come to an end.

Markets dropped 1,100 points on Thursday. That just means stocks are on sale.

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I’m strolling down the stock market isles grabbing everything I can get my hands on.

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This isn’t the time to hide. Stay and fight for your 401(k). It’s the time to run to the nearest online brokerage and scoop up some stocks on sale.

Berkshire Hathaway is sitting on $100 Billion cash just waiting for another 2008-2009 so they can get those deals.

Nobody wants to pay $3,000 for one share of the S&P when you can get it for cheaper.

So go out there and find some bargains!

SHOULD YOU BUY OR SALE

“Fearful when others are greedy and greedy when others are fearful.” – Warren Buffet

I once read a story about a famous investor who in 1939, when World War II began in Europe, the 26-year-old investor borrowed $10,000 and bought 100 shares each in 104 companies that were selling at $1 a share or less, including 34 in bankruptcy.

A few years later, he made large profits on 100 of the companies; four turned out to be worthless.

This became the foundation for his $13 Billion global growth fund and the start of his road to wealth. He did not let fear stop him. His own the world philosophy made him a billionaire.

Sir Templeton looked fear in the face and marched ahead anyway.

Trust your gut and don’t make any decisions unless you know what you want to do. Fear is no place to make decisions from.

When you are coming from a place of great loss, you don’t sell the house, cut your hair, or make any big decisions until you are back in a place of control over your emotions. At least, that is what all the books say.

Same rules apply when investing. Buy when you are knowledgeable and ready. Not scared.

Knowledge is the slayer of fear.

FLIP A COIN

I could tell you what you should buy. The gurus and financial pundits will tell you that you should invest in this or that, blah, blah, blah, etc. etc.

Well here at Greenbacks Magnet, we keep it simple.

Just buy a good quality total index fund and keep it moving.

Studies have shown that no one can time the market. If you put 25 random stocks on a dartboard, you could do no worse than an active fund manager could by throwing darts to pick your investments.

It’s like the flip of a coin. 50/50 odds or worse. Tails you lose. Heads the house wins.

If you buy the whole market, you are bound to get some winners in there.

PUT YOUR FACE MASK ON FIRST

They say face masks are being bought up all over the world.

The mark up is getting unbelievable as some places are charging three times the normal going rate.

The surgeon general says masks are only good for those already infected to not continue to spread the virus.

Those that are healthy are wasting their money because a mask will not stop them from catching it.

Therefore, instead of wasting money on overpriced masks just invest in the company that makes them. They are making a killing right now!

Increase your wealth portfolio and put on your fiscal facemask for your future generations.

Your future self will thank you for investing that money.