What is this whole wealth building thing anyways? Google it.

The internet can be your best friend or your worst enemy. You can literally consume a Harvard-level amount of knowledge or bing-watch 16 hours of cat videos while stuffing your face with Cheetos. I think most of us fall somewhere in between.

While I like cat videos as much as the next guy, I had a goal: To not go broke and end up homeless and starving. Pretty powerful motivator if you ask me. So I hit the Google. I searched get out of debt strategies, rags to riches stories, financial advice blogs and read dozens and dozens of articles on investing and living frugally.

Something inside my mind started to change. I saw things from a new angle. I think a huge part of it was the realization that my situation wasn’t unique. In fact, there were people out there who were A LOT worse off than I was. Like, a whole lot. I am a 30-something (okay, almost 40) year old guy with no kids, have a good job that pays me $25 bucks an hour and I am currently renting a pretty decent apartment ($650 a month) in a nice, quiet town. I am about $25,000 in debt and have meager savings. I thought I had it rough. Some people out there are married, have several kids, are tied to a job they hate that pays crap and have astronomical levels of debt. But, the thing is, there are SO many stories of them making it out. Not only making it out but thriving!

A common thread throughout a lot of their stories is, first, the acceptance that they can no longer sustain the way they are going about things. It just isn’t working. Western society and culture has turned most of us into little unthinking, consuming turds that feel the urge to always need the next, best, greatest thing and to spend, spend, spend. And to what end? It’s all bullshit. Well most of it anyways.

The first step to helping yourself is realizing that you have problem. Was it Yoda that said that? Anyways, it really is true. Once you are able to step back and take an honest stock of your situation (For me  it was SEEING it with YNAB) you can really understand how and where you are literally hemorrhaging money. Like I said in my previous post, I started to kill off or seriously cut back some of the biggest money-sucking leeches in my life. This is the first step.

It actually becomes fun after a while. When you can save $5 here, $15 there, $25 over here and you start to add it up and understand how much is going into your bank account every month and then every year instead of being pissed away in the wind something in your mind changes. At least for me it did. And I know I’m not alone. I came across blogs like Mr. Money Mustache which talks about frugality, Bigger Pockets which focuses about real estate investing, Financial Samurai, Listen Money Matters and so many more. These sites are all unique in their delivery but all carry a common thread; the biggest being “Stop throwing your money away!”.

My application of lessons learned was having an effect:Screen Shot 2017-05-19 at 8.13.09 AM

Make a lunch at home to take to work. Don’t buy a coffee everyday (although there is a valid argument that it is the big expenses that kill you not the little ones). Get a cheaper phone plan. Cut the cable or get a better package (I went from 100MBps to 10MBps and it’s fine). Call and ask for lower interest rates. GET OUT OF DEBT! This is a huge one and is the foundation of any wealth building. Dave Ramsey is sort of the guru on this subject and has a simple plan of action to follow.

I was so excited I wanted to start building wealth now! But, the most common advice is to eliminate debt first, establish savings, and THEN start investing and creating a nest egg. However, I am mildly impatient and kind of do my own thing so I chose a hybrid method and it’s worked out pretty well so far. Since my “awakening” in December of last year I have eliminated three credit cards (feels good!), re-started a stagnating Retirement account, opened a separate savings/investment account and even bought individual stocks. I would not recommend the individual stocks though. I bought about $150 worth of shares in a stock in an industry I work in and thought I knew what I was doing and still lost my ass. I knew it was risky which is why it was only $150. Some lessons I just need to learn myself. Probably won’t do that again. All my other stocks are in ETFs which are similar to index funds but are a little different. Google it.

I can’t emphasize the importance of research. With the power of knowledge at your fingertips via the internet there is no reason you shouldn’t be able to make a relatively informed decision about planning and implementing a savings and investment plan.

I was able to find a way to transfer my old, unused 401k account to TD Ameritrade and roll-over my $2500 worth of funds into an IRA retirement account for free. I also switched from the balanced fund it was in (an even mix of stocks and bonds) to almost exclusively stocks. After a lot of research I decided that ETF stocks were the way I wanted to go instead of the traditional index funds. I might get into the details of that decision in another post. TD Ameritrade even has a list of commission-free ETFs so it was basically free for me to setup three different funds instead of paying a, at the time, $9.95 commission fee for each one had I picked from their standard list of funds. TD Ameritrade has since dropped the rate to $6.95 in direct response to their competition doing the same but their list of commission-free ETFs is still there too.

I chose the following funds: VTI, IVE, and VNQ. I did this because after reading tons of articles on ‘The best ETFs for IRAs” these funds kept coming up as the best (that I could get on the commission-free list). It is important to understand that they may be different depending on where you are in your life. For example, if you’re young-ish like me, then you can afford to take a “risky” path and invest in almost all stocks which can be volatile but also give you some of the greatest returns. They might go way up or they might go way down but over a span of 20 or 30 years the trend is historically upward. If, however you are closer to retirement then it is advisable to be more heavily invested in bonds as they are more stable and secure but will yield less of a return. It’s a balancing act.

My plan is to just let them be for as long as I can and contribute as much as I can every year. The max is $5500 for me. So, this is my retirement account. I check it every once in a while but mostly set it and forget it. But I also wanted to get a savings account going that would give me a decent interest rate. I’ll save you some time, THEY DON’T EXIST! Unless you consider 1% or so decent. I don’t know about you but I would like my money to make me more than a dollar or so a year. So, back to the classroom. That’s when I discovered Betterment. This is part of the new wave of online, streamlined, accessible investing that the millennial generation is inspiring. It is super easy to set up and get going. There is a drop-down list of goals to choose from: savings, retirement, Nest egg, etc and then you set a target amount and date for when you want to achieve it and it will automatically tell you how much you need to contribute to hit that goal. There is a slider that you move to pick between stocks and bonds and the program will even tell you how risky it is based on what your goal is. You link your bank account, transfer funds, set your parameters and bam! You’re investing. It’s all managed for you. Betterment also uses ETFs as their vehicle. It’s great because they take the best funds and get rid of the ones that aren’t working. The best part is, when they sell-off the funds that aren’t performing that great you can reap what are called ‘tax loss harvesting’ benefits. Basically, the money you “lost” through these underperforming funds can be a tax write-off of sorts. And you don’t have to do any of this yourself! My Betterment account is actually one of the better performing investment accounts I have. I’ve made about a 3% return on interest so far and it’s only been open for a few months. That may not sound like a lot but it is way more than if I had just let my money sit in a traditional savings account earning .01% or something ridiculous.

Well this went way longer than I thought and I need to get ready to head to Lake Tahoe for the weekend (going on a sunset champagne sailboat cruise with my girlfriend!) so I’m going to sign off. There’s a lot more I wanted to get into about books, blogs and other resources but I’ll save that for the next post.

So, be frugal, be smart, and be well!

 

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Knowledge is power (Make a damn budget!)

So, like I said when I left off, I was in debt up to my tits and had just gone deeper after hitting that deer (technically he hit me, but whatever) and my funds in my checking account were draining fast.

I had thankfully secured a personal loan in late December of $5000 so my head was above water and a HUGE weight was taken off my shoulders but I knew I had to make a plan and change the way I was spending and tracking (I wasn’t) my money.

I am a firm believer in the power of google and using the internet to research ideas so I began to look at budgeting software. I tried a couple of spreadsheet-based apps but they didn’t seem very intuitive or interactive and I finally settled on one called YNAB (You Need A Budget). Game changer.

My method of budgeting up to this point in my life was periodically checking my account balance and going “Sweet! I’ve got $432, I can go buy some more bullshit!” or “Crap! I have -$36, guess I’m eating whatever’s in my pantry until I get paid again.” And this was the cycle. Granted, for a while I wasn’t making a lot of money and I had debts to pay off and I had to periodically get cash advances from my credit cards to keep from going broke which just prolonged the suffering but the root cause of the problem was financial ignorance. I would actually avoid looking at my account sometimes because I didn’t want to know just how little I had in there. Can you believe that?! Obviously, things had to change. And they did. And I thank that stupid deer that jumped in front of me for setting things in motion.

So, fast forward to setting up YNAB. Being as cash strapped as I was it was great that YNAB has a free 35-day trial period. It is very easy to set up and is simple, clean, and intuitive once you understand what all the functions do (there are plenty of great tutorials to be found online).

Basically, you create a category for all your expenses and account types and they are listed line by line. This is great because I am a visual learner and being able to actually “see my money” was sort of mind-blowing. I mean really. Something in my brain clicked. I saw the exact amounts I was hemorrhaging every month, where I could cut expenses, where I could shuffle funds to or from, and things that I could significantly cut back or eliminate altogether.

Again, it’s great because it has clean visuals and breaks everything down into categories.Screen Shot 2017-04-29 at 4.36.38 PM

Maybe pie charts are you thing?Screen Shot 2017-04-29 at 4.40.37 PM

Regardless of where or how you spend your money, being able to SEE where it’s going and, more importantly, how it is impacting your overall net worth is a game-changer for me.

*Disclaimer: I did have to restart my budget once because I started clicking on buttons that I didn’t fully understand the function of and got “lost”. The great thing  is though that YNAB saves older versions of your budget so technically I could have taken the time to figure out what went wrong but starting from a clean slate seemed easier at the time. There is also a handy ‘undo’ button that I totally missed initially which would have really helped so if you do something you didn’t mean to you can always just click it and go back.

I started my path to saving money with the easiest and most immediate method; getting rid of shit that I didn’t need. 100MBPS internet? Down to 10MBPS. $30 saved. Renting a modem/router from the cable company? I bought my own. Another $10 a month in my pocket. $120 phone bill for services I hardly even use? Switched to TING. Now I only pay for the minutes and data that I use; phone bill averages about $28 now. I boosted my monthly income by over $100 just by making a few changes.

I figured it couldn’t hurt to ask for a raise. Got one. I felt emboldened. I had hope. I started to see a light at the end of the tunnel. “I can do this!” I thought to myself. I began to form a plan. Next step was to attack and kill my debts. Kill them with extreme prejudice. Credit cards, IRS, loans, car payments, it seemed daunting but no longer insurmountable. Just having a plan and a path forward was incredibly motivating and confidence boosting.

As we moved into the new year this process would accelerate and I would find new ideas and methods and begin my foray into the world of investing and begin to seriously research avenues of reliable and PASSIVE income. Because after all, that is my goal. To escape the rat race and get to a place where I no longer have to work because I HAVE to but because I WANT to. I will get there. I am on my way.

Next post I’ll get into the details of investing and gathering educational tools and resources to assist and accelerate my journey from roadkill to riches.