My Visit With Warren Buffett

The typical investor has no business investing in individual stocks.  Most of my investments are in Vanguard index funds–VTSAX is my favorite.  Until recently, I owned only two individual stocks.  I also own some managed funds (which carry higher fees) but I would move all of my investments to VTSAX if I could do it without paying taxes on my gains.  You can learn more about my investment philosophy here.

A few months ago I broke one of my cardinal rules. I bought another individual stock–BRK–Berkshire Hathaway.  I bought it only because I wanted to go to the annual meeting and see Warren Buffett (world’s 2nd richest person) and his partner, Charlie Munger talk about investing and life.  A trip to Omaha doesn’t sound all that exciting but this annual meeting is a real spectacle–more about that later. Continue reading “My Visit With Warren Buffett”

How Can Money Buy Your Happiness?

I’m reading the book Happy Money. It is helping me understand how we can use money to create happiness in our lives.  It’s an easy read–follow the link above to buy it on Amazon (and I’ll receive a small commission) or look for it in your library.

The research on how money makes us happy is super interesting and not always intuitive.

I always thought the more money I made, the happier I would be.  It seems like life would just get easier.  But the research shows that once you make $75,000 a year, you don’t get happier with more income.  I’m sure this number varies based on the cost of living in your area but once you reach that amount, your happiness doesn’t rise. Continue reading “How Can Money Buy Your Happiness?”

Little Decisions Help You Reach Your Dreams

It is hard to set money aside for your future.  Damn hard.

Especially when you are surrounded by people who spend money like it never runs out.

I hated being the one saying I couldn’t do something because I didn’t have the money.  Really I had the money but I didn’t have the budget.  So then I started saying those things weren’t in my budget.

But it got easier–people got used to us being more frugal and adjusted to it or they sort of slipped out of our lives. Continue reading “Little Decisions Help You Reach Your Dreams”

What Could You Do With A Million Dollars?

On the Stacking Benjamins Podcast I was listening to today, Joe was talking about the responses he received when he asked his Twitter followers what they would do with a million dollars.

He got some interesting responses.  Some were altruistic–donating the money or helping family members.  Some were realistic–like paying off debt.  And some were funny–like calculating the time it would take to count the money at the bank–in twenties.

It got me thinking.  What could each of us do with a million dollars?

I’m overly rational so I got out the calculator.  $1,000,000 invested should provide $40,000 of retirement income forever.  With Social Security providing 40% of our needs (as it does for the average recipient), we should have a stream of income of about $67,000 in retirement.  I could live a pretty nice life on $67,000.

That $1,000,000 invested in rental real estate should provide even more income.  According to Paula at affordanything.com, we shouldn’t invest in a property unless it will rent for 12% of the purchase costs per year, 6% of that goes to costs and that leaves 6% return for us.  Our retiree now has an annual stream of income of $100,000 including Social Security.

Now we’re talkin’!  With that income, we could do some really cool altruistic stuff too! Continue reading “What Could You Do With A Million Dollars?”

Fees Matter . . . A Lot

Do you know how much you are paying in mutual fund fees?  You should, because fees matter . . . a lot.

When you hear people talking about mutual fund fees, they are usually talking about the expense ratio.  This is the percentage charged against the earnings of your fund each year.  These fees pay the operating costs of running the fund and, usually, return a bit of profit to the company running the fund.

My focus in this article is going to be on this expense ratio. Continue reading “Fees Matter . . . A Lot”

Autopilot can be great . . . unless it isn’t

We are truly fortunate that we can set many of our financial transactions up to happen automatically.

Most of us have 401k contributions come out of our paycheck before we even see it.  You can’t spend what you can’t see.

My utility bills go on a credit card automatically which–you guessed it, gets automatically paid in full each month from my checking account.

When I was working, I had an amount automatically sent from my checking accounting to my investment account each month.

Now that I’m retired, my investment account sends money to my checking account–automatically.  It feels like I’m getting a paycheck–even if it is just from myself!

These automatic transactions are great when they help us achieve our financial goals–forced savings and simplification of routine bill paying are fantastic.

But automatic transactions can also derail us from reaching our financial goals. Continue reading “Autopilot can be great . . . unless it isn’t”

You Should Leave A Job With More Than Just Memories

When I retired, I rolled my 401k balances over to IRA accounts with Vanguard.

My company’s 401k plan was a good one.  They even offered my favorite Vanguard fund (VTSAX). But all 401k plans have fees in addition to the underlying fees of the funds where the money is actually invested.  This is because of the reporting requirements, paperwork and account holder support that 401k funds provide.  Those services cost money so each quarter I’d see some of my money disappearing to pay those fees.

With Vanguard, I pay the underlying fees of the funds and nothing else.

Converting my account was easy.  They even assigned an account rep. who monitored the transition and kept me updated on its progress.

I think the account rep. thought I was crazy. Continue reading “You Should Leave A Job With More Than Just Memories”

It’s Not Always Smart To Do The “Smart” Thing

It is typically recommended that we purchase insurance for catastrophic, infrequent events and we self insure for everything else.

So we should insure our lives and our ability to work if people depend on our income with life and disability insurance, our home because its loss would be difficult to recover from with homeowner’s insurance, our cars because the damage we can do to others is enormous with auto insurance, and our other assets if they are significant with an umbrella policy.

But we should not insure things that are relatively easy to replace or dollar amounts that are small relative to our net worth.

Using that rule, it would not make sense to insure my wedding ring.  While it is valuable to me, it isn’t valuable compared to our overall net worth.  It was when we got engaged but it isn’t now.  For $35 to $50 in premium each year, we’ve had the peace of mind that comes from not worrying about replacing my ring.  We’ve paid that premium for 28 years.  We filed a claim once and may be filing another claim Monday. Continue reading “It’s Not Always Smart To Do The “Smart” Thing”

If You Can Only Do One Thing

Life is busy, I get it.  The last thing you need is one more thing on your to do list.

Mastering your finances seems really time consuming and complicated.  I tried to simplify it as much as I could for you but it ended up being 12 steps to a kick a$$ life.  And those 12 steps didn’t include some really important things that help us move through the steps more quickly like figuring out your why and tracking your net worth.  And it didn’t include things like making a will and getting life insurance which are critical if anyone depends on your income or in-home work.

If I had to pick one thing to have everyone do (after getting life insurance*) it would be to calculate your net worth.  Your net worth is like a business’s balance sheet.  What you own minus what you owe.  Calculating my net worth kept my eye on the prize and was my secret weapon to achieving early retirement.  Once you start tracking it, your mind automatically thinks differently about earning and spending decisions–you want your net worth to go up each month.

Net Worth = What I Own – What I Owe Continue reading “If You Can Only Do One Thing”

What Is Weighing You Down?

I wrote this a couple months ago–I wish we had 10″ of snow today, that would be super fun.  I woke up this morning thinking about what was weighing me down and decided to put this out into the world.

We were blanketed by 10″ of snow today.  We live 30 minutes from world class ski areas but are in a banana belt where we get much less snow and big storms like this are not that common.  After shoveling the driveway, we grabbed some friends and went cross country skiing on our local golf course.

It was warm and the snow was wet; it was sticking to the middle part of my ski.  It’s pretty hard to glide on a ski when you have a heavy lump of snow underfoot.

This is how life is.  In life, we can’t get where we want when something is weighing us down.  I came up with several ways to get rid of the snow.  Each sort of worked but none worked great. Continue reading “What Is Weighing You Down?”