The Real Beginning of Investing for Young Budgeteer

P.S. There are no affiliate links in here. Not one. I linked to a few sites from time to time to show you where I search for information but my goal is to share what I do, not to get you to buy something so I profit. Have a nice day and feel free to check out anything without the fear of being sold. Also, the wad of cash is from high school when I used to drive food delivery for a small sandwich shop called Jimmy John’s? It seemed like a fun thing to reminisce with. Nothing special about that.

Okay, wow. Yes, it has been probably over a year since I threw something up. As my “main hustle” or some people might call it just, my job, started to take off, as well as getting married, buying a new house, becoming the HOA president (bad decision), and then having to remodel because of a freak accident in my house, I haven’t been able to write much recently.

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Transfer Complete: Getting Into M1 Finance

Finally it happened!

Yesterday I finally finished the transfer process from Fidelity to M1 Finance. I saw the balances come over into my accounts in M1 and then that same day I got an email that asked me if I had any questions before they turned my investing on.

I asked one question which I know a lot of people will ask when they are starting in M1 or thinking of it. I had made some target %s for my portfolio. Simple just a few 20%s, a 10% and a 5%. Obviously having bought full shares in my other brokerage, I didn’t have that already set up in my portfolio as my targets. So when I first put money into it, it looks like one of those squishy balls that you squeeze and it expands on one side. Definitely some of my companies were not what I thought were evened out by sector. So I asked my question. “When you turn on the investing, and when I put money it, will it sell anything, like these hugely over target items, to get to my target allocation?

The answer: “On the M1 platform, nothing is sold without a manual process on your end, which includes the following activity:

1) Removing a slice from your portfolio – this triggers a liquidation and the proceeds are automatically reinvested into your portfolio.
2) Using the rebalance button – this will sell your securities that are overweight (the securities with percents above the target you set) and buy back into the underweight securities.
3) Entering sell orders – you can place a sell order for an individual stock at anytime.”

And then they proceeded to say that I could adjust after the funds came in to fit the target amounts to what came in if I wanted.

That’s cool!!

So what happens:

I had created some sectors of securities of what I wanted to start my M1 Finance experience with. Some of them were the stocks that I already had and the others were some that I wanted to add. So I had a portfolio void of actual cash that was broken into percentages for different sectors of what I thought was stable and had good growth, and then in some of those sectors, I had several securities.

For example, I don’t own an AT&T or Verizon but I thought to add a Telecom sector and add 90% AT&T and 10% Verizon. Now when I put in $100, it tried to help my Telecom sector to get to the 10% allocation that I set for it. So, with a few other items I was trying to get into, it put ~$38 into Telecom, then took 90% of that $38 and put it into AT&T and then put 10% of the $38 and put it into Verizon! HOW COOL IS THAT???? So, though I don’t have any % in Telecom, it evenly put the investments to those to work my Telecom closer to that 10% but also inside of Telecom, it is perfectly to my allocation!

So you will see my at the top, and after some massaging through the investing, my pie is getting closer to balanced. And what’s even better is that because the investing will only buy securities, it will just keep buying to evenly allocate all of my items. When I get paid dividends, those will pay back in and buy my lower percentage items and things that have dropped so that I am getting them at better prices than I previously bought them.

I guess I will let it go and you will find out more in the next two weeks!

Thanks for reading!

P.S. Also I will mentioned. I talked about mentioning my portfolio buys.

I added $100 and I had $6.58 in my cash balance. At Fidelity, I would buy a stock or two and then I would have some amount left over.

With this amount, it invested $106.55 of my money. I will share what percentage my portfolio has and then what percentage each of the slices in these sectors are of that sector.

Bonds – 20% of full portfolio
LQD – 50% – $35.52
BNDX – 40% – $28.42
SHY – 10% – $7.10
Telecom
T – 90% – $31.96
VZ – 10% – $3.55

Excited for next week!

M1 Finance: 7-10 Day Transfer of Roth IRA Balances

So what’s been happening with my portfolio has been a bit weird this past weekend. I initiated a change of brokerages from Fidelity to M1 Finance and they mentioned it would be about a 10 day process. As of Saturday all of my funds in my Fidelity account are gone. The account is now at $0 and my net worth in my Mint account went down with the funds missing.

I am a bit eerie and just kind of feel nervous inside. Luckily in the M1 Finance emails they state that this will happen for about 2 days and then everything will show up, they will pause my accounts in M1 Finance until it is set up how I like and then turn them back on. I thought this was a good note to add. It literally states, “DON’T WORRY!” and then explains the gist of why those account numbers will be gone for a couple days. I am really hoping to see them by tomorrow so I can figure out how this whole auto-investing work as well as the pie slices and having sectors.

Basically I have an okay understanding that it will place my other securities into my portfolio here and then anything else I have in these pies I have set up, it will buy those when I put in money until it balances things how I have allocated. I have not heard at all that it will sell items I have in order to get to my %s. So like, for instances, I have some REIT ETFs, one being VNQ and I placed another slice/company called Simon Property Group into my Real Estate slice. I have VNQ at about 70% of the pie and SPG at 30%. I am really hoping that it doesn’t sell my VNQ and then use 70% of that money to buy VNQ  and 30% of that money to buy SPG. From what I understand, I don’t think it will. I think it will only buy to get me to where I am balanced out. I have Telecom companies in this pie/portfolio that I don’t have in my other portfolio and I’m really hoping it doesn’t sell other items in order to buy a % portion of them.

I guess I will let you guys know later this week. Just thought I would give a short update for those of you that are thinking of doing something similar and wanted the mindset of someone who is going through it. I’ll get back into the better parts of the journey next week. Have a great weekend and remember those serving our country this Veteran’s Day!

The Battle of the Brokerages and Why I’m Transferring to M1 Finance

Hi!

The Situation:

I thought this would be a good item to talk about. With a shift in tech industries turning out lots of new ways to invest, there comes a decision in how to choose what investment platform and if some of the newer places have been around long enough to be as stable as the long time goers such as Charles Schwab, Fidelity and Vanguard. Recently, one that has interested me has been M1 Finance. I’ve heard a lot of good rap about it and I haven’t heard a lot of bad rap about it. When all of the controversy was going on around Charles Schwab cutting trading costs and trying to steal market share from robo-advisors like Robinhood, Betterment, and Stash, M1 Finance had this understanding a year or two before and dropped their investing fees to $0 in anticipation of changing tides in the Battle of the Brokerages.

I have been using Fidelity for the entirety of my Roth IRA investing experience. Granted that that is only 4 months, I haven’t been super impressed with the age of the platform and the level of output that I get as an investing helper. The accounts were SUPER EASY to set up. I think I had my account set up within a day or two. And once I figured out and understood the issues with funding my account, I was up and running.

After that, everything was very… excel. There are a few graphs but you have to search for them to find the right ones which are scattered around. As a data person, I am very organized and feel like you can chart out a lot of things very easily. There’s so much that investors want to know before they give their money to a company. I just felt like Fidelity lacked on that. All my stocks were just in a sliding view of basically an excel sheet that slides for most of the items.

The mobile app is nice and very simple. It has the stock price chart and then a bunch of drop downs that give you your different key items such as dividends and ratios and what not. Very simple. If that was all I felt I needed, I would probably stay with Fidelity.

What I think is the three hard parts for me with Fidelity are that M1 Finance does:

  • No ability for fractional shares (I’m sure they’ll add this at some point)
  • Weighting of your portfolio
    I feel like I just have stocks and securities but I have no idea if I buy more of a certain stock, how much does that change what percentage of risk it puts me in. Am I really heavily weighted towards Real Estate, Bonds, Tech Companies? Do I have to buy 10 shares of Apple to be even with my 1 stock of Amazon?I’ve seen someone complain about this before and I just don’t get it. They were upset that if you took Facebook, Amazon, Microsoft and Google and put 25% into each, why don’t you just invest 25% of your portfolio into each of these. And maybe if you are choosing those 4 stocks as your portfolio basis, this may sound dumb, but even in that situation, buying a share of Amazon throw off how you are balanced. I also think that if this is your entire portfolio you should probably not invest in individual stocks because having 100% of your stocks in tech does not protect you from issues in the market.
  • Dividend reinvesting based of under-weighted securities
    This one takes your dividends and then when you have enough in your cash balance (usually about $10) it will invest bits and pieces into the pieces of your portfolio that dropped in value. This method will give you a lower dollar cost average for each stock and ultimately try to get you towards your goals of evening out your profile to the percentages that you set. When you are focused on investing for dividends, this allows you to get paid the same amount of dividends per share as you did before, but you now get to have more dividends for less $$$.

My Experience Transferring to M1 Finance

I started the M1 Finance process on Friday, it is now Wednesday. Their support is definitely growing and lacking a bit. I definitely understand that. They have spent the majority of their growing business on deepening their development of their platform instead of marketing their products as they are. I’m sure at some point, they will put more into marketing, but as I’ve learned about them at this point without having been marketed to, I am glad to know that they are not out to make a quick buck. There are good long term goals in the platform and I’ve really liked what I’ve seen so far.

Account Set Up Experience

When they go to open your accounts, they first start you off with a Taxable account that is required for every person. I wasn’t as interested in this. I am going to see how they deal with my Roth IRA and then I might move everything else over.

They asked for me to send my driver’s license and a utility bill to their email address. That was a bit nerve-racking but I sent it in, got a quick response that they were processing, that it might take 2-3 days to do so and then within the end of the day, I got that account set up and ready to fund.

I actually read into their transfer process first. I emailed the transfer team that does the Roth IRA transfers and they weren’t able to transfer until I had opened a Roth IRA with M1. In order to do that, I had to get my regular account authenticated and I had to wait for that.

From Friday until today, I have gotten my first account opened, authenticated and gotten my second account open and authenticated. I am not just waiting for them to tell me that they are getting all the transfer items done. It is usually a 7-10 day process with a day or two where I won’t see my funds from my other institution. They mention they in the documentation and that was relieving that they understand and let you know so you don’t worry.

I think the Transfer Process will be pretty simple and then I will have all of my items set up. They tell you that while you wait for them to get your balances transferred, you can set up your Pies (how you want to break up your investing securities.) The best way that I’ve come to learn how to do that is to: Create a pie of each type of stock or security that you want, and then create a bigger portfolio holder pie.

For Example:

I created a:

Tech Sector:

Energy Sector:

Consumer Sector: Includes Johnson & Johnson

Real Estate: Includes O: Reality Income Corporation

Bonds:

Automotive: Included Ford

Financial:

Healthcare:

Industrial:

You get the point.

Each item in the different pies has a different % and each pie has a different % in the overall pie. This allows me to weight my portfolio with the idea of 20% bonds and 80% equities.. or however I want but I get the exact control of how it works. Then in each pie of Real Estate or Consumer, I can focus on companies that are more what I want, but not letting any of those take over my entire portfolio with a single purchase or with a single weighting.

You may think this sounds dumb if you are looking for that “low” or worrying about buying it quick on the up and selling it quick on the high. I guess. That kind of investing is for speculators and in the end, speculation doesn’t win out. Just like going to a casino doesn’t. The house always wins.

Dividend investing is all about the long term and gradual growth. Warren Buffet will opt for dividend payments over buying at a discount for a high sell value. He keeps all of his Coca-Cola stock. And they pay him millions and millions each year. I feel like M1 Finance understands this better side of dividend investing and helps its investors in this way while also cutting out the need to create development of their platform for things like day trading.

Update: I just got an email from the Transfer team today. They said that started the review process (yesterday) and that today they are starting the transfer. 7-10 days but I assume it will be a touch faster. The account team also reached out today and sent in my small deposits to verify that I was the right person. They did this for both my regular account and my Roth IRA. Both bank connections were smooth as butter.

I will be back to update when I get my accounts set up to see how it puts my Roth IRA account balance to work and we’ll go from there!

Why Dividend Investing and Rental Income is Right For Me

I think this will be a shorter post. I wanted to explain why I am deciding to go with these two routes as opposed to other routes that people take to gain Finance Independence.

My goal is to generate income each month that not only covers my expenses, (Phase 1) but allows me to travel, allows me to pick up side projects, and allows me to not worry about if it is pay day next week or not. (All inclusively Phase 2)

Rental Properties

With rental properties, the math is a bit more simple in my mind. That is, after you’ve made the purchase on the rental and your numbers are correct to what you thought.

Simply speaking with rentals, you have a pretty fixed income each month, say $1000 of rent paid by the renter.

+$1,000

You then have your expenses. This includes a few things, but my list won’t be all inclusive, nor is it a perfect representation.

Mortgage: Principal and Interest: $400
Utilities: Electric Bill: Paid by Tenant
Utilities: Gas: Fully electric house so $0
Utilities: Water, Sewer, Garbage: $100
Home Owner’s Insurance: ~$50
Taxes: $100
Capital Expenses: Repairs Savings: 5%-10%: $50-$100
Vacancy: 5%: $50

Adding these up, you get about $800 on the high side. This leaves you with $200 left over as cash flow each month. Yep. Pretty simple. A lot of other people just take the Capital Expenses and Vacancy as cash flow as well, but I am hesitant to do that due to the fear of something breaking and then just not having any money to fix it or having to fix something while looking for a new tenant.

These numbers work pretty well for a house that sits around $100,000 to $125,000 which is around the price I would plan on buying if I did.

If it was enough to own one rental property and then retire, I’d be putting a lot more of my savings into it. But $200 a month is not enough to live entirely off of. It’s a great amount, don’t get me wrong, but not enough to stop working.

The beautiful part about it though, is that each month, that $200 is saved as well as what I was saving before for rental properties and it grows. Say I was putting away $500 each month for a rental. In a year, I’d have $6,000. After the first rental happens, I am doing $700 a month which in 12 months, is $8,400. That’s pretty sweet! Just imagine what it’s like after 2 or 3.

And no, this is not fully passive. I don’t think my goal after working was to not do things for my financial future. It will still take some work, it will still take some planning and time, but the payout can be great and the work can be rewarding and that is good for me.

So that is a start. Will it take a while to get there? Of course! I plan on buying my first rental property in year from now. I am not waiting for some inevitable crash or for prices to drop, I just have to save and 20% down on property is quite a lot. To imagine, a $100,000 house requires $20,000 of down payment, about $2,000 in closing cost if you are lucky, as well as having to pay for a month or two of rent while you find tenants. That could be $1,000 or more. So you look at around $24,000 savings just in case. And while we are finishing up paying off my wife’s student loans, I am pouring everything I have into those. Once that is done, I will funnel it all into the other items and it will grow much more rapidly.

Dividend Income

Why dividends? Why not just put money into funds that grow til I’m 60 like VTSAX and FIAX?

Well, I’m not fully NOT doing that. I have a 401K that is contributing to some mutual funds that are growing great. Something around 14% on average each year. But really I can’t tap into that money until I am 60 and that is just so far away.

Dividend income allows me to get money into my pockets now or when I retire. While dividend payments in a Roth IRA can be taken out, my plan is to keep them invested as long as I can. Since Roth IRAs have a limit on what you can contribute (currently $6,000), the dividends will help to grow that portfolio to a greater amount than I can if I just pay myself. As well, this gives me another stream of income when I need it.

Right now, I am no where near maxing out the Roth IRA account I have. Mainly because I started it in August for the year of 2019. That means, I’ve only contributed to it for about 2 months. And not terribly exciting. Right now, as I mentioned in my last post, Current Investments, I am only making a few bucks a month. As things ramp up, that should change pretty rapidly.

The whole idea that I bring up though, is that once my portfolios start to grow to 5 and 6 figures, my dividend income will be several hundred dollars a month. That covers a lot of expenses. Of course, this will take time as well.

But the nice thing about these is the compounding effect. I don’t have to wait another year of rental incomes to buy another property. I don’t have to wait to see if Amazon or MCD is going to go up high enough by the time I retire so I can sell the stock and pay for my retirement then. I am able to get a decent return back into my pocket now, and continually put that back in. Maybe I only get 4% back annually, but I get to put that back in, every couple of days as opposed to every year.

Many people talk about how rough is it to have student loans because they compound daily. Why does a 8% student loan sound worse than a 10% car loan? The same goes for daily compounding investments like dividends. And at the same time, those dividends will eventually cover expenses while keeping my stock in the market to grow as well. Warren Buffet follows this same strategy. Last month he wanted to buy into a deal at 10% (which is the highest an individual can hold of a company but we wanted 8% dividends as opposed to whatever they were going to give out to normal investors. Now, I am restating what a lot of people write, but someone made a great point of “Why wouldn’t he just ask for those stocks at a discounted price?” That would leave him with a better share and his stocks would grow better. The 8% dividend allows him to grow his investment faster. Nail in the coffin. Do you think I’m wrong? Let me know.

In any case, Dividends and Rental Income are great ways to get paid in order to cover my expenses but I also get to keep the original investment as an asset. This means that if continued, it will produce more and more and open up doors that weren’t open before. The possibility of Part-Time work or more flexibility in what career I choose. Maybe it will be motivation to quit a job and start a business passion I’ve always wanted to try out. The real goal is to cover the expenses of daily life and to open up opportunities greater than I would have if I decided to not save my money. I can easily make it to 65 just working each day and I don’t have to save a dime. It’s for when I am switching job or when I stop working that I want this saved money to kick in and pay for everything that I was paying for by spending 8 hours a day at work.

Hopefully that gives you a good idea of why I think these two vehicles are great ideas. If you would like to talk more, you can message me on Twitter and Instagram @YoungBudgeteer or comment down in the comment section. Thanks for reading and I hope you have a great week!

October Buys and Dividends

October was a simple month as far as dividends but I was also able to add a few stocks to my portfolio.

P.S. The picture is just a fun 3D Print that I played around with a bit and I think it turned out pretty well. What do you think?

Dividends

I got paid dividends on my Stash account. 4 funds paid me out for a total of $1.30.

MGC: $0.42
BNDX: $0.01
ADM: $0.49
SPLV: $0.38

These are all index funds through the stash app.
Blue Chip Companies
Bonds Worldwide
Match the Market
Slow and Steady

I didn’t receive any dividends on my Fidelity account this month due to only having a few stocks right now (F, JNJ, VYM, VNQ.) My cash storage account paid me $0.04 but that really isn’t anything to talk about. As the months go on and I add companies to my portfolio, I will have a more steady level of dividends coming in each month.

Stocks I added

There were two stocks that I bought into this month. Those are SPHD and I bought a few more share of Ford (F).

F: Ford: I’ve had some good experiences with Ford and the cars that I’ve had have been fantastic. I know that they are doing some restructuring as well as paying for some union issues, but I think with the changes, people will be very happy. The most sold vehicle in the U.S. is the Ford F-150 and as cars are getting bigger here in the U.S., just like the people, I think they will fare just fine. They also have a high Dividend Yield up around 6%.

SPHD: Invesco High Dividend Low Volatility ETF

This is probably one of the best ETF funds to buy if you just want to put money away and not worry about researching the market. This fund will analyze companies in the Fortune 500 and select 75 companies with the highest dividend yields and then they will cut out the 25 businesses that have the highest volatility. It is pretty much just a recipe for good growth. They pay a 4.11% dividend yield right now and they pay their dividends monthly. This allows me to now start having a monthly dividend from my portfolio! I am grateful for simplicity.

High-Yield Savings Account

My high yield savings account, which is where I put my money that is not being invested in, paid me $10.54 for the month of October. This is the account that I store my emergency fund as well as my savings for a rental property. I used to have my emergency fund in my regular “Share” savings account but if it’s going to sit there for a while as an emergency or for savings, there is no point in having it not pay me. Regular savings account: 0.01% return, High-Yield: ~2%.

So technically this seems to be my highest yielding vehicle for passive income right now. It is only ~2% but as my other items start to pay more regularly, I expect it to grow a lot from the other items as well.

Change in Investing Platform

So, I’ve had Fidelity for my Roth IRA and it has been an okay experience. Fidelity touts $0 fees for everything. That is great. But the site kind of lack luster. It shows my securities all together in like… a table on the app. I could do this in excel. The website is not too much better. It shows charts but they are all very jumbled and I don’t feel like I can understand them very well. Where are the tabs, Fidelity? How come I have to scroll to look for dividends? Why can’t a group stocks into a sector or area to try to control my volatility?

I’ve been watching a lot of youTubers like “Joseph Carlson” on the Joseph Carlson Show that talk about their different platforms they are using, especially with these new changes happening between brokers vying for your investments, and I am having a hard time using Fidelity and feeling like I am just “going for it on my own”. I could go with some more broad securities, but I want to feel like I am not just shooting in the dark. Yes, I get that the point of trading in the stock market is about risk and being educated. Yes, I get that there is a learning curve. I just don’t feel like Fidelity has upped their game on putting the technology to use and putting the control of my items at the tips of my finger tips.

With all of this, I am making a movement to M1 Finance. They are a newer company in the investment environment and they haven’t done a ton of marketing. Most of their money has been spent on developing their software and developing the ability to do mostly everything that the different brokerages have collectively done but never on one platform. As someone who for work, delves analytics and reporting through visuals, M1 Finance has done something that I think the other companies don’t do. It simplifies the information but provides it all, and it helps you to visualize what you are participating in.

Top 3 Reasons about M1 Finance

Sectoring

One of the pieces that I like the most about it is that you can group up your securities into different sectors. You simply create a “pie” that includes the stocks and whatnot of the group you want to have and then you add that to other groups you have created to complete a full portfolio. That way, you can say, I want to have 20% of my portfolio to be Bonds, and then you have it. 20% allocation. And inside that group you can say, “of Bonds, I want 50% of those bonds to be the Blah Blah Blah bond.” And there you have it. Yes I can do 10% of a certain bond in a 401K or other managed account and then re-balance it, but I don’t pay anything for this. Not to mention possible taxable events if it were in a non-Roth account or if it were in a taxable account. I don’t see this anywhere else.

The percentages work to allow you a big picture view of what types of things you are trading in. It allows you to say, “wow, because Ford is so cheap, I just ended up buying 100 shares over a year, but I really want a stock of Amazon.” What happens is that, although you bought 100 shares of Ford which is about $880 right now, that one share of Amazon at around $1,700 now contains 65.9% of your portfolio. If Amazon drops, and it does frequently, then your portfolio will significantly drop as well.

Conversely, if you always make sure that Amazon is at 50% of your portfolio, then once Amazon is at 50%, it will buy other shares to make up for that. You won’t see as much of an off balance when you initially buy into Amazon though because of Fractional Shares, which I will talk about later.

And you get full control over your portfolio percentages. If my portfolio were to look like this:

COST: Costco: 50%
HD: Home Depot: 20%
APPL: Apple: 20%
O: Realty Income Corporation: 10%

And then I was to change these percentages to:

COST: Costco: 15% (less exposure of my portfolio)
HD: Home Depot: 30% (more exposure of my portfolio)
APPL: Apple: 15% (less exposure of my portfolio)
O: Realty Income Corporation: 40% (more exposure of my portfolio)

Now, when I put money in or when my dividends start to reinvest, they will pour large amounts into O: Realty Income Corporation and HD: Home Depot and not put as big amounts into APPL: Apple or COST: Costco until my portfolio was readjusted to the correct percentages. If you are only adjusting a few percentages at a time, it could definitely put some into the ones that you lowered the percentages of if they were to drop in value and drop below the percentages that you allocated. That is definitely possible.

DRIP (Dividend Re-Investing Plan)

Going along with the allocation setting, there is the issue of re-balancing and how to keep your portfolio from only being.. Apple or whatever. Yes, I understand that other places will invest your dividends for you in a mutual fund. (Fidelity only DRIPs for mutual funds, I checked. And I was upset.) I’m sure Charles Schwab or someone else invests this as well, but the DRIP on M1 Finance will collect dividends and then once you have reached over $10, or your set amount, it will invest into parts of your portfolio that have dropped from their target allocation. This means that if you have 50% in Energy companies, 50% in Tech companies and Tech companies start to drop to 40% because of the terrible stuff that is happening to FaceBook, (I will never own FaceBook stock, different story) that would mean that when you receive dividends from either of those companies, it will put that into FaceBook because you will be buying it cheaper than you had it before which lowers your Dollar Cost Average, or DCA, how much you are paying per share of a company.

Fractional Shares

It will also do it’s best to gives you a little bit of each company that is lower than your allocated percentage. For example, if you allocate for a large portion of your portfolio to be Real Estate, say 33%, then when money hits your cash balance, you will see that money work to even out your percentages so Real Estate is at 33%. Most of the time, this is through buying other items that are lower, or buying RE when it is lower than that amount. It can do this at increasingly focused amounts because it is not buying full shares.

If you got some dividends from Amazon or Google where the stock price is over $1,000, you would be able to put that dividend back into that company as opposed to just putting it in your cash balance and not being able to reinvest it into Amazon until it hit $1,700 or so. This is all all done through buying portions of those shares. I am allowed to have 1.05 shares of Amazon. And when they pay out a dividend, I will get x1.05 the dividend payout amounts. This works really well when trying to balance your portfolio to have some defense in certain sectors.

Again, I can’t get into the tech industry if every share is $1,000 when I only deposit $500 a month. I’d have to wait two months to invest. But again to the negative, when I put that into my portfolio, I will now see that I went from 100% Ford to 65.9% of Amazon and Ford is 34.1%. Obviously that is a basic portfolio, it just doesn’t sit right with me not knowing that a certain percentage of my portfolio could drop without me knowing that I am trying to protect myself against that risk. The pie percentages help protect you from going over too much in any one sector as well as going over in any one security in a sector.

It will be interesting to make the change and see what difference I saw before I changed versus what it actually is like. I am really thinking it will be closer to my ideal way to research and analyze companies as well as track their performance and reinvest for the best future.

Conclusion:

Hopefully that gives you a good overview of what is going on in the YoungBudgeteer portfolio. As you are going through the journey of learning about investing and getting better, so am I. I think that diligent work and the willingness to change course if needed will help you have a well diversified portfolio, eventual retirement and life in general.

Do you like this style of reading? I plan on charting out everything that I do and create some data analytics on all of this. Would that be exciting? If you have any questions or you think this article was great, please feel free to reach out on Twitter, Instagram, or on the blog. I appreciate all that you do and hope my content is helpful. Have a great week!

Current Investments

I wanted to go through my current investments and really what I will be sharing about and what I won’t be sharing about so if you’re reading, you know that I won’t add that stuff into my posts or if I do, it will be brief and won’t be the main subject of my posts.

First the ones I am not sharing about.

Not Sharing About!

So I have two items I won’t be sharing about: My 401K and my Stash Account.

401K

  1. So the main reason I won’t be sharing about this account is because it does not have any dividend stocks and I don’t gain any passive income through it and will ,therefore, not be able to add it to my passive monthly income number that accumulates.
  2. Reason number two is that it only has a handful of mutual funds/index funds available for us to invest in through our company companion portal. Therefore, research into specific companies is short and won’t be of much value to you guys or to myself in sharing.

However, I will say that I currently have been working for almost two years at my company and they contribute 3% if you contribute 6% which is pretty typical. I put in at least 6% because them putting in 3% is free money for me. If you have an employer that does a 401K and matches your contributions, yes, do it and hit the max amount you need to get all of their contributions. Sometimes that is $50 a paycheck and you get $25 from the employer. It is worth the sacrifice for this and because mine comes out before my paycheck hits my accounts, I don’t even see it or treat it like my own money in a sense. And I won’t be able to take it out for another 35-40 years, so I can’t really count it as a retirement idea until that age. I believe it will help once I get there, but it doesn’t pay my out or put money in my pocket now or consistently.

Stash Account

Now this one seems silly to exclude because I definitely can own dividend stocks and bonds or funds that pay my each month or quarter.

  1. The only reason I am not including it currently is because they don’t sum up your monthly dividends or payouts so I have to go in, calculate out all my pay outs for October, then November, then December. It is very possible that I will just decide to add this in and add the numbers I tally here with the numbers I add up from my main investing account, but right now, it is just a lot easier to focus on the second.
  2. I guess if there was another reason, it would be that my Stash account is a taxable account and currently I am focusing on my main account which is a Roth IRA. Every time I get a dividend from my Roth IRA, I get 0 tax on that payment and I can put it back in. In a taxable brokerage account like my Stash account, I will have to add up any dividends I receive and if I sell any stocks, I will have to add any gains to my taxes. Once I get to the point where I am maxing my Roth IRA, I may consider adding to this account. But, I would maybe just add any extra amounts to my rental property savings account.

My Stash account has under $1,000 in it which is mostly contributions and then about 9% of growth. Not much but not bad. And I will say, I do get a few dividends from my stash portfolio each month. It isn’t a bounteous amount, but it is okay. What is probably a good plan in this situation is to get my portfolio to the point that it is gaining dividends enough to pay for the $1 a month subscription. So far, I am probably close to that, but I haven’t done the numbers out yet. That might be a fun side project. Mainly that is because dividend companies pay out either monthly or most of the time they pay out quarterly. Quarterly doesn’t give me a monthly average but I will have to add things up and see where I am at.

Last year, earlier in the year, I was using Robinhood with a few stocks, Ford being one of them, Macy’s, AT&T, etc (all good dividend companies). I was in the app about 3 months, put in about $200 and made about $27 when I sold them. I was taxed on the $27 dollars and then I moved that money into my Stash account.

Sharing About!

I have two items here as well as I mentioned in my last post where I stated my goals.

Roth IRA

I started my Roth earlier this year with Fidelity. The platform is really good on the computer and it is decent as an app experience. I think it would be nicer if it move int he direction that M1 Finance is going with it’s multitude of charts, filing your stock/ETFs into sector or “pies” and their ability to trade with fractional shares. Recently, they just dropped off all trading commissions which is great! As a new investor, I was worried about making trades even up to $200 because I was like.. Well, I just paid 2.5% of my trade for a stock that i hope gets 2.5% of growth just to make up. Not anymore. Thank you Fidelity! and have yet to start making bigger contributions as I am putting a bigger sum of my paycheck to help my wife finish off paying off her student loans. Once I finish that here by the end of the year, I will be able to up my amount I do here and max out this bad boy Roth IRA. I hope. For now, I put in about $50 per paycheck. Not a great amount but it’s good that I’m starting out small while I get rid of my other expenses in my budget.

Side Note: I definitely understand the idea that investing while I pay them off could give me a better return. I definitely do. I am all about the numbers. The purpose of doing this now is that both my wife and I are working currently. If I can use this time of dual-income to get rid of a monthly expense, (even though we’ve paid it down so much that our next payment is scheduled for 5/24/2024) then when my wife gets to the point of raising our kids as her main priority, we will have less to cover each month and I will feel better about myself throwing more money into my investments. Some times you have to prioritize peace of mind which is the ultimate goal of all of this, right?

I currently hold a few stocks/ETFs right now as the start of my portfolio. My current portfolio is at about $550 with about… yep, $550 in contributions. I’ve only been at it a few months and I have a few stocks that are down a few dollars while my others are up a few dollars. Oh, well. I’m not concerned currently. In fact, the one that went down is the one that paid me a $3.10 dividend this last month. Not too bad for a few months in! That is worth a few pieces of fruit, right? or a hot cocoa at Starbucks? In any case, I want to state this as it will come up a lot as you research into investing: I haven’t lost any money yet. I would only lose money if the stock went down and I sold it lower than I bought it. It’s called “unrealized.” As long as I hold it, it doesn’t matter what the price of the stock is. Most of these companies I will buy into, I plan to hold onto forever. If I think a company is doing great and they are going to be around and pay my to hold their stocks, then if the price falls for a bit, that’s okay. In fact, if it falls, I can just buy more and it lowers how much I paid per share. So then, when it goes up, I now have more shares for a cheaper average cost than my original purchases and they all pay me the same dividends.

My Current Holdings:

Here are my current holdings listed out as well as some items about them. I’ll make it fancier as things go on. For now as I only have a couple shares of each (about $550 worth), I will just share the ticker symbol and the company/ETF that I have to give you an idea of the starting of stocks I have.

F: Ford Motor Company
I bought Ford mainly because when I first owned them, the stock price started at $10 and went up to $13 per share and right now, the share is somewhere between $7-$10 per share. Now, yes, that can mean that they had a bad year, they made some bad decisions. My experience with Ford cars has been really positive. We have had 3 so far and each of them have been very reliable. My wife just traded her 2005 Focus with 243,000 miles on it for a Ford Escape and we gave the Focus to my brother for college. Good luck, dude. Ford has a really high payout ratio right now. Something between 110% and 150% I think. So they will probably cut their dividends soon. They recently stopped production on smaller cars to focus on EV cars and bigger cars as most of their sales were from their bigger lines like trucks and SUVs.

We will see how this goes but in any case, I bought them again because they were a good stock before and they are very cheap as far as stocks go right now so I can at least get started. If they do end up slashing their dividends, then I can sell out of them without being taxes and put that money elsewhere.

JNJ: Johnson and Johnson
There has been some news recently that talks about lawsuits that JNJ is going through regarding their baby talcum powder. The company knew about it for a bit and decided to reach out first before they were on the receiving end of issues. As one of my favorite YouTubers right now, Joseph Carlson on Joseph Carlson Show, states (paraphrased): “This may look bad, but you have to look at the whole picture for JNJ. Even if they stop running the entire line of baby talcum powder, that would only be a percent or so of their entire production. They are so well diversified that they will be okay and will continue paying dividends.” He adds up their lawsuits and showed that even if they settled all of them, it wouldn’t hit their dividend payout for investors and after 56 years of continually growing their dividends, they are going to keep doing that for investors.

This is very interesting to hear, especially since my wife has a lot of JNJ products. I think they are a pretty good buy right now and I will probably buy some more here in the next week if things stay as they are. They pay out quarterly around the end of each calendar quarter so that adds to my portfolio!

VYM: Vanguard High Yield ETF
This is one I bought even though it is a little bit high. I wanted to start off buying ETF/stocks that had good dividends and I thought that Vanguard’s high dividend yield ETF would be a good place to start. They distribute a 3.16% dividend yield which is pretty good and holds companies like JP Morgan Chase, JNJ, Procter & Gamble Co, Intel, AT&T, Exxon Mobil, Coca-Cola Co to name a few. All good dividend companies from different sectors and ones that I will probably invest in at some point. This ETF is really just to get exposure to the dividend companies. I think they paid me $3.10 in the last dividend distribution for my 1 share! So that’s pretty cool.

VNQ: Vanguard Real Estate ETF
This ETF is similar to the High Dividend Yield ETF in that I am looking to get some exposure into these areas and get a feel for how they pay, how they perform, etc. Real estate is a good holding because of the growth and performance of the sector as well as the payouts being good as well. The groups of companies that are in this group range from Healthcare real estate companies to Public Storage, commercial property owners and residential real estate. This gives for a good variety and they pay out a 3.12% dividend distribution.

For those of you who aren’t really sure about specific companies, I am the same way right now. I don’t know what I should put tons of money into. What if Chase blows up again. What if I invest in CenturyLink and then their coverage goes out for 3/4 of the U.S. Will that affect how much I’m getting paid? These are all concerns I have as I am starting in as well and I think taking a little time to know about your companies will help you feel safer about putting money there. ETF will help you spread your risk in a sector that you like but you question who actually performs well, keeps their balance sheets in check and continues to pay their shareholders and grow their dividends.

Dividends So Far:

In August, I made my first dividend from my portfolio on Fidelity.

August: $0.04 cents. Oh joy.
September: $3.10 Not bad!

I will have more updates as October comes to a close!

Rental Property/Rental Savings

This is my savings account that I am using to store the money I will use as a down payment and other costs when purchasing a home or duplex as a rental property. Right now, I keep it in a high yield savings account that makes about 2% interest and has a $1,000 minimum balance. I have about 25% of what I am hoping to have saved for a down payment right now with the price of properties in my area for renting ranging anywhere from $100,000 to about $150,000.

Once I hit the numbers I want saved to cover the rental amount and the costs and a few months of rent, I will move on from there. For now, I add a few hundred dollars into it every month and I am waiting.

Mortgage Payments

Now this doesn’t sound like an investment. It sort of isn’t but if you understand that as my mortgage goes down, I have a lot of options open up to me.

PMI:

We bought our house when we were newly married and because we are going to be living in it, we got it with a 3.5% down payment. This causes us to have to pay PMI (private mortgage insurance) til the mortgage balance is down to 80% (or 78% for some mortgages.) So putting extra towards the house will ultimately get us to that point and allow us to drop that $68-$80 extra payment off of our total monthly costs.

Equity/HELOC Opportunity:

Now, I understand that if I build up equity in my home and then I pull out a HELOC I now have two loans which equal the full value of my house and I’m back where I started. Plus HELOCs typically hold higher interest rates. However, once I have enough to pull out a HELOC, that money can be used to make purchases on a rental property which ultimate will leave me positive on my investing if I do it right. Then, the cash flow from that and other items helps pay back that HELOC and we’re back at square one except I have a second house now generating monthly rental income.

Mortgage Payoff:

Eventually I will retire. When I do, if I still have a mortgage payment, than I still have a substantial amount of month expenses along with the typical utilities, food, gas and insurances. If I am able to pay off my mortgage faster, I can cut out a good chunk of my monthly expenses. This ultimate helps my monthly cash flow that helps my investing and moves me closer to that investing to pay for my retirement.

Student Loans:

I don’t have any student loans. BUT when I got married, my wife had about $10,000 in student loans. We have since paid for her schooling out of pocket which has helped to keep that were it is. In the past year we have paid those down to about $3,500 and plan to be done with them fully before Thanksgiving!

Now it has taken a lot of sacrifice to do that. We eat out but maybe once a week, if at all, and we don’t buy much extra furniture or other fun items. We have a TV that I got my from parents that is older and starting to dim. Our table chairs are from a thrift store. There are few things that we can really say that we splurge on.

Car Loan:

Yes, my wife and I have a small car loan. We got a 6 year old car and we decided to pay 75% in cash and take a loan out for the rest. Because my company works with the seller company, doing this allowed them to drop their original price by about $4,000-$5,000. Not a bad buy now really. This equated to about a $3,500 loan and currently is around $3,300. We are making the monthly payments and as I mentioned in the Student Loan section, we are throwing everything extra into my wife’s student loans. Once those are gone, we might consider paying this off more quickly. But really, as the interest rate is really low, I’m not too worried if I am paying 3% interest on a ~$75 car payment and putting the rest into my investments where, it is not too difficult to do better than 3%. If we were to only pay the monthly payment, we’d only be out $277.60 over the life of the 4 year loan.

One these two are gone, we will only have the house to pay off! Debt-Free baby!

Conclusion:

So you now have a pretty okay picture of where we are at. We aren’t atypical and I’m not pretending to just have gobs of cash, experience, or to be better than anyone else at this. I’m simply sharing where we are at and hoping that others can align and feel that they too can start the journey of investing, paying off debt, and understanding the need to start as soon as you can so you build up more and more as time goes on.

Please feel free to reach out, comment your thoughts below, or to follow me on Twitter @youngbudgeteer. Always happy to share in the struggle and the journey!

 

 

 

Photo by Austin Distel on Unsplash

Questions about 401Ks

I am trying a post to try and get some comments. I have questions and I’m testing this out. And there is a picture of my wife and I’s rings from our wedding a couple months ago. That is why I haven’t posted in a couple months. You can find her beauty blog at Katesimmonsbeauty.com

The Situation:

I have a 401K through my company that matches 50% up to 6%. So if I put in 5%, they’ll match with 2.5% and if I put in 10% they’ll match with 3%. Right?

I don’t have any other debts and I don’t have a great need to sock away cash in a savings account now that I have my emergency fund set. I was thinking that I would try putting in 20% or at least 15% for a while and see how it goes. Is that a bad thought?

I know the idea of compound interest and definitely understand the desire to build up a nest for when I retire around 60-70.

But what I don’t know is how it works with future… adventures?

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Vacation time again for the Young Budgeteer. Saving your way to Hawaii.

Mala Pier

You have to know, when I say the Young Budgeteer, I could be talking about myself or I could be talking about all you young people ( of course including the young at heart ) that may or may not be taking a vacation in the near future and want to have a good idea how to save and a good example of how I am saving right now for my vacation to Kona, Hawaii in January.

In in this post, I set out to explain a few things:

  1. Why I have the goal of saving for Hawaii. (Which is to take my wife to Hawaii for the first time; with my parents. Again, why save money if it isn’t for something)
  2. My original idea of how to save
  3. My new way how to save
  4. Cost of the vacation (and how I did it)
  5. What the journey has been like from paycheck to paycheck

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