Week 2: More Buys on M1 Finance

Looks like we’ve done a lot of things this past week. I wanted to add a bit about my portfolio this week as well as talk about a few things that happened on the platform that are worth mentioning if you are looking into investing with M1. As you can see, my portfolio is a lot closer to being close to that smooth dotted line that indicates if a sector has more than its allocation or less. Right now Health Care (JNJ right now) has a bit more because I lowered the sector to make room for some other sectors.

The Situation

First of all, if you haven’t checked out Joseph Carlson on YouTube and at JosephCarlsonShow.com, he is a great person to watch, to take ideas from and to get a bit more news as well as backing up the whys of the portfolio and the whys of picking certain stocks. It is a great place to find a few stocks. I have taken a handful of picks from him but catered them to my portfolio size.

The two things I want to hit in this article:

  1. Transferring from something like Stash with a small portfolio balance
  2. More buys on M1 and how I changed up the porfolio/but also didn’t do any hard work
  3. Upcoming Dividends

Transferring from Stash

So after a week of trading with M1 Finance with my Roth IRA, I decided that I liked it a lot better than my current situation with Stash. Yes, Stash is great and it has fractional shares and I can see what percentage of my portfolio each stock is, I can auto invest, but I didn’t feel the same control on what I had chosen there and the $1 monthly fee for a portfolio my size just felt like I was paying a lot of having less than $1,000 in there. In essence, I was pay $12 a year to take care of $800 which is an expense ratio of 1.5%. That is a lot of management fees.

With that money in M1, I have no fees and I have a bit more control over the make up of my portfolio instead of the “idea” ETFs that were really the only thing when I started my Stash. Plus, when I get dividends now, it will automatically invest those in the items that have lost a bit of value, therefore giving me my same stock (and for that matter, the same amount of dividends) at this lower price than paying to get that same dividend for a higher price. That is a great deal.

Now I will say something I was hesitant about. When I sent my information to the transfer team at M1, they told me that specific to my situation with just so relatively little in my account, that it would be more beneficial to me to just sell my positions/stocks in Stash, deal with the few sale tax items at the end of the year and then just pull the money out, and put it into M1. I thought that was really cool of them and I definitely felt like they are very personalized and are trying to get you the best value for your loyalty.

More Buys!!!

So with the $1,000 that I got, I rewarded myself a little bit. I had contributed about $800 and had gained about $100 (~10% gain) which comes to about $900 coming out of my Stash account. I put half of it towards a car loan that we are still working on, put $100 towards my normal taxable account at M1 to get it started, and then I put the rest into my Roth IRA so I can move that towards the $6,000 limit. I probably won’t reach it, but my thought process is that I am limited to that amount for the Roth IRA which is tax free growth while the other is taxed on any gains I realize (or get paid for.)

So with that extra ~$275, I added a few companies that I think are strong companies and the rest went towards rebalancing my portfolio to get it closer to those even percentages.

These are the purchases it made: (12)

Waste Management (WM): $114.37
Costco (COST): $114.37
Vanguard REIT Fund (VNQ): $15.47
SP500 High Div/Low Volatility (SPHD): $11.16
Corporate Bonds (LQD): $6.25
Vanguard International Bonds (BNDX): $4.74
Simon Property Group (SPG): $3.09
AT&T (T): $2.39
Treasury Bonds (SHY): $1.13
Annaly Reality (NLY): $0.96
New Residential Investment Corp (NRZ): $0.66
Verizon Communications Inc (VZ): $0.50

That is pretty cool. and what happens is that it works to balance my overall sectors. If Real Estate is at 30% and it’s supposed to be at 25%, it’s not putting money there until after it bumps up other things. If Telecom is at 5% and it is supposed to be at 10%, then it will put some in there. How much it puts there depends on if other items drop in value or if I allocated them higher in between.

Upcoming Dividends

Seeing the next dividend or seeing what dividends I am expect to earn and which ones I am to be paid in the next month is something that M1 Finance has talked about implementing.

But for now, I just have a spread sheet of the different companies that I have and roughly when they will pay their dividends throughout the year. This lets me know what dividends will be earned in the next months. It is really rough but it is a work in progress.

For now, I can see that I have one more dividend to earn from JNJ in November.

In December I have 9:

WM
VYM
SPHD
NLY
NRZ
VNQ
LQD
BNDX
SHY

I haven’t done out the math yet mainly because some of these haven’t announced how much they will be paying out, but I think I will be upwards around that $10 mark for December in dividends. Although, these are the just the dates that I have to have the stock. The date they get paid out could be anywhere from 1 week to 4 or 6 weeks. I think by the end of 2020, I want to be at the point where a set of dividends in a day will put in enough that it will get reinvested automatically without me helping it with my paycheck each pay period.

Conclusion

Anyways, that’s a start. If you have questions about what these stocks are, one of the best places that I’ve gone to for information is seekingalpha.com. The website is free to use. If you set up an account, which is free and I’m not like sponsoring it for money, you can set a watchlist of stocks. I’ve really liked it. I really don’t know much  about other places like Yahoo Finance but besides a specific list of my next dividends, it seems to have everything I am looking for.

Feel free to reach out @youngbudgeteer on Twitter or comment below. What is your goal with all of this? Do you like the idea of investing? Do you just want something easy and does a pretty good job without work? Let me know and have a great weekend!

Emergency Funds and Next Year’s Goals

You might be wondering why there is some wood planks in the header picture. This relates to my Next Year’s goals that I am setting. We bought our first home about 6 months ago in May and when we went to use the almost-brand-new oven they had in the place, it smoked out the entire the house. This has led to 6 months of ripping out our entire kitchen and installing new cabinets, flooring and countertops and while the insurance on our new home helped, it didn’t cover everything and we had to do quite a bit out of pocket. That kind of puts a damper on savings lots of money but we are finally through it all. But that is a side note. Let’s get to the interesting parts.

The Situation

Recently I read an article that talked about emergency fund needs. This link goes to a writer Early Retire Now who talks about the necessity for a $1,000 or a 3-6 month’s of savings saved in a emergency fund account. Only for emergency funds. I feel that this article falls a bit away from those who are struggling and leans more towards those who have good credit card limits, Lines of Credit available against their houses, and good cash flow to be able to pay everything off rather quickly if their cash account doesn’t have enough. But nonetheless, it shouts a few great points that I will sum up during this Portfolio Update article.

  1. Most “emergency” expenses, you have some lee-time before you actual pay the bills. Ex. If you have a car repair you know has to get done soon, or you have a medical something happen, you have an idea that the issue is there as well as with medical, it takes some time to get the bills out so you can save for it.
  2. The interest rate that you are usually getting on your savings accounts are usually pretty low. They mention about 0.50% which I think is pretty low compared to some High Yield Savings Accounts that offer around 2% but just lowered to about 1.85% or so. They comment that it isn’t hard to beat that in the market and that you could be sitting on several multiples of what you would have earned once you have to pay for it.
  3. The money that you have sitting around in a emergency fund is usually pretty sightly and makes you feel like you have more than you need. Often times, you move towards spending when such a high amount is sitting in your bank account.

I think I agree with all of these. It was pretty cool to read and you should definitely read deeper into the article when you have a chance. While there are good points, I also think that there are some good counterpoints.

  1. There is a sense of security to having your money close and readily available. For those who aren’t able to stash away a lot of money into investments that payout, build tons of equity in a home or having the cash flow to pay off credit cards or HELOCs quickly, the idea of paying for something big can be scary and we don’t all have the confidence that our investments will grow or be available to fill that security blanket idea.
  2. While I don’t think Dave Ramsey’s plans work well for all people, I do feel that if you are deep in the ruts of debt or you have never had any education on finance, that this is a great start. build up a thousand dollars. That teaches you to spend less than you make and to put it somewhere and don’t use it in case you need it. Then you move on to bigger principles.

The Verdict

Because of this article and others, as I’ve been contemplating how to better fund my retirement as well as be prepared for life changes such as my wife leaving work to be a mother or to find a different job, I have made a few changes that I think are better for the overall health of our family.

We have been aggressively paying down my wife’s student debts. Easily 25% of our paychecks go to putting out that forest fire. We were down to about $2,200 and on our usually pay day, I decide to take a bit of Dave Ramsey’s advice and use extra cash beyond my emergency fund to try and finish off all consumer debt. I sent my wife enough to cover pretty much everything left and she covered the remaining balance. Now, a week later, when we get out paycheck next week, we will have a lot more extra cash flow going forward as well as much peace of mind. As well, once the debt is paid off, the real fun begins. Positive growth instead of combating negative interest.

The second change I made involved the part of the article that mentioned spending habits when you have a large sum number in your account. Now I am already very frugal and.. well, my wife already knows that I don’t like spending money on much. But I decided to drop my emergency fund down to the basics. Now my High Yield Savings Account (HYSA) has a minimum balance of $1,000 so it doesn’t make sense to drop it to $1,000 if I can’t use it in emergencies because of that. So I dropped it to about $1,500. And I took the remaining amount (which would be the extra that puts us up to around 3 months of bills) and I invested it.

What I think pushed me to take this lump sum and toss it into my investments was the fact that my Roth IRA can only be funded to $6,000 a year. That amount even if I maxed it out each year, would still not be a lot of money. And while I am not going to hit that this year, I think it is important to make up as much ground each year as I can so that I don’t lose out due to the limit to maxing it out each year. So I will be behind a bit this year but I feel great in knowing that I upped my amount closer to the maximum amount. Next year I will max it out for sure.

The best part of throwing in the extra money is that once it showed up and pending a transfer of cash, the M1 Finance account already had allocations to put it into. It took all my percentages and it divided it up to even things out. I was so happy and it takes the stress off of trying to buy exactly what is the least valued stock in my portfolio and then make a stock order, leave some money left over because I can’t buy another full stock… I am loving my experience here so far.

So here are my financial goals for next year:

  1. Finish paying off our car. I could technically do it now or significantly dent the debt, but our payment is so low at $78/month that we won’t accrue more than about $274 in interest over the life of the loan except that we will probably pay it off after about a year of owning it. That should mean only like $80 of interest which is worth us getting the loan and getting a $4,000 price cut on this used car which we needed to replace.
  2. Max out my Roth IRA. With a $6,000 limit, you have to put in about $500 a month for 12 months. $500 x 12 = $6,000. That means that I will set up a recurring deposit for 2 days out of the month and that should satisfy everything I need for that account.
  3. Pay down our house a bit. We got a mortgage this year for our first home. We only had to put down 3% because we are living in the home and we went with a loan type that works well with how we feel about the housing market. Right now, we are at about 95% loan to value which means we have about 5% equity in the house. Obviously, this is because for the first several years, you pay a lot of the interest part of the house and then later, you pay more principle.One trick that we use to build up extra to put towards principle, and therefore equity, is that we have a separate account that is just for the mortgage. Each paycheck we each put in what we talk about to cover the mortgage but it doesn’t always line up as 2 paychecks every month, sometimes, it is three. We also have auto-pay for our mortgage with our credit union. This usually ends up with us having a bit of leftover in the account after the auto-pay happens. Currently it is a few hundred bucks. After some months of paying it, there is sometimes up to $1,000. Once we are around $1,000 in the account, I usually just put that towards the principle. While this is a good move, I’d love to up that amount and get down to maybe around 90% equity by the end of next year and then hit that 80% equity number in 2021 so we can take off the PMI that we pay each month. It isn’t a lot that we pay for it, but it reduces our monthly expenses we need to cover by about $70 and that is a nice relief.
  4. Start contributing more to my 401K at work. hopefully about 10% as opposed to 6%. Currently I put in enough to get my company match and then I put my money in other places like my Roth IRA, paying for countertops, big car repairs, emergency fund. Next year should only have a few big items.. like possibly a baby and possibly a dog. Yeah, I know. Those are pretty big. I will try to make this all happen.
  5. Start investing in a taxable brokerage account. Yep. As much as I’d love to max out my 401K and my Roth IRA, if I am going to retire early, I will need income that can cover my expenses before I hit 55. Probably about 10-15 years worth. Enter the taxable account for dividends that will pay for expenses through distributions and payouts.
  6. Possibly save up for a down payment for a rental property. The Rental Property market isn’t the best right now, but some recurring income could be better than none. And while I may not be able to fully build up a 20% down payment with all of my other goals, I can sure work towards it. Even having 2 rentals when I retire could be enough to cover most of my expenses if we are able to pay off our house.
  7. Save for a baby and a dog. Ha. These will eat into everything. We don’t have either of these, but the eventuality will happen and it will be good to save for. Luckily, I have 9 months to save for any baby that might show up. The dog could happen any time though.

Conclusion

Hopefully these give you good simple ideas of what you might save for in the future. I think most of these will be doable now that we have thrown almost everything we have at my wife’s student debts.

What is/are your big 3 goals next year? Replacing a car like we did this year and you need to pay that off? Starting to invest? Don’t know how to open a Roth IRA? Here is my link for M1 Finance. https://mbsy.co/CLlcW. If you have any questions about the process, feel free to comment or to reach out to me on Twitter @youngbudgeteer. Always happy to help and I appreciate all of you who read this. Have a great night!

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!

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

The Melt Review: Grilled Cheese Perfection

grilled cheese sandwich

Oh Boy. Oh my… Wow. Okay. Deep Breaths. This.. This is just too good.

These are some of the emotions it takes to write about something so tasty. Thick slices of bacon inside a homemade Mac and Cheese with jalapeno slices stuffed into a Texas Toast grilled cheese sandwich.

The Situation:

If you haven’t guessed it yes, this is an amazing meal to partake of. I was in my office having some casual conversation about food places to eat since I am still a bit new in town (although slowly becoming a connoisseur of foods here.) My co-worker mention this amazing place to get grilled cheese sandwiches that only stopped it food truck at certain places on certain days. Today, it was parked pretty close. Now to get the feeling that I had when I first heard about it, I will share this bit of information.

  • The company started about two months ago.
  • They open from 5:30pm – 8:30pm each night and are usually sold out within an hour or two.
  • After 26 ratings (and counting, it’s been two months remember) on their page, they still sit with a 5.0 rating. That means no bad rating, not even A- ratings. Perfect Ratings so far.
  • A personal reference that they are one of the tastiest places in town.

Hopefully I can be your reference in saying, if you ever get a chance to pass through Pocatello or go nearby, check out the link about the ratings to see where they are and when they will be open.

So back to the situation. I decide it’s time to call in the fiance and weigh in on our Friday night Date Night meal. She agreed after some convincing and we were off.

When we ordered our food, we didn’t wait in line very long. The people we talked to were very kind to us, made a few jokes, didn’t force a tip (which we gave) and then we sat on the lawn chairs outside until it was time to eat. and as the description above states, it was an amazing meal from the start to the finish.

delicious grilled cheese

Here’s how I would grade it:

The Verdict:

Food Quality: 10

If I could say 11 on a 10 point scale, I would. This was one of the best meals I have had in the area. The bacon worked so well with the Mac and Cheese, the jalapenos added some kick, and the Texas Toast was both fluffy and savory to give it the rest of the flavor it needed. THE BEST.

Food Uniqueness: 10

Anyone can make a grilled cheese at home. Only some people decide to put mac and cheese in it. These guys are willing to take a food truck to a business and throw huge slabs of bacon in them. Very, very unique.

Price: 6

This is probably the only big ding I could give. I paid about $10 after adding a small tip and we shared it. At the end I was a touch more hungry after only eating half, but I wouldn’t say it isn’t enough by any means. (And yes, I understand that all the other reviews are 5 stars, but I think this is important for different wallet sized players.) I just didn’t expect a grilled cheese place to cost as must as Texas Roadhouse.

Environment: 10

The day we went was actually pretty cool for a summer day. They provided a couple lawn chairs to sit in while you waited with a canopy above you and some cold water and squirt guns so you didn’t “melt.” It was kind of nice for a hot summer day.

Service: 9.5

A small small knock here. Not because they did something unplanned but because I didn’t foresee how long we would be waiting after we placed our order. It was probably another 25 minutes? Being a grilled cheese place, it was just not my expectation and that is sort of my own lack of understanding of the restaurant. Because their only informational page is a Facebook page, it is a bit hard to know what their menu is or where they will be on a night a few weeks out. Small improvements. Maybe I’ll make a website for them.

And the grand total is… Drum roll please… .. .. .. .. .. 45.5 or 9.1! Not a bad rating at all. Honestly, anything above like an 8 is almost a definite you have to try it.

More to come as I wrap up my trip from Seattle and all of the exciting things we did while we were there. Is there a niche company in your area that you think just blows it out of the water? Do you have a lot of food truck companies? and especially, Do you think you have a grilled cheese that’s good enough to take on this bad boy?

Let me know on Twitter @YoungBudgeteer and let’s, as they say, collab?

Cantina Leña: Food Review

Hey, Yo, Welcome! It’s been a while since I’ve posted. I figured it was about time to step back into the realm of judging things since that’s the what I’m said to do best. (“You’re judgy” though I don’t think it’s a compliment)

I have been away trying to buy a house as a college grad, taking a Microsoft Certification, and having my initial review from my boss this month. It has been crazy and I can’t believe it’s been a month but I am back. I’ll have more on those subjects later as I’m sure you new college grads will have questions about that. It feels good though so let’s gets started here!

The Situation:

We fly into Seattle and we are looking for something with that Seattle taste to fill us up. The hotel recommends some of the local stores: American Kitchen, Mexican, and pizza. I think my co-worker was thinking something more fancy but he chose the mexican place which turned out to be a spanish bar called Cantina Leña. We sit at the bar and get horchata to start with our waters. It’s a good chill place with pretty much the same bar attitude that you would expect anywhere.

So we order our food. He gets cod tacos and I get something just called a Torta, with about 20 ingredients including shredded pork, guacamole, melted toasted cheese and a bunch of herbs and pickled vegetables. We grab some chips and guacamole while we wait for the rest of the food.

The bartender took our order, mentioned a few things but other than that, never talked to us except of course to take our payment. The environment was slow. I felt like I was drunk just by sitting there without even drinking anything alcholic cause I don’t drink. It was a bit depressing. Couple in the rear arguing about a breakup one of them had, old movie with subtitles on the TV; nobody was happy.

Our food comes and wow. This thing looks good. Pre-amble first, the chips were really well made and the guac was alright. Anyone with a knife and some salt and lime could probably match it. The Torta though, was something special.

torta

Just look at that meat and extras! Lots of flavors, lots of goodness. I was only able to eat one before I was super full. That always bums me out. I’ll have to toss it now that we’re leaving because that kind of stuff just doesn’t heat up well, especially without a microwave. It was juicy and the pickled onions are new to me. Some of the ingredients fell out while I was eating but all in all it was delicious!

The Verdict:

I have to say if I were to judge this place, here is how my breakdown would be:

Food Taste quality: 8.5

The torta had a lot of flavors, sometimes delicious and sometimes pickled onions which I can now say, I’m not the biggest fan of. Other than that, they did a great job of blending the pork with the guacamole and tomatoes on a nice sandwich bun.

Food uniqueness: 9

I think a 10 here would mean that you couldn’t have eaten this anywhere else. Although this torta was not that, there was something to be said for this bar having a very put together Seattle tasting meal.

Price: 5

This torta came out to be about $17 bucks. I understand that Seattle is a little pricier than other cities, but I don’t think that the other factors made me feel like the price was worth it. I feel like I would take a less unique sandwich for $10-12 and feel overall much happier. Because in the end, your satisfactory with the meal includes (or should) the aftermath of wallet depression and how that weighs on your mind.

Environment: 5

This seemed to be the typical bar scenarios. We sat at the bar and the bartender got us some water and horchata, gave us menus and then besides taking our order and our money, didn’t really talk to us much. And he stood there cleaning glasses almost the whole time we were there not doing much else. There was loud music and a silent movie going and just much feeling of relaxation.

Service: 4

I mentioned this in Environment but our service was nothing to be desired. No real conversation, nothing witty or fancy. I gave it an extra two points because our food was out to us pretty quickly.

 

I’d have to say, for my first meal in Seattle, it was just average. I wish I could say it was fancy, but at the end of the night, I went home full of food but not with things to tout. That is not to say that it is not worth going, but I would say to switch out the torta and go with the cod tacos.

I’ll be up and posting more and more as the new month starts and I have better access to internet and my life slows down a bit. (Wedding in 37 days!) Follow me on Twitter @YoungBudgeteer and we’ll talk more fancy foods!

Finally Selling My Stocks. 4 Steps I Took When I Bought To Make Major Gains.

Macy's Stock

(Disclosure: There is an affiliate links in here. This means that if you click through the link and set up an account (which is also free for you in this case), I will receive some sort of compensation. In this one, we both get a free stock.)

Yep I did it. June 7th. I had recently talked about my dividend income report and I don’t have any plan to stop doing that. I am simply selling while I think my stocks are high and then I’ll buy them again probably when they drop a bit.

I am very happy with the outcome and even if the ones I sold go up and up, I was happy with the deal I got. I mean, pshh.. I made almost 20% on some just in a week.

So because there isn’t much to tell about my selling strategy, (besides, I guess, timing and why) I will talk about each stock and why I chose it and why I sold it.

The Situation:

Here was a short list of the stocks I had:

  • Ford – 5 stocks
  • AT&T – 1 stock
  • Macy’s – 2 stocks

Very simple but I’m not trying to say I’m the best or catch the eyes of the big investors. I’m trying to teach to those who are looking to learn about stocks and investing and maybe dip their feet in. If I make you cry with my measly small number of stocks, there are plenty of big shot investors that are glad to tell you that they’ve won and lost thousands of dollars. But I haven’t. I’ve only gained dollars.

When I bought my stocks, I bought each stock at a certain price as I thought it was going down.

Ex. Ford: I bought it at $10.70 which finally put my skin in the game.

And guess what happened? It went down! My first investment. What a way to start, right? But remember, I said I never lost money in it. You only lose when you cash out below what you bought in.

It continued to go down and when it hit what I thought was a low point, $10.15 (It went to $10.14 and it’s only gone up from there), I bought another share. This means that my average cost was around $10.42ish. So as soon as it went back up past that $10.42, I was making money.

As it continued to move up and down for a bit, I bought a few more stocks and then I held on. Ford eventually went up to $12.00 in under two months and my stocks, which I paid an average of $10.65, made an average of $1.35 per stock.

Bonus: While I had the stock, it paid out dividends and I made $0.15 for every share I had. (5)

The Verdict:

I put in about $200 and with Ford and Macy’s I made 18% and 20% respectively. My other investment of AT&T made about 4% which brought down my average but it was only one stock.

Honestly, this was really fun. My 4 learning points that I would share with you if you feeling like trying it out are:

  • Take time to look at how things move up and down for a while, maybe a month even. We sometimes want to dive in. “If I want to invest, I should just invest, right?” Wrong. Investing in stocks is different then putting it in savings or a CD. It isn’t about having extra money. It takes a little bit more work because your hope is that it will work harder for you than a CD. Watching how a certain stock moves will give you an idea of how it moves and it gives you time to read about the company and some of the news that happens. (One article wrote that Macy’s just gave out a dividend that was way higher than expected. They then said that Macy’s would probably go up to around $40 when Back-To-School sales happened. It was at $29. I bought it at $33 while it was shooting up and it DID go up to $40! $7 in 2 weeks!)

 

  • I always look at the P/E Ratio and I tried to pick ones with under 15. The advice given by most experts is to try and pick under 15 P/E Ratio. So what is P/E Ratio? Price to Earnings Ratio. That means the stock price people are paying compared to the earnings of the company. Basically, if I am a stock with a 20 P/E and you give me 20 dollars, at the end of the year, you should expect that in a year, you will get 1 dollar extra back. High PE usually means that investors think that the stock is in high demand and they think that the stock is going to increase as time goes on and the price now will be worth it. Low PE means that a stock price is a good value for how much the company is earning. Sometimes though, this is seen as the investors not having much confidence in the company’s growth. So pretty much P/E Ratio is how a company’s stock is valued. Is it possibly overvalued? (High P/E) Or is it undervalued? (Low P/E, possibly a good price.)

 

  • I don’t invest in companies that don’t have a dividend. There are 3 reasons for this:
    1. Dividends mean that if I buy a stock and hold it til the next pay out, (every quarter and sometimes every month) then I get free money for owning a part of that company. In my case with Ford, their Earnings Per Share was $0.43 cents of which I got $0.15 for each of the shares I had. If we’re talking simple thinking, it’s like my stock went up $0.15 but it went straight to my account instead of being on the market still. Added Bonus: My stock can still has the potential to go up that $0.15 and earn me that much more. It’s just icing on the cake. Which makers the dividend analogy like a baker giving you some icing without taking it off your cake! (I crack myself up sometimes)
    2. I understand that a company wants to put it’s extra earnings back into the company or it wants to give every a raise in the company. I think that is great. But personally, they made the decision to fund their company on the backs of the investors. Companies that go public say, “You can own a part of my company and if the company grows, your money grows.” But when they get their earnings report each quarter, they made some $100 Million in earnings. You don’t get a take of that even though you partially funded that by owning a share of the company. A portion of that should be yours! So I think it is selfish and I wouldn’t participate in that.
    3. Lastly, and this kind of goes along with 1 and 2, you have to keep your money A.K.A. your skin in the market to hopefully realize the gains. If the company decides to make a stupid decision, (you know, like having their airplane engine blow up or switching their name from pancakes to burgers) then you will suffer as well and your money would have been better spent buying yourself an ice cream that you now kind of need.

 

  • I look at the 52 Week High and the 52 Week Low and I look for items closer to the 52 week low. Now, as I’m writing this, I have the voice in my head of others that say, “But that means it’s gone down from a higher point.” You’re right. In fact, that’s my favorite kind of stock to buy. Why would I buy something that is at the highest point it’s ever been at for the year? By buying near the 52 Week Low, along with my other tips, I know that there is potential for the stock to grow.

The nice thing about the Robinhood app I was using is that it shows all of these indicators in one nice box.

Macy's Price

Macy's Stock

 

 

 

 

 

 

 

 

So if you’re looking at Macy’s with my 4 tips, I’ll walk you through what these mean and how they actually play a part in my decision.

  • Take time to look at how things move up and down, maybe even a month. On the left side, there is a picture of the 3 month view of Macy’s stock price. You are able to change it from 5 years, 1 year, 3 months, 1 month, 1 week, and then the current day (which is what you’ll probably be following once you buy.) As you can see, Macy’s had a few ups and a few downs. Right before the upward line that I am highlighted up, they had announced their dividends (and their respective earnings) to be higher than speculated by analysts. There was also an article saying that after seeing their Earnings Call, (where they announce how much profit they made) that the value would go up, (that P/E Ratio) and people would want it more, so they would pay more for it. The article also talked about Back-To-School, a Macy’s super sale, that would probably push their stock price to $40 or more. When I read this, I was almost ready to buy it at $29, but there were a few other things to check.

 

  • What is the P/E Ratio? Looking at the screenshot on the right, we see that Macy’s P/E Ratio is right where we want it. 7.141 shows that if I put in 7.141 dollars now, I should expect growth of 1 dollar in a year. That’s a nice growth of 14% assuming that holds. But in any case, the P/E Ratio of 7.141 is under our mark of 15.

 

  • I don’t invest in companies that don’t give out dividends. This one is easy as well. Looking at Macy’s we see the div/yield of 6.067. That is great. You usually don’t see numbers above 2 and 3 so anything over 4 or 5 is gold. That is another green check for this. For me, this shows that the company cares about it’s stockholders.

 

  • Let’s look at the 52 Week High and 52 Week Low. Sooo.. with this one, I can only see what I screenshot as of now, but before it had the high of $41.33 it was closer to $37 or $38 I think. The low is $17.40. So Macy’s which was around $29 was actually more in the middle. Not the best, but after hearing that the earnings call did amazing, it was worth a shot!

So there is my analysis. For this buy, I had 3 and a half out of my 4 checks and the ones that were green lights, were super nice. In the end it ended up growing about 20% for me before I decided to sell ONLY 2 WEEKS LATER. And how has it done in the last week since then? It’s gone down $3 a share. That was a good time to sell.

Reason for selling:

Honestly, I’ll keep it short. I like when I can trust the market and how things are going, but when people get upset about how things will go with different political things, I figure I won’t let other people’s fear affect my growth so I pulled out. And I’ll be back in in no time at all I’m sure.

You’re welcome to give it a try. I’ll get you a free stock to start if you do it through my personal link here. I have more information on it in my other post about when I bought the stocks and my fears of doing so if you want to check it out.

And that’s all folks. Hope you enjoyed it! Let me know what you thought of my analysis and what I could do to be more clear about certain subjects that I am learning and teaching about. I love feedback and even more, I love sharing what I am learning as I try things out. If you’re anything like me, you are just starting into your new life as a college student or a graduate and you need tips from people going through the same issues and things in life that you are. And I hope I was a good help for that.

Follow me on Twitter to get more of the action @youngbudgeteer and I’ll see you next time!

What The Heck is an eCheck: Paying Rent Out of College

eCheck

(3-5 min. read)

I think this is more of a simple lesson from something I found out while moving to a new city after college and trying to find out the best way to pay rent. This is not going to be some Grand Experience but I thought it would be a good point for those people who are either moving to a new city or are just getting out of college. No payment or transaction fee when you are paying for rent is always nice.

The Situation:

So what exactly is an eCheck?

EChecks are in essence the electronic form of a physical check. It’s kind of cool because nobody uses physical checks anymore. You’ve all seen the commercial of the person writing the check at the cash register that is holding everyone up in line. So how does an electronic version work any faster. Well in the case of a store purchase, it might not work faster. (That is kind of what a credit or debit card is for, or even Apple Pay, Samsung or Garmin Pay.) But when paying things like rent, we sometimes see a charge for using a Visa card, or for using a Discover card, and honestly, this is ridiculous. I was told that to use my Visa card to pay for my outstanding balance at the end of the year (parking pass for the year) that it would cost me $55 to process my $50 payment… What kind of garbage is that???

So what I did instead is gave them my bank account number with my routing and it processed as an eCheck, free of extra charge.

Why did it work that way?

ECheck run on the ACH network, which is the way that direct deposits gets transferred. These funds are transferred the same way.

You are also able to set this up for auto-pay if you would like. I am still dancing around with idea of auto-pay. I have different accounts in different places and I’m trying to do the whole credit card rewards things and I’m still fumbling around with the details of if it’s all worth it.

Companies also like this because it costs them extra to be able to process your Visa. (Why do you think they would charge that ridiculously extra amount?) The eCheck makes it free for them and also gets them their money in a more secure and efficient way through the ACH network.

The Verdict:

Starting off paying rent with this is the best so if you have the chance to take advantage of it, do it. And sometimes, it isn’t super obvious but do your due diligence and ask if they accept an eCheck from your bank account. With Auto-Pay and eChecks, you’re well on your way to a less stressed life where you can now focus on saving for retirement!

If you have questions, comments (or answers to my other dilemmas) let me know on Twitter @youngbudgeteer and get ready for a good week.