Patient and Disciplined Saving

The Table That Got Me Started Investing!

When I was 22 and about to graduate from college I attended a seminar about where to place investment money. A table was shown early in the presentation that I can say literally changed my life. It has been the defining philosophy of my approach to money.

The table was made up of five columns. The first column was the “Age” column starting at 18 and going all the way down to 65. The next two columns were “Annual Investment”. The last two columns were “Investment Return Total”.

Overall the columns represented two people. The first person began investing $2000 a year starting at age 18 and stopping after 10 years at age 27. From that point, after an overall investment of $20,000, that person never put in another dime.

The second person starts their investment of $2000 at age 27 and invests every year until age 65 for a total of $78,000.

With an average of an 8% return the person with the most money at age 65 was the first person who started at age 18.

In fact, despite all the money that the second person puts in every year, they are never able to catch person number one.

That is the power of compounded interest.

I remember seeing that and being completely blown away. I had absolutely zero money saved or invested at that point, but I resolved at that moment that I was going to get started immediately because I was already four years behind.

I also understood from the table that the absolute most important money was the money that was put in early. As many of those dollars that I could put in were the ones that were going to be supercharged and make the difference 40 years down the road.

I can say that overall, by any measure, it has been successful. I’m not quite 65 yet but I’m well ahead of that table and if what I read online is correct I’m ahead of most of my peers.

You can find the table that I talked about online or it is easy enough to create it on your own with a spreadsheet program. I actually encourage you to do it.

If you are behind, don’t get down. It is never to late to start saving. You do what you can. But pass along lessons, especially to those who are younger. You won’t become fabulously wealthy, but you will have security and peace of mind.

As always, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Target Dated Funds

While I am not personally a fan of Target Dated Funds, they do have a place for people just starting out investing or people who are too busy or lack the interest to follow the market on a regular basis. They are definitely better than doing nothing at all.

Target Dated Funds are designed and structured to maximize the investor’s returns by a specific date. They are built with a mix of stocks, bonds, and cash that changes over the target time horizon. The intent is that they build gains at the start and the early years by focusing most of the fund on riskier growth stocks and then move towards a heavier weighting of bonds and cash towards the end of the timeframe to lock in the gains.

The philosophy is sound and the intent is good. These funds have given people an easy to understand product that they can invest in and mostly forget about.

My issue with these funds has to do with their increased cost relative to just doing the exact same thing on your own. In most cases it is very easy to replicate what these targeted funds are doing with other available funds. The best example to me is the U.S. government TSP fund portfolio. There, the Target Dated Funds are literally made up of the individual funds and you can mimic the exact fund makeup, with a lower cost, if you simply spend a few minutes of your time.

I also just think that you will get better returns along with a lower cost if you stick with large cap index funds. There your returns can be maximized to such an extent that you may never need to eventually transition to a much more conservative portfolio. That is my plan. I want my growth to be so high that I never need to put most of my portfolio in bonds or cash. So, Target Dated Funds don’t fit my investment philosophy.

But, as I said above, if you don’t want to spend the time or energy to monitor and track your investments on a regular basis, then Target Dated Funds are not a bad option. But realize that you are giving something up both in lowering your costs and increasing your gains over the long term.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Make Your Money Work For You!

The most important thing that you can do for yourself and especially for your children is to get your money to work for you.

The way to do that is through the magic of compound interest.

Compounding interest is one of the most powerful forces in existence but it takes time.

The earlier that you can plant that initial deposit nugget and start the process the bigger the payoff will be.

Twenty years is the rough target timespan when growth starts taking off and it gets fun to watch.

So, getting started as early as you can is the key.

Even if it is only $50 to $100 a month, it can turn into a life changing amount if you can just give it the time it needs.

If you can give it 40 years you will be rich and if you can give it 60 years you will make your entire family wealthy.

It is math.

Sixty years seems like an impossible and unrealistic timeframe to just let money sit and for many it is if we are already adults.

But that is where we can give our kids a advantage.

When they are young even just opening a savings account will help start the process that can grow into a bigger deposit that can be transfered into a low cost index mutual fund later.

That is what I’ve done with my kids.

So, get something started today even if it is just opening a savings account to start building an initial deposit to put into a more robust investment later.

Make your money start working for you now so that it picks up the heavy lifting for you later down the road.

To see the math of what growth can look like check out my previous posts.

Also, if you have a young reader in your life check out The Fairies of Oylara children’s book at your favorite online retailer. You can check out that blog here.

Low Fee Index Funds are the Champs!

During an interview on Bloomberg radio recently , the person being interviewed (whose name I didn’t get) made a statement that I have written about before in a previous post. He very clearly said that if a person is patient and willing to wait 10-15 years then the Vanguard S&P Index Fund ETF (VOO) and the Vanguard Total Stock Market Index Fund ETF (VTI) would beat any Hedge Fund. This is despite the high paid and very smart people who work at the Hedge Fund and their expensive and high end algorithms and computers. Those high expenses were actually the very reason that the Hedge funds would lose.

Warren Buffet actually proved this with a bet that last ten years. By the end of the 10 year period it wasn’t even close. The Vanguard model of keeping fees down, keeping investments simple, and betting on the United States is a winning strategy.

And, I had to laugh at the comment about having to be patient about investing for 10-15 years to make this work. That is not a very long time in the scale of an investing time horizon. Most people can expect to invest at least twice that long.

Also, the mantra here at this blog is to remain patient and disciplined. It was really nice to hear a “Wall Street” guy reinforce what I believe and have been trying to share to help others be successful!

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

EPS as a Tool

When you are new to investing or trying to do a quick evaluation of a stock that you are not really familiar with looking at the companies Earnings per Share (EPS) is good to review. Bluntly, it will tell you right away if the company is making money or not.

Investopedia defines EPS as the company’s profit divided by the outstanding shares of its common stock. The higher the number the more profitable the company is considered to be. If the number is negative then the company is losing money.

Like all things though, that is a simplification and may be worth reviewing more. I normally look at the trend of EPS over several years. I want to see the number getting bigger over time. If the number is positive, but getting smaller, then it is trending less profitable. Also, a trend over time many help understand a single bad year or a new company that is growing. The EPS may be negative but if the trend is moving toward profitability that can signal a good opportunity to get in on a growing company.

Therefore, do a little homework and look for EPS trends over time to help you understand a companies profitability. In general stick with companies that have a positive EPS but it doesn’t take long to look a little deeper and evaluate the EPS trend that will often tell you more of the picture. Then you can make a better decision as to whether you want to invest or not.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Demographics are Important!

people walking on pedestrian lane during daytime

While I absolutely love reading fiction as a primary source of entertainment, I recently have started reading Peter Zeihan’s books. He is a political scientist and demographer and has made and continues to make very bold predictions about the global future. I’m a bit obsessed with everything he has to say as he has been proven correct about some major world events including the invasion of Ukraine by Russia. He predicted it back in 2014!

I found him because I am very interested in demographics and in particular the Chinese demographics. I found myself getting tired of hearing about China as this 800 lb gorilla that we should be terrified of and I felt that the effect of the one-child policy there was having an overlooked impact. I found that and a whole lot more with Peter. He opened up a whole new way of looking at the globe. He highlighted past trends that have brought us to where we are currently and identifying the trends, heavily demographic, that are influencing where we are going. It is staightforward, intuitive, and very easy to understand.

Having an understanding of demographics can have a meaningful impact on our investment decisions. Based on how a country’s population pyramid looks tells you a lot about that country’s economy. Aging societies like Japan and Germany tell you that consumption is low in their respective areas and that they are facing an available worker crisis. The retiring Baby Boomer Generation here in the U.S. is going to have an upward pull on inflation as those workers leave the workforce and companies have to hire and train new workers. China’s population crisis is driving up costs and causing companies to leave and restore back to the U.S. and Mexico. There are so many impacts to the world that are related to population growth or decline that having a working understanding of demographics is critical.

I highly recommend you check Peter Zeihan out on YouTube and definitely read his books. You can find them in your local library. Most of his presentations end up on YouTube and I watch for new ones constantly. I really have learned a lot from him and I know that you will also.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

People Unable to Cover $1000 Expense!

troubled young woman near broken automobile in countryside during car accident

According to Bankrate’s 2024 annual emergency savings report only 44% of U.S. adults would be able to pay an emergency expense of $1000 or more from their savings. That is not fantastic and shows that a high percentage of people are simply living paycheck to paycheck.

This number hasn’t really moved in several years. How do these folks without emergency savings pay for these unplanned expenses? The survey tells us that 35% would borrow money, including 21% financing with a credit card. The next 10% would try to borrow from family or friends and 4% would take out a personal loan.

Those are high cost options that play a part in making everything else harder. Therefore, work hard before an emergency and get some short term savings in place before you are forced to pay that same bill plus a whole lot more in interest!

Be disciplined!

Additionally, I came across this very cool podcast on Spotify that everyone should check out called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Keep Fees Low and Returns will be High!

The great investor Warren Buffet won a famous bet against a Hedge Fund manager that over a ten year period he would have better returns using low cost mutual funds versus a basket of higher cost hedge funds. The founder of Vanguard, Jack Bogel, built one of the most successful companies, ever, on the idea that investment fees were excessive and unnecessary. Therefore, you should pay attention to the fees of whatever product you are looking to put your hard earned money towards.

Over time, fees do add up. The money that would have gone into the investment can equal tens of thousands of dollars over a 30-40 year period. I’ve transitioned to almost all new investment money to self managed low fee/cost funds over the years as I’ve become more educated and confident in my ability to handle my money. I’m especially careful to watch the fees in my 401K as the higher fee options are simply not worth it. I definitely want all that money working for me as long as possible.

All that said, I didn’t start out managing my own investments. I started with an investment advisor and still have a good portion of my portfolio there. I don’t regret it at all and have used that person to educate me on options over the years. They helped me at a time when I certainly needed the help. I don’t begrudge them the fees/money that was paid to them. However, over the long-term it has been significant and I’m much more aware of it now hence I try to do all new investments on my own using low cost products.

So, overall, educate yourself and look for the low cost option unless you determine that the higher cost is worth the money. It may be at times, but make it your decision. Don’t pay for things that just aren’t necessary.

On another note, if you are looking for a gift for the young reader in your life, you can find some great children’s books on Amazon. Just go to these links The Desert Fairies of Oylara, The Rainforest Fairies of Oylara, and The Artic Fairies of Oylara and order them.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Invest in the U.S.

The longterm advantages of the U.S. make it the best bet in the world. It has advantages that have made it and will continue to make it the most powerful economy on Earth. It is large and has favorable geography and climate. It has a large educated population, good demographics, and abundant natural resources. Finally, add in a favorable economic system, the world’s preferred currency for trade, and large innovative companies that are not reliant on globalization due to internal consumption, and you have the place to invest your money for the future.

The rest of the world has so many challenges due to demographic pressures and a less than favorable geography that doesn’t meet all their needs. No economic challenger is going to come close to the overall economic dominance of the U.S. This is not a tough decision as to where to place most of your money as the U.S. is only going to get stronger as time goes on.

Bet on the United States!

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and First Day Out. Enjoy!

Car Expenses

I did a post about some car expenses and issues I was dealing with a couple of months ago. Well, I’m dealing with these issues again as someone hit my car again. So, I’m reposting this for everyone to make sure that they are thinking about expenses related to cars.

Cars/vehicles are essential to the majority of people and especially important to those of us who live in the United States because our cities are not designed for mass transportation. And other than their house, cars are most folks largest investment. It is also well known that cars are also a terrible investment because they often lose a third of their value as soon as you drive them off the lot. But most of us still absolutely need them for our transportation needs.

Recently, I’ve had three major events that have really opened my eyes to exactly how expensive cars continue to be. First, I’ve added a teenage driver to our insurance policy. Even with discounts for driver’s education classes and a good student discount our insurance doubled. That was eye opening but expected.

The next event happened six weeks later when he was involved in a minor accident. Thankfully, no one was hurt and it was not his fault so our insurance did not go up. But the accident highlighted several things about repairing a car. The first challenge was finding a body shop without a weeks long waiting list. Some issues are COVID related backlogs however it is also a product of how expensive new and used cars are that people will fix cars rather than replace them. Next, all the additional features that cars have now increase the cost of fixing them. My vehicle only had some minor damage to the front fender area however there are proximity sensors that needed to be changed and two panels were damaged. Most modern cars now have plastic panels that cover the body and even minor damage to the panel can result in the entire panel to be replaced. And add to that most body shops don’t stock a huge inventory and the cost of painting the panels and a seemingly simple repair can take weeks which it did in my case. Bottom line is that there are no such things as cheap repairs. That is also reflected in the cost of the insurance we pay which has had to rise to meet these more expensive repairs. It is very frustrating.

Finally, I’m dealing with a significant repair to my current vehicle. The car is just over seven years old and I accept that it is going to have things that break. I’m actively in the process of saving money for the eventual replacement of this particular vehicle however sticker prices of new cars are just shocking. At least we appear to be turning the corner where dealerships are asking for money above MSRP but there aren’t many really great deals out there that I have seen. Therefore, I’m actually happy to pay for a pretty expensive repair because it is still so much cheaper than buying a new or used car. I feel a little lucky that it looks like this major issue was caught early with a routine oil change before it became a much much bigger issue. That allows me the option of getting it repaired versus being stuck having to replace it. It didn’t take me long to seeing that even an expensive repair is still the better option. But it is still quite the financial punch.

So, in conclusion, have emergency funds for the unexpected which will happen at unexpected times. Realize that cars are really very expensive and be very careful with what you have. As they have improved in both capabilities and safety, they have also become more expensive to operate, maintain, and repair. Don’t skip on the routine maintenance as that is a big risk and do the best you can and make smart decisions with the insurance that you carry. Don’t go cheap and make sure you have enough to protect yourself. Not everyone can ride a bus or a bike as our primary means of transportation.

Additionally, check out this very cool podcast on Spotify called Gen X Dad and his Gen Z Teens. Entertaining!

Finally, check out some pretty cool music on YouTube if you have a few minutes: Introduction , Mosh, Smoke, Watch Out , and a brand new addition First Day Out. Enjoy!