Black Monday

I am not very good at any trade with my hands. There are a combination of things that make be a bad tradesman, I do not have patience, I can not focus efficiently and I do not work fast. I have made my living at work that requires physical work combined with patience and attention to detail, but generally I am following up and selling the service. The problem is to become an expert at selling something, it is very beneficial to have a lot of experience doing the thing that you are selling an so I force myself to learn through action. I have become an expert in many processes, but I have learned to train someone instead of trying to be the installer. I know how to polish concrete, install floor sealers, joint sealants, stains and coatings on concrete, but I tend to get impatient towards the end of the job, or maybe even in the beginning, and mess up some of the details. I can also paint cars, but I wouldn’t hire me to be the painter at Henrick’s Chevrolet. I am also not fast or productive at any trade. I cooked in restaurant when I was a kid and I could make every dish, but when it got busy, I couldn’t really put it in another gear to make the dish faster. I am better at writing, which I can do at my own pace, or working in the financial or real estate markets because I enjoy the analyses. It is key in life to find out where your actual talent is and hone it. I am a salesman – I have written about that in this blog – I can walk through any door and make a friend. This is my key to wealth, but what you do with your money when you get some is key to keeping it and providing yourself with a retirement that is stress free.

I like the financial markets and have since I was a kid. I like stocks, mostly in American companies and I like to make money grow while I sleep. I have learned that picking individual stocks is not an easy game, both through practice and through analyzing funds created by stock pickers. The greatest stock picker of all time is Warren Buffett and he tells the majority of people to not pick stocks, but to invest index funds that tracks the S&P 500. I spent my twenties trying to pick stocks – I would trade daily on a little tiny Nokia phone that was far from smart. I remember buying stock in the Chicago Mercantile Exchange early in its public offering and multiplying my money by one hundred fold. It was intoxicating, much like the days that I would spend in casinos chasing my tale and maxing out our credit cards. I have made every bad financial decision one can make, which gives me the experience to discuss financial matters with clarity at this point in my life. I have had to go through the slow process of rebuilding my credit after cutting up all my credit cards and telling the big banks to suck it when the United States decided to take away my freedom for living “Breaking Bad Style.”

I rarely pick stocks anymore – I have one stock in my portfolio now and it is a nuclear play because the U.S. needs power to keep this data center boom going. I have all of my personal investments in Vanguard index funds. An index fund just mirrors the index that it is designed to. Some examples would be the S&P 500 (this is the Standard and Poor top 500 companies listed on the American Stock Exchange) or the Nasdaq Composite which is a competing stock exchange to the New York Exchange that concentrates on technology companies. There are several other groups of stocks that are in an indexes and can be duplicated in a fund that doesn’t require a person to be right in picking them, therefor not requiring expensive management fees that the stock picker funds require. The S&P index fund beats 75% of the stock picked funds, so why pay more for a product that looses to an automated product most of the time. I love Jim Cramer on CNBC, he is very entertaining, but he manages a fund for a charitable trust that does not beat the S&P 500. It is very rewarding and fun to pick your own stocks in a portfolio and if you are going to study it each day and make educated decisions, you can do very well, but if you don’t enjoy being entrenched in the financial markets, buy index funds and forget about them. The stock market returns on average 8% a year and that is far greater than interest accounts. I didn’t start saving a lot until 2011 and since then my return on index funds is 12-14% with a little bit of stock picking mixed in, no more than 5% of the overall account.

The one thing that I do is manage my entire financial life – I do not hire anyone because I enjoy it and have access to a brother-in-law who is at the top of that profession. I keep all my financial products at the same firm, Vanguard. When I leave a job and have a 401k with them, I transfer it to Vanguard as soon as I can so that everything is in the same place. When I started to listen to Dave Ramsey in my 30s, I began saving extra money in a Roth IRA which will then be accessible after I retire without being taxed as it was taxed money before I put it in. I am a salesman that generally gets bonuses at the end of the year and during many points in my life, these were substantial. I treated bonuses as extra and did not incorporate them into my lifestyle. They went to college funds or retirement accounts and I live off of salary and side hustles. The key to having a robust financial life is making a lot of money and when life feeds you lemons, being able to withstand some down years without taking on debt. I buy vehicles with cash, never new ones as they loose 10% of their value when you drive them off the lot, and pay credit cards in full each month. The only debt I service is on real estate and I think it is very important to own land as well as stocks, diversification is the best way to subvert downturns in the economy. I am fifty and do not plan on selling any stocks until I am sixty – when downturns hit, I do not panic and sell. This is actually an opportunity to buy more equities, when the whole thing goes to shit, as I bet that America will always make a comeback.

I know that many people have not had the same opportunity that I have had to make substantial incomes and that it may even be hard to save for retirement, but I think a lot of it has to do with spending. During covid I spent a year with a 50k salary as I was part of a new company, but I did not take on debt to make it through that year – we buckled down and bought food and paid our bills without any excess. If I would have had a bunch of debt to service, like car notes, we would of had to liquidate some of our savings, but instead we picked up some side work – cleaning our own houses for our Airbnb business instead of hiring someone. We also spent our vacations camping and didn’t take any flights for a couple years. I am more than happy to buy clothes at a thrift store and am proud to show up anywhere in my minivan with a dent in the side (we just finished a 2500 mile family vacation in the same beautiful minivan and I bet that it is only half way through its life at 150k miles as it is a Toyota which is the brand of all our vehicles.) I love America, but I love Japanese engineering when it comes to maintenance and reliability of vehicles. Currently, during the week I drive a company vehicle as I did the math versus a vehicle allowance and keeping the maintenance on the company side of things saves me a tremendous amount of money, especially as my job requires close to 50k miles worth of driving per year which kills the value of a new vehicle quickly.

I have found that creating wealth is a very slow slog. I take risks in the real estate market and the stock market, but both have larger gains over time than an interest bearing savings account. My stock account has more than doubled as have the worth of many of the properties that we own. I have the max contribution coming out of each pay check to my 401k and I don’t see that money to spend it. I still have side hustles at all times as I can’t sit still and I try to spend less than I make (I have to be honest, I haven’t been successful at that recently as I have dipped into my brokerage account to create memories with my family prior to our children being launched). I am not a gazillionaire, but I have built a positive net worth that will keep us fed for the forceable future and I am constantly learning more about the markets, finance and the life style modifications that make wealth possible and maybe some day I can stop trying to keep up and just be.