A Good Problem to Have

With my sister-n-law finally moving out of my in-laws house we are now able to sell it. My wife’s parents passed away in 2008 and we inherited a paid off house in a nearby town. It has taken awhile(years and years) for my sister-n-law to be ready emotionally and financially to get a place of her own. Our good friends are actually buying the house because they need the bigger space and I do not want to work to get the house into ‘showing shape’. We are glad we can help out friends and they are getting a pretty good deal. Can you guess which one it is?

All said and done we will clear $135,000. What to do next is the dilemma. For various reason spelled out in earlier post, we will not be giving half to my sister-n-law, we will be paying her a lifetime annuity month to month. So I get the whole lump sum to play with. The way I see it forming up, I have 4 options;

  1. Increase my passive income through rental properties. I could easily buy a duplex with this money and see a positive cash flow (call it $700/month) from here on out. This would provide a stream of money coming in while building equity and it fills a glaring gap in my income diversity.
  2. Increase my passive income through continued dividend investment. I already have a healthy portfolio, but $135k can easily translate to almost $400/month with very little downside.
  3. Decrease my debt load. My wife and I still owe about $90k in student loans and have a HELOC balance of about another $25k. This house windfall could ZERO out those balances saving $380/month in interest.
  4. I could SALT a lot of different accounts. I would take the money, pay off maybe one outstanding loan, beef up the cash holdings, invest a good chunk in the markets, finally get the kitchen updated, and still sit back with a sizable amount waiting for the next good opportunity.

I did not write this article just to create a new post. Although I admit I am the guy who when making a list, adds things to the list I have already done so that I can scratch some things off right out of the gate. I have truly been somewhat frozen about making this decision. I can see the merit in all 4 paths and have made no progress is eliminating any of them.

Your thoughts on the matter would greatly be appreciated.

A Problem Like Maria

We all have our crosses to bear, mine is named Maria. My wife is a lovely, intelligent, emotionally balanced, funny, kind, woman, her older sister is a train-wreck. Since both of their parents are deceased, Maria has become my wife’s and therefore my problem.

Maria chose to divorce her husband because [insert no good reasons here]. She also blew through her entire inheritance from 2008 in about 3 years with nothing to show for it besides a lot of framed artwork involving cats. She traded in a perfectly good paid off PT Cruiser for a 1983 Jaguar that broke down immediately and had to be shit canned less than 1 year after acquisition.

She forgot to pay all of her bills and would call me wife complaining of all the things THAT WERE HAPPENING TO HER. She stayed with us for about six months until it became obvious that either she moving out or I was moving out. For example, Grendel would refuse to identify anything she wanted for herself from the grocery store and simply emerge from her crypt to consume everything in the dead of night. We had to let her move into the empty parents house (rather than sell it). She proceeded to not do anything all day everyday while the house fell down around her and she sunk further into debt.

slothMaria does have income, she gets $1100 of your money every month because her various ailments, both perceived and actual, prevent her from working. Now before you swear under your breath, let me share with how I feel about SSI/Disability.

It is a SMALL price to pay for having these people removed from the workforce. Think about how much you do not like your job. Now imagine the very same workplace crawling with Marias. The trade off seems to simply be a another type of tax and  well worth the money as far as I am concerned.

skeletorI am not allowed to confront Maria about any of her life choices because I make her feel bad about herself. I would actually be OK with helping if I were allowed to also vent, but that is not the path the Royal We have chosen. Enough ranting, I have a point here that involves the conscious financial steps we have taken to bring this train-wreck into the station and prevent future derailments.

Kind, Clear, and Firm. I realized that part of what was lacking in Maria’s life was her Pater Familias. Her Mom and Dad had always helped guide her decisions and she was somewhat adrift after their loss. So we learned not to give her money in lumps, she lacked the impulse control to budget. Much like with drug addicts and gamblers, do not give her money to pay a bill, tell her to send you the bill to pay. We paid off her backs debts and set up a clear highway to partial responsibility. I created a joint account and set up a direct deposit from her bank to this one so that she could contribute a share of expenses at the house where she was living. I covered the rest. She agreed to consult us on any ‘big’ money decisions to be made.

From the eventual sale of the inherited house she was occupying , we all agreed we would not release her half to her in the form of a big check. We decided instead to give her a personal annuity. Every month we would add to her SSI check a stable amount so she can budget in bite sized chunks. She gets stability and I get to use all the proceeds up front. Should she wish to make a large purchase, I will pay her and simply subtract the dollar amount from her amortized balance.

I suspect that Maria is a lifelong obligation, but nowadays it is more about preventative maintenance than damage control. What are you going to do, it’s FAMILY right?

 

Part 1; By Long and Winding Path

So I was raised in the middle class white flight suburban dreamscape of a Rust Belt city slowing choking to death on its own fumes in the midst of Reagan’s New Dawn in America and life was pretty good. I was outside from dawn till dusk doing God knows what because bad things didn’t happen to kids back then. There were a dozen kids my age who were all the same and my D&D ranger/assassin was like level 22.

Timeline Content Link; First Jobs
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Avoid emotions with Gallows humor

But then my parents got divorced because somebody told my mother that she ‘deserved to be happy.’ Their split was rather amicable. My Dad found Jesus in a big way and my Mom found a red haired dickhead alcoholic whose passive aggressive nature was only outpaced by his unmitigated bitterness. Parents please put your children first or you will mess them up badly. I actually blame the shitty ‘me first’ culture of the Boomers more than I personally blame my mother.

bangerAnyway we got poor real quick. I had to move to a different kind of neighborhood, still suburban but with 3 different coke dealers within a few blocks. My old friends suddenly did not talk to me. I was 12. I like to blame them and think it was because I could not afford Z Cavaricci Jeans, but it might have been because I was changing as well. Punk rock was really there for me in a big way when I needed something to be there for me. High school gets done somehow. It wasn’t all Sturm and Drang, I realized I needed some discipline in my life so I joined the Military. I went to Boot Camp and straight into the Reserves.(They don’t let you do that anymore)

I didn’t run away from home so much as I stopped going there. Strays like me tend to drift into the cities. The problem with that is without any real support network the kids tend to band together into packs of orphans who technically still have parents and try to raise each other as best they know how. And yes by packs, I mean gangs and yes there is only one real gang for white kids.

warriors

So I was a Nazi Skinhead for a long time. Even right through the Military and Undergrad. I flew under the radar because pre 1995 there was no such thing as domestic terrorism. I won’t try to defend that time in my life, you weren’t there, you don’t know.

The catalyst for change in that subculture often comes because you are burning the candle at both ends. You keep waiting for something drastic to happen to justify your delusional worldview and before you know it you start making the drastic things happen. Your options are death, prison, or get out. The crew you are running with, the territory you control, the shit you’ve seen. It all starts to fold back in on itself. The average newbie lasts about 9 months, I made it 5 years.

Relevant Blog note; I taught myself HTML by viewing source codes, it was 1994, I could have made a ton of money, the internet back then was only pornography and radical politics, but alas I was short sighted.

dumbOK back to the life progression parts. A girl I know buys me a copy of the GRE book because I wanted to go to grad school. The things is one third math, I don’t do math. I took the GRE book back to the bookstore to return it ($100 book). I ask the counter clerk which one of them there fancy tests don’t got no math on it. Why son you must mean the LSAT. Oh yeah, what do you become if you do good on that? A lawyer.

So I moved to a different city and started law school. Lucky for me, another fish out of water one year ahead of me happens to be a girl with great boobs and a strikingly similar background in terms of the punk rock scene and plodding along into law school because of guilt and good grades. I stalked her until she became my girlfriend. Life was looking up.

Continue to Part 2, Electric Boogaloo

Part 2; Electric Boogaloo

I finish law school and marry that girl. Now we start to see some life moments relevant to finance. We have enormous Student loan debt, over $200,000, but we both land decent jobs. My blood is so working class that this is what I think I look like in a suit;workclothes

I did 5 years as a Public Defender in the bowels of a large city with the Lumpen proletariat. Yes, perhaps I viewed this as some sort of penance for my past. We skipped a wedding and bought a house instead.

I would not say I was actively into personal finance just yet, but I was definitely developing precursor habits. Like keeping track of all money pored into fixing up that first house. I was certainly better off than my wife who did things like keep $11,000 in her no interest checking account.

It was easy for us to live below our means because it came natural to us. The exception was eating out, $10,000 a year easy, this is still a big problem. We kept waiting for our employers to realize we were frauds. When it came to being professionals, it was definitely a ‘Fake It Til You Make It’ type situation. By now it is 2005/2006 and I can begin to show fledgling net worth figures because my personal finance instincts are evolving due to enormous amounts of down time at work and access to the Internets.

Ah the days of buying Apple at $23 and selling at $90, or Amazon at $17 and selling at $70. Too bad I had no real capital and was buying stocks $200 worth at a time. Anyway, it is time for our big Life Change.

In the same 6 months we; quit our jobs, sold our house, moved to a different state, foundapple new jobs, built a house, and had our first baby. Trying times let me tell you. But the Best Laid Plans of Mice and Men. The main reason we moved was to be closer to my wonderful in-laws. They die 2 days apart before our first kid turns 3.

Continue to Part 3; AutoPilot

The First Net Worth

This is as far back as my record keeping will allow. This is the net worth on 03/06/2006. I have at least one total assets record from 2005, but no corresponding total liabilities from the same period. My Net Worth Blog maybe new, but it has the ability to run deep as far as the raw data is concerned.

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All rising to great place is by a winding stair. – Francis Bacon

0306assets

0306liabilities

Gotto start somewhere right?

empty-wallet

Weddings are for Suckers

I read a depressing stat today on CNN;

The average cost of a wedding climbed to a record high of $35,329 last year, according to The Knot’s 2016 Real Weddings study. That’s up 8% from the 2015 average.

wedding

Every 6 months or so, my wife and I high five each other and reaffirm that NOT having a wedding was one of the best ideas we ever had.

Don’t get me wrong, I like going to other peoples weddings, but my wife would have hated having one of her own.

Generally I am all for the whole spend money on experiences not things. However, it seems to me that most people go through mounds of stress and expense for an event that never quite lives up to expectations anyway.

My wife and I took the money we would have spent on a wedding and used it for a down payment on our first house. A house we sold 3 years later for $100k profit mind you.

Our wedding took place at the Justice of the Peace for $55, license, transportation (‘L’ rides), first rings (sterling silver) and post nuptial Snapples included.

Look some people dwell on their wedding day from the time there are little, but don’t have one because you are ‘supposed’ to have one. There are plenty of conventional wisdoms that are also smart money plays. Big weddings are not one of them. Stay thrifty my friends.

Part 3; AutoPilot

Having a child means when you take a hit like we did, you just have to keep plugging along. There is no real time to wallow in the mire. My new job, in Prosecution this time, was rewarding but stressful. The wife worked for the same employer, she had just transferred locations. This time around my conversations with HR actually involved me listening and trying to make the best financial decisions when it came to Defined Compensation and Healthcare plan choices.

2008 was also the impetuous for me really cracking the books on Personal finance. After the death of my in-laws, I became the Personal Representative for thier Estate. Nobody else was in any shape to take on this duty. It involved a fair amount of paperwork but I have always been fairly well organized.

generational-transfer-of-wealthThey say that the transfer of assets through inheritance from the Baby Boomers to their offspring will be the single greatest transfer of wealth in the history of humankind. It happened in our lives way too early, but it did give us opportunities we would not have otherwise had.

I was able to start accounts and stash away savings before my projected time tables. We were able to buy each of our kids 3 years worth of prepaid college tuition and we get to tell them it’s from Nonnie and Grampa. We also eventually swung the inherited equity in the family cottage into a full blown takeover that preserved the cottage for generations to come.

child2My wife and my in-laws showed me what family was supposed to be like.My own personal growth is directly attributable to my wife and the way she was raised. I would trade it all in to have more time with them and let them meet our second son.

Our life progressed according to the time honored cycles of child rearing, work drudgery, and slowly preparing for a comfortable retirement. However, thanks to my obsessive nature and the feast or famine reality of legal work, I found a ton of stuff online relating to FIRE.

Continue to part 3; Bourgeoisie Creep

Precious Metals

I believe in a well rounded family of assets, this definitely includes PMs. The question is to what degree. I have watched people go back and forth on this issue and the only conclusion I have arrived at is that some PM is part of any well diversified portfolio.

dragon

I am fond of the 50 : 1 ratio of silver to gold, and strive to keep to some semblance of that goal.

My current PM holdings consist of;

  • SILVER  483 ounces.
  • 50 ounces   10 oz. bars   bought at $ 5.75
  • 50 ounces   1 oz. silver eagles    at $ 16.58
  • 50 ounces   1 oz. Libertads          at $ 15.98
  • 58 ounces   3.8 oz. Balboas         at $ 15.71
  • 75 ounces   Assorted Coins        at $ 16.67
  • 100 oz.        1 oz. Maple Leafs     at $ 15.17
  • 100 oz.        1 oz. Philharmonics at $15.17
  • PALLADIUM 10 ounces
  • 10 ounces  1 oz. bars   bought at $ 257.00
  • GOLD 3 ounces
  • 3 ounces   1 oz. Eagles bought at $ 1,255

I have $ set aside to purchase more Gold but I am waiting to see it drop below the $ 1,200 threshold. There is also a decent variety of Rare Earth Metals, but they are difficult to put a current value on, I keep those mostly as a collection rather than an asset.

Precious Metal Spot Price Change
Gold $1,227.15 0.95
0.08%
Silver $17.89 0.03
0.17%
Platinum $1,001.15 0.50
0.05%
Palladium $779.05 -0.50
-0.06%

I also believe in physically holding my PM rather than paper ownership from halfway across the country. A part of my brain will always have to admit that the percentage of my portfolio kept in precious metals in a hedge against inflation, but also a backup for an end of the world scenario which I am unashamed to confess I think about way to often to not be considered a paranoid hobby of mine.

Yes people, the zombies are coming. It is not a question of IF, but a question of IN WHAT FORM.

Part 4; Bourgeoisie Creep

The big problem with accumulating more and more wealth is what I like to call Bourgeoisie Creep. Much like an ever present weed it must be hacked back down to its roots by the vigilance of Frugalitas. It is so easy to get used to spending money.

toothJust remember given enough focus one can overcome even the most pervasive of conditioning. I strive inside of a system so I can turn my back on that very same system. FIRE is about the long game, not any get rich quick scheme.

I used to love to drive my P.O.S. 2000 Ford Focus to work everyday. Every time some lawyer made fun of me for it, I would smile because I did not care about things like that. Fast forward a couple of years and I sprung for not one, but two newish vehicles because we were sick of our old cars idiosyncrasies.

It is like a race between discipline and delicious comfortable apathy. I think that is why I made this blog. Sure it is cathartic, but even if nobody read it, I will. It will help me stay the path.

My master plan is to acquire enough passive income to stop working. I may go past that point in order to give my kids a leg up in life. After that is acquired, I’m gone. I am not the Drug Lord who can not quit while he is ahead, once I feel me and mine will be perpetually comfortable, then it’s;

bigfoot

FIRST JOBS

So after you start to read enough Net Worth Blogs you start to notice certain similarities that pop up in this niche scene. The frequency of lawyers, engineers or computer types. The compulsive frugality and thinly veiled narcissism that makes people want to not only leer at each others intimate numbers, but post our own for the world to see.

I suspect another less obvious trait shared by most of us. If we were to think back to our very first jobs, I bet we find a certain vein of creative adolescent greed and ingenuity. I’m talking about the jobs that predate any sort of formal work for a paycheck. I’m talking about the childhood hustles, let me give 2 of my examples.

labor

The first business I ever started was ‘Bug Busters’. This was the 1980’s when Suburban America was smack in the middle of an unparalleled ‘Japanese Beetle Bug’ infestation that was reeking havoc on the yards of this once great land. To be clear, I am talking about the time before the Green and Yellow bags you put in your yard from the hardware store that virtually wiped the little bastards out inside of a year. There was no chemical cure in sight and it was driving our Dads to tears watching their once green lawns turn brown with clumps of mating beetles.

Have no fear for ‘Bug Busters’ was there. I would knock on your door and for $5 cash in hand I would troop around your yard, filling my bucket of hot soapy water with all of your little Asian invaders until we were both satisfied that I had killed a worthy amount for the price paid. I even had a T-shirt made up with Gold lettering on a Blue background with a picture of ants (no readily available image of the true enemy at the time, this was before Al Gore invented the internet).

The second business was also a service provided to those in need. I would go to Bingo halls with a very specific target population in mind. I looked for the ladies playing a minimum of six cards simultaneously. Then I tried to narrow down which ones looked most likely to be in need of a snack from the concession stand. I would offer my concierge services. Everybody got something, she got her nachos and I got a tip. The perfect symbiotic relationship.

My point is, if we shared our stories from these time frames in our lives, I’d bet all my bingo tips we have a shared experience or two. Those folks on the knitting blogs did not invent ways to make money like we did. Right?