Not alot of movement in general, just the typical retirement contributions, but I did knockout the remainder of a single student loan in September – as you can see from a big drop in that category.  The ROTH account’s are getting a bit battered from two fronts.  First, the ROTH transfer occurred which resulted in some painful one time expenses to save from years of painful expenses.  Second, Strum Ruger has been a drag in value and dividends, so that isn’t helping the cumulative balance either.  October wasn’t too eventful because that is when I paid the remainder of the home deductible, not allowing for much activity in investments or debt repayments.

Not a bad few months overall, how was yours?

September

Income

• Paychecks: $4,451
• Interest & Dividends: $28
• Credit Card Rewards: $24
• Other: $0

Total Income: $4,503

Expenses

• Health Insurance: $124
• Health costs: $10
• Mortgage Interest and Escrow: $632
• Car Loan Interest: $13
• Student Loan Interest: $51
• Water & Sewer: $45
• Electric: $33
• Natural Gas: $20
• Internet: $60
• Cell Phone: $0*
• Life Insurance: $44
• Trash: $60 (this is paid every 3 months)
• Dining Out: $65
• Entertainment / Hobbies: $15
• Personal / Household: $57
• Gas: $198
• Clothing: $11
• Meals: $124
• Snacks & Beverages: $24
• Car Repairs and Maintenance: $0
• Home Repairs and Maintenance: $137
• Car Insurance and Registration: $0 (6 month insurance for 2 vehicles)
• Vacation $0
• Gifts: $0
• Misc: $0

Total Expenses: $1,723

Savings Rate 61.7%

October

Income

• Paychecks: $5,324
• Interest & Dividends: $13
• Credit Card Rewards: $24
• Other: $0

Total Income: $5,361

• Health Insurance: $124
• Health costs: $10
• Mortgage Interest and Escrow: $630
• Car Loan Interest: $24
• Student Loan Interest: $44
• Water & Sewer: $37
• Electric: $35
• Natural Gas: $38
• Internet: $30
• Cell Phone: $0*
• Life Insurance: $44
• Trash: $0 (this is paid every 3 months)
• Dining Out: $85
• Entertainment / Hobbies: $0
• Personal / Household: $18
• Gas: $200
• Clothing: $0
• Meals: $85
• Snacks & Beverages: $38
• Car Repairs and Maintenance: $24
• Home Repairs and Maintenance: $2,500**
• Car Insurance and Registration: $0 (6 month insurance for 2 vehicles)
• Vacation $0
• Gifts: $0
• Misc: $129***

Total Expenses: $4,095

Savings Rate 23.6%

September was excellent and October more than likely would have been as well if we hadn’t paid the other half of our deductible for the insurance repairs.  In fact, excluding that one time expense of $2,500 I would have achieved a 70% savings rate for the month.  Dining expenses are a bit higher than usual.  I went over to the other side of the state in October to visit some family while my wife hung out with a friend that same weekend.  So a bit more dining out expenses occurred in October due to that, September I think it was because we did the extra trip to buffalo wild wings later in the month.  On another note, food expenses in general are down as I am watching this area more closely.  Canadian Budget Binder has an excellent reoccurring series on grocery budget challenges.  I suggest you check it out if you are interested in combating this area of your budget, his most recent post can be found here.  Per usual, there are a couple of items I would like to mention in detail.

*Currently free because of a referral from Dividend Mantra.

**The remaining amount that was due to storm damage on the house.  I have a high deductible insurance plan, I should do the math to see if this is the wisest idea long term, but it is not likely another event will occur in which I would reach the deductible.  In fact growing up in this area, this is the first major storm I can remember where there was wide spread damage.  So I think I am safe maintaining this high deductible for the future.

***Misc expenses include Amazon Prime membership and some cash my wife got out while spending time with her friend.

Well that wraps up my most recent months, how did your past two months go?

Photo Credit: adamr/freedigitalphotos.net

My answer would be cash flow.

This is really what all of our efforts boil down to. Generating the largest amount of free cash flow so that we can retire when we want to. Now there are really three ways to increase your cash flow, assuming you have debt. One is to decrease reoccurring expenses, another way is to invest, and lastly pay off your debts.  So lets go over some of these areas and talk about the advantages and disadvantages of these things when trying to increase the spread in cash flow.

Decrease Reoccurring Expenses

You may wonder why financial articles always seem to poke fun at weekly lattes and a monthly cable subscription.  It is not that the single expenses are expensive in and of themselves, but cumulatively they are very expensive.  Take the weekly Starbucks, or whatever brand you may prefer.  Say you spend $4.00 a week that is just $208 a year.  Not too bad!  But lets consider what it costs to maintain that habit.

Assuming a 4% yield after inflation on your investments, you need an extra $5,200 ($208 divided by .04) saved to maintain this habit.  And really most dividends and the S&P 500 index are not yielding near this amount currently.  So lets look at Vanguard’s S&P 500 index fund, the yield is currently showing 1.95%.  So lets say 2% for simplicity, you would need $10,400 dollars in the S&P 500 index to fund your weekly coffee without worries.

And this gets worse with more expensive habits like cable or satellite television.  Say you have some combo deal for $100 combining TV and internet and the internet will cost $35 without the combo pack.  So you are looking at $65 a month, or $780 a year.  Using the base of 4% yield you need $19,500 to keep your TV indefinitely.

It is important to note that these numbers above do not take in account the costs of taxes for your income, so it is possible that you may need even more to maintain these in retirement.  This is why when I find ideas to decrease expenses I like to try them out and if it worked for me I feel no shame in sharing.  Such as switching to a prepaid phone, making my own laundry soap, and cutting my own hair.  I read articles about people using Amazon prime, or how their membership works for them at Costco.  I cannot emphasize enough that this is one of the more important areas and why so many articles focus on it.  When you make changes in this area not only are you decreasing your future cash needs but you immediately increasing your cash flow allowing you to save more now as well.

Increasing Cash Flow Passively

Investing in Dividend Stocks

This is probably my personal favorite way to increase cash flow presently.  My favorite example of how this strategy works is the blog Dividend Mantra.  Jason has built a six figure portfolio on a middle class income in a small amount of time.  This is now generating a decent cash flow that will in time meet all of his finance needs.  There are many who argue that index investing is superior, and I would say that the overall returns are more than likely to be superior, but when you look at this form of investing from a cash flow perspective dividend investing is king.  You have a more stable stream of income and as a result a change in the stock prices will more than likely not result in a change in your lifestyle.

Land-lording or Real Estate Investment Trusts

I am no where near an expert in this area, but I must admit it is intriguing.  There are alot of blogs and resources that focus solely on this area of building income, one of which is No Nonsense Landlord.  This is an area that someday I may want to try out, but really I am not sure if it is for me or not.  Some of the risks include damage done by tenants and vacancy and I don’t desire to jump into this realm while having to rely on steady cash flow.  I think it is something you can either start early to get a feel for how things are running in your personal rental, or start later when the cash flow would be a bonus.  Personally I would like to try it out later when I don’t need the cash flow to live off of.

That said, you can still invest in real estate without directly owning a rental unit.  With Real Estate Investment Trusts, or REITs.  This can be a way to invest in a diversified market and remove yourself from the issues of repairing a unit and dealing with a vacancy.

Interest

Interest returns are not that great in the current environment, but that does not mean that will last forever.  Besides earning a respectable interest on your checking account, you can invest in bonds.  Bonds have different classifications upon their risk level, with ratings done in letters (the highest rank depends upon the agency).  Usually the higher the interest rate, the riskier the bond.

Now the odd thing about bonds are, in a rising interest rate environment, the value of present bonds decrease.  That is because in order to make themselves competitive with the current market rate, if you are to sell a bond then you must less it for less.  On the other hand, when the interest rates are decreasing the value of your bond increases to adjust to the current market interest rate.  If you buy individual bonds are hold to maturity you will receive the face value back regardless.  When interest rates begin to increase I may consider investing in some bonds to diversify in this area.

Paying Down Debt

The last area to improve your cash flow is to pay down debt, if you have any.  The thing about paying off debt is you will probably get the higher return on your cash flow in doing so, because part of your monthly payments include principle.  This does not mean it is the best investment, but it is more than likely the fastest way to increase your spread in cash flow.  That is why the method of snowballing is so effective for people paying off debt.  It is not that they will be paying the least amount of interest in this method.  But it is that they see perhaps the fastest result in decreasing their monthly obligations.

For example using my own debt, I showed a car loan in my last Net Worth update.  At the end of August it had a balance of $10,100 and an interest rate of just 2.75%.  The interest portion, or expense, is quite low so I would get a better long term return by investing the money instead of paying off the debt early.  But my payments are $2,400 a year, or just over 23% of the loan balance annually.  So by paying off the loan early, I obtain a much quicker return on cash flow.  So for someone who is in a dire situation cash flow wise, paying of even low interest debt can perhaps have the biggest impact for them on a monthly basis.

I am not advocating for everyone to pay off low interest debt instead of investing, but what I am saying is that it can be the right thing for someone to do who is struggling on a monthly basis to get some air.

What about you, what do you consider the most important aspect of personal finance?

Photo Credit: ddpavumba / freedigitalphotos.net

And I think the theme of last month had me personally a little off.  I just can’t seem to post every day and while thinking about living while I am dying, I would rather live a bit more in the moment.  Anyways, as of today I have found myself with some extra time in the short term so I hope to get everything up to date shortly as well as some posts set up for the future as well.

Loyal3 buys in October

I continued my regular stock purchases with Loyal3 purchasing the following: .1777 shares of Kraft (KRFT), .2164 shares of Microsoft (MSFT), .1652 shares of Kellogg’s (K), .3212 shares of Mattel (MAT), .2478 shares of Unilever (UL), .1085 shares of Pepsi (PEP), .1226 shares of Disney (DIS), .2343 shares of Coca-Cola (KO), .1336 shares of Walmart (WMT), and .1096 shares of McDonald’s (MCD).

Just $10 into each of the aforementioned stocks, or $100 in total and that is on a continuing automatic plan to ensure I earn interest on my checking account.  The system is really a win-win for me as I automatically invest fee free in these companies while continuing to earn interest in my checking.  These purchases together add as a whole about $3.14 in additional annual dividend income.  Not bad, every little bit helps in the long run.

Roth Transfer Finally Complete!

This process took some time but it has finally completed in October.  Back in July I talked about the fees in my wife’s existing ROTH account and then looked into options of where to roll this money into.  I had settled with Options House at the time due to the low $4.75 trading fee, but I need to make sure they will provide the $150.00 roll over credit.  I am not sure if it the process took too long since the funding was supposed to be done in a certain amount of time.  I will have to inquire about that, but hey, $150 is $150.  Anywho, here are the transactions that occurred inside this ROTH account:

Aflac (AFL)

This is more of an increase of a position as I already owned shares of Aflac in my other ROTH.  But with the decrease in share prices in October (although I did not buy during the best part of the dip, but did so in the first dip earlier in the month), I saw it as an opportunity to increase my position in this stock.  I purchased 22 shares, for $1,279.32 of this insurance company adding another $32.56 in annual dividend income.

Deere & Co (DE)

Like Aflac, this purchase was an addition to a previous position as the price of the business decreased I saw it as an opportunity to add more shares.  For $1,326.03 I received 16 more shares of ownership in DE.  This purchase currently adds another $38.40 in annual dividend income.

Baxter (BAX)

This is a new position for me in the healthcare industry in which I had no exposure through direct investments.  The price / earnings was a bit higher than I prefer to spend when looking for investments, but they have a good history of increasing dividends and with an aging population perhaps it is not too high?  I may have overpaid slightly on this one as the current value is less than the purchase price, but I am not too concerned about this long term wise.  I purchased 17 shares for $1,243.20 and this will add another $35.36 in annual dividend income.

Chevron (CVX)

The energy sector has been trading at very desirable P/E ratios for awhile and have actually trended down a little more after this addition to my portfolio.  I already had a position in XOM, but decided to pickup a competitor in CVX for some diversity as well as the strong dividend history of Chevron.  As I see alot of value in this sector I invested $1,413.49 for 12 shares increasing annual dividends by $51.36.

Visa (V)

With a much longer dividend yield and short history of dividends it would seem like this wouldn’t be the wisest dividend investment to make.  But it is important to consider future dividend returns, and considering at how much V is increasing their annual dividends, the yield for the initial cost of capital has the potential to surpass many other investments within maybe 10 years depending on the growth rate.  Now I don’t expect 20% growth rates forever, but if they can provide a solid 5 year span on 20% dividend growth before starting to taper down this investment can provide some great dividends in early retirement.  That and V has alot of areas to grow internationally unlike many other consumer giants whom have already encompassed the globe and need to reinvent themselves and deliver new products to grow.  That time will eventually come for V, but right now they can grow with their core business.  And every time I swipe earning cash back, I can be happy that I am also helping my dividends too.  This purchase was the most expensive of the month at $1,483.50 for 7 shares.  With the initial annual dividend of $11.20 already growing I am confident that it will begin to provide a good source of income in the future.

All together the purchases of stock in the ROTH account initially added another $168.88 in annual dividend income, however since these purchases there have been alot of announcements of dividend increases.

Dividend increases (and a decrease)

There has been alot of dividend changes it seems this past month with 7 recent changes in dividends.

• Aflac (AFL) has increased their dividend per share per quarter to $0.39 , up from $0.37.  With 45 shares this adds another $3.60 in annual dividends.
• Strum Ruger (RGR) has decreased their dividend per share per quarter to $0.14, down from $0.45.  With 25 shares this costs me $31.00 in annual dividends.
• Visa (V) has increased their dividend per share per quarter to $0.48, up from $0.40.  With 7 shares  this will add $2.24 in annual dividends.
• Microsoft (MSFT) has increased their dividend per share per quarter to $0.31 up from $0.28.  With 5.5581 shares before the increase the annual raise was $0.67.
• Kraft (KRFT) has increased their dividend per share per quarter to $0.55, up from $0.525.  With 2.7452 shares this adds $0.27 in annual dividends.
• McDonald’s (MCD) has increased their dividend per share per quarter to $0.85, up from $0.81.  With .1064 shares prior to announcement the annual raise is $0.02
• Unilever (UL) has decreased their dividend per share per quarter to $0.3637, down from $0.3842.  With .477 shares this costs me $0.04 a year.

Looking back I should have not made the RGR purchase being there was already one dividend cut before the purchase was made.  I also should have taken my loses when the first cut during ownership had occurred.  Now they had some abysmal earnings this last quarter and as a result they had cut their dividend dramatically.  Looking forward with the current pitiful dividend I don’t see too much downside holding onto the stock.  I have already experience the downside in losing the majority of the annual dividend income and the current stock price is quite low.  I think this provides a situation in where I should hold onto this for the time being and when they start to preform well in the future sell them and don’t look back.  Should have done so after the last stock cut, but there isn’t much to lose at this point and more to gain from my point of view.

Regarding Unilever I noticed that they are sporadic on their dividend payments after my initial stock purchase.  This is a small position obviously, but I would like to complete at least one entire share and then perhaps move onto another offering through Loyal3.  Others that have my attention include YUM, DPS, and TGT.  We shall see, it will probably be after the January purchase to complete a share and then make a decision if I want to change my automatic purchase to something else or not.

How about you, how was your savings this past month?

Full Disclosure: Long AFL, DE, BAX, CVX, V, KRFT, MSFT, K, MAT, UL, PEP, DIS, KO, WMT, MCD – Not long on RGR… willing to sell at cost if you are interested

Photo Credit: suphakit73 / FreeDigitalPhotos.net

Some examples are a recent euchre tournament I participated in at my Aunt’s.  Got to spend some good quality time with family, and some of their friends.  Although I was soundly defeated at rank eight of twelve participants, it is a bit easier to forgo my competitiveness and just enjoy the moments.  I have also made plans to visit my friend in Ohio in November and to watch the Trans Siberian Orchestra this December with my parents.  I have also spent some time just chillin’ playing video games so I am not without an excuse as to not doing an update on this blog.

But the more I think about it, the less I would choose to work.  Maybe I would feel differently at this point if I was actually outsourcing the other menial tasks such as cleaning or raking the leaves.  And I am basically near the end of the gauntlet of how much I would have to work before utilizing my available vacation time so I could maximize the life insurance payout for my wife.  I know many others have disagreed with me on this part, and I understand why.  If you are dying basically all of your time suddenly becomes more valuable.  Sure I gross less than $20 an hour now, but I still work.  Now compared to my original calculation of keeping the group life insurance by working for basically $400 an hour, the question remains, is it worth it?

I think that answer comes to a sense of sacrifice.  I sacrifice my time and my life for sooo much less now.  If I wasn’t willing to spend those hours now to help my wife after I am gone, then it also makes my current sacrifice almost meaningless.  And another aspect of consideration is what would I do with my time if I were waiting for her to come home from work?  In my final days, I want to spend the most time I can with my wife.  I don’t think I really want alot of spare time to just sit around and think about my impending demise.  I would probably start to feel more lonely or on edge.  Sure I am occupy myself during the day, but everyone else is still working.  The world does not revolve around me.

Anyways, after my little side rant there, I think the importance to keep in mind when looking at a proposed activity is to question, “Would I do this if I was dying?”.  That is really the best way to get yourself on track for prioritizing.

What about you, how do you decide what activities you want to do?

Photo Credit: ddpavumba / freedigitalphotos.net

Financially there are many things you can automate.  You can have automatic payments, automatic savings, and even automatic investing.  But you can use free tools such as mint to help track spending spending and growing their net worth when you are gone.

Right now, I do not use mint, but I have in the past.  I found a few things I didn’t like about it personally.  It would not separate the grocery purchases from the gas station run by the store.  Also, being my typical place to shop sells more than just food, it could not distinguish between the items from a single trip between food, household, or any other types of items I would pickup such as gifts.  So for myself, I found it to not serve my needs.  But for someone just needing to know how their spending is – in general – it is an excellent tool.  It can include accounts from most financial institutions, although it could not include all of mine which was another problem I had.

So using a tool such as mint and setting up automatic payments for things like credit cards, student loans, mortgage, water bill, basically everything possible, would ease the burden for when I am gone.  Most of that is already on automatic except the credit card payments as I usually just pay off the current balance at the end of month.  But also the investing strategy can be on automatic as well.  I would setup everything to go towards index funds and all automatic contributions and earnings to reinvest into those funds.  I doubt my wife has the interest, at least not currently, to learn about individual stock investing.  So this is another area in which I can help make things easier for when I am gone.

What about you, what sort of things would you consider automatizing?

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So if I am going to work, I need to get the most out of my remaining time.  That leads the topic to outsourcing.  I am thinking just about every mundane task.  Mowing the lawn, dishes, and cleaning in general.  For the last month I would hire lawn service to take care of mowing and raking while hiring some sort of housekeeping service.  I also considering eating out at a greater rate, but considering the time to travel to a restaurant, then wait to sit, then wait to eat after ordering, I don’t see this as a huge time saver.  Especially if I am paying someone to do my dishes daily while cleaning the house.  I think I would probably eat out more as a social occasion to meet up with family and friends, but I am not sure if a restaurant is even the place where you would want to have a deep conversation regarding your last days if you choose to tell that person.

There isn’t alot of other activities that I see would free up alot of time for me to spend with family.  But even at an unreasonable cost, it is worth it to outsource these tasks since I am choosing to work in this scenario.  I can basically deem any task less than $400 an hour worth it to outsource to make up that time at work.  Thus, freeing up as much time efficiently to enjoy those last moments and weekends.  So even more costly DIY repairs to cars or your house become affordable in comparison.

What kinds of things would you consider worthwhile to outsource if you were dying?  Is there something I am missing?

Photo Credit: Stuart Miles/freedigitalphotos.net

I am not sure who I would tell that I am dying, if I actually was.  Of course immediate family would need to know.  But what about more distant family and friends?  Would you rather just stop by, have a good time like how you are used to, or be burdened with constantly explaining to everyone.  Most things that kill you are obvious, but I am kind of going under the assumption that I would just cease to exist at the end of October for the theme.  Not that I would disappear, but that I am perfectly capable of doing what I do now throughout this theoretical experience.  So therefore, I would not appear to be any different despite the fact that I am dying.  So since it is not obvious, back to the question, who do you tell?

I honestly think the less people who would know the better.  The people who need to know can, but I would rather enjoy my time with everyone as if it were just another day.  I wouldn’t want to spend my time rehashing the diagnosis that I received.  I just want me to be me and my friends and family to be the friends and family I know.  But this opens up a different set of a can of worms.  If you know you are dying and somehow you end up if an argument with someone, would you then tell them?  I wouldn’t want anyone to feel a sense of regret that the last words between us were bitter.  But how does one go about not telling if there is an argument?  It is not like I have anyone I think I would argue with on a regular basis, but it is a fact that it can happen and would it just be safer to tell everyone so everyone can choose their last words carefully?

What would you do?  Who would you tell if you were theoretically dying at the end of this month?

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But this past weekend off got me thinking, that weekends are designed for a purpose.  You need that break, mentally or perhaps physically depending on the work you do, to recharge.  And if I was actually dying I wouldn’t be spending much time on here anyways.  Although I think it would be nice to leave something in writing for loved ones showing your thoughts during your last days.  But it is of utmost importance to live now, more than ever.

And living now doesn’t necessarily mean spending huge sums of money.  Some of the best things are free like this past weekend.  And many other great activities just cost your transportation such as Art Prize which goes on in nearby Grand Rapids.  Spending time with family and friends.

What about you, would you take some time to just recharge with your significant other if you were dying?

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If it wasn’t going to be so cold this weekend, I could just sit outside on our newly stained deck.  Or have a small fire and just enjoy the outdoors.  But we can always go for a bike ride and enjoy the outdoors and the wonderful colors that fall brings.  Or watching a sunset go down much like your life is arriving at its very own sunset, so to speak.  What about you, would you seek a moment of peace if you had 29 days left to live?  Or would you try to be as active as possible?