Category Archives: Wealth

Are You Running in the Wealth Accumulation Race?

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I hear people complain about not being wealthy or people complain about “so and so” being wealthy, but I have to ask, are you even trying to become wealthy? Are you participating in the Wealth Accumulation Race?

The wealth accumulation race involves a few thing to participate:

  1. Frugal habits – spending too much money on coffee, cigarettes, and booze just won’t cut it and of course, these are impulse items. My advice, “Think on it for a while before buying”.
  2. Investing money that you have saved from your Savings Delta. If you don’t invest, how do you expect your money to help you become wealthy?
  3. Believe… You have to believe that it’s possible! This is important because if you don’t believe there is a great chance you won’t even try. It’s simple, but half of the wealth accumulation race is believing it’s possible.
  4. Your spouse needs to be on board too. If you are saving and your spouse is spending as fast as you are saving, you will never get ahead.
  5. Don’t fear small market downturns. This might not be as obvious, but sometimes you’re going to lose money in investments. Either do more research or invest in a good index ETF.
  6. Sacrifice, yes, if you are not born into wealth, you will have to forgo some things to get ahead… such as a vacation each year, eating out as much as you want, drinking, smoking, etc.

So if you are not doing most of the steps above, how do you ever expect to get wealthy? Luck is great, but most of us don’t have such financial luck, so lottery tickets are out of the question.

So what next? Do the 6 steps above and see how far you go over a 5 to 10 year span of time!

Thanks for reading,

Don

Year End Financial Results 2016

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Well, it that time of the year for reflection on how the year went!

My secret wealth goal has only improved a little, but this is not necessarily a bad thing!  I’m making a bit more these past few years, so much so that my wealth growth delta amount is just barely passing my accumulated earnings delta change.  If my salary was static, my wealth goal would be improving, but currently its growth is just a small improvement.  At a certain point, my secret wealth goal has the potential of having parabolic growth instead of the linear growth my accumulated earned total income amount.

The tail end of last year and this year has enabled me to cross a few of my wealth accumulated milestones!  While I’m not going to go into deep details, a couple of my thresholds have been crossed.  So much so, that I’m now coming up with new financial and wealth goals.  Including some that might go beyond my personal financial scope and instead enable me to help (albeit in a small manner) other with their finances.  This is a stretch goal for me, but I think it’s worth the risk and if I do it right!

Okay, on to my financial pyramid (or wealth pyramid).  Lately since I passed over into the green outlined region, the pyramid for me is really more of a wealth pyramid now instead of a financial pyramid.  And if you have read my blog from the beginning, you know that I mentioned a few time the concept of financial “critical mass”.  Well, while I’m still not rich yet, I believe that I have enough “critical mass” now to try a few financial things.  Hopefully, I’ll have more financial experiments in 2017!

So speaking of my financial or wealth pyramid, where am I now?

If you look at the pyramid below, I’m somewhere about 5 to 15% up into the lower Upper Middle Class area.  While I believe I have the core credentials to be considered Upper Middle Class, I’m still frugal and personally do not reflect the class that some could consider me to be apart of.  My kids and their friends too, belong to the the Upper Middle Class more than I do (and not sole because of on my efforts).  I still wear clothes that are 10+ years old, and wear shoes until they have holes in them.  Old habits are hard to break, and this is the way I was raised, so in many ways, I will never really be a part of the upper middle class class… no matter how far I’m able to climb on the financial pyramid below.

Financial Pyramid

I’m starting to think that in many ways I’ve been incredibly fortunate and lucky financially, especially considering where I started at, and in my opinion, how the cards were not exactly in my favor.  I definitely didn’t have a silver spoon in my mouth growing up, and I was actually born with a black eye.

Recently, I went through some old spreadsheets I created ten years ago, and believe it or not, but my wealth level is almost exactly what I predicted it would be at.  I’m just a little bit head because of the year-end “Trump rally” or “Santa Claus rally.  It just shows the power of planning as realistically as possible.

So my financial life is good overall, my kids seems pretty happy and fulfilled and I’m okay.  Overall, if I were to grade myself, I now think I would be at an “A-” level, so this new outlook is a small wealth advance from my last grading where I considered myself at a “B+” level.  It will be difficult to achieve the grade of a solid A though…  To accomplish that level, it may take me 10 years…

Here is wishing you all a great new year in 2017!

Don

My Personal Route to Financial Independence – Wealth Swimming to Shore Analogy

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I’ve been swimming to shore financially for the past 2 and a half years since my last update!  The shore is the closest it’s ever been!

In fact, if I let my body submerge under the water straight down like a pencil, my feet touch bottom and the water line is only about a foot or so above my head.  I consider this great progress for me, especially after the last gut-tearing years!

Gulf of Mexico Sunset

Captiva Sunset

I’ve stuck to my simple, financial philosophy by being a big saver and practicing frugality all along my swim.  My trusty spreadsheet being my only real tool in addition to my continual struggle and determination.

So as I shorten the distance to the shore, I realize that I’m exhausted from a financially focus perspective.  I find myself continually played around with the idea of taking an overseas or Hawaiian vacation.  We can do it, but it would be a major slip towards my process financially. but it is always nagging the back of my brain…

Financial Independence is still my primary goal, but now I’m also focused on increasing my household net worth percentile.  this make the wealth accumulation process more measurable for me and enable me to track milestones.  That said, it also make each progressive milestone that much more difficult to obtain.

If I had used a mountain climb financial analogy, instead of my current swimming analogy, I would say “The air is getting thinner and it’s getting hard to breath!  Progress is now more of a slow crawling kind of process.  This makes sense because although my net worth is increasing at a decent clip amount-wise, It is much harder to move up to the next percentile level because of the huge steps to get to the next percentage point!  For example. to move one’s net worth percentile position from the 70% level to the 80% level, it takes about 200k for the 10% increase.  But from 80% to 90% it’s 400k for that 10% increase!  and if you go from 90% to 95%, it’s over 800k (more like 900k actually) for just a 5% increase…(depending on which survey of wealth percentile stats. that you use from the government).  Those upper percentile are starting to look intimidating!

Still, I swim on… The stock market has really helped me by coming back quickly as it has rebounded from the dip from the Great Recession.

With my financial pyramid, I’m still at the doorway of the upper middle class though, maybe I moved a few inches inwards, but not much overall.  So I still consider myself a kind of “lower upper middle class” guy.

To read my previous update on my progress, you’ll have to read my article back in 2012 called “Progress on Financial Independence – Still Swimming to Shore“.

Thanks for reading my financial progress article, I hope I have more good news with the next article!

Thanks,

Don

The Real Financial Independence Crossover Point

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The crossover point of financial independence isn’t where you’ve been told.  Let me explain…

You see the crossover point where you are now considered financially independent and work is optional isn’t really the point that you think it is, instead it is just another financial milestone on the journey to financial independence…

The real crossover point of financial independence is much higher that point where your income equals your expenses.  So let’s say that you calculate that you need an even million for financial independence.  So if you have one million, and it was investing in such a way that it could provide you with a 5% yield (via a combination of bonds, stock dividends, real estate, etc), that would provide and income stream of about $50,000 a year.  For some of you 50k a year might not seem like a lot, but financial independence isn’t about a luxurious lifestyle, it’s basically the point where you can stop depending on earned income (your job) to survive at your current lifestyle.  So while 50k might not seem like enough, it’s past the point where you have to depend on a job to survive (at least most of us).

BusyOfficeMan

So why isn’t this the end of the story?

Because of market volatility and other unpredictable variables could move your “financial independence” point below what it is currently.  For example, let’s say that you have stock in a stalwart company you thought was rock solid, but it was ended up having some kinks in it’s armor, so that suddenly, the stock price decreases in value by 50% or even more, and as a result, it axes it’s dividend entirely.  Well, that puts you in a bind because suddenly you could have an income stream that is much lower than the 50k you thought you would have.

So what is a closer representation of my “financial independence “point?

Well, while there is no set in stone answer, I’m personally shooting for a number that is 50% higher than my “old” financial independence number.  So instead of 50k, I’m shooting for income stream of $75,000.  So for hypothetical nest egg amount, instead of 1 million,  I should shoot for 1.5 million, but since there is also taxes to consider I actually bumped my number up to cool 2 million dollar.

The point of this post is that you should overshoot your mathematical “financial independence” point just to have a cushion for variables that are not currently predictable.

Bests,

Don