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

Why Increasing Minimum Wage By Doubling it to $15 Is Harmful For The US

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The current Federal Minimum Wage is $7.25, but there is a “doubling” proposal by various group and media channels that are interested in increase it to $15.  Personally, I think that is a very bad idea, and below are the top reasons why:

Why Doubling the Minimum Wage is a bad idea

  1. Small Employers and small companies starting out will be squashed.  Companies, much like human are born small with a small footprint.  Over time they grow and become larger, at that point they can afford to spend more money because they have more financial leverage to do so.  In fact, as they grow, they make more money by purchasing more skilled labor in the process.  In the recent past, I’ve thought about starting a small business, but I would had a hard time making the finances work because of all types of cost, including human labor.  If minimum wage is increased to over double the current rate, there is no way I could start a business with employees, which leads me to the next point.
  2. Human labor becomes too expensive with wild increases, especially in the United States.  Companies would offshore or automate everything as much as possible and continuously, just to survive.  This isn’t a matter of companies being spiteful, it’s because they couldn’t compete in the market place with such a high US labor cost.  This is basic economics that most people don’t understand because they haven’t ever read economic theory or even had a business where they hire human to work for them.  When the average US worker is paid around $20 in US dollars, and the average Chinese works is paid less than $2 in US dollar, I think making the US less competitive by raising the minimum wage by double seems like a bad choice for US employment.  We all know that the average wage would increase by at least 50% if not doubling itself.  Making the US much, much less competitive in the proverbial “global” marketplace.  Old economist think we still operate in a vacuum, but we don’t.  Now our competition is the guy next door, and the guy next continent over.
  3. Minimum wage is wage minimum, not average wage…  Increasing minimum wage to “average wage” makes it hard for young people to become employed because they are too expensive to train or hire.  I’ve been brainstorming this, and perhaps it makes sense to have different minimum wages based on age and living circumstances.  I’m still playing around with this idea and I might expand upon it in a later idea in a separate post.
  4. Increasing the minimum wage to double the current rate will have an inflationary effect, and at the same time reduce employment.  If I were a small employer, I’d have to increase the price of the product or service that I sell to the public by a big jump, in some case by double and at the same time I would automate and do as much as I could as possible so I could have a viable business.  The sad thing is that the unemployment might not even show the decline in employment because unemployment isn’t the total number of people unemployed.  if you stop looking for employment, you are no longer counted in the employment number… bad statistics, bad… sort of… lol

 

 

Flat-World

Okay those are the main thoughtsI wanted to convey.  I believe in what I typed above and without the intent of trying to sensationalize this communication, which is so common in the media anymore.  Think of it from a consumption standpoint,  Would you still buy milk if it cost $7.00 a gallon instead of $3.00 a gallon (I know, my math seems weird until you realize that there are more costs with a doubling of the minimum wage than just the actual minimum wage itself)…

From an economic standpoint, increase the minimum wage by double would be a bad move and I’m sure it won’t pass Congress.  Sadly certain News media channels will jump all over that story, trying to portray the Congress (and in particular the Republicans) are the bad guys, but in reality they are just protecting you by keeping the country from going into a massive decline and a steep rise in unemployment or underemployment (know that we know the number is not entirely accurate).  The media channels know this, but the sensationalism of the story brings eyeballs to their channel or site.  Kind of sad that a story becomes first than the accurate depiction as to what could happen in the country.  I wonder if the media will ever right itself, or will they just keep pimping themselves out by dishing untrue dirt for profits?

Please share your thought either way if you’d like,

Don

Proof That Buy and Hold Still Makes Sense

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After the shock and hit from “The Great Recession”, everybody and their cousins came out and said that the “buy and hold” strategy doesn’t work and the days of 9 to 10% annual returns were over.

So, I decided to come to the defense of the buy and hold strategy once again.  Back in one of my earlier articles called, “Is Buy And Hold Investing Dead“, I stated that I was basically going to stay the course and not deviate much from that philosophy.  As a result, I’m happy to say that my Annualized Return is above 9% again (9.3% to be exact).  While this number is not quite as great as if it were 10% or slightly higher, I’m still pretty satisfied that it has jumped back up to a normal level.

It’s true, Warren Buffett is definitely not quaking in his boots (I this he averages over 20% annualized), my 401k return is still a decent enough to be satisfied with it.  In other articles I mentioned that I wanted to rebalance my portfolio more, but alas I haven’t…

So the chart below is pretty much a Buy and Hold strategy, along with the added benefit of a dollar cost averaging element in place too.  While the bull market has been running for quite a while now, I still feel confident enough to say that the basics of a buy and hold strategy has worked well enough for me personally.

BuyAndHold2014

Not much more to say, the picture above says it all up to this point.  Tomorrow, who knows…

Thanks,

Don

Can You Really Negotiate Rent Prices

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You might be wondering can you really negotiate rent prices

A landlord has the right to increase your rental rate once your lease expires. At that point, you will, of course, have had a heads up of this happening. So should you sit around and just accept it or move out? No, you should try to negotiate your rent. Negotiation can be done based on monetary value as well as time saving factors. The worse that can happen is your landlord says no.

Review Your Good Tenancy with Them

Talk to your landlord about how much you appreciate your living situation. You are a good tenant, and it is worth their while to keep you there. You pay your rent on time, the place is in tip-top condition, you’re helpful to your neighbors, and are friendly to all passersby’s. Your landlord has never had any problems out of you, so why increase your rent making it unfavorable to you, which may force you to move?

Pay Up Early

Another rent negotiation strategy is to pay your rent early. Think like a landlord for a moment. There is nothing better than receiving their rent on time, except receiving it early! The earlier they can turn in money towards their mortgage, the faster they can pay off that loan. If they own the building outright, they can apply this money towards other expenses they have.

Sign an Extended Lease

Agreeing to an extended lease can go a long way. Your landlord will appreciate knowing they have a dependable tenant that pays on time. So instead of a standard one-year lease, agree to two years.

Show Your Landlord It’s to Their Advantage That You Stay

When a unit turns over, it’s not as simple as just a new tenant moving right on in. Your landlord has much to do to get the apartment rented again. Point out these expenses and timetables to your landlord if you were to move:

  • Advertising expenses for the unit’s opening
  • Screening applicants
  • Repairing and cleaning the apartment
  • Taking the time to show the apartment to multiple applicants

When you point out how they would spend between $400-$900 on all of this, keeping your rent as is or raising it to no more than $30 a month ($360) is a killer savings for them.

Don’t Be Over Excited

If you love a place don’t let on to the landlord that you do.  If they feel you want it you will lose some negotiating power.  Always look at places only when you check your emotions at the door. This will give you the opportunity to compare properties against each other and negotiate a better deal.

The above four strategies should help you negotiate the rent on your unit. If you both come to a compromise, you’ll save time and money.

What do you think?

Chase