My Secret Wealth Goal

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Okay, obviously this isn’t going to be much of a secret wealth goal soon, but here it is anyway…

My “Secret Wealth Goal” is to have a Net Worth amount that is larger than the total amount of my “After College” income amounts for each year that I’ve been working.

An example would be if you worked for five years after graduating, and had a salary that was 20k for the past five of those years, your “After College” total amount would be 100k.  So if you invested those past five years too, and your Net Worth was 50k, you would be 50% of the way to accomplishing my secret wealth goal.

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Now in my case, my “Net Worth to Accumulated Salary” Ratio is 37.4% (my house equity isn’t included in my net worth number).   While the 37.4% is nice, I’m more excited that my yearly investment amount is growing fast each year!  This year’s investment return plus the amount I contribute to my 401k, Roth IRA, regular brokerage account and “side income saved” should come to over 70% this year.

Obviously a more immediate wealth goal is to have my “investments plus contributions” vs my current “earned” income ratio be greater than 100%.  Until I cross the 100% threshold there is no way that I can conquer the “Net Worth to Accumulated Salary” Ratio.  Much like my mortgage payments milestones, I’m thinking of creating another milestone spreadsheet to track both of these goals.

Seems like an impossible goal huh, but it’s not.  As my investment income keeps increasing, there should be a turning point where my investment and contributions amount will pass my salary (earned) income.  While it will be an awesome day when my investment and contribution amounts surpasses my salary income, the big goal is when my investment amount surpasses my accumulated salary income.

Much like a “coming of age” test, at this crossover point I should be financially independent!

Bests,

Don

Why I Bought Some Facebook Shares

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Yep, that’s right I finally broke down last month (in December) and bought some shares of Facebook.

Previously, I wrote an article called (Why I Passed On The Facebook IPO) where I described why I decided to skip purchasing shares of Facebook during the IPO of the company.  History proved that skipping out on the IPO was pretty spot on, but times have changed!

My goal was to buy some shares once the stock price dipped below $20 a share (which it did), but unfortunately money was tight at that time.  Even in December, I only bought a little over $1,500 worth of the company (at a price of $27.50 per share).  I’m late to the game, but hopefully early enough to catch a larger wave that will still push the valuation of the stock up much further.

Why I bought Facebook shares, even though I don’t use Facebook much.

  1. Mark Zuckerberg – I think he will be like a Steve Jobs, but not quite as a powerful presenter, yet.  The idea here is that he’s proven and has incredible drive and intelligence.  I think he’ll make it exciting for Facebook shareholders.  I wouldn’t be surprised if he doesn’t try to be the next Bill Gates.  Either up or down, it’ll be an exciting ride.
  2. Untapped Monetization Potential – They have over a billion subscribers.  And even if only half are active, they have all that data on them that could be a gold mine for selling to companies (if they went evil).  Could you imagine how much the sales team of other companies that sell products would pay for such information?  Instead of a 1 to 5% success rate for a company using cold calling, their success rate might be in the 20 to 50% range.  Not to mention that all of the email addresses of all the Facebook members could sold (and by product interest probability to boot).  They eyes in the Facebook website is only half the story, the data warehouse of information on each user in Facebook is a data miner’s dream come true.  Both the the previous options are just the tip of the iceberg.  Most likely they won’t even pursue those option, because of the direct Advertising models they could implement.  I’m not even being creative here, the possibilities are far reaching.  Shoot, they could change the sales landscape with just a little bit of effort (watch out Amazon)!
  3. Momentum – All of the cool financial analysts and advisers are now on recommending Facebook…  Perception is reality.  Even if there revenue for the up and coming quarter is flat (which I doubt it will be), the analysts know the potential that the company has and I think they wouldn’t let mediocre numbers affect their rating of the stock (and company).
  4. Facebook is young – This platform can continue to grow.  It’s a single platform but multifaceted!  It’s a social engine, but the code base is something that can continue to grow larger and more useful over time.  I think once the Facebook teams realizes that instead of trying to make the product harder, it could really take off.  Some point in the future, they will have to realize that the audience that they are coding for aren’t themselves and needs to be written so that the average user can use the product without getting a headache.  But what do you expect from a new, young software company?  Eventually they will see the light and make Facebook user friendly, after all they have to be bright people right?

Here is my free advice to Mark and the Facebook team, do I expect them to read this… of course not lol.

Make the site more friendly for the average person or the LCD (lowest common denominator).  If you want more complex interfaces, give the users the option of alternative interfaces so you keep all of your users interested and engaged (no Henry Ford color options in these times).  Your site no longer appeals to the normal male audience (or at least the ones in my backyard), you need to think about that segment of the population and how to re-engage them, while at the same time keeping the female population interested.  Again, this is where the different front-end interfaces options might come into play.

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Anyway, just thought I’d share my thoughts.  What do you think, is the Facebook stock now a good investment?

Best,

Don

Financial Thoughts Spinning in my Head

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Today, I thought I’d break out of my normal style of writing and openly think out loud the current set of financial thoughts that are spinning and bouncing around in my head.   All too often, we read a direct organized list of things to consider and while this will be similar, it will also me my thoughts as it directly pertains to me.

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Taxes For Next Year

Okay, just sold a stock for an almost $4,000 capital gain (doh).  While this might seem like a positive (and it is really), it’s also a problem because I now owe 1k in taxes on the third day of the year, grrrr.

This in combination of the fact that my wife doesn’t withhold 25% of her earnings, and that I plan on making money this year from side income means I’ll have to take this into consideration from a Tax perspective.  Now I could save and file estimated tax payments 4 times a year, and this wouldn’t really be an issue, I’d rather not.  So to keep my lazy ways, I’ve decided to increase my withholds by $200 a paycheck from my primary employer.  This should cover the increased taxes that I need to save, and still give me some money leftover next year when I file my taxes.  Yeah, I know it’s stupid, but in this particular case, lazy trumps stupid.

Decreased Cash Flow Considerations

Well, I’m officially at the phase in my financial life where wealth accumulation is very important to me, and so in response, I’m channeling as much money from my earnings as I can into investments.  This will be a year-long battle, much like it was last year for me.  By taking $200 out of my paycheck per week, I may have to live a little more frugally this year than I did last year.

Kids 529 Thoughts

Time to increase my automated contribution amount for my kids 529 plans by another $20 per month this year.  $20 a month doesn’t hurt too badly, so this shouldn’t be noticeable (I hope).

I also need to make 1 direct contribution to a new mutual fund option in the 529 plan so that I can split the automated monthly contributions between the current “age based” option and the new “indexed something or other” option.

Investments

This year my mind is in a tug-a-war between dividend and growth stocks.  The ideal stock would be a solid growth company with an ever-increasing dividend.  I have a lot of things bouncing around in my head on this one.  I also need to invest 10k in a car debt experiment (more coming on that in future articles).

Controlling Consumption Spending

Life is short, too short to be too conservative with money.  So this is where the mission impossible theme song starts playing in my head, since I want to also spend more this year on fun stuff.  This might be possible if I actively seek out the best deals on things and/or increase my income by about half.  I guess, this is my stretch goal.

Making Money

I would very much like to increase my “employed” and “side” incomes by about 50% each.  To be honest, if I were to just increase one of them two distinct steams by 50%, I’d be pretty happy.

That said, I might also look for a new job.  I haven’t done a job search in years, but this feels like the year for me to put out the feelers to see what there is out there in the hard, cold, world (lol).  If I do get a new job, a lot of financial reworking will need to be done and a lot of the above thoughts go right out of the window.  But if I can find a job that fits me better and still pays a reasonable amount, I’m jumping!

Well, there you have my thoughts.  If you’d like to share some of your financial thoughts, please feel free to comment!

Here’s to the new year!

Don

The Genius That Thought He Was Stupid

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Today I’m going to step outside of the finance and money world and tell a story about a friend that thought he was stupid (actually retarded to use his exact words).

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First, let me describe my friend’s background…

He comes from a broken home, where much of his early life was he constantly moving, which includes living in bad neighborhoods and even basements at times.  Eventually his mother remarried and he now had a new family that he was apart of.  His new dad’s siblings was well-educated and intimidating to him.  Some of his step-dad’s brothers and sisters had earned top marks in school, with one even being a valedictorian.

He told me that he didn’t try very hard in school, and many of his family members downplayed the value of school even, still without even trying he was able to get Bs and Cs.  He thought that all the other kids in class must not have read or did any of the homework based on their answers in class, so he stopped reading and doing homework too.  Eventually the teachers started sending notes home, and only then did he put in a half-hearted effort.

Okay, the background is set, now onto why he thought he was stupid.

One of my friend’s new aunts (who was a TA in college at the time) brought home an IQ Test and wanted her brothers and sisters to take the test on some holiday when they were all together.  I think he said it was the Stanford Binet IQ test, but I can’t remember if that’s what he said for sure.  Anyway, they each took the test and after everybody took the test, she suggested that my friend take it too.  He resisted at first, but everybody egged him on so he took the plunge.  He said that he thought that she was trying to use him as a comparison for her family, and to say basically that her brothers and sisters were more intelligent.  After all, she was kind of like that and everybody in his step-dad’s family knew that his grades were mediocre at best.

So he went into a quiet room with a timer ticking, like the rest of the family did when the took the test.  He said that he remembered feeling like he did okay, and was surprised how easy the test was.  At least until his step-dad’s sister scored the test for everybody…

Below is an example of a Bell Curve that the scores were plotted on:

bellcurve

Now most kids would think that the top of the hill is the best location to be, and that’s what my friend thought too.  So he was pretty embarrassed when his new aunts and uncles were higher on the bell curve with scores near the top of the strange bell curve, while he was very close the X axis 0 staring point.  Thinking that having a 0 score was bad, he naturally assumed that he was retarded in some way to have such a low score so close to the x-axis.  His new step-dad x and all his sisters and brothers were higher up the hill than he was.  The brother that had a score almost as low as his was his dad’s brother, who was an engineer, but he didn’t know what that meant at that point in time.  Ironically, all of the other brothers and sisters picked on the brother that was an engineer, and that brother was always joking and clowning around.  So in his mind, he said that it made sense that the brother would be the least intelligent of his new step-dad’s brothers and sisters, or at least so it seemed back then.

He said he couldn’t remember if he was near tears, but he must have been because everybody came to his aid, telling him that he scored the highest of the group and did most excellently.  This just made him feel worse though because he still believe that near the top was a higher score, and if he was stupid, such manner of speaking to him to make him feel better would be excepted.

So he left that house that day thinking that while he didn’t think he was retarded totally (after all, who get a 0 on a test?), he must be stupid.  He also believe that he must have performed poorly on the test.  And so for years, he thought he was slow… kind of ironic huh.

Anyway, I thought it was a funny and interesting story that I would share.

Bests,

Don