My Mission Trip 2012: Homestead, Florida

Last week I travelled down to Homestead, Florida which is about 30 miles away from Miami, Florida to volunteer with an organization called Sembrando Flores. According to the organization’s mission statement,

“The mission of Sembrando Flores is to reduce the spread of HIV/AIDS in the communities of South Dade by addressing substance abuse, mental health, poverty and violence, using a public health, faith-based, compassionate care model, providing free services.”

The focus of our group’s trips was to help with a monthly event called, “Test Miami.” At these events residents in a high-risk area are offered free HIV, STD, glucose and blood pressure screenings. To help encourage residents to attend the event, the first 75 people screened received a free bag of groceries. All who were screened also received for free lunch on-site and clothing.

The day before the event our group canvassed the neighborhood armed with flyers to help promote the event. I was nervous and uncomfortable at first. The high-risk area was impoverished and it is a far cry from the normalcy that I am used to in my north side Chicago neighborhood. I was surprised, relieved, and oddly felt blessed that the residents in the community were so receptive to talk to us and learn about the event. I did not receive a single cold shoulder and everyone I approached could not have been more welcoming. The unease I felt when we began was immediately wiped out by the openness of people within the community. People I met shared their stories, talked about their neighborhood, and thanked us for being there. I was then and I still kind of now, am at a loss for words.

People are in need of help and we do not have to go outside the borders of the US to see it. I don’t intend to get political, but one of the heartbreaking things to me when walking the neighborhood was that at first people thought we were representing political groups and were there to van people over to voting polls. What I find repulsive is that political groups, who are supposed to be “helping people,” only venture into these at risk neighborhoods when they want something from the community à their vote. That is pure exploitation and it sickens me.

For me I do not venture into at risk areas to exploit anyone. For this mission trip, add to that any missions trip I go on, my goal is to help people help themselves. With the testing being offered by Sembrando Flores, the concept is that people in high risk areas become empowered with information about their own personal health, and if diagnosed with anything from high blood pressure to diabetes to aids, within 30 days the organization sees to it that the individual begins treatment for their condition.

It was a moving experience to be a part of this program and see an amazing organization like Sembrando first hand. The day of the event was just as moving as our group saw up close the needs of people in the community. A free bag of groceries and free clothes went a long way for these residents and their gratefulness completely moved my soul. As I continue on my journey on financial peace road, I am certain that volunteering, helping others and giving in a meaningful way for others, will be a core piece of how I want to utilize my time, talents and resources.

My Television Transitions

We’ve had an interesting history with televisions since we moved to Chicago. During our five years here we have owned 3 televisions and have dramatically changed our viewing habits. In my opinion, what is even more noteworthy is that 3 televisions in 5 years have cost us a single cab ride. Allow me to elaborate:

Our First Television

Our first television was an ancient hand me down that came from my wife’s grandparents farm house. It was a boxed TV with rabbit ears that came straight out of the 1970s and looked exactly like this one, with the old school knobs and all. It served its purpose and provided us with grainy coverage of television shows. Back then we rented an apartment that included a basic cable package. So we jimmy-rigged the thing to sit at eye level when we watched the tube, which was just about nightly back then. While grateful for the TV provided gratis, we kept our eye out for better options without having to pay for it.

Our Second Television

By this time we had moved apartments and discovered freecycle.org. We had a laundry list of items we looked out for on posts and one day we noticed, a few blocks away from where we lived, was a posting for this boxed TV. Sure it lacked high definition but it got the job done. At this point in time we did not subscribe to any cable or satellite packages and were exclusive to regular viewing channels, watching DVDs from the library and playing Super Nintendo. But tragedy (or as I saw it opportunity) struck when the nationwide Hi-Def upgrade went into effect a few years ago. This TV was unable to keep up and we lost the ability to view any form of broadcast programming. I opted not to buy a converter box in the name of doing things other than watching TV. Since then I’ve had an increase in volunteer time, read a ton of books, made time to hit the gym, and my personal favorite, spent more time talking with my wife after work. So this was the status quo for a while, until this baby landed into our lap.

Our brand new Television

To be honest we weren’t actively looking to upgrade televisions. Our viewing habits are trimmed down now to a DVD rented from the library maybe once a week and the occasional Mario Kart race on our Super Nintendo. But every few years my wife’s employer does an upgrade of office furniture and she was on the receiving end of this bad boy. Getting this home though was quite the endeavor as I have come to realize that there is a severe shortage of sizable cabs in Chicago. It took us one weeknight and one weekend morning to flag down a large enough cab to bring this home from my wife’s office and I ended up using about $20 from our entertainment envelope to pay the fare, but I think we came out ahead on the deal! J

In five years we have owned 3 televisions that cost a cab ride from the Loop to the North Side. And here it sits in our living room as evidence that frugality, patience and a little luck will go a long way.

My Changing Goals

There have been some interesting conversations within our household the last week or so that generated some intriguing insights that I’d like to share with you today. Up until now for just about the past 4 years my wife and I have been following Dave Ramsey’s baby steps just about to a tee. We established our baby emergency fund and then proceeded to pay off all debt, $80,000 in all and in doing so we have happily become a debt free couple. From there we raised our emergency fund to 6 months worth of expenses, began to save for a house, set aside 15% of our gross income towards retirement, began to invest in a taxable brokerage account and started saving for what will be contributions to our future kids’ Educational Savings Accounts.

Where the rubber meets the road is in the long term approach of our game plan. When we were early on in our baby steps we had definitive goals that had end dates that ranged from a matter of months to a matter of years. Being on the latter side of the baby steps is a marathon and not a sprint. The saving and investing that we do now is for long term wealth building. Unlike when we were working our debt snowball, the 15% we set aside for retirement, at the earliest through our ROTH IRA, has a “do not use” date attached to it for when we turn 59 ½.

“But what about living on investment income BEFORE we get old?” This has been my wife’s chief concern that she brought to the table at our most recent household budget committee meeting. And she has a valid point. It would be wonderful to live off investment income well before we become eligible to do so through our Roth IRAs. But to do that we have to prioritize it.

Since we became debt free I feel like we’ve been trying to do too much and are not utilizing the power of focused intensity. Between the two of us our top laundry list of things that we want to prioritize include: paying cash for our first home, saving for retirement, regularly saving for vacations, planning a big vacation trip in 2013, investing outside of retirement vehicles and moving to a new apartment.

I definitely agree with you if you feel that is a long laundry list. So we’ve decided, after much debate and negotiations to focus on a few goals at a time. Under 2 umbrellas, for the next 2 years we will be focusing on savings goals (our first home and increasing investments in our taxable brokerage account) and travel goals (moving, vacations). While scary to me (fitting with Halloween being tomorrow) you notice that retirement saving is not on the aforementioned priority list. As my wife happily pointed out to me, currently we have $40,000 set aside in retirement between our 401ks and Roth IRAs. If we do not invest another penny and assuming 12% average annualized returns, at 59 ½ this will grow to over $1.8 million dollars. Now of course as we move through these new “shorter” term goals eventually we will get back to regularly contributing to retirement and saving for our future kids’ college.

But like the debt snowball, there are greater forces at work here. Our plan is essentially two-fold. By lumping together moving expenses, regular vacations and a big ticket vacation in 2013, we established a total number that we need to hit by about mid-year next year. So we have changed our budget to take a sinking fund approach to fund these endeavors and put these travel goals on auto-pilot. With everything else that we can squeeze out of the budget we are saving for our future house and increasing contributions to our taxable brokerage account. By the end of 2014 we plan to have more than enough funds to buy a home and be on our way through the brokerage account to live off its investment income by the time we are 50. For 2 years we will pause retirement investing to hit these goals.

I’m excited, nervous and definitely out of my comfort zone. But I’m looking forward to sharing our progress with all of you as I continue my march from 0 to one million.

My Financial Planning Day Adventure

This past weekend my wife and I were happy participants of Chicago’s Financial Planning Day held at the Harold Washington Library. We participated in two events from that day. The first was a lecture on retirement planning and for the other we met with a financial advisor to have an outside perspective on our financial picture.

The Lecture

The presenter on retirement planning thoroughly surprised me, in a good way of course. I wish more financial advisers were like this guy. He definitely had the heart of a teacher and gave a good amount of straight talk. Although I have my own goals and pathways to retirement, this was a great gauge for me to listen in on questions and concerns from the general audience, I got a temperature gauge, if you will, on what common concerns are from people regarding retirement.

It was disheartening to hear the bulk of Q&A shift towards Social (In)Security. When to file, when not to file, when to file and suspend; All of these cares and concerns lead me to one conclusion – that those close to and near retirement are counting on this failing government system to provide income for them in retirement. This gives me an even greater motivation to write this blog. In my personal planning my goal is for 99.999999% of my income during retirement to come from my personal investment income from retirement vehicles (401k, Roth IRA) and taxable investments (brokerage account). The theme here is that I am planning to rely on myself, not the government, for my general well being.

Overall I thought the presentation was excellent. The adviser focused on investing for the long term and actually shared a lot of the same views held here at from 0 to one million, even down to a general dislike for target dated mutual funds! J

The Financial Advising Section

So here was my plan going into this part. I would present a financial advisor with our household’s overall financial picture. I would share my thoughts and concerns, and the advisor would show me holes in my plan that I have never thought of and offer tidbits on how my wife and I could improve our finances. Instead, as my wife lovingly put it, the advisor was shell-shocked with our current financial picture and, I quote directly from the advisor, had said, “I just don’t see many people in your situation.”

It was actually very humbling to hear a trained financial professional say that we have all of our ducks in a row. Most of our financial planning has been self-taught through trial and error and I was taken aback to hear, from someone who meets with people day in and day out, that we are on a strong financial path. So the bulk of our conversation focused on wealth transfer planning and long-term care insurance.

Overall I thoroughly enjoyed the event. So I highly recommend, when financial planning day comes to your town, to check it out and gather all of the information you can to make well rounded and educated decisions about your personal finances. I’ll end today with a quote that is kind of relevant to all of this.

“Where no counsel is, the people fall: but in the multitude of counselors there is safety.”

Proverbs 11:14

My Black Monday Reflection

25 years ago today was Black Monday. The Dow Jones Industrial Average, in a single day, fell 22%. I bring this up, especially today, because I am seeing a large number of financial pieces out there today and I too wanted to add my two cents. I would love to say that the bulk of pieces I have been reading today are positive, uplifting and reflective of what has actually happened in the market since then, but alas I am left to be the voice of reason. Or, to the financial goobers out there, I’m the crazy guy on the street corner that yells nonsensical and unsophisticated things to anyone who will listen. But you can decide for yourself which side of the fence you think I am on.

In a single day the Dow took a dive. It had closed on October 18^th, 1987 at 2,246.74 and on October 19^th, 1987 closed at 1,738.74. This fact reflects that none of us can read nor anticipate future events and what specific effects they will have on the stock market. Reflections from that day state that there was blood on the streets. Investors (institutional and individual) shed stocks and ran to “safe havens” such as bonds and even some to cash as the Dow dived on that fateful day, and that is a damn shame.

I advocate consistently investing over a long period of time, regardless of what is happening in the market. I began my life as an investor right before the freefall in 2008. Since then I have consistently and steadily invested through my retirement and taxable brokerage accounts monthly without regard to what is happening in the market. I’ve bought when it’s up, I’ve bought when it’s down and I’ve bought everywhere in between. And to this day I have average annualized returns that are beating taxes and inflation, and I expect them to do so with emphasis for the decades to come.

But back to the subject at hand. On Black Monday the Dow fell 22% and there was blood in the street. Just a little over a year later, on January 31, 1989, the Dow restored itself from Black Monday by closing at 2,342.32. From Black Friday through January 31, 1989 the Dow went on a run fit for a bull, going up 26%. If you had “nerves of steel” and invested $1,000 when everyone was jumping off the roller coaster, by the end of January in 1989 that would have turned into over $1,200.

But I don’t know when the market is going to make big jumps and falls and neither do you. All we know is that over the decades the market has always consistently risen. So my investing strategy is to invest consistently and hold my positions for at least five years. I invest for growth and ride out market cycles through my buy and hold strategy. My investments are spread across four types of mutual funds: Growth, Growth & Income, Aggressive Growth and International. And I only invest in mutual funds that have been around for at least 10 years and have average annualized returns of over 12% since inception. In fact, the first mutual fund I bought, EVER, during the freefall in 2008, has generated a 13.4% average annualized return for me.

So I’ll end by beating on this drum yet again, mainly because it’s my favorite! Only invest in proven and quality investments. If you do this and invest for a time horizon beyond five years, then you will be on the path to financial peace J.

My Budgeting Priorities

I’ve spent some time this week thinking over our monthly household budget. One additional benefit from completing and living off a zero based budget is that I can pull back and see what we are prioritizing in our lives. I firmly believe that if you look at someone’s budget you can tell a lot about them. Dreams, goals and priorities all stand out when examining one’s budget. Below is a list of a few of our generalized budgeting items that I want to focus on today. Percentages are based on our net income and are not inclusive of every “category” on our budget, which is why these items do not equal to 100%.

*Saving: 60% (does not include pre-tax savings going into our 401k)

Housing: 15%

Food: 5.7%

Clothing: 0.01%

Recreation: 5%

Saving and Housing

The two heaviest hitters on our monthly budget are saving and housing. When it comes to saving we prioritize retirement, saving to buy our first home and saving to travel as our most important goals for the future. Time is a huge factor for us when it comes to saving. Within our retirement vehicles and our taxable brokerage account we are investing a set dollar amount every month so that we can be on the receiving end in regards to the power of compound interest. When the mathematical explosion that is compound interest occurs for us in the decades to come we plan to get our time back. The end result being that our investment income will earn more than our working income and we can retire from the 9 to 5 jobs to pursue our dreams of: living and travelling abroad, regularly volunteering, seeing family more often, just to name a few.

On the housing front we have made a conscious effort to keep this percentage figure well below 25%. In the coming years when we have children we want to have the flexibility to be able to choose if my wife will be a stay at home mom for the first years of parenthood. While we are planning to move from our current apartment when our lease is up in the spring (hopefully for a place with a bit more space and even lower rent), we can keep our housing costs within reason of our monthly take home pay on one salary.

Food, clothing and recreation

When it comes to these categories some terms that immediately come to mind for me include planning, ingenuity and thinking outside of the box. Now percentage wise we don’t give ourselves a ton of wiggle room in each area but to be perfectly honest whenever we have assessed whether to raise any one of these categories we always come back to the same question: Would we really get joy and fulfillment from an increase in spending on any of these things?

My wife is a master seamstress and she can whip any piece of clothing that I find at Salvation Army into shape. We are pros when it comes to grocery shopping and meal planning, plus we keep this cost down by consuming less meat and more fruits and vegetables (plus I hear that’s good for me anyway). When it comes to recreation, we’ve gotten pretty adept at finding events and enjoying the city of Chicago without busting the budget.

It’s not that I don’t enjoy a good meal, some nice clothes and a night out on the town. Believe me, I do. But I get a greater joy out of planning to send my kids to college debt free and being on a mission to pay cash for our first home. At the end of the day when assessing my means and opportunity cost, the budget priority breakdown is really a no brainer.  

My First Couples Counseling Session

This past weekend my wife and I attended our first marriage counseling session and I can summarize with this: I wish we had done this years ago. See, I have always philosophically been of the opinion that counseling is similar to working out and eating a balanced diet. It takes intentional and daily action over a period of time to develop and maintain a healthy body. In the same manner I believed that couples counseling is an intentional action to strengthen a marriage, make a good one great and help in staying connected to one another. After our first session I no longer believe this but rather accept it as fact.

Even through one session I feel stronger and more confident that our marriage is heading in the right direction. It was wonderful for my wife and I to open up and share our fears and desires for the coming years in a controlled setting. Our therapist was phenomenal in steering our conversation and keeping us on track and exploring specific feelings, thoughts and issues without going on wild tangents that I have been known to do when trying to talk about these things with my wife on my own. I’ve typically been reserved to only acknowledge mutual funds as sound investments but marriage counseling is without question an investment in a healthy and happy marriage.

Thankfully through my wife’s insurance our only bill is a $20 co-pay for each visit and we can save for this expense through our tax deductible health savings account. But aside from the X’s and O’s I think that this is a great step into the direction of where we want our marriage to go while healing our hurts and hang-ups from the past. For me ultimately I want our marriage to have a deep and strong connection as we began the family planning process of having our first child and I think we’ve found someone who will be a great addition to our team (our therapist) to help us get there.

Sure, we could have attended seminars and read self-help books but after being “Ramsey” for so many years a light bulb went off some time ago. Great team members in our lives can include accountants, lawyers, real estate agents and insurance agents. For each of these we rigorously screen to find ones that have the heart of a teacher to help us excel in areas that we cannot gain overnight competence on our own. Why not apply this same principle in strengthening our marriage?

So I give my thumbs up to you regarding marriage counseling. Now that my wife and I are debt free, have a fully funded emergency fund of 3-6 months worth of expenses saved for, are regularly contributing to retirement and for our future kids’ college, now we can prioritize what is important in our lives. This includes travelling the world together, saving to buy a home and nurturing and strengthening our relationship so that we are always connected as we go through life.