My Planned Transition

Wintry weather here in the windy city is doing its best to put a stranglehold on and curb stomp the warm temperatures of spring. Yet my spirit is in an uplifted state and in general I have found myself in a mid-spring delightful mood. My wife’s student loan will be obliterated in just a few short months, we are in the midst of planning a celebratory trip, work has been going really well and we’ve been connecting with friends on a really personal and cool level lately.

But the single biggest contributor has been the addition of a new item to our short/medium goal list. The idea of it scared the living hell out of me as a teenager and in college. I reluctantly knew it was at least a decade away as I started my 20’s. But now, being in a loving and growing marriage, with our finances just about where we want them to be (debt free—HELLO!) my wife and I have been talking more and more about bringing a life into this world.

Although we have discussed being parents with each other off and on over the last seven years, this year the conversations have taken more realistic tones. Early in our relationship we would brush the topic by talking about the kind of parents we wanted to be. Now we are running budget estimates, talking about how we plan to spend evenings together as a family, considering becoming a single income household, and I took a good look at the number of mutual funds available through my bank where we plan to open an ESA and took inventory of how many mutual funds meet my strict investing criteria (at least 10 years old with average annualized returns of over 12%...there were over 70 J).

And lately it’s all I’ve been able to think about. On the empty seat next to me on the bus and the el I picture my toddler looking up at me. When I’m at the gym I picture myself at home bench pressing my newborn and making time to read stories with my child instead of pumping iron. I look across my cubicle and envision a crayon drawn picture made just for me.

Reflecting on my 20+ years of life there are really only two things that my soul has desired and that I actually prayed for. The first God answered about seven years ago when I first met my wife. The second has been to be a father. I used to dread in fear the idea of taking care of a life apart for my own. I mean there are no user manuals, there’s lots of bright ideas, but no single source that you can read and say, “Yup, I’m ready to be a parent now.”

But as 30 is on the horizon in the coming years my attitude has changed. I’m less and less worried about “being ready.” I’m going to make mistakes. I’m going to have a lot of successes. And all the way through I have an unbelievably amazing and loving wife to begin a new chapter of life with.                     

My Hometown

My wife and I have been discussing a lot of changes lately. Mainly to revisions and updates to our short, medium and long term goals. We’ve discussed (and will continue to) about when to start having kids, when the move away from Chicago would be appropriate, career paths and of course the bolt-tightening of our monthly budget. We’ve taken a good and long look recently at what we would like our future to look like, and more importantly, what we have to do to get there. But today it’s led me to think about my past, where I came from, which might give you some insight into this particular wild and crazy Dave Ramsey nut.

I have what some may call a bi-polar love/hate relationship with my hometown. Nestled in an East suburb of Los Angeles within the San Gabriel Valley, it’s barely a blip on any radar for a community in Southern California. It’s not Newport Beach, it’s not Santa Monica, and there are no rows of palm trees or Mcmansions. On paper as of the 2010 census there’s a population of 75,390, 80% of which are Hispanic, and the medium household family income stands at just over $40,000.

Growing up there though gives you a different insight than what you can find on Wikipedia. I grew up in a place where multi-generational housing – kids, parent(s) and grandparents – all living under the same roof was normal. Kids like me, 1^st generation American, spoke English fluently while our parents and grandparents did not. In this place you are more inclined to see a Mexican state flag hanging in front of your neighbors’ home, not the stars and stripes. Thanksgiving and Christmas staples included tamales and rice & beans. There were also the problems that seem to come with a community struggling to assimilate to a new country.

Drugs and gang violence stood out beyond any acts of public goodwill. A lot of what you see and expect from people when growing up in this environment stays with you. I still distinctly remember seeing tennis shoes hanging from utility wires, and being able to decipher from the type of shoe and color, which gang territory belonged to who. Although likely outdated now, I knew which colors and which professional sports teams’ logos were not acceptable on certain sides of town. Stray bullets that hit innocent people as they sat in their homes or were bystanders were commonplace, as were drug deals in parks where school children played.

My parents did their absolute best to shield and shelter me from all of this. I was discouraged from getting to know just about all neighbors and I went to a private Catholic school from 1^st grade all the way through high school. Drug addiction and gang violence also showed itself on both sides of my family, I believe driving my parents to raise me in further isolation.

Looking back on it is very hard to stomach, especially in context. Adults seek out moving to America for hope, opportunity and the chance to provide a better life for themselves as well as their children. Those children struggle to assimilate. On both sides of my parents’ families, there are relatives of the previous generation that I never met, because of the aforementioned problems that were dominant in the city I grew up in.

But there are a ton of memories that I look back and find immediate glee. Time spent with my parents and siblings. The friends I made in grade and high school. The family holidays. My most cherished though have been every second spent with my grandparents.

I didn’t leave that place to see more of the world. I wasn’t looking to “make it” in a big city. I left at 18 because I did not want where I was from to define who I was or would become. The ironic thing is that I can never change where I am from. Those beginnings are some of the ingredients in who I am and who I plan on being in the future. My parents and paternal grandparents still live in that town. In a sense the very people who sacrificed, uprooted their lives to come (legally) to an unknown country, and who sacrificed their finances for me to stay away from gang influence, will live out their days in a place which I have very mixed emotions: That is bittersweet.

My Contribution to Financial Literacy Month

With April being financial literacy month I wanted to add my own two cents to the mix in the form of a public service announcement. In the usual loving way that I am used to writing, I want to make you aware of the potential wolves, scoundrels, blathering idiots and various miscellaneous jerks that you should be on alert for out there in the financial world, so without further adieu:

Mortgage Lenders

Collectively these scoundrels have spent hundreds of Billions of dollars over several decades to convince us that debt is a way of life and that we need to rush to their offices on hands and knees, to beg them to let us buy from them. Debt is a product, period! It is in these guys’ interest to pitch you a mortgage with a low monthly payment, a low interest rate and a LOOOOOOOOOONG mortgage term. The longer you keep your mortgage alive, even with a low fixed interest rate, the more money they make.

Mortgage lenders have created, implemented and push ARM(s) to transfer the risk of lending to the consumer, and they market Home Equity Lines of Credit (HELLs, they leave off one L) to improve their bottom line; not yours. They’ll charge fees just to setup bi-monthly payments, and when they say they say, “creative financing,” they really mean that they are working every angle they can to siphon off every penny of your income that they can get their hands on.

 CFAs & CFPs (Either way they can be BSers)

I’ve come to find that the more letters you have at the end of your name, the least I expect you to have common sense. I come down harder on these geniuses more than anyone else because they know better (or do they??). Nobody spouts money myths with greater snobbery than these doofuses. Some of their gems include: debt is a tool that is used to create prosperity, invest in ETFs/Hedge Funds/thesesuckymutualfunds/thelatestandgreatestinvestmentthatwillmakemetheMOSTcommissionoffofyou, borrow against your home/401k for the low interest rate and invest, buy single stocks, basically these guys can vomit everything that I find repulsive and stupid in the finance world.

Gold Diggers

If anyone approaches you saying anything close to the phrase, “You HAVE to have gold in your portfolio,” you immediately HAVE TO punch them in the face, run away, and keep them as far away from your dollars and cents as possible. As a long term investment gold has struggled to keep pace with inflation.

During “the lost decade,” gold has enjoyed the benefits of a soaring price rise, that still does not make up for a historic run of mediocrity. Gold rises when investors are fearful, and it falls when consumer confidence rises. Gold has no intrinsic value and when you “invest” in it you are wagering against the tides of consumer confidence. This is called gambling. The money that you work hard for deserves to be invested in something of value, not wasted on chance.

But what if we have a complete and total geopolitical and catastrophic societal meltdown? Trust me, if our world devolves into, “Mad Max,” a gun with ammo, blue jeans, gasoline and bottles of water will instantly transform you into the new Bill Gates, not gold nuggets.

Day Traders

I think I would have more respect for these clowns if instead they went out and bought lottery tickets. Their “sophisticated” methods and tools like: implementing a stop-loss, futures, options, puts, calls and swaps are all facades that “intellectually” mask the fact that these guys are actually more like drug addicts looking for their next high. Day traders are swinging for the fences and are the epitome of trying to “get rich quick.” They’re looking for the next Apple or Microsoft, and have wasted their time, energy, talents and resources chasing after a rainbow.

Whole/Variable Life Insurance Agents

Yes it’s important to carry life insurance and yes it’s important to save for retirement, but putting these two things together through these types of life insurance policies are the wrong way to do it, unless of course you’re goal is to help build the trash insurance company’s revenue for the year, in that case whole and variable life insurances are exactly what you want.

For the most part with whole/variable policies you pay a high premium for the policy and have savings built alongside it. When you die your beneficiaries, thru these products, receive only the face value of the policy, the savings you built alongside – the life insurance company keeps. And even when the savings vehicle lets you save with great mutual fund options, Consumer Reports notes that your average annualized return is somewhere between 6 – 9% after fees paid to the insurance company.

Term life is the way to go. Premiums are low and you are on your own to save and invest for your future, without paying some a fee for the privilege. Ideally it’s best to go with a 20 year level term policy with a face value of roughly 10X your gross income. In my life, if something happens to me my wife can take the paid face value and pay funeral expenses and set aside two or three years worth of my lost income in a liquid account, and with the remainder invest in my four favorite categories of mutual funds, and with the growth and returns she can replace my income. If we outlive our term policies we will have already been for several decades on Dave Ramsey’s baby step 7, debt free with fully funded retirement and college savings set up along with an emergency fund to cover one year’s worth of expenses, so if I die she can handle associated costs out of pocket. There is nothing “permanent” about the need for life insurance.  

But Wait…There’s Light at the End of this Tunnel…I promise!!

PSAs aren’t always squeaky and clean. This one has been harsh and direct in conveying that there’s a ton of wolves out there. About 85% of people in the finance world will approach you with the heart of a salesman. 15% will do it with the heart of a teacher. Your job is to find the 15%. Those are the ones that you learn from, they don’t talk down to you and they convey thoughts, ideas, concepts and strategies in a way that you understand. These are the ones that care about you and your financial well being and do a good job at it.

Meaningful and sustained wealth, where you live below your means, live on a budget, value relationships and experiences over the superficial and give like no one else along the way, this kind of wealth is built in slow, steady and gradual steps. The tortoise is our mascot! And when it comes to finding trusted advisors, Proverbs 11:14 says it best: “Where no counsel is, the people fall: but in the multitude of counselors there is safety.”   

So when it comes to finding finance professionals to help you through, screen ‘em like a mutual fund. Take them and their spouse out to dinner. Ask to see their personal rates of return. Get to know them and their values. And for God sakes pray about it! J Once you surround yourself with intelligent people with the heart of a teacher whose values align with yours, the sky is the limit.

My Insightful Easter Weekend

This past Easter weekend was relaxing, beneficial and exciting. My wife and I spent time at her family’s place in Michigan so we got away for the weekend out to the country for a little R&R and catching up with the family. There was also some great insight learned along the way. Good Friday was a holiday for my wife, I on the other hand worked a half day. Knowing that we would be out of town for the weekend, my wife took the lead to run a few errands while I was in the office.

In our day to day I generally take it upon myself to make our purchases. When we venture out for groceries, use the entertainment budget, etc. I carry the cash and make the purchases. In general if we have a lot of errands to run or we use up some entertainment envelope, by Sunday night I experience spending fatigue. Yes the money has already been budgeted and is sitting in our envelopes ready to be used for the month, but even without going over and staying within our set parameters, if I do a lot of spending over a weekend (to clarify, for me a lot of spending in one weekend = groceries, some clothes at salvation army, dinner out and a afternoon treat like fro-yo on a Sunday afternoon) by Sunday night I want to take a two week purge of not spending another green-back.

So if you had asked me how I felt the morning of Friday, April 6^th, about my wife heading out to spend our money on her own on our errands, I would have thought, “I’m sure she’ll enjoy it, women are supposed to love this kind of stuff right?” I would soon discover how wrong I would be.

Over the course of the weekend my wife physically spent dollars out of our budget envelopes on the following: Groceries, protein shakes, lunch at Subway before getting onto a train to Michigan, tickets to get on the train to go to Michigan, (once in Michigan) fee for jewelry repair on her wedding ring and new tennis shoes.

Up to this point let me remind you that these purchases transpired between Friday morning and early Saturday afternoon. In almost a culmination of energy being spent, my wife just about comes to a standstill in the middle of Wal-Mart with me trailing behind her, as she price compared Easter chocolates. The aura around her, the look in her eyes and our ensuing conversation assured my underlying immediate thought: she’s tired of spending money.

We’ve been enemies of debt for over three years now. We pay cash for everything and plan just about all of our purchases (including splurges). Now I’ve read all of the studies examining the neurological impacts of spending money, and the comparisons between using a credit card, a debit card and cash. Before this weekend I thought, “We’ve been doing this for three years now, surely our neurology has shifted as a couple in that spending cash is not as neurologically painful as it was when we lived on credit.” Again, how wrong I was.

When we got back to the car my wife threw herself into the driver’s seat, looking and feeling as if she had just ran a marathon. She was exhausted from the physical act of spending money, and did not want to spend another dime that we didn’t need to spend. I know, I know, all of you married guys out there are asking, “Dude, how did you do that and can you write a manual?”

The short answer is this: in living on a zero based budget, prioritizing our wants/needs/dreams/goals, and sharing with each other through an open dialogue our shared values as individual people and as a couple, we are on the same page when it comes to how we want to spend our money. The result is that we have become cost conscious. We do everything we can to stretch every single spending category every single month, while at the same time we want more “bang for our buck.”

But we are also informed and empowered consumers. We stopped eating pink slime about two years ago for the same reasons everyone else is now. We buy clothes are re-sale shops to avoid paying 3,000% at cost mark-ups shopping on the Magnificent Mile. We cut the cable and don’t watch television to ensure we make time to stay connected in our marriage. And we also make purchases that are in line with our anti-consumerism values.

For Easter this hit specifically with chocolate, and where I think the rubber hit the road with my wife. All women love chocolate, of this I am convinced. So when my wife was debating on which kinds to stock up on, she hit a wall. Global Exchange can give you more info, but most of the big boys in the chocolate industry like Hershey’s, World’s Finest and Nestle (indirectly thru their vendors or directly thru their own subsidiaries) use child slave labor in their cocoa production. I know my wife’s heart just about broke looking around Wal-Mart, seeing American school aged children running around carrying their own weight in chocolate, unknowing (or uncaring?) that the products they love were made by their peers in 3^rd world countries under inhumane working conditions.

Our way to combat this: Hit Nestle’s, World’s Finest and Hershey’s bottom line. We don’t spend a single dollar of our hard earned money on any of their products and instead go out of our way to buy certified fair trade chocolate. My wife’s cocoa of choice is Divine Chocolate!!Yes we will go out of our way to spend a little bit more on a product we enjoy, with a company whose values are in line with ours. So hopefully over the course of our lifetime, and maybe thru sharing this with a few friends we make along the way J we can bankrupt chocolate companies that use INDIRECTLY OR DIRECTLY child slave labor. Yes together we can bankrupt them, because companies that are uncaring enough that use child slave labor, are also stupid enough to use debt in their business operations J

Happy chocolate hunting everyone!

My Springy Start

Although it doesn’t necessarily feel like it, spring has sprung here in Chicago. (although I’m not a fan of unionized sports) Baseball has begun, runners are out on the lakefront in apparel that exposes their skin to the elements: as if trying to will warmer temperatures to come.

I am personally approaching this spring season with a cautious optimism. The market run-up in Q1 was phenomenal, couchsurfing requests are secured for trips to Grand Rapids, MI and Charlotte, NC, I’m going to see Dave Ramsey at a live event, and the kick-off for hosting FPU through my home church is two weeks away. So why cautiously optimistic? I think it’s from the books I’ve been reading lately.

Not my normal cup of tea, my last few books have been on themes of Christian living, with spiritual and religious overtones. Generally the only Christian books I’ve read over the last few years have been finance based, my favorites including anything by Dave Ramsey and Larry Burkett. But with the last few I’ve challenged myself, and something about it doesn’t sit right with me.

There’s one aspect in a current one I’m reading that I’d like to delve into. Arthur Simon’s, “How Much is Enough?” is for the most part rich and compelling in advocating that living below your means and following an anti-consumer lifestyle is biblical. What irks me is the way he tries to balance and streamline Christianity and Capitalism.

Simon uses the bulk of the book to advocate that living a Christian life means helping in every and any way shape and form those marginalized, victimized and stereotyped in our world. With our hearts, purchasing power, acts of goodwill and with our charity, Simon argues that God calls us to carry a heavy heart and soul for those that are hurting in our world, and I agree with him.

Where I disagree is his viewpoint of Capitalism. In a section that thoroughly amazed me (not in a good way), Simon denounced and rejected Socialism as unbiblical and a gateway for tyranny rule that suppresses a population. He proceeded to brag on Capitalism, as the most efficient way to generate wealth within a population and give its people pathways and roads to climb the socioeconomic ladder. And he wrapped it up, after lengthy contrasts of each, with (to paraphrase), “People in a capitalistic system need to share and redistribute their wealth.”

So you recognize that Capitalism, against socialism, is the best way to give people opportunity, and then you ask that Capitalistic system to behave like socialism? You can’t have it both ways pal!

My lens is this: I am a Christian and I believe in Capitalism. My duty (more-so calling) as a Christian is to help those in need. To do that, God whispered to me a mission to empower consumers. To help teach that money is a tool that is to be used to follow the hopes and dreams that God places on our hearts. It could be attaining financial peace so that you can take a lower paying job at a non-profit, routine go on missions trips in 3^rd world countries, have the time to volunteer in underserved areas within our communities, or the biggie: leave a legacy when you die to bless people and organizations.

I hit on this earlier and I’ll repeat it here: Money is like a candle, not like cake. God has placed a mission on my heart to help people empower themselves to make smart and biblical decisions with their income, and help inspire the fact that anyone at any place in life can achieve financial peace.

I won’t go too high on my soapbox here, but everything that I have is God’s. Not a tithe, not a love offering, not what I deduct for gifts at the end of the year, ALL OF IT! It’s in my attitude and exercise in what I do with what I have that defines my personal relationship with God and those around me (more accurately defined in Christian circles as the super awesome tandem tag team of FAITH AND GOOD WORKS). In the lens as I see the world, I’m living below my means today and passing up big item purchases so that in the future I can: make missions trips, setup college scholarships to help kids go to college debt free, adopt a child and help build schools in 3^rd world countries. And you know what, if I want to splurge sometime along the way and buy an RV to travel the continental 48 states on a long vacation, I’m going to do it, and there’s nothing wrong with that. It’s when you start to believe and trust in material possessions to bring happiness that spiritual disease has taken over.