I'm just a local business and finance nerd looking to help people get educated about small business, marketing, and personal finance! I write about anything and everything that I can tie into those themes. I'm also Central Florida's only Kilted Realtor, so I write about Real Estate too! Check out my About Me page to see the origins of Cash Flow Celt.
Conquering Your Financial Empire
Jamie Dimon, CEO of JP Morgan, spoke at a financial conference two weeks ago and said some interesting things. One thing that stuck out for me was his comment about American consumer health. He said we’re doing great in terms of debt. That’s what he said; what he meant was Americans are paying off their debts, and his vacations, at a steady pace. Banks track all kinds of metrics when it comes to consumer debt; however, the most important is months paid. Banks do not want you to default – best case scenario for them is when you pay the minimum payment for the life of the loan. A $5,000 credit card bill, at 18% and just paying the minimum payment, will take nearly 23 years to pay off and you’ll pay an additional $6900 in interest on top of the original balance. Ouch!
Because debt is such a huge financial killer, it tends to be a pretty common question asked by my friends. Usually, it comes with many parts – like, “how do I pay off debt AND save for retirement?” It’s a valid question. It can seem impossible to save for retirement or even a tiny emergency fund when you have revolving credit card debt at 18% looming over your head. So, here’s my method. Continue reading
We all die. It’s just a fact of life. Although I don’t think of this fact often, I was reminded of it the other day when the local law enforcement agency I work for faced a tragedy that made the national news. On top of the awful things our suspect did, he also got into an altercation with our units and I had to listen to true fear and anguish as my unit screamed into his radio for help. His tone was chilling to the bone and I will never forget it. Our units were safe and, sadly, that was the only silver lining to what happened.
Being reminded of my mortality made me start thinking about end of life – life insurance, bank account access, and my distribution of assets. Then it dawned on me. . . I’m only 27. What about my mom? If she died tomorrow, would I have enough knowledge about her financial life to be able to maintain her expenses and posthumous care? I know her assets would be handled intestate (that means without a will), but I couldn’t access her bank accounts and I have no documentation to allow me to be her personal administrator in death. It would be a slow process, one which has the potential to devalue her estate due to missed payments or defaults. The kind of changes that would need to happen take time and, Death simply does not wait. Continue reading
In my last post, I briefly mentioned why I love real estate for investing. As an asset in your portfolio it provides distinct advantages that you simply can’t get from buying an equity or bond. Because my readership is mostly young professionals, I felt a follow-up is necessary since we have the most time to benefit from the wealth building potential of buying property.
First though, it’s important to note what real estate is not. Real estate is not liquid. At all. When you buy a piece of property, you need to realize that you will likely hold this asset for at least five years. There is also a time commitment involved with property – whether it’s your primary residence or you have tenants in a rental situation, you must maintain the property. That comes in the form of keeping your appliances up to date, ensuring the plumbing is in working order, and that the home is safe and hospitable; those responsibilities are increased tenfold when you have a renter. You might be able to live with an ice maker that sounds like a T-Rex when it makes ice, but your renter will not. On another note, can we seriously get an ice maker that roars like a T-Rex when it drops ice into the bucket? Now let’s talk about other million dollar ideas. Continue reading
I was on Youtube a few days ago passing the time as one is oft to do and I came across some interesting videos. Naturally, it first started off watching animals do silly things – like an Orangutan enjoying magic tricks – and then slowly began to devolve the further and further I went through related links. During my travels though I found this amazing little one-minute video about a squirrel venturing for a peanut and all I could think while watching it was “wow, this guy understands risk vs. reward”. The REAL morale of the story though is that I can officially label watching animal videos for two hours as research.
So back to the squirrel video, if you Google “squirrel wants a peanut” it pops right up as the first video and it’s only about a minute long. It starts with someone’s hand in the foreground holding a peanut near a fence and a squirrel further down the fence cautiously studying the peanut. He then starts to creep forward, backtracking and jumping back at any sign of danger, until he finally reaches the peanut and takes it. You get a great shot of him gingerly taking the peanut in his mouth before he runs like mad in the other direction with his spoils. Continue reading
The news media is fascinating to me. If you search “Millennial’s saving rate” on Google you receive back a myriad of results running the spectrum from awesome to financial apocalypse. TIME has a report about how Millennials are outpacing everyone but Baby Boomer’s when it comes to their savings rate, Marketwatch states that half of Millennials have less than $1,000 in savings, Wall Street Journal notes we face a savings deficit in our future, and CNBC notes that we’re becoming money-saving champs. Fascinating! The answer, as it tends to be, is probably closer to the middle. Some Millennials are doing well and some are not. Anecdotally, I know I have friends who are savvy retirement savers, some who save well but tend to spend it on short-term purchases, and then others who live paycheck to paycheck because they purposefully spend every dime.
It seems that when people think about retirement, it’s only as a forlorn thought. A mysterious place where one percenters frolic and play among grassy hills and flowery blooms; not a place for your everyday working guy and gal. No, your everyday guy and gal see their “retirement” as a place where they have a small chunk of money and monthly payments from Social Security, and every day they wake up and hope they go another day without getting sick because that would lead to financial ruin. What a dreadful way to live life. Continue reading
One of the most frustrating things about retirement planning is simply the multitude of choices: deferred comp, IRA accounts, SEPs, 457s – it’s enough to make your head spin. You could always take a gander at the IRS website for a brief explanation of each type of account, but bring your coffee. Reading materials from the IRS run the spectrum from “dull” to “listening to Ben Stein talk about the differences between a Cournot & Bertrand game theory model”; that is to say, less than thrilling for most of you. Fortunately though, I find this sort of material to be quite interesting.
For the purposes of this post, I’m going to focus on Traditional and Roth IRA’s, as well as a company 401(k); perhaps at a later date, if the demand is great enough, I’ll create a post on SEP’s and 457 accounts. First though, let’s start with some basic warm-ups to get the blood flowing before we get into the nitty-gritty. IRA stands for Individual Retirement Account and you don’t get rich by simply having one. An IRA is, more or less, a box – mostly more. In fact, let’s just call it a box. This box is a place where you store different items to accrue wealth. These items are things like CDs, stocks, bonds, mutual funds and ETFs. For what it’s worth, these items are called “investment vehicles”. Now let’s get into the meaty stuff! Continue reading
Why should I be investing at a young age?
I hear this question a great deal from my friends and a quick search on the internet finds it echoed frequently in online forums. This makes me wonder, with all this literature out there, how come we don’t see more savings from young professionals? I believe much of the answer can be explained by opportunity cost miscalculations (more on that later!), but I think a lot of people just simply don’t consider the numbers in visual terms. Hopefully I can help with that.
I imagine most of you are familiar with the term compound interest; earning 5% on $100 one year means the next year you’re earning on $105, and so on and so forth. I think the hardest part about compound interest is trying to visualize just how long it takes to make it worth something. Coming back to the $100 example, consider this. Annualizing at 5% a year, it will take you about fourteen years to have $200. Why is that? Compound interest is a geometric series – a progression in math where a sequence of numbers is multiplied by a common, fixed number which in this case 5% – so earning 5% on $100 nets you $105, and then next series will be the sum of $100 times 5%, plus $5 times 5% which is $.25. Then the next series will have all that plus $.25 times 5%. Conceptually, starting with $100, you’re adding $5 plus smaller and smaller increments with each compound. If we weren’t using compound interest, it would take you exactly twenty years (100/5) to get an extra $100 – but adding those smaller and smaller increments shaves a cool six years off that total. The power of compound interest is real! Geometric series are a pretty neat thing to think about; however, understanding them, for the purpose of this post, isn’t necessary. And no, there won’t be a quiz later. So how does compound interest apply to you? Continue reading