Tag Archives: Wealth

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

Paying Expenses From Dividends

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Paying normal expenses is a lot like renting, you never really get ahead and may even be living paycheck to paycheck for your entire life, just barely getting by.

Or perhaps you are hording away money living like a miser until it’s time to retire.  The problem with that approach is retirement may never come, after all, accidents happen…

Maybe your plan is to just spending everything, going into massive debt figuring that you can always declare bankruptcy and start overall someday in the future.

All of these are ways to handle expenses and spend money, but what if we tried paying our expenses from dividends instead of money from our paychecks?

In fact, what if from the beginning of adulthood we started paying expenses from dividends?

If from the start, we took our salary or wherever you get your income, and bought stocks that provide a stable dividend, we could have a level of freedom that most people don’t have after 10 or 20 years!  I’m sure you are thinking that it wouldn’t be possible, and you would be right!  It would have to be a gradual process, buying some dividend stocks at the beginning, but slowly using that dividend money to pay your expenses.

Using the graph above, the red would be the money we bleed from our paychecks, whereas the green would be the dividend money that would continue to grow over time.  Eventually we would be paying all of our expenses from dividends!

You wouldn’t have to directly use the dividend money, instead you could have the money automatically reinvest back into the stock (let’s say a DRIP), while paying from your paycheck as normal.  it might take decades for your expense to totally be handled by your dividends, but it’s worth a try!

Much like the line in the graph above isn’t straight, neither would the stream of dividends.  At the end, it would dividend money would grow more quickly, so it would be slightly parabolic.

So I’m going to try this approach, but more importantly, I’m going to teach my kids early when they are young.  If they could incorporate such a system into their lifes, I think they would be well provided for in the future!

Bests,

-MR

10 Ways To Improve Your Chances To Become Rich

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Honestly, Are you trying to become rich?

I’ll admit there is more that I could do to try to breach the point where my passive income exceeds my expenses, but I choose not to.

Although I’m frugal, I’m quite sure that I could run an even tighter financial ship! 

Below is a quick list of ways that I could improve my chances to become rich:

  • I could use budgets and do extreme couponing to whittle my consumption expenses down much lower! 
  • I could try to get more free stuff via giveaways online.  Free stuff is great and believe it or not, it’s out there with some work.
  • I could create a budget to identify where my weaknesses are and plan to fix them accordingly!
  • I could get another job by working during a second shift period.  This would have a huge impact on my savings game since my first job covers all of my living expenses.  This means I could pocket almost all of my earnings from the second job.
  • I could try to expand my hobby activities into other forms of social media.  This could practically double my hobby income.
  • I could create a goals spreadsheet to track my saving goals and keep me on track…  This is more important than it sounds!  Feedback is a great thing!
  • I could create an investing goal to track my investments performance.  This could help determine if I should start investing more into index ETFs etc…
  • I could borrow tools/things from family, neighbors and friends more.  Why buy a sidewalk edger when I only use it once a year?
  • I could do a better job of reducing my taxes, a Roth IRA is a great vehicle to reduce taxes on dividends from stocks, etc.
  • I could do a better job of reducing my gas expenses, treat driving as a real expense instead of just ignoring it.

There are plenty other ways that I could improve my chances of becoming rich some day.  Surprisingly, I now realize that I”m only putting  in about half the effort that I should be putting into getting rich…

-MR

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Getting Wealthy By Swimming to Shore

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Getting Wealthy By Swimming to Shore.

Yesterday’s post: Defend Your Financial Fortress Against Spending Temptations!, prompted Sandy from First Gen American to ask the following question:  “I’m interested which budget categories you beefed up since your mortgage got paid”?  So in this post, I attempt to explain my position and answer Sandy’s question!

Originally, I wrote: Stop Drowning in Debt, Start Swimming To Shore.  In that post, I compared being deep in debt to being underwater trying to breathe.

When you are underwater, you only focus on one thing, and that is to get our head above water so you can breathe again!  In the financial world, you try to get out of debt so that is your goal and what you primarily focus on!

When you are deep underwater, it’s a battle to get to the surface to breathe air!  When you are in massive debt, your primary goal is to claw yourself back to the financial free air.

I broke the surface of the water, but instead of getting wealthy by swimming to shore, I’ve been treading water, trying to catch my breath, and then determine which direct to swim.

 

Getting Wealthy

Now that I’ve caught my breath, I’m going to start to swim towards the financially independence island/goal by going after the expenses that are like debt!

So I decided to start swimming by buying stocks with dividends, so someday the dividends could cover my Real Estate taxes and homeowner’s insurance payments.  I think the key is to start swimming and stop just treading water!

I’m going to start to research which stock(s) to purchase, and then in a later post, I’ll identify which one(s) I have chosen.

 

The Decision

While I haven’t saved a lot of money since paying off my house, I still have a few thousand to play with, and that enough to start to swim towards shore. 

So to answer Sandy’s question above, I’ve been putting the extra money from the payment from my former mortgage into cash, fixing things and a mild lifestyle inflation spending.   I’ll probably purchase the investments partially through a Roth IRA and partially through my regular online brokerage account.

Other than retirement, what ways are you planning on using to getting wealthier?

-MR