Wandering with a Purpose

Category: Personal Finance

My tips and experience in handling money, saving, and investing

Investing 101

I feel like an imposter writing this because I am not a CFP, CPA, or have any certifications in finance. Even though I am not a professional, I love to read about personal finance. I am interested in investing and the markets at a high level. Friends and family know this, so I had a few of them come to me because they are nervous about how the markets are performing right now because of the reaction to COVID-19. I wanted to outline my perspective on this in a way that (I hope) isn’t overwhelming or intimidating. It is basic information that I think all people should know and maybe this downturn is the wake-up call you need to start that learning process.

Annual stock market performance as of March 27, 2020
At a high level…

Investing your money is important to build long-term wealth, which is something we all want to do if you want to “retire” one day. It is your money. It is your responsibility to understand these things. Spend time researching these things and constantly learning so you understand and can take control of your future!

Do not invest your money if you…

This is because you want to use investments for the long-term. If you may take this money out of the market, that isn’t smart. Therefore, you should only invest money you don’t need to live day-to-day.

Types of Investment accounts

Assuming you are in control and planning for your future, you have a few options on where to invest. This is what I think people find confusing.

  1. Tax-advantaged (meaning you get a tax benefit in one way or another)
  2. Taxable (you will invest with your take-home money, so you already paid tax on it and will pay taxes on any gains you make. There are no tax benefits on these accounts.)

Let’s go a little deeper into these pots so you know what vehicles these include:

Tax-Advantaged: at a high level, these are mostly retirement plans. The government is giving you a tax advantage because they want you to plan for your long-term so they don’t have to. They are encouraging you by giving you a tax break. You may recognize some of these types of accounts (think of these as different pots):

  • 401k: different types, but company sponsored)
  • Traditional IRA: reduces your taxable income now, pay taxes when you take it out
  • ROTH IRA: invest after-tax money so you don’t pay taxes on its growth
  • SEP: for individual entrepreneurs
  • Simple IRA: 401k for small businesses
  • 403b: like a 401k for non-profit and government employees
  • 457: deferred comp plan for entities listed above
  • Healthcare Savings Account (HSA): available to individuals with high-deductable healthcare plans to help them plan for their future healthcare needs

Taxable: these accounts are a regular brokerage account where you can buy and sell securities. If someone says they have mutual funds with Charles Schwab or that they just bought some Apple stock with their broker, then the likelihood they did that in a taxable brokerage account is high, but you can still do those things in your retirement pots.

What do you Invest in?

So you have your pots (and likely have many different ones), but what do you put in them? Regardless of whether or not there is a tax break, you can buy or sell different types of securities. (This is very basic, and I think what everyone needs to understand. Like all financial products, you can make this much more complicated.)

There are two groups of securities:

  • Equities: This is when you are buying ownership or equity in a company. Think about your house, you have the value of your house – the mortgage (liability). The remaining amount is your equity or ownership. Publicly traded companies allow individuals and institutions to buy a share of their equity to give them more capital to grow over time.
  • Fixed Income: This is a note or a loan that will pay out a fixed amount of interest/income over time. You may have government savings bonds – this is a type of fixed income. Your mortgage note is an example of this on a bank’s balance sheet, whereas it is a liability on your personal balance sheet.
How do I purchase securities for investing

There are a lot of ways that you can purchase securities, and it all depends on your risk profile, timeline to invest, and understanding of investing. For the purposes of this article, I want people to understand that you can buy any of the below items and put them in any of your pots. There are pros and cons of each, but this is where you need to learn, research, and feel comfortable with where your money is going. You can put any of these into any of the pots listed above.

  • Mutual Funds: These are a group of stocks (and/or bonds) that a firm will put together to meet various goals. You may have a group of stocks from all non-US companies which could be labeled as an “international fund.” Another one may be built with long-standing, stable companies (think Coke or Johnson & Johnson) for a “large-cap” or “growth and income” type fund. Another one may be made entirely of tech stocks that will fluctuate a lot since it’s a less stable industry, but it will likely see a lot of growth.
  • ETF: This stands for Exchange-Traded Fund. These have lower fees than mutual funds and can be made up of different types of investments. This review will give you a lot more information!
  • Index Funds: This means there will be lower fees since the stocks in this fund are built to mirror a certain exchange or index (like the S&P 500, a total stock market, FTSE100, etc.) There isn’t a lot of thought that goes into these because they are going to deliver what the market brings. That means, their returns will be what that specific market returns.
  • Individual stocks or bonds: You can also go to your brokerage service and buy individual options instead of the pre-packaged, already diversified options that are listed above. The general consensus is this is not the way to go for long-term investing as an index fund will outperform most individual stock-pickers’ success rates. Even Warren Buffett agrees.
What I do

I would never suggest someone copy me and my investment strategy because everyone has different goals and different levels of risk. That being said, I really enjoy hearing about how people invest and manage their money to see if there is anything I could do to improve my portfolio.

Currently, I house almost all of my pots at Fidelity because of their low fees and no commissions. People will also recommend brokers like Vanguard, Charles Schwab, and others. I use Fidelity likely because my first job ran our 401k through Fidelity so I know the site. As of March 2020, I have a rollover traditional IRA, a ROTH IRA, a trading account, and an HSA. I also have a trading account at E-Trade because that is what I used when I first started buying stocks during the 2008 crash.

My accounts
  • Rollover traditional IRA: This is made up of all of my 401k contributions from my first job. I rolled it to an IRA because I didn’t need it in the 401k anymore. New money cannot be added to this account, so its outstanding balance is what it is. I just watch it go up and down. Since this is for the long-term, I invest in a total stock market index fund. Dividends get added in as the fund earns them, but I cannot touch the money.
  • ROTH IRA: I have been building this up over several years and was able to roll over my ROTH contributions from my first company into this fund. Since I paid taxes on it already, the government doesn’t need to track it separately. Since I follow the Dave Ramsey baby steps, I put 15% of my income into retirement. This is the first place I put my money. You can contribute up to $6,000/person each year unless you are older. I invest in the same total market index fund as my rollover IRA (FSKAX).
  • Trading Account: This is where I put any extra retirement funds and also have fun investing in stocks. I don’t invest a lot of individual stocks, but when the markets go south like they are now, I have a lot of fun buying poorly performing companies that I understand (currently airlines, cruise lines, a share of Disney, and such) that I believe will come back when the world recovers. This is not part of my wealth strategy, just something I do because I love doing it. It is an insanely small part of my net worth, but I love to watch how they perform. Any long-term funds are put into a total stock market index fund. Since this is a taxable account, I can pull the money out at any time. I may do this at some point to buy rental real estate.
  • Healthcare Savings Account: I decided this year that I should invest my HSA for the long-term, but I don’t think this is something everyone should do. I have been lucky because I have been generally healthy and have an emergency fund saved. Last year, I was able to have an HSA for the first time in a while, so I want to make the most of it. I plan to use this for the long-term, so I’m investing in a total stock market index fund for this. Once I get to age 65, I can pull this money out for anything without a penalty. Until that time, I can only use it for healthcare-related expenses. Later in life, maybe I will change this strategy, but for now, I’ve decided to use this as a retirement-like account.

Next Steps

  1. Track your net worth with a tool like Personal Capital
  2. Create goals. What do you want to accomplish in your future? How much money will you need to make that happen? You may not know the specific amount, but if you have goals, then saving for the long-term will be easier.
  3. Know what pots are available to you. Do you have a 401k at work? Have you been contributing? Do you have accounts from a former job? Try to collect everything.
  4. Read and learn. After you know where you are, learn more! This is just an intro. That new knowledge will help you go in the right direction.
Helpful Resources
  • Dave Ramsey (love the podcast and listen to it daily)
  • ChooseFI (I love their podcast. It’s definitely worth it to listen to catch up on old episodes)
  • BiggerPockets Money Podcast (Same as ChooseFI – listen to the old episodes, and then keep up with the new interview weekly!)
  • There is a whole slew of books I love, but I’ll list those in a future post!

Equifax Hack – Protect Yourself!

Equifax, TransUnion, and Experian are the three credit agencies that gather information and report a “credit score.” They have a lot of sensitive information and, recently, Equifax was hacked. I thought I would share an email I wrote to my family for tips to protect your identity. It’s a really big deal, and I’m not sure how worried people are about it. I am in no way an expert, but they are a few simple steps to take to try to stop identity left.

Hi All,
Not sure if you’ve heard but last week Equifax was hacked for the 3rd time, and it is pretty major. I think we should all be secure and watch out for things. After researching, I recommend you take the below steps:
1. Check to see if your information may be compromised
143 million people were…I am one of them
2. Freeze your credit bureau reports
This makes it so you have to lift the freeze if someone needs to check your credit. You need to keep that in mind, but I don’t see myself applying for anything in the near future. It took me a few tries to get it to go through since they are really busy.
3. Sign up for ID Theft insurance
I registered for it, and it was very easy. Individuals are $75/year; family is $145. This is one that Dave Ramsey promotes, and you know I’m a fan. If your identity is compromised, they assign an agent who will handle everything. I can’t attest to how easy that is (hopefully, I don’t!), but I think Dave Ramsey’s endorsement is strong.
4. Monitor your credit reports annually
You can do this for free at http://www.annualcreditreport.com. I have a reminder on my calendar every 4 months to review one agency’s report so I can monitor it all year long.  You can view 1 report/year for free. It does not give a credit score, but you should make sure the information is correct. It’s very easy.
Let me know if you have questions.
Thank you,

Budget Motivation: 7 Tips for Getting on Track

My new budget process for Q1 is finished. I thought I was budgeting for the last nine years and just not sticking with it, but I was wrong. Everything I did was backward – I was more tracking my spending than actively budgeting. It took me three months, but in March I finally did it the way you’re supposed to! I went over in just a few of my categories, but overall, I was under. I was in control of where I spent money. On top of that, I made some additional money (sold Disney tickets I had and had an AirBnB guest), so I could have some additional money. I’m quite proud of myself and can’t wait to see how I do in April without any large expenses! Now the game is on!

My tips for budgeting:

  1. Sit down and do it!
  2. Give it time. My first month was awful, but you have to learn and stay committed
  3. Visit it often. You can’t measure your progress if you start at the beginning of the month and don’t look again until the end. I’m obsessive and look every day, but I think every 2-3 days is good.
  4. Find a tool you like
    • As I already mentioned, I’ve used Mint.com for the last 9 years.
    • Part of my new motivation and how I was able to plan in advance (obvious, I know), was using EveryDollar. This resets your budget each month since each month will be different than the previous month. Before I kept the same “budget” and tried to squeeze into this frame without accounting for different activities. Resetting each month forced me to look ahead.
  5. Goals
    • Why are you trying to save money? Is it to have money to pay off debt? To stop taking on new debt? Are you saving for an awesome trip or a new car? If you don’t know why you’re making a budget, then it is going to be hard to stick with it.
    • In addition to your big, why goal – you have to understand each of your categories and your spend goal for each of those. My biggest challenge is eating out. I used to eat out all the time, and now I am saving hundreds of dollars each month by eating at home. I didn’t think it was possible for me to save hundreds each month until I started doing that. Now I have hundreds of dollars to put at my bigger financial goals.
  6. Find ways to stay motivated. My personal way is to visit my budget often and then look at my financial goals I wrote down just as often. By reminding myself that I want to eliminate my car payment and have an emergency fund, I am more motivated to eat at home. Once I complete these two goals, I will have additional money to make some bigger purchases I want.
  7. Be intentional. Watch the little purchases – they add up quickly and it’s unbelievable. Going out for drinks is innocent enough, but soon your tab is $25. You do that a few times and all the sudden you’ve spent $100 just on drinks. I didn’t put a lot of thought into my spending before because I didn’t have a good guide. My budget is a reminder to not spend in certain areas. It’s not easy, but I have a greater awareness now, which is how I can move the ball forward.


Mint.com: Insight into Your Finances

Most people have heard about Mint.com, but I don’t know many people who actually use it. I started using Mint.com before I bought my first house in 2009. It took many, many months for me to figure it out, but once I did, I loved it! I recently fell into a rabbit hole (a phrase I use often) in exploring new apps and technology; therefore, I decided it may be fun to write about some of my favorite or new apps on my blog. The power of technology amazes me! As a history lover, I can’t imagine what Teddy Roosevelt’s life would be like if he had a smartphone. Some of the romance would disappear, but wow, could he have accomplished so much more!

The Overview

Mint.com is a site for people to manage their personal finances. I almost always pay with a credit card, so this is a very easy system that automatically imports your transactions and categorizes them into spending types. I use mint.com to get an understanding of how much money I am spending and where. Sound financial management is very important to me.

Tips for Using

  • Be patient and spend time with it. It takes time to understand the categories and label your spending habits. The system is decent matching expenses to categories, but it needs time to learn. It’s a good activity to do when waiting for a doctor’s appointment or a meeting to start.
  • Be consistent with labels and updates. For whatever reason, I started categorizing all of my work expenses as “Business Services.” It really doesn’t make sense to an outsider, but it does to me. When I get reimbursed from work, then I flag my reimbursement as a “Business Service” so it nets to 0. You can make up your own categories, but I wasn’t planning ahead back then.
  • Set goals. A major purpose of mint.com is to set financial goals and link accounts to show how close you are to achieving them. I did this for trips and a rainy day fund. It was so rewarding when I achieved them! There is another one for retirement to show I am still on track for my goal – too bad I’m not there yet! I wish they had a goal to pay off your house early, but maybe that will come later.
  • Free basic credit score. Each quarter, mint.com will run your credit score. Hey, it’s a good thing to make sure it’s where you think it is! (You can also visit freecreditscore.com for a free report each year from the 3 agencies.)
  • Research their recommendations. Please note that mint.com is a free service, but they get paid for advertising credit cards and other financial tools on the website. I have researched some of these things over the years, and last week (after a year of researching), I decided to get another credit card. More to come on this, but it’s part of my plan to maximize rewards points. It’s also where I found another app Acorns, which I am excited to use more!

The Final Say

So with that, take a go! I truly enjoy this app and use it daily. Understanding where you’re spending money is the first step to being able to manage it. If you haven’t started yet, do!

Beginning to Budget

Personal Finance is one of my favorite topics to learn about. Whether it’s reading articles or listening to podcasts, I find the topic fascinating. Since it affects a large part of my life, I’m taking it as a good thing. In no way am I a trained professional; I just like to learn and talk about it.

For the past month, I have made a bigger effort in budgeting and controlling my spending. I have a healthy income, but it’s significantly less than I use to make. I’ve been blessed in that I’ve always tracked my spending, but I didn’t have to worry a lot. I set some new financial goals, so for me to achieve these, I need to save more money. My current motivation is listening to Dave Ramsey podcasts.

Most people know his name, but I’m not sure how much people know about him. I personally didn’t know his principles, but once I started listening to people’s stories about how they turned their life around, I was intrigued. Even though I don’t agree with all of the details, I love the philosophy. An example is that I wouldn’t get rid of my credit card. I am too worried about online security to use a debit card online, and I enjoy benefiting from travel / cash back perks. I pay my credit card off every month and would never consider carrying a balance. However, if you have credit card debt, and that is a weakness for you, eliminate the problem and cut up the card.

Budgeting Takeaways

I didn’t do a perfect job budgeting this month, but it opened my eyes to how much unnecessary money I spend. Food is the biggest area of change for me. Whether it’s buying a lot of food at the grocery store (unnecessary), snacks on the go, or eating out, I can change my behavior to buy less. This month was an additional challenge because I planned two trips. I packed food before I left and watched what I spent at restaurants. Even doing this, it was hard. There were so many times when I thought, “I think I’ll go buy this” until I reminded myself of my goals. This is a huge paradigm shift for me.

February will be another tough month because of my trip to Switzerland. I’m preparing my budget now. Until next time, happy wanderings!

Reward Points – the start of a new adventure

I’ve been thinking about this for a long time, but today I finally jumped and took the plunge! I’m going to figure out how to maximize using reward points to help me travel. Since I make less money than I used to, but my desire to travel is as big as ever, I need to find a way to make it happen. When I bought my first house, I used my credit card points to buy towels, pots/pans, and other decor. It worked out nicely!

First off, this world is pretty complicated. I mean, there are probably thousands of credit cards out there. It’s not like you can sample cards and figure out which one works best. You can’t continue to open and close cards either because it can affect your credit score. Two big sites helped push me over the edge – Mint.com and The Points Guy. I’ll have a separate blog post about Mint.com, but I’ve been a fan of The Points Guy for a while. He has a beginner’s guide that I found very interesting and helpful. Stay tuned as I start to learn more, but so far I decided to take the following steps…

  1. Applied for Chase Sapphire Preferred card (crazy how fast you can get approved!) which is supposed to be great for travel. Plus, it doesn’t have foreign transaction fees which I need for my trip to Zurich in February.
  2. Made an account and started linking my reward programs to AwardWallet. It’s a free site (there is a Plus version), but essentially it tracks all reward programs (airlines, food, hotel, etc). I had tried TripIt Pro‘s program in the past, but I didn’t like it. One day in, and so far I like AwardWallet. More to come!
  3. Researching other ways to save or grow money. Currently looking at Acorns, Wallaby, Mint.com, and general budgeting techniques.

Once I start to figure things out, I’ll keep you posted. Any tips or experiences would be appreciated! I have some big goals…I can’t wait to turn these clip art pictures into my real pictures! Switzerland, Paris, and Machu Pichu – here I come! Until next time, happy wanderings!
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