mrjay's journal

Where are you and where are you going?
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mrjay
Posts: 47
Joined: Mon Jan 07, 2013 7:06 pm

Post by mrjay »

Well hello everyone......
I feel fortunate to have found this website. I'm 35 years old, a business owner in north alabama, not married, and sort have always enjoyed finance to an extent - although i will admit i know next to nothing about it. I found I was interested growing up somewhat when my dad would occasionally catch a "suzie orman" show on CNBC. I didn't like Suzie too much - but I liked the topic. Occasionally I'd find myself on Fox Business or CNBC or Bloomberg - -not very long, mind you, but to get a taste of finance. When the economy tanked in 2008? - I had just had a very massive good income producing summer, and figured Fox Business had to have a suzie orman equivilant "to keep up with the jones's" - and thus, I discovered Dave Ramsey. I liked him a lot more than I did Suzie, and started tivoing his show every night - mostly during that summer, and I throw a lot of money in the stock market when I felt it had bottomed out. To make a long story short, I turned about $8000 into about $20,000 over the next four months (a lot of it was playing with fannie mae and freddie mac, and looking for stocks that used to trade from $60-80 a share, that were now from $15 to $35 or so per share). I wound up spending quite a bit of this money on a business venture a few years later and now am back to $8000 or so (with a license to perform said business venture, but now am waiting on technology to catch up - it's a long story)
Ok, a little more about what I do. I have a degree in computer science - i started out doing IT consulting for small and medium size businesses. This grew into my being an owner of an internet cafe as well, which grew into running a wide area network using radios to deliver broadband to rural and unserved areas (who can't get cable or dsl). I helped start a company (where i have several partners) and, after we figured out what we were doing, we launched a few other companies that are similar (franchises, sort of, if you will) in other markets. I also did dialup for a while - made a little money off that (actually survived off dialup during the great recession, that was about my only income during the time) ; i'd say now on average between my consulting biz, internet biz's, and a few other projects, I bring in between $5k and $7k a month. I'm self employed all the way, I don't always get to "work when i want to" - many times i work much harder than I'd like to, but I do enjoy my work - and I get a lot of gratification out of solving computer and network problems - and by providing internet service to my fellow man who otherwise would have no other options but cellular or satellite internet.
How did I get here? I've been paying off debt - mostly a credit card that I've paid my taxes with in years prior and that I bought a lot of my broadband internet radio equipment with when I got started. I've paid down about $23k in about 18 months, i have about $5 of this left, my goal is to take $1000 of my internet income each month and pay that towards the card until it's paid off. I feel compartmentalized in a way - - most of that money was charged for that company, so that company should pay it off (which is a lie, there are several $5000 tax bills on that credit card ; i try to manage the tax bill better now, i'm still not that great at it...).
I realized I have disposable income now - and frankly, I couldn't spend all the incoming money if I tried. Ok, I probably could - but I'm not a big spender (at least in MY opinion i'm not). I got a "lady friend" of about ten years to stop screwing around with our lives and move in with me (she moved over 600 miles ; come to find out she was probably about to lose her place anyway, her life started untangling during the great financial meltdown) and when she moved in, our agreement was/is to pretty much give her a place to live and sleep, she could do what she wanted, and i'd cover basic expenses. A year later, she's working in our office, going to school (trying to figure out what she wants to do), she writes in her spare time (and is frustrated her writings appear to go nowhere, she can't find an audience), and she trys her best to pay her half of our eating out, entertainment expenses, etc. I splurged a little and upgraded some things ; got satellite tv, bought some lcd tvs, i didn't live alone anymore, and i was making a good income, so those things are bought and paid for.
Back to Dave Ramsey, I figured I need to be putting money in my roth ira - even if I am not debt free yet. I am probably losing out on quite a bit of compound interest - - whatever that is. (still trying to learn) I knew Ramsey suggested four types of mutual funds - so i was googling to find if there were any"real" results posted from anyone using his system - - and that's how I found this website. I guess I read blogs about six hours total last night - -I really like how this community comes together and feel like I could feel at home here.

SO - - no wife. No plans to get married. She's got three kids but they're kind of estranged currently (previous life problems). She does pay some child support - that's partially how she wound up with a job with us (but she wouldn't work anywhere else lol ). What are my thoughts on retirement? Not really retirement - i feel like i'd be bored out of my mind. I do find some trends in reading other blogs here - - i do have that 5 year attention span. I'm always wanting to try new things - - so maybe i'm sort of caught up in that.
Here are some financials I have thrown together:
Cash: I have about $2500 in savings/liquid. In fact, I put that there last week. No savings prior to that.
Investments: Scottrade says I'm worth $6406 currently. Down from that $7k left from that investing fun a few years ago. Hey, I did buy a boat with that investing fun - - a $4800 bayliner. We called it the "Fannie Mae". It had to be bailed out last September, took on 5 inches of rain in 2 hours. : (
These investments are mostly stocks - some bad investments from newsletters (evergreen solar, blockbuster liquidating), facebook (not bad), ubiquty networks (i use them in my biz a lot). Fannie and Freddie are 2050 shares a piece, currently worth $624.225 and $588.35 respectively. I am in this for the long haul.
Cars: Hey, it's just me. I own a 2002 ford exploder. going on 212,000 miles. Have sorta been shopping, but not really. Don't really want a payment, but can actually afford it this time. Couldn't from 02-08 when I had one last time... lol
Income: In terms of being a consultant, income really varies WIDELY. Some months I'd make $600, other months I'd make $6000. It's very hard to budget. Using my broadband companies and a salary I pay myself, plus a contract I currently have in my consulting gig, here are guaranteed monies - - the consulting biz could swing a few grand up at any time, but i simply don't count that anymore. THIS was one of the reasons I never really got off the ground with this before:
Consulting Gig - $1250 twice a month / $2500. This is without taxes taken out. I hate hate hate hate hate paying self employment tax. Ya'll tell me how to fix this.
Broadband Company - partnership with 5 people - salary $3000 (it's about $2400 after taxes)
Broadband Company - solo - income after expenses, around $2200.
Broadband Company - partnership w/ one fella - salary $600 / mo

total estimated income: $7700 / mo
Remember of this income, I pay $1000 towards a credit card. That should be gone in 3-4-5 months.
Summary:
Cash: $2500

Investments: $6406

Car Worth: $2000 (maybe)
Income:

$7700 / mo
Debt:

House $91,000 (worth $139,900)

HELOC $18,000

Credit: $ $5077.98 (9.24 interest)

Credit 2: $4154 (0% interest)

(hmm - owe a little more on that than i thought)
Expenses:

Ok, i'll just say this. I live in the south. Living here is CHEAP. There are a few exceptions ; I owe $1100 on my house insurance in the next month. I just paid $423 in property taxes.
But - over all, my living expenses are nill:
Mortgage ($825, I only have to pay $783, I pay a little more)

HELOC: $272

Utilities: $160 average

Phone: Provided by one of my companies ; included

Internet: Provided by one of my companies ; included

Groceries: Everything I buy rots. I eat out a lot : / Soda, maybe $40 a month. Food $200. Yes, I know this is bad. I read. :)
Entertainment: not much. Maybe two movies a month. $24

Medical: Health Insurance- $173 / mo

Gas / Fuel - fill up twice a month - $130

Directv: $63 / mo
Total expenses estimate: $1847

Total expenses w/ CC payments: $2969

Target amount to retire: $20,000 / year

Target Safe Withdrawl Rate (SWR): 3% [$666,666] / 4% [$500,000]

$2000 / mo would take 250 months or 20.83 years

$3000 / mo would take 166 months or 13.83 years

$5000 / mo would take 100 months or 8.3 years

So what to invest in?
still reading the blog....

lots of acronyms to learn!

whats my savings rate?


User avatar
C40
Posts: 2542
Joined: Thu Feb 17, 2011 4:30 am

Post by C40 »

If your total spending is $1,847* and your income is $7,700**
Then your savings rate is:
= (7,700-1,847) / 7,700 = 76% = Nice!
* - Should not include debt payments. (but maybe should include debt interest - not sure about that)

** - You probably want to use after-tax money.


mrjay
Posts: 47
Joined: Mon Jan 07, 2013 7:06 pm

Post by mrjay »

I re-read that post and ask myself why I don't have more money. Then I remember the income has been slowly creeping up - - the reason I allocated $1000 to that credit card so many months ago is that was all that particular broadband company was bringing in after paying for bandwidth, etc. Obviously it (and most of them) are doing better now.
Do ya'll advise just cutting checks out at the start of each month like clockwork, or how do you justify making sure all the money is where it's supposed to be?
Really looking to focus on an investing plan here. I actually took some time to review what my portfolio would have been worth had I stayed in the market instead of cashing most of it out for that investment - - i'd be down about $6000 over where I cashed out at...


mrjay
Posts: 47
Joined: Mon Jan 07, 2013 7:06 pm

Post by mrjay »

Something else to add tonight, with the one broadband company i have partners in, i actually get paid a salary, and taxes are deducted from the check. Everything else I do is straight income - payments come directly to me, etc. No salary paid, just "draws", and there are no taxes taken out automatically. Therefore, it's hard to calculate that money coming in and at what rate I should "pretend" to remove taxes.
This will also help you to understand why that mastercard kept getting $5000 charged every April (that amount is up to $7000 to $8000 now, but i paid it with cash last year)


mrjay
Posts: 47
Joined: Mon Jan 07, 2013 7:06 pm

Post by mrjay »

I have been thinking more and more about "extreme" things - not just extreme retirement. If I put $4000 back for nine months, I could buy a brand new automobile for cash (not that that is high on my priority list)
I could buy a rental in a beach front condo (financing it) - after saving cash for a little over a year:
http://www.usamls.net/theproteam/defaul ... 4&sortby=2
(not to say that's a goal either, although it could be nice almost passive income...till the next hurricane arrives...which we are overdue for..)
If you have the intensity, makes you wonder why people finance little purchases (is a car a little purchase?)
So - my income. Still trying to figure out what to do with it. I have found I don't like dealing with credit cards although that makes it very easy to "track" expenses. I think I like the idea of giving myself a cash budget each month. Earlier last year, while building a business, I was able to pay myself $300 / month. Later in the year, I was able to pay myself $600 / mo.
I think if I assigned $300 to my food and entertainment budget

(that's like 4%), i'd be good.
Now lets experiment some. Some expenses are going to be fixed and required. Mortgage, HELOC (whats left of it), gasoline (travel for work, that's about it, i'm not a war driver...), natural gas bill - that's about it. The occasional insurance bill or automobile grab that comes at me (had to have maint done today, was $180)
What to do with the rest? Save, obviously.
I read somewhere a single guy like me can do $5000 a year in an IRA account. Mine is a roth IRA, so I am assuming that's $5000 a year Roth (it might be $5000 a year in a traditional IRA as well...i don't know). I also have an IRA with my bank, but the interest there is terrible. A 5 year cd might produce more yield...
Then there is the risk in the markets vs. just the stability of a bank. So many choices. What to do? Thus a budget, of the monies, maybe....
Ok - income - I've calculated it to be an average of $7800
$7800

$825 (mortgage) - $6975 left

$230 (HELOC) - $6745 left

$1000 (Credit card left) - only a few months with this - $5745

** (i "tie this back" to a business i started with that card)

$200 (estimated) - gas, water, sanitation, power, etc

** (eh, it's the south, i consider this cheap) - $5545 left
What to do with that $5545 is where I am lost.
$415 - ROTH ira contribution - mutual fund? ($5130 left)

$2000 - direct savings account ; build up ; buy CD ? ($3130)

$2000 - invest in my own non-roth investing account? ($1130)
This is rough - just some thoughts - I said in an earlier post i couldn't spend all this income if i wanted to (i don't want to) ; but i could obviously save a large majority of it and invest in something that i consider to be least-passive income (and even something i could enjoy, like the condo at the beach)
i dunno - thoughts?
EDIT - one thing i must include - $1000 to savings each month for the sole purpose of paying taxes - and heck, i might need more than that. That's what i'll be doing between now and April and what is left I might buy a CD with it...


anomie
Posts: 439
Joined: Sun Apr 29, 2012 2:13 pm
Location: midwest, usa

Post by anomie »

Hi -- Here are 2 thoughts for surplus $$.
1. Save your $$ for ERE - others can suggest taxable investment options.
2. Put any additional $ in tax-deferred retirement savings accounts like a SEP-IRA:

1. SEP-IRA. If you’re a one-man or woman band, this account is a good bet. A simplified employee pension, or SEP IRA, is a basic way to set aside pretax savings. You can contribute as much as 25 percent of your net self-employment income, up to a maximum of $49,000 in 2010 (same for 2011). A SEP-IRA, however, cannot be a Roth IRA. source: http://www.forbes.com/sites/kerryhannon ... -employed/
*(& never waste $$ on buying New automobiles!) :)


mrjay
Posts: 47
Joined: Mon Jan 07, 2013 7:06 pm

Post by mrjay »

So I've been on the west coast for the last week at a training event, feel like i should be posting on behalf of one of my companies, man, spending $4800 for travel (and four people) was extreme. Overall, I feel we need to be at this conference, but not sure I wanted to spend that much money.
Did a lot of thinking on the plane (in the middle also of reading "the millionaire next door") - One suggestion made in the book is invest FIRST, spend later. On my rough income again (best to list again, see how my memory is doing) :
$1250 (biz contract - first part of month)

$1250 (biz contract - second part of month)

$1250 (broadband company - 1st check of month)

$1250 (broadband company - 2st check of month)

$1000 (broadband company - pay debt with this)

$600 (broadband company - available)
=====

$6600
Ok, so I was thinking I was closer to 7k. Still pretty close.

I'm putting all excess cash into savings until after the tax man comes to visit in April, but I'll be kicking off in a major way after that.
So, invest first, "spend" later. I know my fixed expenses each month are:
$1000 - debt payment (credit card, $3000 left)

$825 - house payment

$290 - 2nd mortgage payment ($1000 debt goes here next)

$219.90 - bandwidth payment, internet company

$100 - tower rent payment (internet company)
=======

$2434.90 (lets just say $2500)
$6600 - $2500 = $4100 more realistically.
and I was hoping to put $4000 into savings each month to invest.

Darn.
Question - Lets say I wrote a check for $2000, or $2500, or $3000 each month for investing purposes, what should I do with that check? Put in savings? Invest in a "dogs of the dow" type move, or a permanent portfolio type move? Do you invest monthly? Quarterly? What gives the best results?
I have a scottrade account ; i could draft money each month.

Scottrade says I'm worth $6620 today.
I also have a few "unexpected", "not normal" expenses this month. My house insurance is due. That's like $1187. So, no $3000 investment for me this month.
I just remembered the anomaly on my income - - the broadband company I own outright (that i pay debt with) - the income is probably closer to 2k a month, i just pay debt with 1k. The income has only recently gone up to that level (added a lot of customers in December), just have to see if they pay regularly.
I still need to do billing after being on that trip.....
I guess I'd like to know, roughly, how long it'd take for me to reach $500,000 and $1,000,000 respectively if I put back $2000, $3000, and $4000 a month and invested it.
Still working out exactly what I can do here.
Hey, thanks ya'll.


mrjay
Posts: 47
Joined: Mon Jan 07, 2013 7:06 pm

Post by mrjay »

thanks for the advice on the SEP_IRA too, anomie!


mrjay
Posts: 47
Joined: Mon Jan 07, 2013 7:06 pm

Post by mrjay »

Kind of ashamed to have to admit this, but the real world has caught up with me. Since the beginning of the year, I've saved some $5800, but it's all come to an abrupt halt this month. One business hasn't done as well, so i've only gotten half the paycheck I was used to. I had to pay homeowner's insurance of some $1400 or so and auto insurance. Lets talk about Auto Insurance - I replaced my car this month (not really planned but since my 02 explorer was approaching 205,000 miles, not a bad deal). The new car, lets just say, is NICE, and i'm happy with it, and it's only taking about $500 of my $7000 / mo income - when i'm actually earning 7k. (which should be most months)
so - i've decided to hold off on actually tabulating my money or doing any investing with it until after I know what my tax bill will be. It was around 7k last year, so I expect it will be similar this year, and i'll need every bit of that savings.
So - until then. Wish me luck. :)


bulgaria
Posts: 70
Joined: Sat Jan 26, 2013 5:28 pm

Post by bulgaria »

I can only say one thing: don't give up :)
From personal experience I know that plans can be stressful due to failing expectation, especially if the reality changes. But sometimes there is not much that can be done about it.. so.. adapt.. update your plan.. and continue.


JoeNCA
Posts: 81
Joined: Sat Aug 28, 2010 7:58 am

Post by JoeNCA »

If not already, you might want to consider setting aside 3-6 months worth of living expense as buffer for just such occasion.
That way, your ERE doesn't get interrupted unless the situation is truly dire.


mrjay
Posts: 47
Joined: Mon Jan 07, 2013 7:06 pm

Post by mrjay »

That is the plan ; not giving up. Just...accepting this will probably happen when taxes are due and house insurance is due...
thanks :)


mrjay
Posts: 47
Joined: Mon Jan 07, 2013 7:06 pm

Post by mrjay »

Welp, finished compiling all the tax information for my various companies - tax bill was about twice what I initially thought it might be (I had saved 11k for taxes, I initially thought it was going to be around 3k, but it wound up being 5k - and with the first 2014 estimate, more like 6500k). So, that gives me maybe 3-4k to invest nearly immediately, and I hope to be adding at least another 2k to that by the end of the month.
Expenses are up a bit this month, looking at $2700 currently where previous estimates were $2500. Not too bad - and only one more month paying off the biggest credit card. Then 3 months on the smaller credit card, and then start whacking the HELOC.....
I am always demoralized right after tax time. I feel like everything I've saved goes to the federal coffers, but i'm usually over it within a few days.....


mrjay
Posts: 47
Joined: Mon Jan 07, 2013 7:06 pm

Post by mrjay »

another abnormal month - expenses up a bit (see earlier post about house insurance coming due from time to time). Also had some money go out to subcontractors. Not a crime....
expenses totaled $3885 this month, up about $1000. So far this month, I have put back $9377 (after using ALL reserve to pay uncle sam last month, minus about $2200). I'll be paying another $1200-$1800 next month in an estimate, but so far, so good.
Very interested in dividend investing ; trying to figure out what to save vs. what to invest. Thinking 70% invest, 30% save. On 10k, that'd be putting back 3k a month and investing 7k. On my more "normal" month, that'd be $2500 or so saved and $4700 or so invested.
Need to spend some time reading and researching now.


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