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College: To go or not to go

Is it really necessary?

If you look back at blog 5 where I discuss pay scales for me, you can see my argument for not needing to go to college.  I make an awesome 6 figures and I have no college debt to pay back.  I don’t ever wonder what my life would have been like had I been able to afford to go to college.

An expensive piece of paper

I was able to get a higher education from NOVA because work paid for me to go to medic school.  NOVA is the Northern Virginia Community College. I attended classes for the paramedic program.  Had I really wanted to finish my degree, I could have but why would I want to?  In my earlier days, I took some general classes to get things started for a general diploma not knowing what I planned for in my life.  I only needed a few classes to complete my degree in Fire Science.  But why?  So that I can have an expensive piece of paper on the wall that would later collect dust and later be taken down and put in a box?  Who cares about that?  I don’t care that I don’t have a degree.  Where does that matter to me in my grand scheme of things?

You don’t need college to be a millionaire

It does not come up in my conversations whether I have a degree or not.  Mostly, folks don’t care if I went to Stanford or NOVA when I run in the buildings to put out fires.  Similarly no one cares when I’m pumping on their chest to bring them back to life whether I attend Yale or UVA? What about when I delivered the babies during my career span? Those ladies did not care that I did not attend Georgetown Medical. Not tooting my horn here at all.  What I mean is, I love my career path.  I fell in to it on accident really.  The sheepskin doesn’t matter.  I have always said if you do what you love, the money will come.  I absolutely believe this.  Never in my life did I think I could reach a million dollars in net worth.  I can see it now. 

College options

Now I know I spewed my opinions of college and to why bother going but don’t get me wrong.  Some might not want to be FI (financial independent) early in life.  Maybe some of you want to have a life of servitude and do great things well into your 60’s.  Well go ahead, I won’t stop you but maybe you can look at college payments with open eyes and ears.  You can join the military and have them pay for your college with the GI bill.  You can go to college and then come out and work for one of those awesome jobs that has college debt forgiveness programs like being a school teacher or something like that.  Is that even a thing anymore? You’d have to do the research but it’s never been my thing.  Apparently 50% of the trillions of college loan debt is held by seniors.  That is old people seniors, not graduate seniors.  WTF.  That is unfathomable to me.  That debt will follow you to the grave.  F that!!! 

You can not take a loan out for your retirement

Now a word to the wise.  The parents.  Perhaps they aren’t the wise one’s and they just make decisions out of emotions or guilt or the sense of obligation.  I mean really, did we give birth to children for the purpose of paying for their college debt to the very end?  Seriously.  So many parents forsake their own retirement to pay for their kid’s colleges.  I have colleagues who are working well in to their years of service for the sake of having to pay for their children’s college bills.  The children can take a loan out for college but you, my friend can not take a loan out on your retirement. 

Will they take care of you

If you don’t prepare for your retirement, will your children put you up in their house and take care of you?  Would you want them to struggle to take care of you?  Would you want to even live with them, I mean really? Hell no, I want to be on an island, sipping cold beers and going fishing and sailing occasionally.  They can come visit me if they want.  It is up to you the adult to instill these types of money responsibilities and saving traits upon your children.  Share the value of money, savings and the power of compounding interest.  A little now will go far if you just make it automatic. 

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Hustle, Hustle, Hustle

Last year I hustled real hard and put away 20,000 pre-taxed dollars into my tax deferred 457 retirement account.  I was able to stash away money for my 8 months emergency savings, and take a trip to Florida and Punta Cana Dominican Republic and enjoyed a few concerts as well. 

My assets

I was pretty aggressive with my portfolio throughout my career.  Investing heavily in stock mutual funds, and a bit in bonds. My cash savings was steadily increasing and that was about it. When I say stocks, I want you to know it was in stock funds not individual stocks.  I do not pick stocks and I do not try to beat the market with selected stocks.  ETF’s or exchange traded funds and Index funds are where I’m at. 

The equity in my house was another asset.  I bought my townhouse in 2002 about a year after one of my many break ups.  Once again, not wanting to rely on anyone else for anything, I bought a house I could afford all by myself.  You will see that in 2002 my gross annual income was $36,227.  I was receiving child support also but that stopped in 2007 and then I had to pay child support.  Yeah, don’t get me started with that shit. 

Making it automatic

I decided in the beginning that a percentage of my paycheck would go in to retirement, not a set dollar amount.  This way, if I cranked out some serious overtime or hit the triple holiday pay check, a larger portion would go into the accounts instead of a set dollar amount like 300 or 400 dollars. 

Bonus bonanza

I also put all 100% of my retention bonus into my retirement account.  This way the whole amount went in tax deferred.  Many of my colleagues took the cash bonus but they ended up getting nearly half of it eaten by taxes.  Screw that.  That was free money.  It was offered a few years into my career and continued until this year 2019.  After this year, the bonus amount was just rolled into our total salary for a salary increase. 

Some hyper consumer individuals liked the one-time bonus but I loved that it was rolled into my salary as now my hourly rate has increased for overtime.  It was never a promised thing so just be grateful that we got it at all.  I never ever banked on that bonus, ever!  You get yourself into trouble when you depend on bonuses to pay off Christmas and holiday debts.  I highly discourage this type of behavior. 

Learn as you go

Now even though I was selecting my own funds with the retirement accounts we had through work, I didn’t know what the hell I was doing.  I just made a nice mixture of small caps, and big caps and blends etc.  I would see what the funds returns were since inception and told myself that I think I was doing the right thing.  Well it paid off.  Yeah yeah, I could have had them manage it but then they would get a little bit more of my money. 

I wanted to hold on to my hard-earned money as much as I could.  Don’t even get me started on expense ratios.  I didn’t even learn about that until last year.  Holy shit the money I see going in to their pockets.  OMG get Personal Capital for this.  It’s free.  It’s just like Mint but I like it better.  I can see how much money I lose to them in expense ratios.  Argh!!!! 

Expense ratios are the work of the devil

Expense ratios on the down and dirty.  This is the fee they charge you for managing the fund.  Some of it is 1% or higher.  I have mine now in Vanguard funds.  Thank the bee gees that our new retirement account holders offer Vanguard funds.  Here is a clear-eyed example.  Picking a random expense ratio number, and let’s say you have $100,000 dollars in a fund, an expense ratio at .58 percent would be $580 dollars a year they take from you before they report your gains or losses.  If your expense ratio was .04%, they would take $40.00.  Which would you want them to take?  This is why you need to ask what the expense ratio is or look at it yourself.  All of that information should be visible to you.  Personal Capital reported that I was losing thousands of dollars annually to expense ratios. 

Brokerage firm Vanguard for the win

I have changed all of my funds over to Vanguard funds.  Fidelity is currently offering 0% expense ratio funds.  You better jump on these.  Get started with the Total Stock Market Index fund.  The symbol is Vanguards VTSAX if you have a cool 3 grand to start with or the ETF VTI with no minimum.  Both are Total Stock Market funds.  Fidelity offers FZROX.  Fidelity Zero Total Market Index Fund.  Do some research and see what you like best but look at the expenses for each one and get started.  I have a bit in short term bonds because I’m getting older and want a bit of security but I still have quite a bit in aggressive funds. The bonds are in VBTLS which is Vanguards Total Bond Market Index Fund. I also have a tiny bit in BSV which is Vanguards Short term bond ETF.   

Remember earlier when I said I was only putting in 4% when I first started?  Each year I increased it a bit, and each time I got a raise I increased it a bit, and eventually I was close to maxing out each year. Stay tuned for my salaries through the years.    

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Steady as she goes

Where did the time go? So much to do, so much to read and so much more to invest. The markets crapped the bed last year but you just have to keep plowing ahead and keep going at it with a nice steady pace. Stay on track with your goals to financial freedom.

Max out the Roth contributions and then some

I tried to max out my Roth for 2018 but I didn’t make the cut.  I wanted to hurry up and get my taxes done so I was only able contributed $4800 of my $6500 max but oh well.  I’m sure I could have continued to put money in even after my taxes were done and do some sort of amendment to my taxes next year but you know what…. I like to keep things simple.  So, I started putting money in to my Roth for 2019.  The max increased to $7000 for me so that’s sweet.  Remember I’m on the 50 and up age so I can put in a bit more.  The normal amount to max out a Roth is $6000. So far I have contributed $5100.  I want to be able to max the Roth contributions, max out a 8-10 months of emergency fund then work on maxing out $25,000 towards the tax deferred contributions to my 457 with work.  The 50 and over get to put in that much. Younger than 50 can only contribute a maximum of $19,000.

What the hell, if I max all that out, I will throw everything extra towards my mortgage principal and shorten the years on that debt.  Until next time, keep steady with the contributions and make it automatic so you don’t have to think about it each month.  You can’t spend it if you’ve already invested it right?  That’s how I look at it.  Plus, there is something so gratifying to see how much your money made for you with compounding interest!

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Plan it, Set it, Do It

You have got to set a goal to not work yourself to the bone and plan this early in your working career. I don’t care if you are just starting your career fresh out of college or right after high school. Just plan it. It’s not going to take a miracle. I’m not going to share anything new and exciting. Its tried and true, no gimmicks.

As soon as you start making a paycheck from anywhere, plan on retiring early. Like way early. With a few choice moves, you can retire early, comfortably and reach financial independence without much effort. Man, if I had known this stuff back in the day, I can only imagine how many surgeries I could have avoided. Seriously though, ask yourself. Do you want to work until you are 67 yrs. old? Do you want to work for the man until that blessed social security check starts coming? No, no, no. No, you don’t.

Read, read, read and learn as much as you can

It all started with those few Money magazines that I picked up in the grocery store line. Then I started watching the Suze Orman show. Many in the FI (Financial Independence) community may not be on the same page with Suze’s dislike for the FI generation but Suze’s show is where I got my first hit of the saving addiction. The FI community vary between frugality, living within their means, travel hacks, and saving a ton to retire early and do what they love and if it makes them money, then all the better. Here is the link for the interview with Paul Pant @affordanything.com Paula is another one of those awesome saving and do what you love kind of financially independent people. https://affordanything.com/why-i-hate-the-fire-movement-says-suze-orman/  

Anyway, my biggest take away in the beginning with Suze was to have an emergency fund. This could not mean more than it does right now with the mess the government shut down created. It wreaked havoc for weeks for folks who didn’t have enough savings. Anyway, after listening to Suze for a while on her show she had, I immediately started saving towards 6 months of emergency fund. Now, the emergency fund was to pay for my mortgage, utilities, food, etc. The necessities. I had already determined that in the worst-case scenario, that I would cut cable and other unnecessary things from my expenses in cases of emergencies. From there, the savings just increased for those emergency moments. I eventually got up to 10 months worth of savings and decided that was enough. I felt safe with that and with that said, I will leave that here and discuss more on the next post about the panic at work and my retirement savings.

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It’s never too late…

Financial Independence

It is never too late to start working towards FI.  You will hear a lot about FI here and it stands for financial independence.  I tried to do it in the most painless way possible.  I’m going to repeat the same mantra many others have stated. Make automatic contributions.  This way you don’t ever think about it and you forget about it.  Start with the smallest amount you can think of and increase it 1% or more as each year goes by. 

I went into panic mode around the time I was 38 years old and a mid level rank in the fire department.  It was 2006.  I am now at Station 7 and started looking into my investments with our work sponsored retirement provider.  I was participating in the 457 and a 401(a). In addition to this, I created a Roth. I sooooooo wished I would have focused a bit more on the Roth. 

4% egad!

I was a bit worried about how much I was contributing into my 457.  A mere 4%.  I don’t mean to offend anyone since this might seem like a lot to some people.  At that time, I had the desperate need to raise my son and be a good provider and I did not want to rely on anyone else for the rest of my life.  Experiences in my life has taught me the value of being self-sufficient with or without a person in your life.

Hustling

You see, after my 1st divorce, yes, I said 1st, I worked 3 jobs to make it.  I was around 27. Thankfully I had the luxury of having my mother and stepdad living nearby so they were my child care providers essentially.  Prior to the fire department, I worked at a Drs. Office M-F, and tended bar and DJ’ed on the weekends.  Back in the day when DC was hoppin’ and Georgetown was the place to be, that’s where you’d find me on the weekends.  That’s right, I had mad skills.  Ok, maybe just a few skills. Serving up drinks at the Jury and spinning at the Rhino, Addy’s, Rumours, Polyesters and the like. Ok, enough about that. 

Overwhelming

I digress, let’s get back to where I was.  When you join the fire department, like many other paramilitary type organizations, you get hammered with a ton of information in the first week. You are trying hard to gulp as much information and coffee in as you can.  You are physically exhausted, tested physically every morning and mentally all day long.  So, for many of us, we don’t know crap about this stuff. You play it safe and select a small amount to put in and randomly pick some mutual funds. I didn’t know jack about any of that financial stuff. 

Missing a teaching moment here

They really need to help new recruits with this.  Hence, there I was, never having to deal with any of this, and decided on 4% of each paycheck to go into my 457.  I also opted up to the max with the match on the 401(a).  This was later to be suspended due to some shortage of funds. I’m not sure if the County or State jacked something up when the market crashed in 2008.  Something like Virginia robbed Peter to pay Paul and our 401’s suffered for it. I can’t really remember to be honest, but it ended for a time period and many years later, was reinstated.  

So, at the onset of my career in the year 2000, I was making $28,700 for an annual salary and I was a single mother.  My son was 8 when I joined the fire department, I was sharing a 2-bedroom apartment in a high rise in Arlington with a friend.  We cordoned off the dining room and made a make shift bedroom for my son.  I commuted from Arlington to my place of employment out west 5 days a week for 6 months.  Can you say exhausted? Holy cow.  Thank the bejeezus it was a reverse commute against traffic.  I think if I had to be in traffic, I would have just put up a tent in a field and slept there for 5 days.  DC traffic sucks ass.  This was way before the EZ-PASS and the hot lanes.   

Educate yourself

Approximately 6 years went by with the measly 4% contributions.  I must have started to read Money magazine, financial tips etc., and started teaching myself how to improve my investments.  I read an article about how much I should have in savings by this time in my life. This led me to a freak out. I was 38 years old and 6 years into a 20 to 25 year career. 

Earning an annual salary of $76,800 at the end of 2006.  I only had $47,700 saved.  According to the articles I should have saved at least $140K.  Who does that? Why did I need to go into freak out mode? Seriously? Needless to say, I started researching the funds available in our providers retirement program and began to move things around. I chose better selections, different selections, and kept an eagle eye on the numbers.  I also slowly started to increase my tax differed contributions into my 457. I’ve attached a link for you to see what the numbers are via Investopia.  

https://www.investopedia.com/articles/personal-finance/010616/whats-average-401k-balance-age.asp

When I look back on it, I probably just got lucky with my selections. I did pretty well. I’m sure I was getting hi-jacked on expense ratios though because little did I learn about those until recently. Slap me a thousand times. UGH! Learn from me people, pay attention to those expense ratios.

Small increases

Years later I created that Roth IRA I mentioned above.  I kick myself for not putting more into that Roth for several reasons.  This would later come to be very beneficial in my early retirement years.  More on that in a future posting.  I immediately increased my contributions to 6% and slowly worked my way up and tried to max out the allowable contributions annually.  Slow and steady as she goes to work towards retirement.  Back then nobody really knew about the financial independence or the FIRE movement. Most either got rich, married rich, retired with a nest egg, or worked until your social security benefits kicked in like my poor mom did.  

To recap, it is OK to start small and increase over time.  Get involved with your retirement investments.  Read and educate yourself.  Learn about compounding interest and expense ratios.   Until next time when we discuss bonuses and the pitfalls of the 2008 meltdown, keep living the dream.