Sean Ongley

Category: Finance

  • Know What You’re Worth

    Know What You’re Worth

    Self-knowledge is not only the intrinsic value of your existence, the spiritual powers and carnal qualities of your being, nor is it merely the sum of your productivity as a working human, it is also the superficial measurement of your net wealth.

    Not to elevate our finances to the highest value, but this analysis is one that can help guide you toward a life plan. To carry out a life plan will elevate your will power and imbue your life with purpose. This will lead to a greater good in your life, if you’re a good person.

    My financial writing is not meant for the wealthy. It is for the average person just beginning to get their boat afloat, if you like. I am myself just beginning to sail, and I am not wealthy.

    As soon as you embark on the journey of long term investing and retirement planning — no matter how old you are — it is good to have a sense of your net worth.

    There are probably lots of people who make more money than me who never bother with this. The structure of their finances are probably very similar to mine, so this spreadsheet would help them too.

    I bet there is an alarming number of medical doctors whose overall net worth is in the red.

    That prospect is simple. Say you’re a doctor. You’re 30 years old. You have a six-figure income, but you have $100K in medical school debt accruing interest, and you bought your first home adding $300K to your debt, again with massive interest charges. Assuming you lease your car (no debt), you’ll need home equity and investments valued above $400K to hedge against your great saddling debt.

    To look at the interest charges you’ll pay over the lifetime of a mortgage or student loan payment is frightening. Best to ignore it for now and focus on the idea of net worth in the event of liquidation.

    In terms of ratios, the person with no college, starting out at Walmart, in the short term will surpass the net worth of the doctor. The doctor is highly leveraged and carries liabilities out the gate in life.

    The 17-year old cashier could save at least 50% of their income at first and draw it down to 10% as they become independent, relieving the parents from the cost of hosting them. Out the gate, this worker has the opportunity to build their net worth in the green.

    If the cashier rises up to General Manager after ten years, they too can earn a six-figure income. If they learn how to invest their portfolio, they could end up living next door to the doctor in a cul-de-sac. Who gets there first is a tortoise versus hair scenario. The doctor will rapidly earn more money once they enter the workforce, but the entry level worker can build their wealth debt free.

    This is why everyone should plan their finances, not because it is a race or competition of some sort, just because anybody can elevate their situation with focus and planning. I am speaking from experience. I was raised poor and until age 34, I held myself down in poverty. I’m starting later than the doctor, I am low-income. With planning, I believe I will retire before age 60.

    Once every quarter, I go through all of my financial accounts and enter the balances into a spreadsheet. I am including it as a download here. It is a straight forward net worth analysis. Also notice that I have formulas in the cells. These are calculators. I did the work so you wouldn’t have to.

    There is a primary goal for this spreadsheet. It is to predict the maximum liquidity of all my assets, literally all of them, imagining a scenario where I want to reduce my debt to zero and unload my possessions down to a backpack full of cash and nothing but a change of clothes. This figure is my true net worth.

    When you see these celebrity and CEO net worth articles, most of them are highly overvalued. There is no way Elon Musk can cash out on his shares and retire with $100 billion in a duffle bag. It just is not that simple.

    It kind of leads to a gross misunderstanding of the term net worth. I call that gross worth. Net worth to me is simply my liquid assets minus the sum of liabilities. It is easier to figure than Musk’s money.

    In the process of building this spreadsheet, I decided to include net credit limit into the gross worth figure. If I started cash advancing my credit cards and pulling my balances as quickly as possible, what would be the maximum cash I could liquidate? For this, the spreadsheet adds up total available credit, cash on hand, investment accounts, inventory, and home equity.

    Inventory is important for understanding net worth. Considering the minimal time required to keep an inventory of your possessions, with model and serial numbers, I would say it’s worth it. You can even point that cell on the analysis to your inventory total so that it will update your net worth when you manage your inventory.

    By the time you go through your house, add up your car(s), furniture, computers, and devices, depending on how far you want to go with it, your cookware and knick knacks, with modest resale values associated, then you can track an ongoing inventory of your estate.

    The minus debt field simply deducts my credit card balances and all other debts from the gross, giving me the post-debt figure, which means I pay debts off but run my credit cards to the max to go off the grid. It’s a weird figure, it’s almost pointless, but I like it.

    Liquidity is the final figure for net worth in this spreadsheet. It is also the only realistic number. This time I leave the credit limit alone as if I’m cutting up my credit cards. I total up cash on hand, investments, inventory, home equity, and deduct all debts. This scenario would have the maximum cash I can stuff into a bag after selling all possessions, investments, while paying off all debts.

    The truth of your liquidity is still not revealed. There are costs every step of the way. If I sell my house, I’m out thousands in closing costs and fees. Some people still pay brokerage fees to sell their stocks. If you sell your inventory in a hurry, you probably will get a fraction of its top value. I bear all that in mind, but I don’t have a calculator for it.

    Finally, there is one more figure that I realized I should know and estimate for the sake of my parents. My parents will depend on me as they grow old, so I want to know how much they could potentially get from my estate if I suddenly passed, God forbid.

    I do not presently have kids, so I don’t have a serious life insurance policy. Mine is free through the credit union and it pays one grand, which amounts to a basic cremation process.

    The better news about this total, even though I don’t benefit, is that it adjusts for student loan forgiveness. The only person legally responsible for my students loans is myself. This is the case whether I’m single, or married with children. So long as I keep my credit ratio well below cash in the bank, and my other debts below my home equity, then there will be enough of my capital remaining for them to reinvest into their portfolio.

    Prepare for the worst, work toward the best.

    In addition to this template, I have sheets that reference investment balances to chart growth (or loss). I have a very simple sheet that I will update annually for 20 years to ensure I am meeting or exceeding my goals. If I exceed, then I should at that point own my property and inventory outright and be able to bring my monthly obligations down to negligible figures.

    My entire collection of sheets that work into the analysis and projections include a budget. I update this annually to estimate my income and factor in expected costs, everything from taxes to recreational drugs. 

    The whole jawn is a comprehensive tracking system that no third parties have access to. Don’t leave it up to corporations to provide your financial analysis. They use and sell your data. They might even mislead you. Learning this template will earn you the skill to track it all on paper if you want to.

    I have included three versions of the Net Worth Analysis template. It was built in Apple Numbers, exported to PDF and Excel. I replaced my figures with basic numbers and generic labels. You are meant to personalize it and refer to your accounts.

    It is simple, just start adding your bank accounts and what not into the fields and watch the numbers update. Many of the cells contain formulas. Drop a comment if you have any questions about it.

    Download the Spreadsheet

    PDF VERSION

    APPLE VERSION

    EXCEL VERSION

  • Hedging Against the Machine

    Hedging Against the Machine

    My first appearance on 2 Bulls in a China Shop!

    Two Sunday mornings ago, I joined a conference call with 2 Bulls in a China Shop co-hosts Dan Leeson and Kyle Hedman. The episode can be listened to for free in this post, and you can find a bunch of ways to subscribe at their official website.

    Dan is a friend from high school, one of the few that I have kept in touch with. If I was more active in high school, were I guided by my natural interests and talents in those years, we might have been in the same television broadcasting program in which students produced a morning news program that transmitted official school business. There would be many mornings in which I watched Dan deliver the news on our closed circuit television network.

    Today, he is a podcaster. I am a former community media producer and podcaster as well. We are discussing collaborating more on this program, myself a repeat guest perhaps focused on cryptocurrency. Both of us have been living the odd job life of going broke and pursuing music and random ideas. Many paths one summit, they say.

    Podcasting has been a new universe since the day I launched Horizon at End Times, in 2013, which was meant to be an artist-on-artist interview program, discussing topics from a creative perspective, providing commentary on the madness of our social and political times. 

    If there was a way to invest in podcasting, like an ETF, the market would have quadrupled over by now. In that growth, many podcasters jumped in and drifted off into the noise of obscurity. Dan and Kyle seem to be finding a way to pop their little heads above the noise. I look forward to joining them for their continued success.

    Before the pandemic, I started to write blogs aimed at capturing the lessons that I was learning in the process of investing my savings. It has been a year since my last finance post, a lot has happened, so I think I am ready to get back on that train and take it to the end of the line.

    One of the major educational processes that I went through was more vicarious than personal, as I persuaded my father to move his annuity fund into a personally managed portfolio. I gave him a number of good picks and jumpstarted his path to profit. This will be the topic of my next finance post.

    A Few Thoughts on GameStop and the Finance Economy

    The financialization of our economy is rapidly disrupting stock markets, monetary policy, industries, technologies, and truly the whole social fabric. To hedge against the machine today is to play the game and try to beat the machine using its own tools.

    The weekend that we recorded this was the one leading into a major market activism event in which GameStop (GME) grew by 222% over the week, and by 1,476% over the month, from about $19 to $312.

    There is nothing about GameStop that can justify this valuation, the company was disrupted by lock downs and was shuttering locations. Like record stores, the media can be transferred more efficiently online. Its revenues were only declining.

    That is why the market was broadly betting on GME to decline. There are ways to do this. One common method is options.

    I don’t play options. This is the casino aspect of our markets. I’m a bad gambler.

    I don’t like options. It turns stock valuation into a speculative game rather than a rational valuation based on revenue over loss, supply and demand.

    These are basically just bets that you place with regards to the movement of a stock, up or down. There is more to it but that will do. You don’t actually invest in the company like when you buy a share.

    Options are part of this story, but short selling caused this whole mess.

    Short selling is a little hard to wrap the head around, but this is a common bet in the big investor class, the hedge fund world. One of the best of all the analyses of this short squeeze event that I have heard is, ironically enough, from Speaking of Bitcoin podcast.

    Speaking of Bitcoin Podcast Explains Short Selling and GameStop

    The arrogant move on the part of the investor class was that GameStop was so heavily shorted that 138% of all available shares were being shorted. That means there were 38% more shares than exist floating and would need to be called if the price went up. This means that a large contingency of small investors could call the bluff and force their hand simply by going long on GME.

    It was a movement of retail investors organized on Reddit that forced this whole situation. These are regular people with brokerage accounts who jumped in as a swarm to drive the price of GameStop upward against the hedge fund bets locked and loaded to crush the company. Short sellers were forced to accept losses or hold the bet by raising their position. That is why it is called a short squeeze.

    Tesla is a company that picked up massive momentum in a short squeeze. The valuation is still inflated, in my opinion. Tesla might hold because the outlook for the company is much better than GameStop. Tesla is at the frontier of something while GameStop is comparable to Blockbuster Video or Tower Records, it is simply obsolete.

    The problem lies in the fact that Wall Street has the dangerous ability to crush a company and accelerate its demise. In a world where the balance of power isn’t so top-heavy, GameStop could carry on a number of years without even changing its business model, employing thousands of people, filling hundreds of retail spaces on Main Street.

    Anyone that educated themselves over the weekend will realize that the only position for GameStop ultimately is down. R/Wallstreetbets continues to call for a hold.

    Here is what I would have done, had I been following this Reddit forum. I would have bought GameStop around $20 and did the old halving on double strategy, so when it hit $40, I’d sell half of my shares and hold the remainder from that point until collapse. Even selling those shares at a loss would be a profit.

    Retailers should have liquidity as hedge funds eat the loss. This is actually a major transfer of wealth from the elite downward, largely into RobinHood accounts, Cash App, and other tools that are free and easy to use in the hands of the masses.

    This rare transfer of wealth from the rich to the poor happened on the platform named after Robin Hood, the mythic character that steals from the rich and gives to the poor. 

    Even for the platform’s coordinated effort to control the losses, at the behest of its financiers, enabled the situation by innovating a platform that onboarded millions of first-time traders.

    More importantly, it is a mass public education about big finance and how the dirty business works. There are now millions of people that just learned what options and short sales are.

    This is a peoples’ movement in the truest sense of it, as far as it looks from my angle. The more people that own stocks, the more the people have leverage over companies.

    Democracy is built into the market system. Rather than a single king own Coca-Cola, there are millions of investors that own it, and they can organize. Every stock counts for one vote and every year these votes determine major decisions.

    Millennials are jumping into the markets and today it might be possible for a social media group to remove a CEO, breakup accounting monopolies, inflate a stock, even short their own stock to buy up more shares.

    We are living in a world where personal finance is most likely to become more integral to people’s lives, just like social media, year over year.

    As jobs are lost to automation, even as manufacturing comes back to domestic operation, which it is, automation is changing the landscape of the now passing industrial age, and factories with great productivity will not employ people en masse the way industry did a hundred years ago.

    Social interactions are no longer limited by locality. Tribes form and coalesce in global ways with their own language, to make huge moves. GameStop is one example.

    Or this could all be a set up. It is easy to manipulate the masses into seeming social movements. History has repeated this over and again.

    Right now, silver is at an all-time high and the mainstream news is blaming the Reddit group. I look at the group myself and see flat denials that they are doing anything with silver. This seems like a tug of war, for real.

    The real ending to this story will be the bankruptcy and demise of GameStop, unless it can somehow receive a wave of support in real sales. Lots of naive first-time investors jumped in at the height of this stock and they will lose money. This will be a wealth transfer upward and sideways, from the most naive and late coming players to the game.

    But let the buyer beware. This is a free market, after all.

  • The Risky Business of Your First Investment

    The Risky Business of Your First Investment

    Once More With Feeling: Get it Together

    I cannot stress enough the importance of starting from where you are, and in my previous finance posts, I have approached that idea from the perspective of someone like myself, before I took those first steps. I am not writing a finance series for people that have money and experience already, this is for people like myself: Poor folks. There are lessons in here for anyone that has not invested yet, including people that already make good money.

    From Russian-crafts.com.

    You can start with five surplus dollars a month, like a kid with a piggy bank. That is step one. Whatever bit of money you can hoard, you have to start with that, then find ways to increase that amount. The piggy bank is okay for the first few hundred bucks, but matryoshka dolls more closely resemble the savings investment scheme that is a grown up strategy.

    Living the path from where you began

    Life is a game of risk management. Every action is a risk. Going out is a risk. Staying home is a risk. Driving is. Walking is. At any moment, you could be struck by lightning, stray gunfire, be caught in a structural collapse, be stricken with illness — everything can happen. The deal is, the better you manage your risks the more likely you are to avoid disaster. You cannot avoid every expense, you cannot avoid every disaster. Like anyone, I’ve been screwed many times.

    If you’re doing well with it, then you will be better prepared for economic downturns and more likely to keep your assets improving over the long run. If you just react to every situation in life without a game plan, you will not manage shit. You will sell all your stocks at a loss exactly when you should be buying stocks. You will buy a new car because you got a dollar raise at work. You will budget for life in a short-sighted kind of way.

    My viewpoint, well into my thirties, was that if I paid my rent and bills and I still had $100 and a paycheck coming, then I was solid. I happily spent 60% of my income on a downtown apartment. That apartment was a luxury for me, but it disabled me from saving money. In fact, I had to rent a cheap room to save money to get into that apartment in the first place.

    Your circumstances will rule over you forever, until you take ownership of them. Sometimes there are hard decisions to make, like giving up the apartment, leaving spongey people to dry (speaking from experience as a spongey person), leaving jobs that don’t pay you right, between this and that, and the other.

    Until you’re beyond wealthy, you will always be sacrificing luxuries and comforts, if you want money later. So long as you’re spending all your money now, or worse, credit cards, then you are assuring yourself that you will not have money later. Credit cards are a strategy to themselves, but I started with no credit card, so I’ll deal with credit and debt in a future piece.

    Most folks starting to save money have a short term objective. When you’re inexperienced, you’re saving up for something. If you’re serious, then it will be forever. You should have in mind something like buying a house, starting a business, or funding an investment, while remembering that saving is just going to be a part of your budget, for life.

    However much you earn and however much you expend, it is up to you to analyze what you can sacrifice to maximize your surplus income. Leverage your skills so that you can save money at home, earn extra money if necessary, or simply occupy your time so you aren’t just burning cash. Hobbies are proven to maintain health and youth, saving on bills. There are ways to turn hobbies into secondary income, and that is a very efficient strategy to building wealth.

    What Am I Saving For?

    Stocks and cryptocurrencies are moving fast right now, in these mid-pandemic market conditions. The stock market it behaving with certainty that the economy will reopen, and it hopes that the trifecta of stimulus (cheap oil, loans/grants, and UBI) will have bombastic short term results on quarterly profits, while accelerating innovations that will reduce corporate expenditures. 

    Most stock picks right now are still undervalued. Hundreds of solid companies are trading at 5-year lows right now, and I am talking about blue chip stocks, brands that will survive this, no problem. There are opportunities, like cannabis, that have actually performed well during the pandemic but were already suffering from a supply glut. Real estate stocks are down, many of them more than 75%, but these companies offer some of the most stable, high-dividend securities available, and are expected to bounce back.

    Cryptocurrencies are booming as bitcoin is approaching its halving event, in which the mining reward for BTC is cut by 50%. Trading now around $9,000, as demand is hot and supply is cut, its value should recover 2017 peaks and exceed them. Historically, the value quadruples or better in between halving periods, bubbles and bursts, but continues on a bullish trend after that. This is the built-in supply control limit. It simulates a gold mine with limited supply, the opposite of debt-driven fiat currencies.

    Here is an example of risk management. If you just got your stimulus check, and you put all $1,200 into BTC, then you have a fair chance of doubling it within summer, and quadrupling it within a year. In this plan, the first risk is that bitcoin could totally fail, so you lose most of your principle. Risk #2 is a happy one: Do you pull your money when it doubles, or do you keep it in and hope it quadruples? Let’s analyze this.

    The odds are that bitcoin will continue on its trajectory of exponential growth for years, maybe decades — as the whole supply takes at least a century to mine. That is the design of the technology. Major flaws expose it to failure: If public sentiment turns or the cryptography is broken, then it plummets to zero. 

    If you buy about one ounce of gold, currently trading around $1,500, then you might gain a few percentage points on that, year over year, but it will always be valuable, because it is a commodity. If the whole internet shuts down, your BTC is worthless, and the dollar might even fail, so gold will be everything. It is safer to put it in gold, but in the short term, it seems more likely to profit with bitcoin. 

    So how do you manage this risk? The safe bet is to spread it around. You can buy $600 in bitcoin, and $600 in gold. Even more safe would be to invest it four ways: Open an Individual Retirement Account (IRA), open a stock brokerage account, create a bitcoin wallet, and buy some gold coins. You almost can’t go wrong like this. You have two different, volatile investments to be aggressive with, and two passive investments in which you just wait and add to over the course of your life.

    The second risk is how to manage your profits as they come. If you’re trying to maximize your profit, you should wait until bitcoin quadruples before selling any of it. So here is another strategy. Again, it is about doing both. When BTC doubles, you can pull your principle investment of $1,200, put it in your IRA with a CD, let it grow for a lifetime. Keep your profit at play in BTC and it will probably double again. Or you can convert that into different cryptocurrencies, of which there are now hundreds. You have a cash farm going, basically, as you have bought the field at $1,200. All you do now is till it, and replant the seeds of the fruit.

    What if Saving Was Also Investing?

    When I really truly started saving money in 2017, it just sat in a savings account, earning credit union dividends — like $2 all year. If I had deposited most of it into an IRA then I could have taken a huge tax deduction that year, then rolled that figure back in. This is probably the safest way to save toward a house. The least risky, the most straight forward.

    Alternatively, I could have purchased blue chip stocks, like Ford, and taken their dividends. You see, a savings account is a storage of cash, while gold, stocks, and crypto are storages of value. If Ford goes up by 5% and pays dividends, that crushes any savings account by a long shot, but the timing on your sale has to be good. If you’re saving to buy property, timing is everything, and you don’t want to get hung up with market fluctuations.

    It is difficult to calculate, because it was growing gradually, then exploded in November and December — who knows when I would have sold it — but if I had stored my savings in Bitcoin, I think I could have tripled my savings. I was not experienced yet, so it’s all about hindsight and learning a lesson from it. Obviously the best performing asset of 2017 (Bitcoin) is where I should have put my money. I had contacts in the ecosystem by 2015 and really should have entered at that time, so I kick myself in the ass a little too much.

    Everything I have learned about trading, I have learned by risking small amounts, and running simulations. In fact, my first simulation was high school economics class. It was the “Roaring 90’s” back then, so I am not surprised that my stock picks were successful. Ever since, I had a fascination for economics, but eventually in 2016, I mocked up a portfolio at Google Finance. It is hard to understand why I did not begin trading until 2019.

    There are several digital mock portfolio platforms online, or do it like I did in high school: Look up the day ending quotes in the newspaper and produce a paper graph. Or you can make a spreadsheet on your computer, watch quotes on Bloomberg, and pretend to make sale/purchase orders. Produce a balance sheet and see if you are capable of turning a profit. Good news: You don’t have to calculate brokerage fees because they are no longer common for retail investors.

    If you have an extra hundred bucks, you can open a stock brokerage account and toss in some extra cash — some of them offer cryptocurrencies plus stocks. Suppose I throw $10 at Bitcoin and make $0.50 back, the steps I take are the same as if I played $10,000, to earn $500 back. By the time you have made a hundred low-risk trades, you’re ready to up your game. And if you don’t enjoy the game, don’t play it. Invest in another way.

    The main way to mitigate risk is to leverage expendable money. You pay your bills, you have at least a month’s savings above and beyond your immediate expenses. I recommend three months, but you manage your own plan. After that, you can play that money with no worries. It is not gambling, because you are purchasing shares in companies. Options are like gambling, but I won’t go there yet. Sometimes companies go belly up and your stocks fall to zero, sometimes they skyrocket. The portfolio balance needs to profit overall. But my primary rule is never to sell at a loss.

    We have discussed risk management, savings, entering stocks and cryptocurrencies, and some strategies toward that end. My next installment will detail how I work with my portfolio. I’ll discuss digging in, digging out, buying the dip, dividend stacking, fractional shares, day trading, and I’ll compare a few known platforms so that you can think about how and why to use brokerage services.

    If you want to start trading and to support me for writing these free blogs, then please join Robinhood with my activation link and we’ll both get a free stock.

  • Before Going Zero to Sixty, Get Out of the Negative

    Before Going Zero to Sixty, Get Out of the Negative

    Let us imagine you’re fifteen years old and you have a drivers permit. Your parents are middle-class and they have two cars: a Ford Mustang GT Shelby revival series with a six-speed manual transmission, a 250hp V8 motor, but the other is a Ford Focus 125hp 4-cylinder automatic with safety alerts. As a new driver, you may just be excited about the horsepower, but little do you know how to drive it, and your lack of experience could run you off the road. The Focus is a better bet. You should learn to drive with that, then move onto the beast.

    Take this scenario as an allegory for finance. The basis of your financial plan has to be the long run. If you’re driving cross country, you’ll be glad for the fuel economy of that Focus. If you’re trying to get somewhere fast, you might need that Mustang. In other words, you’re used to being in the negative financially speaking, so if you’re in a hurry to go 100 MPH, you need to stop going backward first.

    My allegorical Mustang is an old one that needs a lot of work, and I’m the one doing that work.

    In my previous blog posts, I discussed the importance of changing habits, developing a budget, and broadly changing your outlook. You need to investigate your spending patterns and conform it to a budget. Do a quick search for a budget template and fill it in by looking at your expenses. If you are unbanked, you have to get banked. This makes everything much easier. No doubt you’ll find a place you can reduce your spending when you look at your bank statements. Usually this involves cutting back on entertainment, services, and conveniences.

    You might have dozens of specific line items in your budget, but they can fall within four broad categories: Housing, Food & Bills, Transportation, and Discretionary. Part of the budget needs to be a 5-10% savings rate of your gross income. This needs to land in your discretionary budget. All vacationing and entertainment has to fall into that budget as well. I think this is a good psychological way to handle it, for me at least. Because I consciously connect my impulse desires to my long term wealth. Maybe I can grow that money before spending it. Maybe I don’t need that right now. But that is a little advanced, you have to build the structure. The structure is all about banking. It is possible to literally own your bank using cryptocurrencies, but this is risky, advanced, and most likely, you’re paid in fiat currency.

    The ideal middle class budget splits the income four ways evenly, with 25% for each of those four categories. That would mean the individual median income of about $50K annually would have a monthly budget of $1,100 available for housing (mortgage or rent), $1,100 for transport (cars, fuel, repairs, taxis, bicycles, public transport), $1,100 available for bills (utilities, taxes, loans), and $1,100 for discretionary spending (vacation, travel, savings, investment). An adult earning the median income with no kids can quickly step into that Mustang. Most folks blow their money on the nicest apartment and car their money can buy. They are foolish.

    I personally have never earned more than 50% of the median income. So you can take those figures, cut them in half, that is my budget. It means I spend more on housing and less on transportation, more on investments and less on entertainment. My split is more like 45/15/30/20. I ride my bike and walk most of the time. I bought a cheap house. I repair stuff. I don’t buy new stuff. It is a tight squeeze every month, and yet, I have been able to buy a house, fund an IRA, invest in stocks and cryptocurrencies. My allegorical Mustang is an old one that needs a lot of work, and I’m the one doing that work.

    Next, look at where you are banking. Do they charge maintenance fees? Do you get surprised on a regular basis by fees? How about their overdraft policy? Is it straightforward and in your favor, or is it against you? Generally speaking, you are better off with any Federal Credit Union than a standard corporate bank. You will find they don’t have tricky minimum balances, and they will pay you tiny little dividends in your checking rather than charge you every month. One thing I have found is that corporate banks have better online platforms, so I like to use both. It is just a matter of doing your research to decide where to move your money.

    I do not endorse any banks, and I’d rather not reveal where I bank. There are interesting features at all banks. Credit Unions were consolidated after the 2008 bailouts, so they are more accessible than ever, but they are State-based. CapitalOne is a tech-based national bank, ideal for those building credit, or prefer mobile services, but branches are hard to come by. Other corporate banks may have unrivaled branch access in your region. Charles Schwab offers standard checking and saving accounts plus brokerage services. Robinhood now offers debit cards and you can trade cryptos there. You must evaluate your needs and select the most advantageous banks for your needs.

    My recommendation is to keep two different checking and savings accounts, one for processing your regular income and one for managing your savings and investments. Here is how this works. Suppose you have $1000 coming in every two weeks. You set your direct deposit up in the corporate bank, manage all of your bills, and make sure that this account holds $2,000 after every paycheck. Most folks have a wave of bills every two weeks. If you have no income for a month, this account should hold for as much as two months before going negative.

    After you have this amount and you have trained yourself not to spend it, then you can take that savings budget and put it into the credit union account. Here you should also have at least another $1,000 in savings before you start contributing into investment accounts. Moreover, if you’re managing at this rate, your credit has probably improved, so you can also manage emergencies with credit lines. This is a future blog topic, however.

    If your goal is to become a first-time homebuyer, the IRA is where I recommend you stage that down payment money. These accounts are great. Every dollar you put in is tax deductible. You get another tax credit if you’re a low-income earner when you make IRA contributions. When I was saving for a house, I didn’t know this, and unfortunately I could have earned a massive tax refund for both 2017 and 2018, but I was just learning how to save my money — to get out of the negative.

    In my next post, I will analyze how I could have maximized my savings during that time using storages of value such as Bitcoin, while comparing that to other growth options, their risks and advantages. This will be applied directly to our current situation economically speaking. This is one of the best moments in the last thirty years to maximize investments if you are starting from scratch. 

    A thriving stock market recovering from shock, low interest rates for real estate, and cryptocurrencies: This is a rare moment to step into investing. Not everyone is positioned to jump into that, and one should expire their driver’s permit before moving into risk management. Because that is what volatile investments are, a game of risk management.

  • Setting Your Stride from Rock Bottom

    Setting Your Stride from Rock Bottom

    A Look at Personal Struggle and Social Inequity in Finance.

    In my first two posts in this series of short articles grappling with the preparatory steps required to embark on the path of financial planning and investment, my personal story was revealed for the purpose of discussing how we get ourselves into the rut of hand-to-mouth living — with a buck earned a buck is spent. I want to dig into that a little further to demonstrate how to get out of it.

    I am still in the process of becoming an Investor, and I am starting from a position that anyone can relate to, because I grew up with one foot in the door to the middle class, but we never really escaped the lower class. That door ultimately closed on my family again, as they are retired and still possess more debt than cash. 

    The fact is, if you are born poor in America, you are privileged compared to Guatemalans born equally poor in scale to Guatemala. And it gets worse from there — god bless whomever is the poorest person in the world. Every American has access to financial tools far greater than that person can probably conceive of. The financial markets are a public, democratic tool that anybody can wield. 

    I live in Philadelphia, we have a third world within the first because these folks were abandoned by their employers in the name of profit. Blight and unemployed men are a volatile combination. While I assert we have to hold ourselves accountable for job creation and community building, we also have to adapt, and for the folks living there that have to work at Wal-Mart, I have a financial strategy for them.

    It was my personal choice to live in chronic poverty as an artist and activist from 2003 to 2016. The consequence of that included the same kind of discrimination any poor person deals with: Unable to get credit, build credit, secure home leases, auto leases, and all that. 

    Folks are discriminated against on the long pathway to the bank loan, but not at the bank branch, where truthfully, the final decision is made by computer systems, and most of the employees considering your loan are from minority groups or working families themselves, and they understand discrimination. You just have to have reliable credit behavior and an income to get good, non-predatory loans.

    Generational poverty and social biases can set one on the wrong path from day one. However, once a person lifts themselves up and out of the situations that keep them down, they cannot learn to present themselves to the financial system toward their own advantage. 

    It is interesting how there are moral implications to good credit behavior, you know, like paying your debts rather than stealing from your debtors, being honest about your income on tax returns, on public assistance applications, rather than lying, and so on. If we abide by it, life seems to open up. 

    There can also be crippling repercussions to our financial system, it broadly produces social inequity. But how to reform the system is beyond my scope, and beyond our personal control. I really believe however that mass adoption of stock trading would improve inequity. One way to achieve that is worker-ownership through stocks, either by law, or by strike. But these are the weeds of political-economy, again. So it is indeed another discussion.

    I do feel that finance can be applied to my own Buddhist morality. The code that we go by is “Right Living.” This means that earning your money can be earned in a wrong manner. It won’t matter how generous you are with your profits if you are making your living in a rapacious way, hurting others in the bullheaded drive for money, or investing in companies that behave that way. My moral compass determines how I invest and from whom I seek employment.

    I cannot tell you where your compass will direct you. I am not saying outcomes will be equal under our system, but that won’t be a problem if we can, together, through self-determination, pull wealth back from the upper-upper-class and end this era of deep inequity. You, as an individual, making the system work for you, realizing that a better democracy and economy depends on your cooperation with others, can improve the world.

    The more of us that own stocks, the closer we are to real democracy. That is how we literally own the corporations and make demands of the Board. This is a radical endeavor that I’m embarking on, not one that will make me soft, or turn me into a Republican. You may however break from the spell of party-line thinking. That would be good, because when you associate securing your financial health with greed, then they win, by planting this negative seed in your mind. They have tooled your mind to keep you out of the game.

    This series of financial articles is for people like myself, starting with, maybe a hundred bucks, zero investments, no credit cards, no direct experience. That is how I started three years ago. I am not wealthy, but I broke from a 15-year streak of hand-to-mouth budgeting, securitized my savings into retirement and brokerage accounts, became a property owner, raised my credit score at least 100 points, and bought my first house. My income has averaged just $23K per year.

    All that said, in this article, I can just outline the main structural points that build credit and financial strength: Income, Debt, Budgeting, Banking, Insurance, Investment.

    Without income, you cannot (or you should not) take on debts. You cannot budget without an income, and you cannot manage debt without a budget. You really cannot manage all of that without banking. When you have your cash flow keeping your bank account well above water, then you can begin the path of investment. Finally, to protect your assets, and your debts, you must have insurance. Let’s go through that again with a simple story. 

    Someone, lets call them Ra, is born urban poor and managed only a high school education. Ra starts working at age 16, but other kids in the neighborhood, even Ra’s own family members, hustle Ra out of every extra dollar, so that by age 18, everyone in the community is still broke. Ra loves the family but realizes they will never let money accumulate in the household. Ra strikes out with their next paycheck before anyone can hustle it. 

    Ra struggles but gets it together in a new place and after several months of work finds there is an extra paycheck sitting on the dresser — it wasn’t cashed because it wasn’t needed. Ra opens a bank account and realizes that this bank can grow with a little budgeting. After putting together a budget, saving receipts and looking closely at spending habits, Ra settled on a savings rate of $100 per month. 

    It has been a year since leaving the house, so Ra takes a vacation. After two weeks off, travel costs, and gifts for the family, Ra notices that they still have one month’s budget leftover. They research investment and secondary banking options to begin taking that $100 a month directly into investments.

    About a year later, Ra has $1,200 invested at an average growth rate of 5%, so the portfolio is now worth $1,323. But during that time, Ra earned a first promotion at work, taking home an extra $200 per month after health benefits. They got their first credit card, and have researched first-time home buyer opportunities in the area.

    Over the following year, Ra saved $200 per month and advanced through the home purchase process with a down payment partially funded by homebuyer grant. Nevertheless, that savings is stored in the value of the home and that position improves month over month.

    As a new homebuyer, Ra is also spared almost two months of bills, as mortgage repayments and utilities are delayed. By the first mortgage payment, Ra has returned $1,200 into investments.

    One year later, investing $200 per month, the home down payment has been restored plus 5% and is now valued at $3,843. With compound interest and more aggressive strategies, Ra doubles the growth rate to 10%, holding now $6,483.

    Over the next twenty years, the portfolio improves to an average return of 15%. Some years are better than others. Ra never increased the original monthly contribution because they started a family, and expenses have kept up with every increase in pay. 

    Ra and spouse are now in their mid-fifties, the kids are gone, they paid off their house, and the assets have grown. They do market research and determine they can sell their house for $250,000, and relocate somewhere to buy a smaller home at half the price, and enjoy their retirement. The portfolio has grown to $58,920. Meanwhile the spouse who worked after raising the babies also squirreled away $50,000 in an IRA account.

    They become semi-retired Investors with a capitol I, spreading that $308,920 toward a house, putting 50% down to maintain low payments, but also to keep substantial liquid capital. Ra takes a more aggressive approach toward stocks, diversifies brokerage accounts, accumulates precious metals, and keeps an eye out for unique investment opportunities. Altogether Ra and spouse are spending maybe 15 hours a week managing the portfolio. The growth rate of their capital falls flat, because their new home is being paid down again, and the good life is being lived without new income. So they make do for the rest of their lives with about $250K, living on quarterly returns.

    This is not ambitious. It is responsible behavior — basic risk management. I never said Ra didn’t party, have fun, have family emergencies and all that. That is what budgeting and credit is for. They just managed risk. Ra learns to save money, only a little, to build that into an early, comfortable retirement. It is an average story, not a perfect one. Your story is more complex. Your story is yours to realize.

    Each post will get into those specifics: Income, Debt, Budgeting, Banking, Insurance, Investment. They will be more research driven than narrative, although I’ll continue sharing personal experiences. 

    Thanks for reading. You can support me by joining Robinhood using my join link here, as well as by joining Coinbase here.