Post 8.0 –> Just Do IT! Take Action to Build your Investment Confidence…Its AUTOMATIC!

FI-light-ER post 8.0 / FirstPublished20200701 www.filighter.com

FI-light-ER – n.(Financially Independent achieving slightly Early Retirement)

Disclaimer: We are not Tax or Investment experts and are not in any way providing expert advice. Please seek your own tax, legal, or other professional for advice and counseling.  FIlighter accepts no responsibility for any actions or activities you may take based on anything discussed on the website, postings, or comments.

8.0 –> Volatility has returned…so what?  With the news of several states regressing back to more protective measures to mitigate the rising cases of COVID-19 the markets are reacting negatively.  Recent recovery gains have been given back.

Spoiler Alert –> Just Start! Make a move forward, a step at a time.  Grow the GAP!

1) Set Up an Account Today and 2) Automate for Painless Success

So do you stay glued to the CNBC or Fox Business ‘Talking Heads’ (and I don’t mean the great music group headed by David Byrne with songs like Once in a Lifetime or Take me to the River, or And She Was…).  Does the financial news just build anxiety about what to do with your money?  Or have you learned that their only goal is to create drama and attract as many advertising eyeballs as possible? 

You are focused on the Big Picture and the Long Term….this drama doesn’t work on you!  You are a FI-light-ER!

I have a broad demographic of regular readers and this post is one of those that could be for those at either end or in the middle depending on your particular situation.  It’s about taking action!  Engaging in your Financial Future!  And to take a line from a song above, asking yourself “How did I get here? Letting the days go by…”

Many who know me or have worked with me have heard me refer to someone in a situation with the question, Are they a pinball or a flipper? A pinball works its way around the game table bouncing off the sides, flippers and bumpers the result of physics and gravity, whereas the flipper is setting the trajectory of the ball and the success of the game.  Are you the pinball just “letting the days go by?” Is your financial life the “same as it ever was”?  Nobody is going to ask you to take the blue pill or the red pill, it’s not all or nothing, just take action.

One of my 20 something readers asked me a question this week that prompted me to think about all the noise everyone hears when thinking about the next moves in their personal finance world.  Advice from parents, friends, the internet, their siblings, advertisers, “experts”, it goes on and on…  As you may guess the answer to the question was…”It depends” which I’m sure is not anyone’s favorite answer.

When we were young and were blessed with children, I can remember thinking we were doing the right things financially, we had a house (big enough to grow into – FIRE Translation, Bigger than we needed), a Chevy Suburban to haul our first born and one small dog around, (also bigger than we needed) and we began to save a little.  In spite of some less than optimal decisions, long before there was a FIRE movement, we began to grow the gap. 

Why?  We had begun having conversations and wanted the option to allow mom to stay home with the kids if we chose that path.

 #protip –> It is extremely important to know your WHY? 

Having this one goal drove numerous decisions to align with this mission/vision/goal.

Lambo Lookback: After paying down our mortgage a bit and refinancing 2 times in 8 years, we got our interest rate from 11+% to a mere 7% and our payment down to $320 for P&I literally like a car payment at the time in the late 90’s.  As paychecks grew, we held our lifestyle static.  When a bonus came, a large chunk went down on the house.  There are many other things I would have done to help our outcome later like fund IRA’s, Buy into the Texas Tomorrow Fund, etc, etc… #hindsightin2020

What is the point of this nonsense?  By growing the gap we had options and by options, I mean CASH.  Cars got paid off early, mortgage refi dropped our monthly payment and we had the option to break the yuppie trend and have a spouse at home with the kids.  You don’t just wake up and have a new option if the foundation and groundwork have not occurred to give you those possibilities.  

I’m not talking about having FU money.  I’m talking about breathing room and getting your financial lifestyle on the rails that lead to happy success rather than nail biting canyons and dangerous mountain passes living paycheck to paycheck when you need new tires on a car.

I don’t always agree with Dave Ramsey but I can tell you I’m 100% in alignment with his early baby steps.  Having $1,000 in hard cash literally frozen in your freezer can be the difference between a good night’s sleep and stressful days.  If you have debt on anything besides your house, start by reading, “The Total Money Makeover”, I mentioned this in one of my earlier posts, 1.0.  Get rid of your debt!

Got an Emergency Fund of 3-6 months expenses in place?

Pay off all Credit Cards and adopt a policy that if you can’t pay the full bill you won’t use the card.  Rewards are NEVER a reason to carry a balance on a credit card.  Carrying a balance on a credit card is simply a symptom of living beyond your means and not planning for the reality of emergencies.  That is it.  Don’t buy off on the fallacy that credit cards are for large purchases and then you can pay them off over time at a crazy high interest rate.  How much sense does it make to charge a meal and pay for it say 3 years later when you finally pay off a credit card.  Think of the most temporary experience like a tank of gas, or a quick lunch, and then pay interest on that experience for many months before you finally pay it off, long after the gas leaves the tail pipe or the meal meets its demise in a sewer plant. 

Ask yourself

  1. Is this purchase something that should be covered by the Emergency Fund?  (If yes, use the emergency fund and then quickly rebuild it).
  2. Can I pay this bill entirely when it comes because I budgeted and expected this expense? (If no, save until you can, who knows you may decide you really didn’t need it after all).

ENOUGH DEBT TALK!!!  We can save Delayed Gratification for another posting in the future.

I’m so debt averse that it takes over my mind when the topic is near.  I want to talk about the other side, ASSETS and Investing with Automation Systems.

Open a Low Cost On-Line Brokerage Account (Vanguard {suggested}, Schwab, or Fidelity)

Open a Vanguard account today and start funding it each week or month.  Automate your investing.

There you have it, stop reading if you are good to go and are taking the above two actions.

Why do this?  Why Vanguard? (I am not paid to endorse Vanguard).Fidelity and Schwab are also great options for robust low cost investing.  The key is low/no trading fees and solid blocking and tackling.  I’m not suggesting the best complex options trading platform, I’m saying these firms handle billions or trillions of transactions and millions of accounts and do it well for any investor from $5,000 accounts to the $50,000,000 accounts.

You don’t need any elaborate investing product to begin automated savings and investing.  If you believe your buddy the stock broker or investment professional that can beat the market, you are already on the wrong track and they will do everything to keep you there and paying their fees.  That is not the point of this post, this light and positive post is to get you moving to control your financial future.

Open an account and start funding it each pay period with something.

Automation – Create Automated Funding and Investing

It doesn’t matter if it is $50 or $500.  One of my kids is on a pretty tight budget and funds his brokerage investment account with $50 a month.  Another is putting $10 a week into a robo-investment system.  These are not big, but they are automatic.  Painless money off the top that just happens.

I’m currently about halfway through “I Will Teach You To Be Rich” by Ramit Sethi.  This author is huge on systems and automation for good reason.  Automated transactions are a great use of technology and features available on many platforms to systematically accomplish your goals.

Automation does not “forget” to make a deposit or investment.  It does what you ask of it; on time every time.

A FIlightER example: Currently, our HSA (Health Spending Account) is funded through a monthly $675 transaction ($675*12 months = $8,100 Max allowed including catch up for families over 55 for 2020) and that HSA system has an automated balance transfer for surplus funds above $4,000 to a brokerage account where it is invested.  This leaves money to cover monthly medical expense needs as they come up but automates transfers to a brokerage account for investment.

This just HAPPENS.  No intervention or reminders required.

The same is true for funding our operating account for monthly expenses and allowance stipends for our college student (now a graduate off the payroll).  In our Vanguard account a weekly purchase of 4 index funds takes place.    

The point is, once you set up the automation based on commitments to save and invest, you wake up a few quarters later and your accounts have transformed based on the planned and executed transactions.  I can look at one bank balance and know exactly the YTD variance to our expense budget.  One number, no spreadsheets or analysis required.

A post on managing Operating Accounts will be left to another day.  Today we are focused on two things, Opening your Investment Account and Automating Funding and Investing.

By paying yourself first, you are committing to growing your assets.  I say over and over, “Cash gives you options!” For Investments, Large Purchases, Debt Payoffs, Large Bills, etc, etc.  If you don’t benefit in any other way, this alone is worth the effort of opening an account and funding it regularly.

What are some of the other benefits?

You will be able to learn the simple task of making your own investments.  Start slow and safe with Money Market Funds, CD’s, and the like.  You have to know the timeline on using the funds to know how to invest them.  If you are 10 years away from needing the money, you could likely invest a good bit of it in equities such as the famous VTSAX at Vanguard.  Consider a portfolio of VTSAX, VTIAX, VBTLX, and VTABX with appropriate allocations (See post 7.0 for more on Allocations).  Other firms have similar low cost index funds.  Those are issues that can be decided in the future.  

What you must do now is open an account and automate your funding.  

Next, while your balance builds, there will be time to create your investment plan, set your allocation, and research the ETF and Fund options that you will soon be the vehicle to grow your investments.

Anyone taking action?  Send some feedback or leave a comment!!!

It only takes a few minutes to set up an investment account and link it to a bank account.  Just take a step forward, they can’t eat you.

Please send feedback or comments, even ideas you would like to see covered in future posts, your constructive input is welcomed and appreciated.  Use the boxes below to send your comments. 

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Remember MIND THE GAP+Income – Expenses = The GAP <– Grow IT!

Stay tuned for Weekly Posts by Thursday each week.

Lambo the FI-light-ER

We are not Tax or Investment experts and are not in any way providing expert advice. Please seek your own tax, legal, or other professional for advice and counseling.

www.filighter.com or on Facebook: https://www.facebook.com/FIlightER

This week’s read mentioned in post 8.0, what are you reading this summer?

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