Investing in You - Your Retirement Savings Bag

I was having a chat with one of my employees and the term 60/40 came up as I have the business news stations on as a requirement for my staff to learn about how business intersects with their everyday life. So, the topic of 60 / 40 came up and he said quite, simply --- "What is 60 / 40?". I immediately responded with the answer that it is a commonly used term for the ratio of your investment of retirement portfolio that should be allocated across stocks (60%) and bonds (40%). He then whipped back who in the world would know that and I kept insisting that it's common knowledge. I then realized once again the purpose of this blog and why I've been writing for the last 20 years. There are so many things that I take as common knowledge but when shared with the world in a simplified way --- it can change minds and lives. 

Saving for Retirement 101

There are no special tricks when it comes to planning for your retirement. It takes balance, discipline, courage, and humility. 

Balance - You must be able to balance your personal finances and position yourself in a way that allows you to save extra money after ALL of your business and personal life expenses are covered. EASIER SAID THAN DONE. This is why I'm not a fan of all of these modern-day financial podcasts. You're telling me to retire but no one is there to guide you along the way. You want my clicks and eye balls but you don't have the true playbook. I'm not going to get into details today but you need to monitor your expenses daily and save from when you first start working or retirement may be difficult or a burden to your loved ones.

Discipline and Courage - If dieting is hard, imagine how hard it is to save money each paycheck for something 10/20/30/40/50 years from now. That takes a type of discipline most people aren't ready for. Find a system that works for you. If your company takes money out of your paycheck then great do that. If you put it in a savings account that you don't touch, perfect. If you need a financial coach or advisor -- they get financially fit. It take courage to do something not everyone is doing.

Humility - I always like to add in the concept of legacy. There is a certain amount of humility that is needed to save not only for yourself but to be humble enough to know that eventually you won't be around and your family or extended family may benefit from a boost. I've heard the phrase the rich get richer, but I truly believe it's the rich pass on wealth from generation to generation which only makes it harder for them to be broke. We speak of a simple term call compounding interest and at some point your funds or the legacy funds you leve behind with accumulate to a level where it truly generates enough income for someone to survive upon. To understand that you may not benefit from this but your future generations may --- take some mind-blowing humility in how life works. There are some truly self-made millionaires and billionaires but if you ever did some research on some of the famous or rich people that you follow --- chances are they inherited that wealth of skillset. 

I would fail if I was asked the question, what book are you reading. I tend to read and save webpages of articles. My phone has over 30 open pages of articles I want to get back to. One of those was about 401(k) accounts. This has become the default type of account for many people who work corporate jobs and usually do not have a pension. Sadly, this isn't available to every person in the world or even every American. The concept behind the account is what we write about here all the time ---  saving money after each paycheck for a rainy day or retirement.

So here is a quick rundown of how to save for retirement:

Save Cash - Save cash after every paycheck and put it in an envelope or savings account. The problem with cash is if you can easily get to it you may easily spend it or like bitcoin --- if the amount gets large and you begin to get unwanted attention it becomes ripe for stealing.

Individual Retirement accounts (IRAs) - Often called traditional IRA, this type of retirement account is tax deductible from your income and if you set it up seamlessly the money comes out and you now have rules imposed on you that penalize you from pulling funds out. There are US government limits on how much money you can make to contribute so do a quick search to see if you qualify. I'm getting old but awhile back the limit was roughly if you're single and make over $75K a year the full contribution begins to scale down. There are limits for other filing types such as married jointly, etc.

Pensions - This is a dinosaur method of saving money for retirement. It was a gem when you had a company of government entity pay for your retirement. You work and they foot the bill for a defined amount of cash you would receive for all those years of service. If you ever get an opportunity to earn a pension with an organization, consider this a huge huge incentive to work for them. As this is a great way to get money during your golden years.

401(k) - The vehicle that took the reins from pension accounts many years ago. The simple way to think about this is you are responsible for your retirement as the money comes directly from your paycheck. To incentive people, the money is tax deductible, so this was effective way to create and increase the wealth gap. If you don't work for a company that offers this type of retirement account or you don't have a good handle of your personal budget --- then you'll be left behind as pensions are a thing of the past. You miss out on reducing your taxes and free money as many companies provide a small match (think donation that tax deductible for companies 👀) into your retirement account.

Roth 401(k) - similar to its sibling, this retirement account is funded with after-tax money. The cool thing is the word "after-tax", so it grows tax-free. It's cousin is the Roth IRA, but you get to stash away way more than the paltry amount allowed for a Roth IRA, and don't forget that match of donation added by companies is still allowed.

I'm planning to continue to learn more about the mega backdoor roth path that were pushed to the headlines by the likes of Peter Thiel and others just a few years ago. It is a way to move after tax contributions into a retirement vehicle that can no longer be taxed. Ironically Peter then used his "retirement account" to invest in companies that went on to earn him over $6 Billion dollars in returns if I recall correctly. We are now in High Earning Not Yet Rich (HENRY) status for those of us that want to explore if their company offers this in their retirement plan. Further, not many of us can use our account to invest in startups the way Peter did. But hey we can all dream so that's what I'll be researching in the future.

A House of Cards --- Pt. 3 (Debt - The Gift & The Curse)

This has probably been my toughest post to write.  I've been hinting at what is to come through posts like Deja Vu. I believe the economic impact to come will be very rough on all of us and it is the primary reason I headed to the sidelines (moved most of my individual retirement accounts to cash) over a month ago. It's the reason why I have been holding so much in savings and declining to take on any real estate and other deals for the last few years.  It was also the reason why in my Investment Account I stop investing in roughly Q1 of 2017 and began trading options --- short term bets I wanted to win quickly and then get out off. I did well but I still have some bets on the books that have been pummeled and probably overexposed myself to retail and consumer discretionary stocks.  I have invoked my sandlot strategy (taking my ball and leaving the playground) and this has only happened one other time in my Gen X/Millennial lifetime (I'm on the border --- take your pick). You'll see the other time was during the financial crisis. Instead of me speaking on what is to come, I've decided to rip from the headlines snippets of what the everyday people feel and believe are their biggest risks to come. Almost all involve too much debt and that's why I rally around a lyric in an old Kanye verse from the Beyonce Ego (remix): "What you want dog, Tryna stay recession free".  Yes sir, to stay recession free is to stay debt free. See the risks of limited savings, too much debt (over-leverage), and not having enough capital to make investments when others are swimming naked. 

----------------DEBT - THE CURSE--------------------------------------------------------------------

The Human Toll --- No Free Lunch

(The Washington Post) -- In interviews with more than a dozen laid off workers and small business owners, nearly all said their biggest economic concern was paying the rent or mortgage in April. Many people across the country have monthly payments that exceed $1,000. The median monthly rent in the nation is just over $1,600, according to Zillow, an online real estate database company. The median mortgage payment is $1,400. Millions of Americans don’t know how they will get the money in time to make rent. The nation has 40 million renters, who tend to be younger. Black and Hispanic families are twice as likely to rent as white households, according to the Pew Research Center. (Bloomberg) -- “If the government tells me you’re good enough to get a loan, I have to trust and believe in the government,” Castillo said. “Then we just hope and pray that the client doesn’t get foreclosed on.” Matt Badders, a San Antonio lawyer who represents lenders, auctioned off two houses. The failed mortgages remind him of the run-up to the financial crisis 12 years ago, when lending to customers with spotty credit nearly brought down the world’s financial system. “We’re almost back to 2007, when mortgage originators are waking people up on park benches, saying sign here,” Badders said. After the last financial crisis, the fund required a $1.7 billion taxpayer bailout, its first in 80 years. The government has since tightened lending standards and built up the insurance fund. Because of rising home prices, borrowers who bought years ago now have considerable home equity, which could provide some cushion as well. But recent loans are the most likely to fail. In San Antonio, Erika Wilson, a 32-year-old home health aide who was separated from her husband, bought her dream house in June 2018. It had an eat-in kitchen and more than enough room for her two young daughters. Along with her other debt, the $1,900-a-month mortgage payments ate up more than half her family’s income. On Q Financial, an Arizona-based lender, foreclosed on her loan.  She’s still living there because the federal government has suspended eviction proceedings in its lending programs during the pandemic. “I messed it up,” Wilson said.  “I didn’t know what I was doing. It made me feel like I wasn’t adult enough to own a home.”  (The Atlantic) -- According to Zandi, at least three big waves will hit American economy activity. The first is occurring now, as businesses close and the economy grinds to a halt.  Next will be the job losses. “The third wave will hit when people realize they are worth so much less, particularly the Boomers, who are focused on their retirement,” Zandi told me. “When they realize their nest egg has evaporated, they'll go into panic mode and cut back on spending, and that further exacerbates the problem.”  The Small-Business Impact of an Over Levered System (Barron’s) -- The Federal Housing Finance Agency on Monday said that Fannie Mae and Freddie Mac would offer mortgage forbearance to some multifamily property owners—on the condition that they suspend evictions on the basis of nonpayment of rent. According to the plans Freddie Mac and Fannie Mae announced Tuesday morning, landlords whose multifamily properties are financed through the enterprises may be eligible to defer loan payments for up to three months. Landlords who want to take advantage must show hardship as a consequence of the virus and gain lender approval, according to the companies’ press releases. (Bloomberg) -- Real estate investor Tom Barrack said the U.S. commercial-mortgage market is on the brink of collapse and predicted a “domino effect” of catastrophic economic consequences if banks and government don’t take prompt action to keep borrowers from defaulting. Barrack, chairman and chief executive officer of Colony Capital Inc., warned in a white paper and in a subsequent interview on Bloomberg Television of a chain reaction of margin calls, mass foreclosures, evictions and, potentially, bank failures due to the coronavirus pandemic and consequent shutdown of much of the U.S. economy. “To keep people employed, you have to support the employers,” he said Monday in the interview. “The biggest part of employer expense is rent. When commerce stops and they can’t pay rent and they can’t pay interest on the debt, and then the banks and the intermediaries can’t pay their investors, it all collapses.”  Urb Lesson of the Day:  Financial Account Diversification ·         Savings Accounts – Gets you through the rough patches in life ·         Investment Accounts – Allows you to take risks when others are NOT – like today ·       Individual Retirement Accounts – This is truly for your future, why NOT wait for a sign that the recovery is strong

The Government Makes It Rain --- Stimulus To the Rescue

Coronavirus Update – Shutdown Has Finally Started

Thanks to the great leadership exhibited from New York, California, and Chicago the nation is slowly shutting down city by city --- and state by state. While unbelievable, this is very necessary to starve the virus. There will be debates on how long and I remind people to look to China’s recovery and the timeline they used. For example, Wuhan the epicenter of this crisis will remove the lockdown on April 8th. SO the reality is the longer the better for the hotspots. Why I demanded leadership --- one voice, one plan. Providing risk consultation to large corporations puts you in a position to see some amazing dynamics. People will not do thing unless they know the order has come from the top…it appears countries are no different. The shutdown should be federal because if we all go into shelter at the same time, you hope we can plan to exit strategically around the same time. Let me give you an example, if you have a missing child, technology (like the Amber Alert) has allowed for us to receive notification all at the same time rather than piecemeal.  This speeds up the likelihood of finding the child much better than sending it to one police department at a time. If the coronavirus shutdown does not come from the top, when one state recovers my question is: “Does that state allow you to travel or accept visitors from states that did not shutdown at all or that shutdown much later than your state did. Essentially this recovery could drag on longer than needed if we cannot move in a cohesive manner as a country. There could be a lack of trust in the air which is why I believe countries like Italy, China, S. Korea and others when into lockdowns all at once. Make It Rain – Last Resort to Inflate the Economy I am hoping for better coordination so we can begin to recover quicker and get the economy going.  The importance of the pillars we work on so hard here is to help you during these exact moments. If you have savings, you have some cushion during these bad times. See these articles, ripped from the news headlines: “Many Americans Biggest Worry is April 1st Rent and Mortgage Payments”  -- Washington Post “Real Estate Billionaire Barrack says Commercial Mortgages on a brink of Collapse” – Bloomberg “Jobless Claims Soar Past 3 Million to Record High” -- CNBC  “Mortgage Rates Surge to Highest Level Since January” – Marketwatch “2 Trillion Dollar Stimulus Package” --- See below These are just a few of the necessary reasons why the Federal Reserve is making it rain. It’s basically a blank check to shore up the economy until we can get a handle on the COVID-19.  Like in 2008, the market has responded with a rally since a “handshake deal” was announced just a few days ago. This rally will likely continue into the actual signing of the bill. Use this an opportune time to trade in the relief rally that is not uncommon. But when the dust settles, I am still not risking my individual retirement account funds at the moment because we know there is more to come. Mortgages need to be paid, the rent is due, businesses are asking for a bailout and jobs are being shuttered. Hopefully all this is temporary but it is a big risk. I don’t see an all clear sign, just yet. Urb Lesson of the Day:  Account Diversification · Savings Accounts – Gets you through the rough patches in life · Investment Accounts – Allows you to take risks when others are NOT – like today · Individual Retirement Accounts – This is truly for your future, why NOT wait for a sign that the recovery is strong

Coronavirus / Bear Markets --- What to Do With My Investments?

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
	https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html
How to Open My First Brokerage Account	https://urbanomics.blogspot.com/2015/04/personal-finance-101-starting.html
Diversify your Life (Mind, Body, Soul, + Investments)	Search My Blog

Thanks for tuning in. I've heard from so many people so these discussions will frame my upcoming blog posts. For example, I raised the discussion of what to do with your retirement accounts so I'll be addressing that soon. This week, I fielded multiple questions on should I start buying. I will try and address all of these items but not in a frantic manner --- remember we were built for these moments. We've been investing in ourselves, setting our budgets, saving for black swan events, diversifying our portfolios and strengthening our core for these very moments.

People and Safety First

First things first ☝ always remember that people...yes I said people and safety always come first. That is why I was so passionate about what the next steps should be for this country during an outbreak like this. As a risk manager, this is the number 1 rule and it must not be forgotten.  If this were my favorite show "Heroes" you would hear the phrase 'Save the Girl' --- well my response to the administration is 'People First Profits Will Come'.  Sometimes we all need that subtle reminder. 👂

Stick 2 Da Script

If this is your first time get familiar with my pillars above. If you've been here before don't forget them because this is a life-long journey of having the tools you need when things are GOOD and when they are BAD. Again I've received a lot of questions this week and I assume people will take their time to read through my blog before firing off their questions but that isn't always the case. The most common questions I get are:

• Is it a Good Time to Buy?
• What Stock(s) Should I Buy?

These are solid questions if you are a seasoned investor, who invests in the markets often. However, I want to start a new trend --- where people are comfortable talking about how much they got in savings first!  You tell me what car you drive, where you work, your favorite drink, damn some people even rattle off their credit score BUT people get real quiet about their savings.  So I'm here to remind you of my Rules above...because the first investment you should be asking me or anyone about is How Can I Invest In Myself.  And here is my answer:

Set a Budget  Every winter its 2 things -- cuffing season 💑(if you're single) and budget cutting season ✂. I revisit my budget and guess what I found out -- It goes UP, DOWN, or stays the same. It rarely ever stays the same so I challenge everything that goes up.

Mortgage - Have you refinanced?

Insurance - Have you asked for lower rates or called a new competitor for quotes?

Bills - Can't fight these much but do you need that super cable -- when you work 5/7 days a week a least? Can you phone a friend for that Netflix account?

Urb Lesson of the Day - Being a boss means doing the dirty work, and having tough conversations. This week alone, I had CEO discussions with my banks and what they need to do to keep my business --- remember they work for you.

Start Saving 💰 - Real savings IMO is the money saved up AFTER you have no outstanding debts in your household. So set your budget to get on a plan to begin saving for your future and future BLACK SWAN events. Before the coronavirus crisis, I've talked about black swan events being the one thing we are always on the look out for.  Well that event is here and a deep savings account helps ease those of us panicking if schools are closed, your company shuts down temporarily, you unfortunately get laid off, medical bills surface, etc. Remember the government shutdown, H1N1, 2008 financial crash make sure you're not a part of this statistical group:  Roughly 70-80% of American workers live paycheck to paycheck. (Source: 2017 Careerbuilder Report)

This is why I was passionate about putting money in hands of the American people. I predicted state and national shutdowns would be required to slow down a contagious disease (note: China, Italy, S. Korea all showed why this is necessary). That finally happened here in the US.  Why was the response so slow? Well, they are scared to shut the system down --- because the capital machine has most people living paycheck to paycheck. So work can never stop (for those who cannot telework/work from home), I guess even when your health may be at stake.  I applaud this gent for keeping it real on national TV, he acknowledged its a big problem when most Americans live paycheck to paycheck:

Urb Lesson of the Day - I live to save because there will always be black swans, moments that shock you and your family --- weddings, deaths, travel, layoffs, medical bills --- you want to have the savings to get you through these moments. I know the rent, bills, and food has to be paid but the long-term plan is we need a healthy you to be a provider for yourself and family for years to come. Use these markers to benchmark how much you need to save for a rainy day:

2 Weeks Pay --- Rookie

1 Month Pay --- Rising Star

3 Months Pay --- Honorable Mention

6 Months Pay --- Veteran

12 - 24 Months Pay --- All Star (Cue Biggie: "I'm not only a client, I'm the player president")

 

I personally have moved to cash in my individual retirement portfolio because you have to sit down and map out what happens next: businesses slow down, layoffs will rise, and earnings from corporations will be bad for the next few quarters. My retirement money is just that a second savings account I can afford to be very careful with.  Your primary savings account is a cushion for whatever is to come. Stay tuned for more, I will address what to do with your individual retirement accounts and for those aggressive people trying to gain an edge in the market --- YES we'll discuss stocks to buy.

Hey HENRY - High Earner Not Yet Rich

Oh no, I’ve got to keep on moving.  So I was in my SUV listening to the Sirius XM service and this song came on by Puff and Mase.  A mood comes over you when you hear certain songs and this song made me feel some type of way. 

First, it served as a reminder that we collectively are not getting any younger so don’t be held down by things in life.  Need proof, this great song was being played on a new station they were debuting: Hip-Hop from the 90s-2000s.  Ha! My favorite songs are now playing on an oldies channel.

Second, it’s a reminder to get your mind, health, wealth, and spiritual core in balance.  I stepped away from blogging for a while because life threw me an upper-cut harder than the ones thrown by Mike Tyson or Floyd Mayweather.  The loss of my father this year knocked me down but his well-lived life and legacy serves as a reminder for me and also hopefully for you to NOT BE HELD DOWN.

Third, live your life to the fullest and build a legacy you can be proud of.  Towards the end of college, I remember setting a goal with a few friends that we wanted to retire by the age of 35. I joke that I am Middle-America retired, I’ll explain shortly.  I recently learned that Wall Street likes to describe many of us as a “HENRY” – High Earning Not Rich Yet individuals. So being a HENRY and coming from a humble background has allowed me to evolve and change my target goal over time. While, I still worked towards the goal of retiring by 35, I realized that I didn’t live for myself anymore. I live to build, provide, and teach my family and friends about the importance of economic security and social awareness so that for generations to come we can overcome the obstacles that life will indefinitely throw at us.  Did I reach my goal?    I can definitively say that I have and now it’s time to lean in and assist you on your journey:

Goal 1: Be Middle America Retired – Remember, your family’s humble beginnings. Start modestly and set a reachable goal: For example, having enough income to buy a home in your parent’s neighborhood with the income from your investments but still having enough saving to never work again.

Goal 2: Debt Free – Eliminate debt from you and your family’s life. Just like Kanye, I’m tryna stay recession free…and the biggest pitfall people have during recessions is usually with debt. My buddy Warren Buffet is a fan of this rule too and DOES NOT like to buy stocks on margin (i.e., with debt).

Goal 3: Savings (6 - 12 months of Salary) – You need savings for life emergencies and they will come. Anticipate car break downs, hospital bills, house repairs, and a cushion against job loss.

Goal 4: Multiple Streams of Income – This is one of the most critical areas if you are a HENRY.  Be ready for what made you a HENRY. Capitalism!! Corporations unfortunately have one master…and that’s the stock market. So if they have to deliver a good quarter or more money back to shareholders…they will cut jobs and close plants and yes that includes the HENRY’s.  Don’t get it twisted, they call it “synergies”. When I buy my competitor’s company…I make money by eliminating all of the duplicate jobs. (What do you think will happen now that Charles Schwab just bought TD Ameritrade?  I heard estimates that up to 30% of the workforce could be cut.

Goal 5: A Balanced Core Gives You Freedom – Focus on family, go on trips, change jobs, start a business wisely, and get off of social media and actually build meaningful relationships. Why because you have planned, sacrificed and have flexibility to do it.

How do you get there, build up your pillars:

· Mental Pillar – Target mental growth through degrees, certifications, and self-learning. Find problems to solve, there is always a need for these items.
· Spiritual – Be grounded in something, when life rocks you…you need beliefs and a community to turn to; Volunteer and give back…trust this will make you feel good
· Financial – Economic security creates the ability to provide for you and your family. Find work that is fulfilling but more importantly solves a problem for others. If you had to advertise your personal skills would I hire you over the next person? Buy assets that appreciate, can be passed along, and that do NOT create additional debt. Diversify your income – do you have a retirement account, investment account, rental income, and a side hustle. If yes, Can’t Nobody Hold you down
· Health – Don’t let bad habits keep you down. A strong core should allow you to hopefully enjoy your hard work for years to come. But remember life is precious, so you must work hard to prolong it

Personal Finance - Lowering Your Cell Phone Costs (UPDATE)

The budget revolution is on it's way and no one can stop us from only paying for what we use and want.  The "pressure" is turned up and AT&T is getting burned by the T-Mobile offense.  AT&T is having to aggressively match the prices of rival T-Mobile who is taking customers away by the boat load from the industry.  Here is my second update in about a week on how you should demand more from your service providers:

Breaking News: AT&T DROPS IT'S 1GB DATA PLAN, and NOW OFFERS 2GB of DATA for LESS MONEY

Now for the details: AT&T's is canceling its 1GB data plan, which previously cost $45 per month. Why because the 2GB price is being cut to $40, yup $40 dollars. 5 dollars less than your previous 1GB plan and $15 dollars cheaper than the old 2GB plan. There is one catch, you must SWITCH to the plan 2GB of data yourself...AT&T will not automatically switch it for you. :) More data for less sounds like a deal to me.

The investment: I will be closely watching T-Mobile and AT&T stock news to see how this one will play out. Cutting costs for demanding customers like me means that they will be increasing costs somewhere else.