Visualizing assets by generation

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Image from Visual Capitalist

Some staggering wealth facts

• baby boomers own half of the nation’s $156 trillion in assets despite making up 21% of the country’s population.
  
• The Great Wealth Transfer - Millennials and Gen X are expected to inherit $84 trillion by 2045. $16 trillion of this could be transferred in the next decade

Assets and Liabilities by generation (table image)

If you are millennial who does not own a home or are behind on your retirement savings, your saving grace could be inheriting a paid off home or investments from your parents. 

If you already own a home, but don’t have income to save, the inherited home could provide a great source of rental income when you are ready to retire. 

Inheriting wealth later in life

Let’s say you are currently 35 and your parents are 65. If they live to be 85 (above average age for Americans), you’ll inherit their property and remaining investments at age 55. 

If your parents live longer, to 90 years old, you’ll inherit their estate at 65, and you might be able to retire a few years early. 

If you inherit a home that you don’t need and can be rented out for $2,000/month, you and another sibling would each get $1,000/month before taxes. After taxes, that would probably be about $800/month in net rental income. 

$800/month is a lot of extra income, especially when you consider that the average social security benefit is currently only $1,781 in 2023. 

You would need to work 32 extra hours in a month at $25/hr to earn $800. The wage amount would actually be higher, because the amount is noted with taxes already removed. 

Generational wealth has huge impacts, because it allows each generation to receive the growth of investments and appreciation of property over time, and it provides more stability for all generations who don’t squander the received assets. 

Investment portfolio options for a parent with low investment balance

 

The 60/40 portfolio

This portfolio contains 60% stocks and 40% bonds and has been one of the major standards of investing for decades.  

It could be built with mutual funds or ETFs. 

ETFs - VTI, VXUS, and BND

Mutual Funds: 

VBIAX: Vanguard Balanced Index Fund Admiral Shares

Expense ratio: 0.07% (only $7 for every $10,000 invested. About as low as it gets!)

Investment minimum: $3,000

Allocation: 60% stocks, 39% bonds, and 0.88% to short term reserves

Number of stocks: 3,385 (almost no foreign holdings -- less than 1%)

What does a current lifecycle fund for retirees contain from Vanguard?

VTTVX: Vanguard Target Retirement 2025 Fund

Expense ratio: 0.08%

Min. investment: $1,000

Allocation: ~54% stocks, ~45% bonds, and 1.2% short term reserves.

Of the entire portfolio, about 22% of the holdings are in international stocks.

Dividend ETFs

SCHD

VYM

VIG

NOBL

Value ETFs

VTV - Vanguard value

MGV - Mega Cap Value

Michael Burry's Most Important Tweets of 2023

Legendary investor Michael Burry occasional drops some wisdom about the markets on the Twittersphere. 

Here are his significant tweets from 2023.

This is a good chart/guide.
(The Y-axis shows uninsured deposits greater than $250k at major banks. The X-axis shows the realized losses percentage of CET1 Capital.)

The crisis could resolve very quickly. I am not seeing true danger here.

2000, 2008, and 2023, it is always the same. People full of hubris and greed take stupid risks, and fail. Money is then printed. Because it works so well.

It is possible today we found our Enron.

It's time memesters look up what a death spiral convertible is.

2/9/23

1/31/23

"Sell."

Burry deleted his Twitter account briefly after posting this. 

iBonds are paying a hefty 6.89% until April 2023

iBonds purchased before April 2023 are paying a whopping 6.89%.

Your money will be locked up for a year, but you'll also receive a risk-free guaranteed rate of return. 

The current rate is almost 3% higher than the top level High Yield Savings Accounts (HYSAs) that are paying around 4% interest. 

A $10,000 max investment in iBonds would earn almost $300 more interest in a year than an HYSA. 

Yearly salary - per workday pay equivalents

How much are you paid for each workday at different salary levels?

A $50,000 per year salary translates to $192 per workday.

To calculate this, I took 50,000 ÷ 52 weeks ÷ 5 days. A simplified way to do this would be 50,000 ÷ (52×5) or 50,000 ÷ 260. In essence, people with standard five day work weeks are working about 260 days per year. 

$60,000/yr = $230/workday

$70,000 = $269

$80,000 = $307

$100,000 = $384

$120,000 = $461

$150,000 = $577

These daily pay rates do not factor in the added value of 401K matching, health insurance benefits, and other benefits paid by the employer.

Simplifying my core investing portfolio

My investing portfolio currently has about 25 stocks and ETFs.

Simplifying the portfolio would make it easier to see performance over time and re-balance it as time goes on.

The portfolio does include the essentials of a four fund portfolio:

1. Large Cap Value - VTV/MGV

2. S&P 500 - VOO

3. Small Cap Value - VBR

4. Small Cap Blend - VB

A four fund portfolio historically performs better than merely holding the S&P 500 during rough decades.

All of the above funds have very low fees because they are all Vanguard funds. 

I want my core portfolio to have 10 holdings or less. Even 3-5 ETFs, when selected appropriately, can create a diverse portfolio.

Choices for my core portfolio:

MGK

Performs slightly better than VOOG in the long run, but VOOG is more diversified. The largest holdings include household names, like Apple, Microsoft, Amazon, Google, Tesla, Facebook (Meta), Nvidia, Home Depot, and Visa. 

MGV

Mega Cap Value

The largest companies in the US with good value (almost the opposite of MGK). Up 11.1% in the last year. Largest holdings include Berkshire Hathaway, J&J, United Health, JPMorgan, Proctor & Gamble, Exxon, Bank of America, Pfizer, Chevron, and AbbVie.

BRK.B

Berkshire Hathaway

An extremely alue oriented company creates by Warren Buffet. Many of the companies they bought are better insualted from harm during a recession than the overall S&P 500. Their current P/E ratio is only 8.2. In the last year, it's up 25.9%, blowing the S&P out of the water. 

COWZ

Cash cow fund (ETF)

Companies rated with good free cash flow. Up 25.6% in the last year. Contains 101 stocks, with the biggest holdings currently in oil, chemical, and drug companies. 

VOOG

High growth companies within the S&P.

Has nearly identical 5 and 10 year average annual return as MGK, except it holds 307 stocks instead of just 112. The largest holdings include household names, like Apple, Microsoft, Amazon, Google, Tesla, Facebook (Meta), Nvidia, Home Depot, and Adobe.

VBR

Small Cap Value fund

A good counter balance to the S&P 500 and high growth companies. In several decades in the last 70 years, small cap value has been the highest performing asset class out of the four fund portfolio.

VOO

The Benchmark standard, the S&P 500, as a fund provided by Vanguard. It holds 510 of the largest companies in the US. Over long spans of time, it typically returns 8-9% average annual return. In the last 10 years it's grown annually by 14.55%. 

SPHQ

S&P 500 Quality ETF

"Tracks an index of US large-cap stocks and selected by return on equity, changes in net operating assets, and financial leverage." Up 9.3% in the last year (March 8, 2022) and 70.1% in the last 5 years. The fund contains 103 stocks and the largest holdings include: Apple, Microsoft, Visa, JP Morgan Chase, Bank of America, Pfizer, Mastercard, Wells Fargo, Adobe, and Walmart. Before the downtown in growth stocks that started in Decembee 2021, this fund was performing better than the S&P 500.

VHT

Health Care fund

Contains 448 stocks in the health care sector. Up 73.07% in the last 5 years. 

VB

Small Cap Blend fund

Contains 1,553 stocks and pulls from the bottom 2-15% of the investable stocks in the US. With an average annual return of 12.2% over the last 10 years, this fund has still done well for investors. Small caps started to tank in late November of 2021. This fund is up 48.2% in the last 5 years.

Building Wealth with VA Home Ownership

 A service member I chatted with recently said that she has bought three properties with VA loans. When first hearing about these loans, they sounded so special that I was shocked to learn that they can be used multiple times.

Own a new property every two years!

National Guard members who have served for six years or were on active duty for 90 days also qualify for VA loans. A young person who joined in their 20s could become a homeowner more easily before age 30.

After buying my first home (with a conventional loan) in 2021, I plan to buy a second home in 2024 or 2025 after qualifying for a VA loan. Then we'll live in the new home and rent out the first (small) home that we purchased. By that point, the rents in the hot rental market where will live will likely reach the point where the renter is paying our entire mortgage.

And if we want to, we could rinse and repeat the same process to buy a third home.

After owning three properties for 10-15 years, we could cash out of the first two homes. Then live off of the profits of those sales until retirement when our 401Ks and Roth IRAs would accessible.

Use Zillow or a Property Management Agency to Find Reliable Tenants

A buddy (non-service member) who just bought his second home in Bozeman, MT was able to use Zillow's Rental Application Form to find qualified renters in less than a month, on multiple occasions.

He rented out his first home, showed the bank the lease, and was able to co-sign with his in-laws to get a single family dream home in the same city! He was expecting a third child and they were outgrowing their original home, a modest 3 bedroom townhome in a newer and desirable neighborhood. He now rents this Townhome for $2,700 per month, which is far more than the total cost mortgage they got in 2014 (7 years ago). Their mortgage, including HOA fees on that rental is only $1,400-1,500 per month. 

Not only is his tenant paying their mortgage completely, they are also paying for part of their current mortgage on this nicer home so his family has more affordable living. 

This service Zillow offers is free for the homeowner and only costs the renter applying a flat $29, which they can also use to apply to other Zillow rentals within 30 days. This is a big win-win for both landlord and tenant. The landlord has better piece of mind getting the history of the tenant for free, and the applicant does not have to pay high fees to apply to multiple properties. 

Some property management agencies swindle big bucks out of applicants in hot rental markets by charging $50, $75, or more to apply, when their costs for the application are almost nothing.

VA Loan Occupancy Requirement Before Renting

Buyers must live in the home for 12 months before renting out the property.

Moving into the VA Loan Home

Generally buyers have 60 days to occupy the property, but up to one year if there is a special circumstance, like a service member who is returning from deployment, or time is needed to perform agreed upon repairs to the property.

"The VA allows for a spouse to fulfill the occupancy requirement for an active duty military member who is deployed or who cannot otherwise live at the property within a reasonable time."

Military Officer Pay and GS Pay Scale Similarities

2022 Rates

0-2 First Lieutenant
Four years ---- $724
Five years ---- $739

0-2 with four years of service, monthly: $5,432

Four years per day: $250.72/day (8 hours at $31.34/hour)

Four year annual: $65,192

Four years monthly, less 15% for Roth IRA 15%, FICA deductions at 7% and $25 for SGLI/SSLI.

= $4,212

Same as above, except 20% towards Roth IRA.

= $3,941

0-3 Captain
Six years (drill) - $864
Six years monthly: $6,482

Six years annual: $77,784

O-3 Captain

Six years (drill) --------$841

Six years monthly: $6,482

Six years annual: $77,785

Starting pay yearly: $55,638

Eight years---- $883


Bozeman BAH for O-2 (no dependents)

$1,638 (2022)

The government decreased this, even though the cost of housing in the Bozeman area has increased since 2021 and rentals are very hard to get. This needs to be increased to match the CPI numbers. 

$1,671 (2021)

$1,934 - with dependents

BAH for O-1 (no dependents)

Bozeman (59718) - $1,491

COUNTY COST GROUP 850 (ZZ850)

Great Falls (59404) - $870

MALMSTROM AFB/GREAT FLS MT (MT175)

Livingston (59047) - $1,293

COUNTY COST GROUP 810 (ZZ810)

Missoula (59801) - $1,338

COUNTY COST GROUP 820 (ZZ820)

Helena 

Big Sky (59716) - $1,491

COUNTY COST GROUP 850 (ZZ850)

Billings

Drill Pay 2021

O-1 Second Lieutenant
One year  ------ $438
Two years ----- $469
Three years ----$568

0-2 First Lieutenant
Four years ---- $705
Five years ---- $719

Monthly Pay 2021

0-1 Second Lieutenant

Two years or less - $3,385  ($40,620 yearly)
Over two years - $3,524   ($42,228 yearly)

Three years - $4,260 ($51,120 yearly)

$1,500 of tax free BAH every month is actually like getting paid $1,875 pre-tax.

$4,260 gross base pay

(Less 30% deductions)

= $2,982 net base pay

$2,982 + $1,491 BAH

= $4,473 per month while at Officer tech school in third year of service, O-1 rank. 

Also add in BAS while living on base. This is about $8.85 per day. 

Some members will also get a split dispersement DTS payment for per diem. 

E-5 pay level (2 years or less).
Automatic base for non-priors attending OTS (Officer Training School). Some members will also be given BAH (Basic Allowance for Housing) and a BAS (Basic Allowance for Subsistence).

Ask Finance at your Guard base to be reimbursed for accrued leave during OTS that cannot be used for actual leave, but will be added to a future paycheck.


GS Pay Scales 2020

GS 8, Step 1 - $41,310

GS 9, Step 1 - 45,627

GS 10, Step 1 - $50,246

GS 11, Step 1 - $55,204

Image of partial 2020 GS Pay Scales:

Seven Secrets Every Rich Person Knows

Excerpted from a Oct 23, 2016 newspaper article from GoBankingRates.com (Cameron Huddleston)

Here are seven things every rich person knows that you can use to build your own wealth.

1. Spending Must Align with Goals
2. Don't Waste Money to Impress Others
3. Have Plenty of Liquidity
4. Costs Matter
5. Asset Location is as Important as Asset Allocation
6. Year-Round Tax Planning is Crucial
7. It's Important to Hire Advisors

Read the complete article from Camera Huddleston here.

Real Estate Investing Podcast - BiggerPockets

I stumbled on this well-established podcast when searching for investing clubs in my local area.

BiggerPockets Real Estate Podcast | Investing & Wealth Building


Some of the episodes that caught my eye:

BP Podcast 124: Building a Real Estate Empire At a Young Age with Jered Sturm

BP Podcast 125: The Key to Business Success with Bestselling Author of The E-Myth Michael Gerber

BP Podcast 120: How to Find, Analyze, and Finance an Incredible Real Estate Deal!

BP Podcast 129: Live-in Flips, Frugality, and Finance with Mindy Jensen

BP Podcast 092: No (and Low) Money Down Real Estate Investing with Brandon Turner

BP Podcast 117: Maximizing Productivity to Get Things Done with David Allen

BP Podcast 090: My First Real Estate Investment – A Newbie Podcast With Matt, Romeo and KC

BP Podcast 134: Creative Finance and Gaining a Millionaire Mindset with Pro BMX Rider Terry Adams

BP Podcast 105: From Minimum Wage to Full Time Flipper with Ophelia Nicholson

BP Podcast 099: 3 Personal Finance Bloggers & Their First Real Estate Investment with Scott, Lauren, and Philip


---

BP Podcast 114: How to Invest in (And Have Fun with) Vacation Rentals with Scott Sutherland

BP Podcast 112: “Little Old Lady House” Investing with Mark Updegraff

BP Podcast 107: Making $47,000 On Your First Deal with Jonathan Makovsky 

BP Podcast 137: How to Use Systems to Scale Your Real Estate Business with Sam Craven 

BP Podcast 122: 5 Myths Holding Investors Back From Real Estate Greatness with Chris Clothier

BP Podcast 121: Creating the IDEAL Real Estate Investing Business with Andrew and Phillip Syrios

BP Podcast 123: Overcoming an Ugly Past to Become a Cash Flow King with Justin Escajeda

BP Podcast 128: Investing in Foreclosures, Quitting Your Job, and Getting More Than 10 Loans with Anca Rader

Ideas for Using My 2011 Tax Refund

Ideas for using the 2011 Tax Refund

A winter trip to a warm place (California or Arizona)
Car fund

Amazon Kindle Fire
Mac Hard Drive upgrade (to 500GB)
Older PC Desktop for making DVD archives
24-inch LCD monitor
Graduated Neutral-Density Filter

External drive for Time Machine / SuperDuper Backup

Blu-ray player

How to spend $10

A few pairs of extra boxers
Some nice, comfortable socks
A few DVDs at a pawn shop

How to Spend Less Money

1. Ride a bike whenever possible. (You'll be less inclined to buy things because you can't carry them, making impulse purchases less likely.)
2. Consider if what you're buying is a necessity. Could you wait a week, a month, or a few months for this ite?. Will you use this item six month from now?
3. Buy everything with cash or a debit card. Paying with real money means that you'll probably be more careful about what you buy.