Millionaire Librarian

I watched an interview of author Jason Zweig and he spoke on the importance of knowing why you own something.

I own index funds. They are the best way to own a diversified portion of the stock market. They also are cheap which means you keep more of your money invested.

By owning index funds, I am putting my faith in the United States stock market which means I am putting my faith in the United States economy. Investment wise there isn’t a surer bet.

Many knowledgeable investors recommend further diversifying into international stocks. For some time, I followed their recommendation, but continued poor performance and immature foreign accounting pushed me into only owning domestic stocks currently. JL Collins also speaks and writes how by owning domestic companies gives you international exposure because the companies sell their products internationally.

Jason Zweig’s also explained that if you own individual stocks then you need to know the business. This is different than what the stock price has done. He recommended reading the last 3 years of annual reports as well as the last 4 quarterly reports. This is because you are speculating when you only track the stock price and where the stock ultimately lands is dependent on the underlying business fundamentals.

Knowing what you own is useful for many reasons, but most importantly it stops you from selling when the price drops dramatically which is a real killer to wealth building.

President Donald Trump was resoundingly elected as president. He won every swing state, but many citizens fear we may have had our last democratically elected president. Ray Dalio’s predicted that the current political and societal atmosphere mimics the populism of the 1930’s. That looks correct. In America, half of the nation is in mourning and the other half in celebration.

The markets are favoring certainty and have shot up. Small cap value jumped 6% the day following the election. This is the largest jump in one day I can remember and has been a silver lining. Also, Missouri passed multiple liberal ballot measures including a state-wide minimum wage and encoded abortion rights in their state constitution.

Going forward I think it is important for me to stay away from catastrophizing social media echo chambers and watch the world turn slowly from my front porch.

We are around 5 weeks from electing our next president. Iran sent 200 rockets into Israel. People are anxious and worried about all the uncertainty. What should you change regarding your investments?

The answer, as it often is, is you should change nothing.

My stocks have value because they are partial ownership in American businesses and the American economy. There will be bumps along the way but I am betting those thousands of companies will continue to find ways to innovate and be profitable. If I am wrong then we have more important issues to worry about than currency. Presidents are important but economies are resilient, persistent, and grander than any one person, even the president.

1. Automate saving and investing. When you automate something you make something that is hard for most people easy to accomplish. You learn how to live on less when the money is not in your account. This is due to the money being less accessible and often having to pay penalties to access it.
2. Automate bills. If you can minimize how many transactions you manually pay then you lower your decision fatique and make better choices.
3. Anchoring. Anchoring an amount you want to save can help you achieve your goals. Setting an expectation that is reaching but achievable can give you a goal to hit.
4. Require Purchase Downtime. Require a week of considering a purchase before you make a purchase in a certain category or over a certain amount.
5. Framing. Frame your savings as life or security purchased. You can strengthen this mindset by reflecting on the power of compounding over long periods of time.

I watched a youtube video of a fiancial adviser and she was talking about why she quit the business. Many of her points resounded with why I have been hesitant to jump into it. Here is a summary of some of her points.

Advising is selling and confidence sells best. She mentioned that her knowledge of the financial markets impacted her confidence because she understood the complexity which dampened her confidence and ability to sell. In contrast, new advisors who knew little but were confident could close despite their advice and knowledge being worse.

The people who need your advice and the people who you can make money off of are not often the same people. Lower income people desperately need financial literacy. The problem with helping them is that the asset under management fee structure system makes them unprofitable to help despite being very needy. Rich people pay you well for managing their money but often you are just helping them go from rich to extremely rich. This reality can be desparing.

Other items that makes the career less appealing is that often the first couple of years your income will be very low while you “build your book” of clients.

I am semi-retired. I may have to work sometime in the future again, but not right now.

Here are some items on my mind.:

Social security. I may be able to get on social security disability to assist with early retirement. We have a doctor’s appointment scheduled for next month.

Federal retirement disability. Though this is a relatively small amount of money, we are also applying for this.

We are also looking again at retiring in Panama, specifically Volcan. It seems to have a slightly younger group of expats. Many of these expats have children. By our best approximation we could pull the trigger in about three years after Lauren has her student loans forgiven. These three years would allow our money to compound for a little longer and some unknowns like social security to become known.

I have started working on my Spanish at the local library. The group I joined is very advanced and beyond my level but it is interesting exercising that muscle again.

We are also very close to hitting a arbitrary but significant financial milestone. Though there are psychological risks to mentally “anchoring” on a number I think the process may potentially ease some anxiety if we stay above the milestone.

This post has been running through my head the last couple of months:

Like JL at the time, I have a young daughter. Also like JL, we have money to give us some breathing room.

I am leaving my job in a week. 11 years with the federal government has been bitter and sweet. Some jobs have been great; others have been draining, especially this latest one.

It is time to rest. Time to reground myself.

I was needing some motivation. The transition to this new job has been rough.

I came up with the idea of a wooden board with different flags in it. On the y axis would be a number which would represent the amount needed to retire in the corresponding country.

This exercise allowed us to select areas that we could retire in the present, in the next several years, and if we wait for a traditional retirement age. Besides looking cool I thought it was an interesting experiment to make retiring seem attainable.

Giving ourself the knowledge and power to pull the plug at any time is empowering. JL Collins writes about how having a little money in the present empowers you to stand up for yourself and it gives you more options.

The difference between FU and FI money.