Millionaire Librarian

A Middle Class Path to Early Retirement

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  • Financial Expert Short Biography: Dave Ramsey

    There is a lot to say about Dave Ramsey. On one hand he is probably responsible for helping more people with debt in the US than anyone else.

    On the other hand his views lack nuance and he demands obedience from both his staff, fellow personalities, and viewers.

    Part of what makes him so successful is how he entertains by beating simple messages into followers. Part of this simplicity is because of the fundamental religious foundation of his views.

    There can be little nuance when you believe sin is being discussed.

    Despite this Dave is one of the best speakers against debt when 56% of Americans cannot afford a $1,000 emergency expense. However, he is a debt crusader even when vanquishing debt is not financially optimal like delaying investing to pay off low interest debt.

    After you are finished paying off debt comes the time to start investing and this is when his advice is especially poor. Dave recommends four types of funds with category names that are vague. All of which you can get through his SmartVestor Pros for very high costs. He also chooses these funds by historical returns. This is such bad advice that it is required by regulatory agencies that “Past returns are not indicative of future returns.”

    Also, his advice fails when he recommends a safe withdrawal rate. He recommends that you can withdraw 8% which is much higher than the Trinity studies proven and tested 4%. This advice is dangerous and his justification is that the market on average returns 10%. The problem with this advice is sequence of return risk. If you start withdrawing 8% during a market downturn you will run out of money in less than a decade. It reminds me of the parable of the 6 foot man who drowned in a river that was on average 4 feet high. Its not the average that you should fear but the extremes.

    Overall I think Dave is somewhat helpful. As a viewer you can also expect to see a good tongue lashing eventually. Honestly his debt advice isn’t terrible. and helps many people get the wake up call they need. However, once someone transitions to investing money they would do much better to listen to the Money Guys, Money with Katie, Kosher Money, or anyone considered a Boglehead,

  • Financial Expert Short Biography: JL Collins

    The personal finance expert landscape is always changing and I enjoy listening to almost all of them. I am going to review, compare and contrast various financial experts. Please comment below if you have a financial expert that you would like me to review.

    JL Colllins is my favorite financial expert. When I was a librarian I often recommended his books to military trying to learn more about personal finance. He has three books which I have read multiple times. In the chronological order there is the Simple Path to Wealth (TSP), How I Lost Money in Real Estate before it Was Fashionable, and Pathfinders.

    TSP lays out the simplest and most powerful way of building wealth I have found. Collins is a self-defined Boglehead which I have found to be the most academic and least exploitative personal finance community. This group follows the teaching “St. John Bogle” which promotes utilizing index funds.

    Collins is known as the “Grandfather of Financial Independence.” He was early on the scene of the modern day FIRE movement (Financial Indepepdence Retire Early).

    One area Collins’ advice is controversial is that he prefers renting to owning a house. His second book details renting out a condominium that he calls an alligator. This is because the property ended up “eating him alive.” We recently ran a comparison between renting and buying and currently we are getting much better deal renting. Theres some great rent vs buy calculators that I recommend people utilize trying to make this decision.

    JL believes while working to invest in one fund, VTSAX or the Vanguard Total US Market. This idea is simplistic but is powerful in that you just put your money in the fund and sit back and watch it go up. No rebalancing or complicated strategies. When you are retired you add bonds to “smooth the ride.”

    Collins also popularized the idea of FU money and how when you buy investments then you are effectively buying back your life. Another idea I have revisited recently is allowing money to let you live on your own terms including taking large breaks from work.

    Overall JL is my favorite financial expert. He is not a provacateour like many financial expert “influencers.” His advice is simple, thought provoking, honest, and powerful. He embraces frugality but makes it purposeful. His advice is simple but that makes it purer and easier to follow.

  • Schwab VS Fidelity VS Vanguard

    There are three major discount brokerages; Schwab, Fidelity, and Vanguard. All three have have rock bottom fees and expense ratios which is the most important part. In this post, I will discuss, compare, and contrast each company.

    Charles Schwab was the first discount brokerage I used. Schwab is publicly owned, has low prices, and mostly great customer service. I have had some issues with my wife rolling over an IRA previously, Where Schwab excels is in their user interface platform. In my experience it is the most intuitive. Another benefit of having a Schwab Brokerage is having access to Schwab Bank. I lived overseas in Korea and Schwab Bank has free ATM withdrawals and excellent exchange rates. This made Schwab Bank exellent to use internationally. Overall I feel Schwab is the best company to use for most people.

    Another great company is Fidelity. Fidelity is privately owned and generally is a great company to work with. They have low prices and fees and amazing customer service. One place they are lacking is their online platform. I had a 401k with them and changing what I was invested in was never very intuitive. Due to mostly their lackluster interface I rank Fidelity second best, but I don’t hesitate to use them if they have a feature that is better than Schwab.

    The last company is Vanguard. Vanguard has a unique organization where the owners of funds are the owners of the company. This means that the company’s goals and your goals are aligned. Vanguard also invented the index fund and has a great variety of index funds. Jack Bogle was the founder of Vanguard and the “Boglehead” philosophy is what I most closely identify as.

    However, Vanguard is known for having a less intuitive interface and worse customer service than the other two companies. I actually own Vanguard’s VIOV ETF through my Schwab brokerage. Through this tactic I am able to get more variety of funds with arguably better customer service.

  • Knowing What You Own

    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.

  • The Presidential Election, Markets, and Limiting Social Media.

    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.

  • U.S. Politics and War in the Middle East

    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.

  • Behavioral Strategies for Saving More Money

    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.

  • The Case Against Being a Financial Advisor

    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.

  • Retirement Lever Pulled

    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.

  • Taking Personal Time

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

    Why You Need F-You Money

    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.