All Forum Posts by: Account Closed

All of the above. When I'm read to invest in notes, I'll do so through a fund. Good fund managers earn their keep.

FYI -- When leaving your legacy to pay it forward, people might want to consider using a donor-advised fund. I've read where setting up a private foundation is best done when you have at least $50 million to contribute because the compliance cost with the IRS is so high. Those of lesser means might find a DAF as a better alternative because you need only several thousand dollars to get started.

If you want to fund the development of a vaccine for a rare disease, you'll likely need a private foundation. But a DAF is adequate for most people to give back to worthy 501(c)(3) charities. I use my DAF to donate money anonymously to worthy causes all over the country and the DAF takes care of the paperwork with the IRS. I choose the anonymous option so the charity doesn't have to spend the resources to thank me for my donation. Instead, every penny I donate goes to supporting the charity's mission. 

I've seen the ShadowStats site, which claims the actual inflation rate is twice the official inflation rate. I don't know enough economics to be able to assess the validity of this claim.

I do know the inflation rate for health care is much higher than whatever inflation rate you want to use as your baseline. Back in the 2000s, for example, my health care premiums were increasing at 25% a year (I worked for a small temporary help agency that didn't offer a health care plan, so I had to buy my own). The great news of the 2010s (before I was covered by Medicare) was the inflation rate for these health care premiums dropped to the high single digits.

The takeaway is to stress test your finances to make sure you can withstand whatever the market or government might throw your way.

In my case, I'm retired. I stopped carrying a credit card balance many years ago and now use them as debit cards (I pay off each purchase as soon as I make it). I've never owned income property as discussed on most BiggerPockets posts, but I sold my house a few years ago. This former "dead equity" has been temporarily redeployed in a high-yield savings account paying a 2% rate of interest at the moment. I'll likely buy a house again in the area where I'm retired.

I built my wealth mostly by taking advantage of the 401K, IRA, and HSA mechanisms of the tax code. A good chunk of my CORE portfolio is invested using the asset allocation strategy (different types of index funds) managed by a robo advisor. I manage the rest of my CORE portfolio myself, which is invested using the dividend growth strategy (mostly Dividend Aristocrats). My EXPLORE portfolio includes crowdfunding, where I'm toe-dipping cautiously to learn this space of startups made possible by the JOBS Act of 2012. Whether they win or lose, none of my crowdfund investments will move the needle on my net worth.

Income real estate is one way to generate an investment income stream. Owning income real estate directly is one of the many ways of owning income real estate and the way most frequently discussed on BiggerPockets because it involves the most hands-on activity (and when done correctly, probably yields the highest return of all the different ways of doing real estate). The checkout clerks at the supermarket, however, don't care if the money I use to pay for my groceries comes from salary income, stock dividends, savings account interest, bond interest, real estate rents, or capital gains. They won't let me pay for my food with capital losses, however. 😜

The next debt crisis is just around the corner (always has been, always will be). The way to prepare for it is to stress-test your income and expense streams. When I was working, for example, I always asked myself what I would do if I lost my job for any reason and then made whatever preparations I could to be ready. One of those long-term preparations was to replace my job income with investment income so I wouldn't need a job someday. This wouldn't stop me from working if I wanted to, but working because I want to rather than because I have to does wonders for my peace of mind.

When my investment income first exceeded my living expenses many years ago, I felt the elation of having arrived (I defined my investment income based on a 4% safe withdrawal rate from a diversified portfolio of assets). Then I noticed my living expenses and investment income could fluctuate (which meant I could lose my financial freedom, as I did for a brief period during the Financial Crisis of 2008), so I decided to develop a demilitarized zone (margin of safety) between my low income number and high expenses number. A 25% MOS is good, a 50% MOS is better, a 100% MOS is even better, and so forth, when it comes to passing my financial stress test.

On the expense side, I require 2,000 calories a day to sustain my metabolism. I remain frugal, wearing things until they wear out. On the income side, I continued working on a part-time basis and used this additional income to diversify my portfolio of income-producing assets. Should some assets reduce the income they generate because of market forces, other assets hopefully will continue generating the income I expect. I even changed my address and moved to an area with a lower cost of living to reduce my financial breakeven point by 25%. I have 24 hours a day, every day, to make all this happen. Lather. Rinse. Repeat.

What was emotional at first when I first achieved financial freedom is now strictly mechanical as I expand and strengthen my financial freedom going forward. My heirs and beneficiaries (mostly charities) will be happy if I'm successful. I'm happiest with a low-cost roof over my head and a high-speed internet service connecting me to the outside world. 

When the inflation rate is 3%, the Rule of 72 says it takes a quarter of a century (24 years) to have your purchasing power cut in half. That means $1 today requires $2 25 years from now (and $4 50 years from now) to buy the same item. The challenge of wealth building is to find ways to outrun inflation. Economic progress (faster, better, cheaper ways of doing things) has historically been the way to stay ahead of inflation. Investments in businesses (stocks and rental real estate) are ways people can do it.

Today's middle-class millionaire is going to have to become tomorrow's middle-class decamillionaire to enjoy the same standard of living. Index funds (investing in the U.S. economy) will get you there without much effort beyond knowing you have to do it (and sticking to it no matter what the stock market does). Beating index funds takes effort, which is why BiggerPockets exists for those interested in real estate investing.

Interestingly, the government's asset-based definition of an accredited investor ("millionaire") has remained essentially unchanged since the 1930s (Dodd-Frank required the value of one's personal residence to be eliminated from the equation when calculating net worth). The Alternative Minimum Tax was passed in the 1960s to nab millionaires avoiding income taxes using tax-free municipal bonds and other legal mechanisms. Because of inflation, many middle-class taxpayers are now subject to the AMT because Congress didn't index this tax to inflation.

I've read where CLOs (collateralized loan obligations) are the new CDOs (collateralized debt obligations). I've positioned myself defensively and offensively with diversified streams of investment incomes with hopefully enough margin of safety to weather the next crisis whatever the cause. Cash in the bank is one component of that strategy.

Are you referring to the U.S. Debt Clock? Back in the 1970s, I remember seeing such a debt clock off Highway 101 in South San Francisco. Retirees like myself are advised to have a couple years of living expenses set aside in cash savings so we don't freak out if the markets crash. For others, the amounts vary depending on personal circumstances.

My landlord is pet friendly, but only with prior permission of the landlord. A deposit and monthly fees have to be paid, and the landlord has to see the animal and the vaccination papers. I don't have a pet. Except for service or companion animals, I'm not even allowed to have any animals "just visiting" if a friend or neighbor wants to stop by for a couple of hours. Otherwise, I'll be committing a material and incurable breach of the lease and can be evicted. For those tenants with an approved pet, the landlord can revoke permission for any reason with 7 days written notice.

There's a YouTube video for that: First Time Renter Tips: How to Keep Your Landlord Happy