Good morning everyone!!! Got some big news to share…

I’m Taking a Sabbatical…

I’ve written 172 articles for this blog in the past couple years, and there’s 1 overarching theme I hope has shined through… It’s that life is more important than money.

That being said, there’s no better time to practice what I preach and disconnect from work for a few months while I shuffle priorities around. Hanging with my family is my new full-time job, and I’m going to stop blogging here.

It’s sad stepping away from Elite Edge Money because this has been a dream job. And I honestly don’t know if or when I’ll get back to an awesome position like this. The next chapter for me is scary in many ways…

→ Scared about money: Even though my wife and I have more than most people in life, dropping one of our incomes (while our expenses are increasing) is going to put a large dent in our finances. We will have a negative savings rate this year.

→ Scared about future work: This is my second “career break” within a 5-year time frame. My mind is filled with all sorts of *irrational* thoughts like “who the fuck is going to hire me again after this? I have zero skills to offer anyone, ever.” These aren’t realistic or true thoughts but I’d be lying if I said I didn’t have them.

But, even with all these fears and unknowns, this move is still a no-brainer decision for me. We have to take a leap of faith. And, there’s plenty to be excited about too!!!…

→ Excited about a new challenge!: Tackling scary new things in life usually results in more good outcomes than bad ones. You never know what you’re going to be good at unless you try. So, I’m excited to try.

→ Excited about a work break: Sabbaticals result in a lot of personal growth and valuable life epiphanies. I’m looking forward to taking a step back and reassessing passions and work options.

The Show Must Go On!

While the owners of this blog haven’t quite figured out a new direction just yet, I’ve done my best to line up some good content for the next little bit.

Budgets will feature some of my favorite oldies from J$ himself, so you’ll be receiving those posts in your inbox for a while. 

Thank you, thank you, thank you. I’m extremely appreciative to you all for reading my dribble over the past few years. Thanks for your comments, replies and encouragement.

I’ll still be blogging daily over at my personal site if you want to stay connected and receive my overly positive daily epigrams.

Goodbye, all.  

Sincerely,

Joel

[This post, MASSIVE NEWS —> Goodbye, and Thank You., was first published by 5am Joel on Elite Edge Money]

Yo, yo! Good morning, peeps!

I just got my annual profit and loss statement for our rental duplex, and thought I’d share last year‘s results with you.

**Spoiler alert**… After all calculations, we made only $89 in cash flow + loan paydown, but the property appreciated about $46k last year. In total, our ROI was about 42% for 2021.

Every year around tax time I do a full property review, calculate the ROI, and note down all the good and bad stuff that happened through the year at the property. I recommend this annual review practice to anyone who owns a rental (even though it’s boring, keeping good notes is always helpful later in life!).

Anyway, here’s what the P&L Statement shows for 2021…

**There are 2 misleading things about this statement… The first is that it doesn’t include our mortgage, annual taxes, or insurance. So I’ll calculate all that stuff separately. The other thing is the $16,000 “other expense” I circled in blue, which I’ll explain in a bit…**

INCOME: In 2021, we had 100% occupancy and 100% rent collection. Every investor’s dream! This duplex rents for $1,975 per month (for both sides total), so that adds up to $23,700 for the year.

Also, we got an unexpected $1,100 from an outstanding rent settlement back in 2018. So our total income was $24,800.

EXPENSES: We had pretty mammoth expenses this year… Mostly due to the new roof (insurance paid for most of it) and a new A/C unit. Here are the biggest expense categories listed on the P&L statement:

• Management fees: We pay our property management company 7% of all collected rent. Seems like a lot, but it’s actually a really good deal compared with the average property management fee countrywide.
• Commissions: Our property manager collects a renewal fee when our tenants renew their leases. This is one-quarter of 1 month’s rent. (If a tenant leaves and they have to find a new one, they charge a little more, I believe half of 1 month’s rent.)
• General repairs and maintenance: This is mostly toilets, sinks, doors, appliance repairs here and there, etc.
• Capital expenses: There were 2 large capital expenses this year, which were the new roof ($11,000) and new A/C unit ($4,800). 
• Landscaping: Seems like a lot, but it works out to be less than $15 per week. The lawn company comes every 1-2 weeks depending on the season and mows the front and back lawns.
• A/C and plumbing: Before getting the new A/C unit, we had a couple annoying repairs, and the plumbing issue was a bathtub that was draining really slow.

OTHER EXPENSE: There’s a line item for “owner contribution” on the form. This isn’t actually an expense – these are funds that I transferred to my property manager to pay for the A/C unit and roof bills. They shouldn’t be counted as ‘income’ and need to be removed from the statement total.

Another thing that’s not noted here is the insurance refund check that I got paid as reimbursement for my roof claim. It’s missing from the P&L statement because it was sent to me, not my prop manager.

So here is the *actual* profit and loss for the year:

$24,800 – Income

(-$22,145) – Expenses

$8,690 – Insurance reimbursement 

TOTAL:  $11,345

Side note, this is why I encourage investors to thoroughly comb through statements and cross check all their numbers. If I wasn’t paying attention, at first glance it would seem like we made a $18k profit this year… But the real number is actually a lot lower.

OK, moving on… Now let’s look at the other 3 big things that I pay separately for this property. These are taxes, insurance, and mortgage interest.

PITI: Principal, Interest, Taxes, and Insurance

Here are the things my property manager doesn’t pay for, so they’re not included on our annual P&L statement:

Mortgage payments: $7,938.60 in total

• $2,949.99 was principal
• $4,988.61 was interest

Property tax: $5,206.89

Insurance: $1,061

Since the mortgage principal isn’t technically an “expense” (this is how much our loan balance has been reduced by) I’ll need to remove that portion from our overall expense tally.

Total (without principal paydown): -$11,256.50

OK, now let’s add this all up and see what the *real* total profit was for 2021…

Welp, all in all, this duplex made me and my wife about 89 bucks last year – before appreciation. Whomp whooooomp.

As a comparison, here is my full review from 2020… That year we made $7,497 in profit.

When I think about what went wrong in 2021 compared with 2020, I can pretty much sum it up to 2 major events:

1. In April 2021 we had a huge hail storm. This resulted in us needing a new roof. Since our insurance paid for a replacement, we were only responsible for the $2,300 deductible.
2. In September one of the A/C units blew up. This cost $5,000 for a new unit with installation and 10-year warranty.

If those 2 things didn’t happen, I’d almost have a repeat performance of the prior year. Funny how it only takes a couple things to go wrong for all of your cashflow to be wiped out for the entire year.

Our Saving Grace: Appreciation

I wrote about this a couple months ago… We ordered an appraisal of the duplex, which showed a new valuation of $266,225 (as opposed to 12 months earlier at $220,000).

So even though we had a neutral-ish year for income minus expenses, we still gained $46,225 last year from property appreciation.

Total ROI for 2021

To work out the total ROI for 2021, I’ll take the income gains ($89) and add them to the appreciation gain ($46,225), then divide this by the equity I held at the start of 2021 ($110,950).

($46,314 / $110,950) = 0.417.  So, that’s about a 42% ROI.

Pretty ridiculous how leverage works in your favor and can supercharge your ROI. When I bought this place originally in 2015, cash flow was my main goal. But I realize now the power of appreciation if you can choose a good location.

Anyone else out there do nerdy annual reviews for their rentals? Care to share your stuff from the past year?

Cheers,
– Joel

[This post, 2021 Annual Review and ROI of My Rental Property, was first published by 5am Joel on Elite Edge Money]

Comparing yourself to others is harmful and self-destructive. 

But LET’S DO IT ANYWAY haha!! Because it can also be very fun and interesting.

Though seriously, when we look at others, we usually see the best version of them and compare it with an average version of ourselves. It’s unfair and inaccurate. So keep this in mind as you read through the below stats. You could be a statistical outlier, and that’s OK! (I am, in many ways.)

I found the following statistics while tooling around on the Rich Habits website. The site founder, Tom Corley, has surveyed hundreds of extremely wealthy and poor people throughout his life to better understand their habits.

What I like about studying habits is that it’s less about the current position that someone is in… Rather, it paints a picture of who they are over time and where they’re likely headed.

Here are 10 habits of millionaires. And for funsies I added commentary on the ones I do/don’t relate to (spoiler alert: I have 7/10 of these habits currently ).

Habit #1: 88% of Millionaires Read 30 Mins or More Every Day

As far as comparisons go, I’m off to a bad start! :( If I’m being honest, I’ve probably only gotten a couple hours of reading in during the past few weeks. Wait, can we include blogs and reading finance news on the Internet?… If so, I definitely do that 30+ mins each day!

Here’s more breakdown on the 30 mins reading per day:

• 63% listen to audiobooks during their commute.
• 79% read educational, career-related material.
• 55% read self-help books, articles etc.
• 58% read biographies of successful people.
• 94% read current events.
• 51% read history.
• Only 11% read for purely entertainment purposes.

Habit #2: Most Millionaires (67%) Watch Less Than 1 Hour of TV Daily

Furthermore, 63% of wealthy people spend less than 1 hour daily “surfing the Internet.”

Well, I guess I FAIL in this category, too. Wife and I usually spend about 1 hour watching TV each night, maybe a little more if we’re hooked on a fun series (like our most recent fav, Ted Lasso). But, this TV habit will be kicked shortly when we invite a little one into our home and all our free time disappears! ;)

Habit #3: Most Rich People (86%) Like What They Do for a Living

Woohoo! I definitely align with this one. I love what I do for work currently – and so does my wife!

Probably the most interesting thing I learned about this survey question is how the financially struggling people answered… While most “rich” people liked what they did, 96% of “poor” people said they did NOT like what they did for a living.

Surprising? Not surprising? Maybe when you have financial stability it changes the way you perceive your work?

Habit #4: 76% of Millionaires Exercise at Least 4 Days a Week

This makes sense. What’s the point of accumulating a bunch of money if you’re not healthy enough (or alive) to enjoy spending it!? Investing your money coincides with investing in your health.

My wife and I work out at least 4 times a week. Lately, it’s been more like 6 times a week! (Again, this habit will probably go out the window when we have kids haha.)

Habit #5: 67% of Millionaires Said They Were “Frugal With Their Money”

Other frugal stats for millionaires:

• 30% of wealthy people clip coupons
• 8% shop at thrift stores!

This dispels the myth that rich people splash around money without thinking. It’s actually the opposite… Most wealthy people are quite intentional with spending, looking for added value and discounts wherever possible. My wife and I are proud to say we align well with this spending habit. We love us some Goodwill bargains.

Habit #6: Most Wealthy People (55%) Spend Less Than $6,000 on Vacations Each Year

Ah, crap. Not only did my wife and I blow $8k+ on vacations last year ($4k on our Hawaii trip alone), but this year we’ve got $10k in our travel budget! Oooops.

But, this is a habit I’m OK not conforming to. Vacationing is something I want to incorporate more into my life, not less. Well, that’s how I feel today… Maybe I’ll be singing a different tune later in life.

I’m curious to hear what your average annual travel budget is.

Habit #7: Wealthy People Do Not Buy Lottery Tickets (94%)

Only 6% of surveyed wealthy people buy lottery tickets. Whereas, 77% percent of survey respondents who struggle financially play the lottery weekly.

My wife and I don’t play the weekly lotto. But we love going to Vegas every now and then and playing craps (at the cheapest table we can find). Gambling can be fun… But not as a lifestyle!

(Ooooh this reminds me, I have to write a post about a book I read called The Luck Factor which has a great section on “lucky” people and how they pick lotto numbers.)

Habit #8: 81% of Wealthy People Use Credit Cards With Reward Options

Yep, yep, yep! Credit card rewards are a no-brainer. Wifey and I have a handful of rewards cards that give us cash back, travel points, and other free goodies – all for doing regular spending. (We pay off our CC balances every month before any interest kicks in, so these rewards are technically “free.”)

Habit #9: Most Millionaires Buy Used Cars

Even though they can afford to buy new cars, 87% of wealthy people said they never purchased a new luxury car in their lives. 44% said they purchase a used car every 5 years.

We found our 2010 Prius about 6 years ago on Craigslist. Still runs great! In fact, it’s about to hit the 100k mile mark soon and join the mileage-high club.

What are you driving these days?

Habit #10: 65% of Millionaires Have Built 3 or More Streams of Income

This is kind of obvious when you think about it. Most people with a net worth over $1mil would have their assets and income diversified somehow. Stocks, bonds, REITs, rental real estate, home equity, side hustles, business ownerships, W2 incomes, Social Security etc.

My wife and I have more than 3 streams of income and plan to always have our nest egg spread out across multiple investments. This is a habit that was drilled into me at a young age – never put all your eggs in 1 basket!

*****

So, there you have it. Millionaires read a lot, are fitness freaks, they don’t watch TV, never go on vacations or do anything fun…. They are like boring, frugal robots. (And if you don’t follow along, you’ll be financially doomed!) Just kidding. Like I said at the beginning – these are great habits to reflect on here, but don’t take them all too literally.

What do you think? Notice any familiar habits with your own life?

Have a great week ahead,

Joel

P.S. Extended reading if you’re interested:

• 16 Habits That Transformed 177 Ordinary People Into Self-Made Millionaires
• Everything I Was Taught About the Rich Was a Lie
• RockstarFinance: Rich Habit Series, 20 x posts by Tom Corley!

[This post, 10 Millionaire Spending Habits — How Do You Compare?, was first published by 5am Joel on Elite Edge Money]

I spotted a killer deal at the grocery store the other day… These Bitchin’ Chipotle Sauce things are usually $7-8 each at Costco… but I found them for only $1 at the 99c store! Woohoo!

After stacking about 15 into my shopping cart, I took a celebratory photo and sent it to my wife… She was very proud, having taught me most of the deal-hunting tricks I use today.

I don’t know about you, but I think being frugal is a cool thing. It’s something we should celebrate more and share more with the world.

Here’s some cool stuff you may not know about why being frugal is awesome…

Being Frugal Makes You More “Attractive”

According to this survey done by Slickdeals a couple years ago, 92% of Americans consider frugality an attractive quality in a partner or potential partner. 92%, yo!

Not only that, 79% of people think it’s “perfectly acceptable” to use a coupon on a first date! Woohoo! Keep on clippin’, you handsome couponers.

The survey also talks about the difference between being “frugal” and being “cheap”… While frugality is a turn-on, being cheap is a turn-off!

Being frugal: 

• Buying off-brand items
• Shopping at second-hand stores
• Seeking deals and using coupons
• Keeping & using old electronics
• Watching movies & drinking alcohol at home instead of going out

Being cheap:

• Not leaving a tip
• Not paying when it’s your turn
• Eating expired food
• Relying on others to pay
• Skimping on hygiene & self care

Frugal Habits = Comfortable (and Earlier) Retirement

Last month, Personal Capital released a survey to find out “Have Americans Become More Frugal”? The short answer is YES! And for good reason…

Here are the key survey takeaways:

• 90.4% of respondents claim to have “frugal habits”
• The No. 1 reason they adopt frugal habits is “to save for future investments”
• Of those who have adopted frugal habits, 50.7% are now considering early retirement!

Wow. “Early” retirement is one the rise! It’s not just a pipe dream – more and more people are getting their financial lives together, using frugality as a cornerstone.

Mindful Spending Means More Value For Dollars

Imagine Joe and Steve each have $100 to spend.

Joe buys tickets to a ball game ($50), hot dogs ($20) and some items at the stadium gift shop ($30) on the way out. In all, Joe spends $100 to experience a ball game.

Steve is more mindful with spending… He buys tickets to the same ball game ($50), but eats food at home beforehand ($0) and doesn’t buy souvenirs ($0). Then, the following weekend, Steve buys tickets to another entire ball game ($50).

Both friends spend the full $100, but Steve’s frugal habits allow him to experience 2 ball games where Joe can only experience 1.

Simply put, spending less on things that don’t provide long-lasting value means you can spend more on things that do provide you value.

Frugal Humans Help the Environment

When you buy less “stuff,” humans manufacture less “stuff.” When humans manufacture less, we use less of the Earth’s dwindling natural resources. Quite simply, really.

Did you know that humans use more natural resources each year than the Earth can actually generate within the year? Doesn’t take a genius to figure out that this is not sustainable, and one day, all the resources will be GONE.

Having a frugal mind-set and lifestyle can help reduce your environmental footprint. Living in excess and consuming more than you need is the opposite.

DIY Projects Increase Your Resourcefulness

If you can grow things yourself, make things yourself, and fix things yourself… you are less dependent on others. And isn’t that what we are all kind of shooting for — independence?

I’m not talking about doing everything yourself in life. There is a balance between DIY and outsourcing.

But frugal people understand that the more problems they can solve with their own two hands makes them more resourceful and gives them more options and control.

Frugality Improves Social Connections

Sometimes people are afraid to admit they are frugal… They’re worried others might shun them or cut them out of future invitations.

But I’ve experienced the opposite! The more open I am about my lifestyle, the more people I seem to connect with. 

It’s refreshing when other people admit they are trying to save money, get a good deal or waste less. Frugality actually brings people together.

A big part of being frugal is sharing, swapping, giving and receiving. All these activities improve social relationships. Think about Buy Nothing groups, co-op organizations, and even potluck meals. Sharing is caring!

*****

So, what do you reckon? Do you think being frugal is cool? Or is my vision warped? (Could also be the cheap sunglasses I’m wearing, which I got for a bargain. Just sayin’ )

Wishing you all an awesome Friday and great Super Bowl weekend!

Love, Joel

[This post, Let Your Frugal Flag Fly! 6 Reasons Being Frugal Is Cool 😎, was first published by 5am Joel on Elite Edge Money]

I haven’t told many people this, but my wife decided she wants to go back to grad school and finish off her masters in special ed.

Her plan is to continue working full time as a teacher during the day, plus take on a full schedule of graduate classes at night. Crazy, I know!

But it’s also very inspiring… Because she doesn’t need more schooling (she doesn’t even really need to work anymore if she doesn’t want to) but she’s doing them both anyway because that’s what she enjoys and wants to do in life. Also, this specific master’s degree + special ed credential will unlock even more possibilities and challenges within her field of passion in the future. 

Anyway, this post isn’t about how awesome and smart my wife is (there aren’t enough words to describe that), this is about how we are planning to pay for graduate school. Or rather, how *her parents* have offered to pay for her grad school.

Accepting Big Gifts as an Adult Feels Weird …

When we started sharing her plans for grad school late last year, my wife’s parents’ eyes lit up!… They’d been saving for her college education their whole life and proudly put her through undergrad with the intention of paying for more schooling if she wanted.

About 10 years ago (before we were married), my wife started grad school but stopped halfway through to pursue other stuff. So, her parents think it’s only fair that they continue paying for the remainder of her education now because they had planned to and never finished.

But, if I’m being honest, I feel a little uncomfortable accepting their offer. I wasn’t raised with an option of free college (don’t get me wrong, I come from an extremely privileged background – my parents gave me everything *except money*) so it feels strange accepting a gift of this size.

Not to mention, my wife and I are self-sufficient adults now. We have earned and saved our own money to pay for the things we want to pursue in life, whether it be vacations, lifestyle upgrades, or continued education. I feel it’s our responsibility.

Why let someone else pay for our stuff when we can afford it ourselves?

Now you might be thinking… “Joel, this isn’t a gift for YOU, this is a gift for your wife. It’s between her and her parents.” And while yes that’s a valid argument, we actually both benefit financially from this. My wife and I share everything in life – our money, our passions, our successes, struggles… everything. A gift to her is a gift to me. And vice versa.

Why Do I Feel Awkward Accepting Gifts?

I need to grow up and get over this feeling. So I’ve started asking myself WHY I feel weird getting gifts… And most of my reasons are pretty dumb now that I write them out:

1. I don’t like feeling “in debt” to other people. I don’t know why, but whenever I get a gift, I feel guilty until I can give back something equal in return. Especially big gifts… Like, if a friend got me a gift worth $500 for my birthday, I kind of feel obligated to spend $500 on their birthday, even though that’s way more than I would regularly spend. 
2. I have too much pride and ego. These are things I’m learning to swallow more and more as I grow older and get more mature. But I’ll admit, earning and paying for my own stuff myself makes me feel better than just getting things for free.
3. Maybe deep down I don’t feel worthy? There are 7 billion other people on this planet who probably deserve gifts more than I do. No matter the gift size, someone out there needs it more than me and my wife.
4. I don’t want to be a financial burden on others. Having parents pay for stuff feels like the opposite of financial independence. (Although ironically, receiving money brings us closer to FIRE because we can save more.)
5. I’d rather be the giver than the receiver. I’m getting better at this as I grow older… I’m realizing that part of giving IS receiving. Refusing gifts robs the other party of the very feeling that I love.

Whoa, that was a lot of sharing my feelings. I know this is a first world problem and you probably think I’m an ungrateful little shit. Believe me, I know how blessed I am in life and I 100% acknowledge these are good problems to have. I’m just sharing my situation and being honest.

Accepting Gifts and Changing My Mind-Set

Sooooo… long story short, we are accepting the parents’ offer and they will pay for grad school. My wife only has about 12 months of classes left to complete her degree, and she found an online university that’ll cost about $20k all in.

And going forward, I’m releasing my bottled feelings of guilt, embarrassment and discomfort when receiving gifts… Instead, I’m converting all those feelings into gratitude, appreciation, celebration, and respect for the gift givers. Generous parents set amazing examples, and their acts are teaching US how to be more generous.

Ultimately, my wife and I hope to pay forward all the blessings we receive in life. Perhaps we should add some more funds to our nephews’ UGMA gift accounts? Actually, maybe we should start setting aside money for our future adopted kids’ education?

Any of you out there received massive gifts from your parents? Would love to hear your thoughts/feelings if you’re open to sharing.

Sincerely,

Joel

[This post, I Feel Awkward Receiving Gifts … Time to Get Over It? 🤷‍♂️, was first published by 5am Joel on Elite Edge Money]

Happy Friday, money nerds!

I was chatting with a friend the other day about publishing net worth reports online each month… He was like, ”Dude! That’s a dumb idea because what if the stock market crashes and you lose a whole bunch of money publicly? Wouldn’t you be really embarrassed?“…

I can understand why he thinks this way – after all, the main mission of this blog is to help people grow more money, not lose it…

BUT… the lesser-known (yet equally important) mission of this blog is actually to help people be happy and live the best life they can, regardless of how many dollars they have.

In January, my wife and I lost a whopping $35k in net worth. On the surface, that looks very sad and embarrassing… BUT, the reality is our happiness hasn’t really changed, nor has our lifestyle…

• We still make and enjoy delicious meals together
• We hang and laugh with our friends, same as always
• Our hobbies are the same
• Our family loves us just the same
• We go to work, exercise, do our chores, and relax on the couch together before bed every night, the same as usual

So there’s nothing really to be sad about, even with so much red in our ledger.

I’m not sure if you are feeling crap looking at your net worth this past month… But I encourage you to focus on your day-to-day life and the small things that provide you daily joy. You’ll realize that life is still quite good. The stock market (out of your control) doesn’t dictate your happiness.

Anyway, here’s how we took a $35k loss last month…

Net Worth as of Feb 1, 2022: $819,282

Summary of our assets and liabilities:

The broad U.S. stock market had the worst monthly drop since March 2020. This is the main reason our assets dropped in value.

Before we get to the individual account breakdowns, here are a few other money-related things that happened in January.

January Money Moves…

Irregular expenses: 

• We paid our annual property tax bill for our rental property. This took $5,321.44 from our property float account.

• Our cell phones are on a group family plan, and we pay a family member in 6-month installments… So this cost us $540 in January $90 total per month for our 2 cell plans)
• We spent $496 on “home improvement” (a.k.a. furniture, rugs, and kiddy stuff in anticipation of a child living with us soon – more deets to come on that soon )

Extra income and savings:

• We didn’t really drive much in January, so we only spent $39 in gas for the car! (and right now the tank is still about ¾ full).
• I hustled my butt off and made $2,625 for extra contract work for my employer last month (and it looks like there’s some extra opportunity in February too!)
• We made some big moves with our Venture X credit card… Booked a FREE hotel night for a wedding in June ($300 value) and also got awarded about $1000 in travel credit for hitting our minimum spend.

Detailed Account Breakdowns

Cash Accounts (-$7,041): The major decrease here was funding our Roth accounts for 2022. We still have more than $20k in cash reserves, some of which will be invested this coming month. :)

Rental Property + Reserve Account (-$4,764): Apart from our ~5k+ property bill, this rental was actually cashflow positive last month. Here are the rental income and expenses…

$1,975  —  Incoming rent from units

(-$138)  —  Property management fees

(-$617) —  Garbage disposal fixes, bath/shower plumbing issues & other maintenance

(-$661)  —  Mortgage principal + interest

$559  —  Total rental gain this month

**Note: I don’t track the monthly ups and downs in property value for this rental. Sources like Zillow and Redfin are too unreliable for my property type, so I only do a value update once a year with a full CMA from my real estate agent.**

Real Estate Syndication (no change in value): We received a $880 dividend in January, which doesn’t change the value of our ownership share. But it does count to our overall investment return. Since we’re coming up on the 1 year mark for this syndication, I’ll have to write a longer post about how this is all performing. So far, it’s crushing initial expectations.

IRA – Regular: (-$12,076): We took about a -6% hit on this account due to stock market volatility. It would have been worse, but the last couple trading days in January were quite nice for the overall stock market.

IRA – Roths: (+$4,813): In early January, we contributed $12,000 to our Roth accounts. The reason we max out both our Roth accounts early each year is because we believe lump sum investing beats dollar cost averaging *most of the time.* Investing at market peaks is scary, but it beats trying to time the market (which I suck at!!)

Joint Brokerage Account: (-$18,343): It stings to see this account with such a massive dip, especially after I just invested $35k in December after the sale of our 3rd rental property. Oh well, we still have a balance over $300k and a long investment horizon.

*NEW* Solo Roth 401(k): ($-578): This is my new Solo 401k with TD Ameritrade (which also has a Roth component). My plan is to max this out in 2022, but the sucky thing is contributions have to be done via wire transfer or mailing in a physical check. 

HSA: $4,743 (-$305): No contributions of withdrawals from this HSA. All of the funds are invested in VTI (total stock market index) which is why we took a 6% hit this month.

Breakdown of Liabilities

Rental Property Mortgage: (+$252): Little by little, month by month, our mortgage is being paid off by our tenants. Principal paydown is an often overlooked benefit to owning a rental property, but it’s one of my favorite consistent additions to our wealth each month.

Credit Card Balances: (+$2,459): Since my wife and I pay off our credit card balances each month before the due date, I’m thinking of removing this line item from our tracking sheet going forward. Although it’s technically a “liability,” I can just minus our CC debt from our checking account balance because that’s where it’s paid from anyway. Thinking of slimming down these NW reports in the future for a more simple read!

Other than that, my wife and I have no other debts at this time!

That’s all for now. Cheers to a *hopefully* profitable February for everyone!!

Onwards and upwards!

– Joel

[This post, Net Worth Report #17 “Dancing Queen” (Down $35,583) 👎, was first published by 5am Joel on Elite Edge Money]

I was recently discussing side hustles with a friend, who was considering starting a small business alongside her day job. This topic has been discussed over and over within the FI world, and with good reason: side hustles are both interesting and a chance to make some extra moolah!

But I’ve always had a love/hate relationship with the idea of side hustles. Often I hear about someone’s side hustle and I think, “dude, that’s just a boring second job – who wants that!?” Other times I’m like “yee-ha, that sounds cool! Even if it pays crap, I want to try it”.

So why my hesitation? I think it’s because I see side-hustles as both a potential outlet for passion, and a potential trap for disappointment. Let me explain:

What I love about side hustles

• it’s a chance to spend time doing something you are good at and enjoy. This is the primary benefit in my eyes, as hopefully money doesn’t dictate our lives
• it’s a chance to make some extra $ in your life, potentially with tax benefits superior to employee compensation
• Having 2 sources of income adds a back-up in case your primary job slips. Or, your side hustle could potentially grow big enough to be your main gig. 

What I don’t like about side hustles

• Often it’s just a second job. You end up trading time for money doing something you dislike. For example, I personally don’t enjoy cleaning floors, so I’d call a night-gig as a janitor a second job, not a fun side hustle. This wouldn’t add happiness to my life.
• Sometimes turning your hobby into a ‘job’ can kill the passion. For example, if I sold my painted rocks on Etsy, it might bring a few hundred dollars a month in revenue, but it completely kills the joy I get from giving my art away for free.

Why do I feel this way?

Mostly, I personally feel a potential trap to miss out on life.

Here’s a real-life example: during college my brother worked a night gig at a bank, reviewing mortgage applications for a year. This was tangentially related to his college studies and he made a small fortune for a college kid. Cool, right? 

Well, he tells me he “missed every sunset of 2006 at the age of 23”. That supposed small fortune of money is now inconsequential to him, and he’s never going to be 23 again. In hindsight, he says the tradeoff wasn’t worth it.

But, I LOVE hearing about side gigs and second jobs that allow people to live more of life, not less. I do believe that side hustles can be a tradeoff worth making.

Here’s a happy example: my friend works for a pharmaceutical company, and she can pick up work at CVS as a pharmacist on Sundays (earning double-time!). For a few years in her early career she worked on Sundays at CVS, even though her primary job paid well. She never relied on this job, and she eventually bought an investment property and left that side gig. She’s happy with the trade-off she made, and genuinely enjoys what she does. 

So what’s a good side hustle?

In my mind, the ideal side hustle would be both highly enjoyable and lucrative for the time input. In reality, I think many side hustles end up being a tradeoff between one or the other, which is just part of life I guess. And since life is full of tradeoffs, let’s not get discouraged when searching for a great side gig.

Side hustles of my past – the good, the bad and the meh

GOOD: Freelance bartender: I used to serve drinks at weddings when I was in my early 20’s, when my primary job was sales. I loved it! Pouring drinks, laughing, even dancing with people who were all celebrating – what’s not to love? But eventually I kind of grew out of it and focused on my sales career. I guess life moved on, but I have great memories from that time!

BAD: “Family conveyor belt”. In hindsight, this is more funny than bad. As a young teenager I took on a paper route. Unlike the movies, where a cute kid rides a bike to deliver newspapers, this job was delivering junk mail and it wore out the whole family! Mum had to drive me to pick up thousands of flyers, my 3 siblings and I set up a conveyor belt system on the kitchen table, and then as a family we packaged hundreds of stacks of different junk mail for delivery. The job paid almost nothing, and it literally took all 6 of us (parents helping too) to achieve the crazy-high quota of junk mail delivery I had. We all laugh about it now.

MEH: Second job at Post Office: I spent 6 months working nights doing postal sorting in my youth. Similar to my brother, I made what I thought was a buttload of money at the time. But I worked every night, ignored my friends, and missed out on some opportunities to enjoy life at that age. I have no regrets, but won’t be doing a hustle like that ever again.

Side hustles I wouldn’t mind trying

• Part time tax preparer – I like this idea because by helping others file taxes, I can take on work seasonally as it suits me. It helps others and is a valuable, marketable skill. I’m a nerd and I find taxes kind of fun.
• Nursing home assistant – a friend of mine picked up casual work caring for elderly during college while studying to be a Registered Nurse. Casual work paid well and the experience was valuable after she graduated. I do volunteering now, and can see myself stepping up to a caring role some day. Maybe.
• Sports umpire – 2 different friends in my life have been football umpires, and both really enjoyed the job. In one case it was Australian football, where the umpires need to run A LOT! Not sure if I’d be fit enough.

Side hustles I probably will never try

• Medical experiments. A friend of mine took part in a few drug trials during their college years for a few dollars. She ended up getting a weird unexplainable rash from it. The compensation was small. I’m all for medical advancement, but not sure I’m ready to sacrifice my health.
• MLM’s. Ever had a call from a friend who wants you to try a new product, and then start selling it too? I can’t fathom selling to my friends and family, no matter how good the product or service is. I know MLM’s work for some people, but they’re not for me :)
• AirBnB my house or spare bedroom. One of the reasons my wife and I are selling our rental properties is to get out of tenant management and dealing with renters. No matter how much we can make, renting out our home brings on too much stress for what it’s worth IMO.

What do a lot of successful side hustles have in common? 

I think a few things. 

1. Lucrative side gigs often exploit a unique skill or qualification a person might have, which usually allows them to offer services that demand a premium over minimum wage. Often that skill or qualification was gained from their primary job. 
2. The side-gig often brings a benefit to a person’s primary job. This means that there are non-monetary benefits from the side-gig, like hands-on experience or widening your network, that are in turn leveraged by the primary job. 
3. I think side gigs are often temporary in nature, like my pharmacist friend who worked toward a goal with her second job, achieved it, and then moved on.

FI people love the book “Your Money or Your Life” by Vicki Robin. Among other things, it discusses similarities between work and hobbies. One takeaway for me was that if you don’t consider getting paid, everything that you can get from a job can also be found in a hobby. That means passion, achievement, teamwork, socializing and serving others – all of these things can be found when you’re working for free!

So, are side hustles worth it?

I guess at the end of the day it all depends on your “why”.

Side hustles are a great opportunity to learn, follow our passions, and hopefully earn some extra $ on the side! But also, I often suspect that if we put that extra effort into our primary job or career development, we might be able to increase our primary income without a side hustle.

So personally, here’s my advice: if you need extra money and are looking for a side hustle, start by looking at your primary job. Can you put in the hours for a promotion or job change? Or is there a related service you can offer? Working in an area you already specialize in can lead to more income.

If not for money, think about your passions. Is there a way you can find casual work in this passion? If you never make any big money from your passion, will it still be time well spent? Probably!

Don’t forget – the world always needs more volunteers, and trust me there will be a rewarding role you can fit that is always worth your efforts.

Wishing you all a great week ahead, doing what you love.

– Joel

[This post, Side hustles and second jobs – are they even worth it?, was first published by 5am Joel on Elite Edge Money]

Do nothing. Stay the course.

**End of post!**

Just kidding. My editor won’t let me publish a 5-word post (even though “do nothing” really is the simplest answer to the question), so I’d better add some color commentary…

When the stock market is crashing —> you should do nothing.

I suspect that many of you already know this. But, even though you know it, you might still be thinking in the back of your head, “Maybe this “crash” is different from ones in the past? I’m more experienced now, so maybe I can make some small changes to limit my downside? My portfolio is different from other people’s, so I am allowed to rebalance a little bit… It’s not like I’m selling ALL my stuff, maybe I’ll just sell a few stocks and buy them back at a lower price later?”

It’s not bad to be thinking these thoughts (I think them, too). It’s human nature to try to actively solve problems when we foresee shit hitting the fan.

But, history tells us that the more human intervention your portfolio has, the more money you lose. Even if your adjustments are made with brilliant research and good intentions, they have a higher chance of negatively impacting your overall performance.

Other Thoughts About Stock Market Crashes…

In no particular order, here are some other notes and stories on this subject:

It’s a good time to “play dead”: Fidelity did a 10-year study of all its client accounts from 2003 to 2013. Do you know which investors had the BEST account performance? Dead people! (Or people who had “forgotten” about old accounts.) When accounts were left untouched, they had better growth. So don’t touch yours, mkay!?

When in doubt, LEARN: To fill the time while you are NOT touching your accounts, start reading and learning. I’m not talking about consuming panic news and social media. I’m talking about studying the good ol’ fashion fundamentals of building wealth. Read some of the top personal finance books that have stood the test of time. Or, check out some notable new books:

• Right now I’m reading Trillions by Robin Wigglesworth. It’s about how index funds were created.
• Check out Money Mastermind. This book is written by 30 of my fellow FIRE bloggers and influencers. Different topics, different perspectives, and I even wrote one of the chapters! BTW, if you do want this book, order with discount code “BUDGETS” for 30% off. (This ebook also has a 100% money back guarantee if you don’t like it! )

We are all in this together: During a market crash you might feel scared, alone, and poor. But the truth is that everyone is in the same boat as you – myself included! One of the reasons I publish my net worth each month is to show you that I practice what I preach. In a market crash, I will lose considerable value in my assets (I’ve lost more than $50k in the last 3 weeks alone). It might get worse, but I won’t be selling any investments. You are NOT alone in a crash.

This has happened before, and it will happen again: The stock market has experienced dozens of crashes and corrections over the decades, and it’s bounced back from every one of them. Since I’m only 37 years old, I will probably experience 5-10 more MAJOR crashes in my lifetime. Maybe even more. But, I will also experience an equal amount of MAJOR bull runs and heroic comebacks. As long as I stay invested, the growth will always be bigger than the crashes. I just need to ride everything out.

You can’t outsmart a crash: Sometimes people think they can use market crashes to their advantage. But, this rarely works out because nobody knows where the “bottom” of a crash actually is. In fact, even if you DID know when the exact market bottom was during every major crash over the past 40 years, you would still come out with less money investing at the bottom vs. investing consistently regardless of highs and lows. Read this easy-to-digest comparison from my buddy Jeremy at Personal Finance Club: How to time the market perfectly.

You won’t lose any real money, **unless you sell**: Even if stock prices plummet, you haven’t technically lost anything as long as you continue to hold your investments. You still own the same number of shares in the same companies, so keep holding them until value rises again (it will).

The “bright side” of sequence of returns risk: A multi-year market crash is one of the biggest risks to people who have just retired. BUT, a multi-year crash can actually be the best thing for people just starting their investment journey! As Big ERN puts it… “Sequence of return risk is a symmetric risk: you can benefit from it or it can seriously harm your investment returns. It impacts both retirees and savers and the risk is exactly a zero-sum game.”  

“Please sir, can I have some more?” To add to the point above, a market crash means you can buy stocks at a discount. Downturns are actually a good thing for anyone who is consistently saving and investing (which is the majority of the population!). When you see stocks slipping, you should think like Oliver Twist… “Please sir, can I have some more?”

Learning from past mistakes: Talk to anyone who lived through the 2020 Covid crash, the 2008 Financial crisis, or the 2001 Dotcom crash… You’ll hear 2 main regrets from any investor during those times. Those regrets are 1) I wish I didn’t panic-sell when the market was crashing. And 2) I wish I bought MORE stock during the crash. Learn from other people’s mistakes!

It’s a great time to side hustle!: Speaking of buying more, market crashes are a great time to earn excess money —> and put that money into investments. Side hustles also distract you and keep you busy so you don’t freak out about what the market is doing.

Guided Meditation Video, by JL Collins: A few years back, legendary JL Collins made the following 10-minute video for anyone freaking out about the stock market dropping. Listen to his soothing voice, relax, and follow his wise advice!

(A Guided Meditation for When the Stock Market Is Dropping)

Last but not least…

My last piece of advice for what to do when the stock market is crashing… Keep living your awesome life. Hang with your kids, continue your hobbies, keep doing good deeds for people and spending money on the things that you love in this world. Just because the economy is doing weird stuff, it doesn’t mean you need to radically change your behavior. Spend your time on things within your control, not worrying about stuff you can’t.

Happy Friday, y’all! Have an awesome weekend.

Love, Joel

[This post, When the Stock Market Is CRASHING… What Should You Do?!?!?, was first published by 5am Joel on Elite Edge Money]

Soooo… my wife and I are having a debate right now (actually, it’s not so much a “debate”… it’s more like “we have decided, just discussing the pros and cons”) about hiring a *regular* housekeeper to clean our house.

This is a new area for us, because we rarely outsource tasks.

In the past 12 years living together, we’ve probably hired a cleaner maybe 10 times max. These have been times when we’re extremely busy or in a transition and need a deep house clean before hosting important guests or something. Apart from that, we’ve always found time ourselves to sweep, mop, dust, clean the bathrooms, do our own laundry, and all the other adulting stuff.

BUT… life is about to get pretty busy for us. On top of all our current stuff, we anticipate a little kid or two entering our home soon – and these kids will come with their own full schedule of appointments and activities.

Hiring a house cleaner will let us prioritize work and kid stuff, as well as protect some of our dwindling free time.

It’s not that I’m against hiring cleaners… I just want to consider the long-term effects of this decision before we commit. To me, this feels like lifestyle inflation that could potentially be a one-way street. Once we get a regular cleaning service, it might be hard to give up later.

Financial Considerations of Hiring a House Cleaner

We’ve found a cleaner that can come every 2 weeks, and will charge ~$150 per cleaning.

That’s $3,900 per year.

BTW – we would still need to clean ourselves in the off weeks. (Our German Shepherd alone sheds heavily and we already sweep a couple times a week). So hiring a cleaner could actually cost us more if we need more than every other week.

We can afford an extra $3,900 per year, but there are a few ways to consider the costs:

First, the weekly cost breaks down to $75 per week. Luckily, one of my contracting gigs pays $75 per hour. So if I worked just 1 hour extra per week, this could fully cover the cost without impacting our cashflow. Sounds easy!

Next, if we think about the time savings, it’s probably a cost of ~$20 per hour that we pay the cleaner to save our time ($150 for 8-ish hours work). 

• Is me and wifey’s work time worth more than $20 an hour? Yes, I think it is.
• Is our FREE TIME worth more than $20 an hour? At the moment I would say maybe, but next year with a full schedule I would think Yes, it’s definitely with it.

Lastly, I’m considering the overall impact of our FI number. If this new annual cost continues *forever,* then it’s something that will need to be replaced eventually by passive income.

Given the 4% rule, an extra ~$4k per year of living expenses adds $100k to our FI number. That’s a pretty huge increase to think about! 

There are also opportunity costs (because we’ll be spending $4k instead of investing it each year before reaching FI) which could be another $100k+ of missed growth over the next 10 years.

Again, I’m not opposed to increasing our expenses (we planned for increased costs when we have kids). It’s just a little sticker shock seeing the numbers written down. Somehow a basic bi-weekly cleaning service has a ~$200k impact on our overall financial life!

Lifestyle Considerations

Money aside, I have some weird emotions going on about hiring someone to clean my house.

First, I think I have a pride issue that I need to swallow. Almost every one of my friends here in LA has a regular hired house cleaner. The fact that my wife and I do all of our cleaning ourselves makes me feel great. I’m proud to be a hard worker. And switching from hard work to smart work is more difficult than I thought. It involves releasing control.

Next, I’m scared this lifestyle inflation will be a “creep” that keeps growing and growing. I’m worried that a cleaning service twice a week will soon lead to every week, and then maybe we’ll start to hire help in other areas of life. I guess the unknown future costs are starting to freak me out.

Lastly, I’m worried about getting lazy. When someone else is cleaning, it means I will stop cleaning. This change in my behavior may lead to me stopping other types of chores and looking to outsource more stuff.

Even worse, what will our kids be learning by seeing someone regularly clean for us? When I was a kid, my siblings and I helped with ALL household chores. Cleaning the house was one of the ways my parents taught me to be independent. I’m worried that if our kids grow up with a cleaner, they’ll expect that as the normal thing when they reach adulthood.

All Things Considered …

Am I crazy for thinking this way? Am I being a tight-ass for not jumping at the chance to outsource chores?

Would love to hear from you all. If you have a regular house cleaning service currently, all in all, is it worth it?

Love,

Joel

[This post, We’re Thinking About Hiring a House Cleaner …, was first published by 5am Joel on Elite Edge Money]

Happy Monday, happy people!

Just a short post today… Here are 3 simple questions to ask yourself this morning.

Asking these questions once in a while (especially at the start of the work week) will help you lead a happier, richer, and more intentional life.

Here we go…

1. What Tiny Little Thing Can I Do to Make My Partner’s Life Easier Today?

I freaking love this question. That’s why I put it first.

I personally believe that the quickest route to happiness is  —> making other people happy. A thoughtful 2 to 3 minute activity in the morning can brighten someone’s ENTIRE day, not to mention make you feel great all day, too.

Since I get up one hour before my wife each day, I have the opportunity to do something tiny for her in the morning. Like, making sure her bike tires are pumped before she rides to work, checking if her headphones are low on battery and putting them on charge, or writing a small love note to sneak in her lunchbox. Tiny tasks —> massive impact.

If you don’t have a partner at home, think about a friend, a coworker, your boss, or even a person you just met. What one tiny thing can you do to make their day easier?

2. What Are 3 Good Things That Will Happen This Week?

Positivity breeds positivity. When you anticipate and look forward to good things happening, other random blessings start to manifest in your life, too.

Anything fun going on at work you’re looking forward to? Meeting anyone cool this week? Are you getting paid or making any extra $ this week? What are the fun hobbies you’re doing?

Feel free to think of more than just 3 things. The more, the merrier. Oh, and BTW… They don’t have to be massive or life-changing events… In fact, looking forward to the smaller and more regular things in life will help you build a habit of simple appreciation.

3. What Tiny Good Habit Am I Trying to Form? (Or a Tiny Bad Habit Am I Trying to Shed?)

My favorite Benjamin Franklin quote…

“Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.”

It’s easy to set big goals and resolutions in life (especially at the beginning of the year). But sometimes we get lost in the grind and forget the small daily habits that help achieve those big goals.

Instead of trying to change everything at once, just focusing on and mastering one habit at a time can be very powerful.

What is the one thing you are trying to improve this week, or month?

*****

Wishing you a happy, productive, and prosperous day ahead!

Love, Joel

[This post, 3 Quick Questions to Ask Yourself This AM, was first published by 5am Joel on Elite Edge Money]