Open post

Spending Report: August 2017

Having a strong understanding of where your money is going is the first step on any financial journey. In Managing Our Finances with Mint, I talk about how Mrs. NFF and I use Mint to track all of our financial expenses and which categories we use to segment our spending. At the end of the month, I find it useful to go through our monthly expenses to how we did, and how to respond to unexpected changes to our spending. I hope by sharing my assessment with you, can you take a similar approach with your own spending self-assessment.

August 2017 Overview: Total Spending – $7,199 read more

Open post

Managing Our Finances as a Couple

Before my wife and I got married, we had a long conversation about how we wanted to handle our finances as a married couple. Previously, we were using a shared checking account for shared expenses like rent and utilities when we were living together, but marriage was an entirely new ball game. There were very different levels of student loans to pay off at various interest rates, as well as vastly different salaries with which to pay them. We needed to find an approach that allowed us to share in our financial successes and failures that also helped to control some of our worst financial habits.

It should be noted that our approach has worked for us, but that is not to say it will work perfectly for everyone else. People have different attitudes about money, financial situations, and financial goals, all of which should be factored in when decided on your own approach. read more

My Money Mistakes: Holding Onto a Bad Stock for Tax Reasons

While I hope to fill this blog with tips and tricks I’ve learned from my successes in achieving my goals, I know that I will inevitably make mistakes along the way. My hope is that by telling you about them, I can learn from them and hopefully help you to avoid them in your own journey to financial independence and early retirement.

“A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.” – John C. Maxwell read more

Open post

Net Worth Tracker: August 2017

First off, I must apologize for the late net worth posting, but I promise that I do have a good excuse. A little more than a week ago, our family grew by one as we welcomed NFF Jr. into the world. It has been an amazing, if thoroughly exhausting, couple of weeks for my wife and me. But I find myself now with some extra time to update you on our financial happenings since last month.

August 2017 was another up month for the New Father Finance family, though I have to admit it is our worst month for spending this year. Some extra costs related to the birth of our son played a major part of that. In a later post, I’ll go into a bit more detail about our actual spending this month, and perhaps go into a little detail about some of our larger baby purchases. read more

Open post

What is a Target Date Fund

My sister recently graduated from graduate school and for the first time in her life has had a full-time job with a steady paycheck and benefits. Last weekend, she asked for my help because she gets a 401k but she didn’t have any idea of how to invest it. After setting up her account and reviewing what her investment options were, I thought that the best option was to sign her up for a target date fund. Specifically, Vanguard’s Target Date 2060 Fund.

What is a target date index fund?

A target date index fund is an index fund that invests in a mix of stocks and bonds (domestic and international) that is designed with specific date in mind of when you will need your money. The weighting of how much is invested in each asset class is meant to grow with the stock markets when you are far away from your target date, and get more conservative as you get closer to retirement. My sister, for example, won’t hit 65 until around the year 2060, so her target date fund is heavily weighted towards stocks, with only a small percentage invested in stocks. As she gets older, the fund will gradually move to be invested more heavily in bonds to preserve capital and reduce the risk of her losing a big portion of her savings right when she needs it. read more

Evaluate your Finances Like a Financial Analyst

As you travel along your journey to financial independence, it is enticing to only focus on your net worth and reaching some goal you’ve set for yourself in the future. However, to really assess the health of your finances and ensuring the best odds of hitting your financial goals, there are other metrics as well that you should at least be monitoring. To get an idea of what metrics to look at, we head to the headquarters of assessing the financial health of organizations: Wall Street.

Financial Analysts make livings on finding the companies that are going to increase their value (also known as Net Worth) in the shortest, most stable way possible. I’m not arguing that Wall Street is any good what they do (see: Index Funds: The Gold Standard of Stock Market Investing), but we can still find the things about Wall Street that do work well and use them to our advantage. One body of research we can use is around metric. There are several basic metrics that the Financial Analysis use to assess the health and future potential of a company. By adopting those metrics slightly, we can apply them to our own finances and paint a picture of how we’re going. read more

Open post

The Baby Box: Our First Baby Purchase

What is a baby box?

The baby box dates back to 1930’s Finland, which at the time was a relatively poor country with a high infant mortality rate of 65 per 1,000 births. To reduce the mortality rate, the Finnish government began providing new expectant mothers with a starter-kit of baby essentials, designed to give all children, regardless of their situation, an equal start in life. Included in the box were clothes, sheets, toys, and a bed in the form of the box itself. Fast forward ~80 years and Finland has one of the lowest infant mortality rates in the world (2.3 infants per 1,000 births versus 6.5 in the US).

The baby box concept is beginning to expand in the US, particularly as a way to reduce infant mortality and SIDS. In the last few years, Alabama, Ohio and New Jersey have started provided new mothers with a baby box after they watch online videos about safe sleep habits and SIDS, and complete a short quiz. The box itself acts as a place for the baby to sleep as an alternative to bed-sharing, a primary risk factor in SIDS. Additionally, the contents typically provide all the basics you need for a new baby, a huge value particularly for low-income parents. read more

What Risk and Return Should I Expect From My S&P 500 Index Fund

“The stock market, on average, returns 8% per year”. You’ve heard that statement probably a thousand times before. If you’ve been reading this blog, you’ve heard it here as well. But there is a lot of data and questions buried by that 8% figure. Should I expect that return every year? What is the worst I can expect? Does investing for longer periods of time increase my changes of earning 8% on my investments? I want to do some statistical analysis to show you the relationship between time, reduced risk, and reasonable expectations of your investment returns.

In the below graph, I show historically how the stock market has performed over a 1-30 year period going back to January, 1950 (the earliest data I had available). By that I mean, from January 1, 1950 to January 1, 1951, what was the return. Then what was the return from February 1, 1950 to February 1, 1951, etc. up through August 2017. Then I looked at the 2-year returns (January 1, 1950 to January 1, 1952) and so on until the 30 year horizon. Plotting the maximum return, the minimum return and the average return presents some very interesting information to show you what you can expect while investing and why investing for long periods of time is so important for mitigating risk. read more

Open post

Managing Our Finances with Mint

A guide to using Mint – Our Approach

Knowing how much you make and what you spend your money on is Personal Finance 101. This is the fundamental building blocks of wealth building. If you income is greater than your spending, your net worth will go up. If income is less than spending, your net worth will go down. It is that simple.

Before you dive into new and exciting ways to grow your income, reduce your spending, and find ways to grow your savings, it is important to know where you’re starting from. Only one you know where you are can you know the best way to get to where you want to go (in our case, financial independence and early retirement!). read more

Open post

Is it Better to be a Rockstar Saver or a Rockstar Investor

I want to present you with a simple question. If you could cut your spending in half and have no impact on your life and happiness, or if you could find a way to double your investment returns for the next 20 years, which option would you choose? Which option would get you to financial independence and early retirement faster?

Sally the Saver and Ivan the Investor read more

Posts navigation

1 2