Do You Really Need That? Seriously?

Earlier this year I took a look at a few bills that we were paying monthly. To name a few, we had a Verizon Fios bill that was costing my wife and I around $180 and two cellphone bills that combined averaged to being around $240. When the two of us were working, these bills seemed like chump change and were easily payable. Now with only one of us working, bills still averaging about the same per month, and a baby on the way, the tables have turned. Something needed to be done… Something had to be done.

I’ll say that from the start, I was never that great of a money saver to begin with. Starting off with what seemed like a never-ending cash flow from mom and dad back when I was a teenager didn’t help. If I wanted something, the easiest thing to do was ask the good old parents to lend some money towards gas, food, or entertainment. Now during that time I took for granted the fact that I’m not paying rent, utility bills, insurance or any other type of fee that is associated with “real” everyday lifestyles. If I could go back in time to expose myself to what I have experienced nowadays, I feel that I would’ve been better prepared and more financially savvy with how I spent my money. By no means am I using this as an excuse, or a way to blame my parents for how I am financially with my money, because they have done everything and more to ensure that their son is taken care of and for that I am grateful.

Taking the time to look at what you’re making and what you’re spending your money on is sometimes hard to do. You would like to tell yourself that everything is all fine and dandy, and that you can afford the payments to that brand new car while denying the fact that you have other monthly bills to attend to. But the truth is, that’s where the financial nightmare will start. You may have an excellent credit score, but how many debts and loans are you willing to take on before you finally convince yourself that maybe you’ve taken on too much? I believe that the earlier that you’re able to catch yourself, the better off you’re going to be for the future. If you can literally tell yourself “I don’t need this” and not be concerned about staying up to date with the latest gizmos and gadgets, I applaud you and your efforts, keep it up.

As of now we currently have three vehicles, two of which we still have monthly payments for, and a house mortgage that we’re paying for as well. The dog we still owe money on, and I guarantee you he doesn’t help pay off the bills. This isn’t an article about how I’m a victim, but about where to go from here. My friend told me about a man named Dave Ramsey, and so far I like what I’ve heard from him. There are quite a few things that we’ve done, that he would recommend not doing to start with as a young married couple, but through his practical teachings and approach I feel that we are getting a grasp on our financials with his baby step program. I’m going to keep you guys posted on how we’re getting ourselves out of debt, and the steps that we’ve taken to be financially free.

To sum it all up, be reasonable with what you have and what you need. A used car that came out 3-4 years ago, will still run just as well as the 300 hp V-6 that you’ve been eyeballing for the past month. You can purchase your brand new puppy through a friend, as opposed to the puppy store, and save yourself the hiked up pricing. It’s always amazing how someone you’re talking to on the phone, still sounds like the same person, regardless of what provider you go through. I will say it again, be reasonable with what you have and what you need. Debt free is definitely the way to be.
Burnt Toast

Keeping it Simple

When it comes to picking out stocks, there are certain factors that I like to look for. The most important factor to me is how simple the company I’m looking at is to follow and understand. There are certain companies that come to mind that define being “simplistic.” First and foremost, The Coca-Cola Company (KO) is probably the best example when it comes to simplicity. Carbonated sugar water is what Coca-Cola produces and the people love it. Coca-Cola can raise the cost of the product to offset the costs that are incurred in the factory and can pass those onto the consumer. In my eyes, that’s perfect. If the consumer is willing to keep purchasing a product regardless of what the cost of the product is, then I consider that a perfect product. Coca-Cola has been able to keep producing the same product over and over again with relatively few modifications over the past 100 years.

Another company that I admire is Chipotle Mexican Grill (CMG). You go into the restaurant, order how you want your burrito made, watch them make it, and off you go. The business idea is outstanding. They have brick and mortar stores located in local shopping centers that have high traffic flow. They sell a basic product that is well known and people love it. They repeat this same process with every new store that they open, and that is how they’ve become successful. Buffalo Wild Wings (BWLD) is another fantastic company that does the same type of business, except they use chicken wings and drumsticks.

I’ve never really been a big fan of tech stocks, but that’s not because they’re terrible investments in their own right. If you take the time to look at the financials for some of the major providers out there, such as Apple (AAPL), Microsoft (MSFT), and Google (GOOG) just to name a few, they are all spectacular and have found their own niche that people have become fond of. Apple is famous for their Ipods, Iphones and Ipads. Microsoft’s software is used on virtually 90% of today’s computers and laptops, so much so to the point that it’s nearly impossible to find a computer in a store that doesn’t run off of their programming. Google’s success is to the point that their name can be used as verb, such as “Google it.” Technology is a field that I would consider unpredictable, since another advancement forward in technology, makes another product obsolete.

The two companies that I’ve put my money into are Green Mountain Coffee Roasters (GMCR) and Guanwei Recycling Corp. (GPRC). I like both of their stories in that they both make products that are straight forward and easy to follow. Green Mountain has taken a lot of flack for its expiring patents and questionable events that have happened in management, but I believe that this company has the ability to turn itself around. Their main focus is on producing different flavored products for their Keurig brewing systems. Guanwei Recycling Corp. focuses on taking used plastic products, melting them down and then selling the finished plastic blocks to shoe companies and companies that use the finished plastic products for fireproofing. There’s not a whole lot that goes into what both companies deal with, and both are relatively simple to follow.

Educated Guess

On May 8th, 2012 the student loan debt hit $1 Trillion. In a country that is focused on going to college, earning a degree and landing them in high paying jobs, many college graduates are finding it difficult to find work substantial enough to pay off their loans. When does the benefit of having a college education, become overshadowed by the cost of obtaining that degree? We have now entered a national student loan debt crisis, and there must be someone to blame.

When something like this is publicized over the media, great negativity is created, and the finger gets pointed at individual companies that stand out in the educational fields. Companies that fall into this category include Devry (DV), Strayer (STRA), Apollo (APOL) and ITT Technical (ESI). Each for-profit school specializes in their own technical field and offer multiple degrees based upon what they are geared towards. I’ve always been amused by negative media and how it affects a company’s stock price. It’s true that student enrollment in for-profit schools has decreased from one quarter to the next, and the returns haven’t been all that spectacular. But what I see is potential for possible turnarounds.

For-profit schools have been around the block, and have seen their fair share of student registration drop offs. I guess I fail to see where the end of the road is for these companies. Jobs will probably be cut, and with the lack of jobs out there for recent graduates to add to the mix, I can see where the skepticism comes from, but why should this be a major turn-off for long-term holders? I believe that the economy will turn around, as well as the current mood of the nation. When that happens, the old motto of going to college and getting the degree will have full effect once again. An increase in the number of students should equal an increase in profits. Of course this would be speculative in nature, but not farfetched. I’m going to be standing by, hoping that the pessimism continues to the point that would allow me to buy into some great companies at a huge discount.

Burnt Toast

Plan First, Act Later

My wife and I decided that it was time to purchase a house for ourselves back in November of 2011. Interest rates on the national average were dropping due to depressing job reports, and a general pessimism towards the overall economy. While most would take this as a sign of a time to panic, we decided that it was an opportunity for us to buy a decent home, in a decent location at a price that was based more towards actual value, as opposed to a price that’s been elevated to ridiculous prices from optimism.
“Sounds easy enough right?” I remember saying, and I soon came to terms with how wrong that statement actually is. When we first started our initial search, we decided that a 3 bedroom, 2 bathroom home was a perfect upgrade from our 1 bedroom, 1 bathroom apartment. We didn’t have much of a plan as to what we both felt like was a necessity for the house other than it needed to have a big kitchen and a backyard for our dog Chewy. We came across a realty firm that claimed to specialize in helping the buyer find a home and purchase it for the best price possible. There were multiple types of home that we looked at during the two months of searching we did with the firm. Every home that we went to, had a unique feel to it, but not the proper vibe to make you say, “This is IT!” After looking at a dozen homes, it was time to take a break from the search and figure out what we really wanted.
After taking a hiatus from the home search, I happened to come across my old work center supervisor. For those not familiar with NAVY lingo, he would be the equivalent of a store manager that I worked for. After retiring from the NAVY, he picked up his realty license and worked for William E. Wood and Associates Realty Firm. The difference between how he helped us out in our search, compared to our former realtor, was that he helped us form a plan. He gave us some tips to aid our home search techniques, so we weren’t wasting time going to homes that were haphazardly picked. Three months later, we finally found the house that came with a backyard that allowed our dog to run around and burn off excess energy. It’s amazing how someone who actually is there to help you satisfy your needs can make a difference. The experience was “night and day” for us and we’re extremely happy with the home that we purchased.
The phrase, “planning makes perfect,” cannot be any truer when it comes to purchasing a home. The more time you spend prepping, the less guesswork is done during actual execution, which leads to less surprises in the long and short-term. By using a solid base plan as guidance, instead of running in circles and acting spontaneously, you’ll be saving yourself time, money and overall sanity. Plan first, act later.
Burnt Toast

Improvise, Adapt and Overcome

Before we purchased our house this last April, everything was running smoothly and on time. The 30-day check and balance routine was moving along with no delays or major bumps in the road. The month-long period was a time used by our bank to review our previous bank statements, allotments, current debt levels, and pretty much any other documentation that applies to financial activities. This is to ensure that you’ll be able to pay off your mortgage bills, using your past records as that you’ll be able to hold up your end of the bargain.
Towards the end of the 30-day process, there was a sudden change in the ship’s schedule. The dates for the final signing had been set in stone, with little wiggle room. I would not be allowed to stay behind, since the event was considered anon-emergency. What was supposed to be done? My wife (fiancée at the time) and I had worked so hard to find this dream home, only to have it potentially taken away because NAVY plans change faster than a typical teenager’s attitude. After talking with our realtor, we decided that my wife would act as a limited power of attorney and sign the documents for me. The other option was to have the documents faxed to me and have the legal officer on board act as the notary. Either way would work, except I prefer to not to rely on technology too much, since it always finds a way to break down when you need it the most.
The process to appoint her as Power of Attorney was quick and painless. The form was clear, precise and defined the terms as to what she was eligible to sign for. After reading and reviewing the document for any grammatical, or documentation errors, in less than 20 minutes the problem was solved. As it turned out, I ended up going underway, and my fiancée signed the final documents so we could seal the deal on the house.
Moral to this story, is that you never can tell when life, or your job is going to throw you a curve-ball. All you can do is hold tight, reassess the situation and then knock it out of the park with a solution. My old baseball coach used to say, “Improvise, adapt and overcome,” and those words I repeat every time I’m faced with an obstacle.

 
Burnttoast

NEVER AGAIN VOLUNTEER YOURSELF

The more I sit in this blue room, the more that I am certain that I don’t want to reenlist again. The original idea of reenlisting sounded great at the time when I was still single, with nothing more than a car waiting for me at the pier. As time progresses, so do opinions and life’s playing cards. As of now, I’m currently married to a beautiful wife and we’re expecting a new addition to the team towards the end of September. We own a home and have an Old English Bulldog that happily greets me every time I walk through the door. Things have changed dramatically from the first time I took the Oath to now.
I understand that everyone has to make sacrifices. It’s an important part of growing up, and to be honest I have not met one person who could tell me that sacrifices don’t suck. The more I sit in this dark, chilly blue room, the more I begin to realize how much an impact me not being around has on my family. I especially don’t think that it’s fair to my wife, and in the future tense, to my son who’s most likely going to rely on me for guidance for questionable things that he will come across.
My dad is a great man who sacrificed a lot to ensure my mom, brother and myself would have a relatively easy lifestyle to live. He worked as a chemical engineer for Texaco before being transferred to ARAMCO. Saudi Arabia was where my brother and I were born, and during the early years of my existence, I barely knew my father. We used to refer to him as the “Weekend Dad,” and it wasn’t until he retired that I finally was able to get a chance to talk to him and listen to some of his experiences that he had been through. Adapting from having my father around only on the weekends to having him at home all the time was a big transition for me. I took that time for granted as most teenagers tend to do and quickly went off at the age of 19 to join the NAVY. Five years later, my father has been diagnosed with psychosis and various versions of memory loss and it isn’t the same, and usually makes it difficult to play catch-up on how things are going. This isn’t the same path that I want my son and I to follow.
My mother has done more than her fair share of raising my brother and I. Raising two boys as random as ourselves was no easy task. Add in the factor of “Weekend Dad” being home a few days of the week, and you’ve got a modified single-mom week. She made sure that we were fed, dressed up and ready for school. She also acted as the homework study buddy, nurse and peace keeper when my brother and I got into scuffles. Meals were always on point and she was there when I needed to talk to somebody. This is just a small list of things that she has done for my brother and I, and I personally feel that there are not enough words of gratitude that would be sufficient to express how I feel. I want to be there for my wife when times get rough, to share the load of responsibility so then that way the overall weight of raising our son doesn’t fall on her shoulders.
My brother has always been a surprise to me. I’ve watched him grow up over the years into a fine, young man. There are things that I would disagree with that he’s doing in his life, and there are things I know that I’m doing that he’d disagree with, but that’s what siblings do when they look out for one another. We’ve always been lose and there’s nothing that we wouldn’t do for the other. The comment that rings through my mind from time to time is, “I want to keep in touch… I think that we’re growing farther and farther apart.” We don’t have as many chances to communicate as we used to, and that makes me angry and sad. With me being in the NAVY, it has affected him tremendously as well.
All these people I’m affecting in some sort of way, by me remaining where I’m at. These people, my family relies on me in some sort of way and I’m tired of not being there for them, but it wouldn’t be fair to my wife and unborn son if I were to up and quit. They rely on me to provide, and that means that I have to carry-on and work. This is where I’ve decided that I’m going to take the remaining time that I have left in the NAVY, to find new ways to supplement, and then eventually take over as our primary sources of income. This is the reason why Band of Investors has come to be. A place where I share with you the trials and errors that I experience on the path of becoming financially independent. What I hope to achieve with Band of Investors, is that whatever you read on here enriches your life in some way, and acts as a guide towards your own financial independence. Now go out and discover your new sense of identity, not as the person stuck late at night behind a desk, but as the person who would rather spend their time with the people who mean the most to them. Good luck and happy investing.

Sincerely,
Burnttoast

Relative Problems

I remember back in Great Lakes, Illinois on December 16th, 2007 when I lent a so-called friend $100 so he could have some spending money when his family came into town.  I figured why not, it’s close to Christmas and I’m doing a good deed for Karma’s sake. Little did I know that I had set myself up for failure when it came to being able to entertain myself for the day. I ended up having to borrow from somebody else, and the so-called friend never paid me back, because he ended up leaving to another duty station after telling me multiple times that he was going to “pay me back.” In the end, after paying back the money I borrowed I was out of $100, which in terms of business was unacceptable.

I just recently talked to one of my Chiefs about tips he would recommend for rental properties, and the one that stuck was, “Don’t rent your properties to friends and family.” It sounded cruel, but I understood the basis of the advice. Friends and family are people that we share emotional ties with. Those emotional ties are what drive us to help in times of need and distress, which in turn makes us feel guilty when we don’t help. I’m pretty sure that there’s been a time in your life when a family member has asked for money and you most likely lent the money, along with the assurance that they would pay you back when he/she could. Let’s apply that same attitude towards a home that you pay a mortgage on. The money that you collect goes towards paying off the mortgage. The so-called friend/family member falls on hard times and can’t pay you this month’s rent. Since you’re the “outstanding” relative, you let it slide and pay the mortgage payment for that month out-of-pocket. Now keep doing this either continuously or sporadically, which in the end results to you paying the monthly mortgage, while your so-called friend/relative lives in a house that you’re paying for. You become frustrated because now your paying an enormous amount of money per month that will cut into your own personal living expenses. Logical solution is to evict the renter, but can you see yourself evicting your own mother or father who raised you since birth? For me, that would be an extremely emotional, gut-wrenching decision. Once you have decided that you want to turn your home into a business venture, you must be able to emotionally detach yourself, so that any problems that come up can be taken care of with as little emotion as possible. I’d prefer to keep things as business-like as possible and prevent having to make that call by not renting out my home to my friends and family. Instead I’d rather have my parents come live with me in the home  that I live in if times get tough, because in the end, who else can cook one of your all-time favorite meals other than mom?

 

To Pet, or not to Pet… That is the Question

Pets are great. They enrich our lives, provide us companionship, and teach kids some sort of responsibility (most of the time). On the contrary though, pets also seek and destroy in the backyard, chew up items of value, and carpet bomb floors with whatever excretions their bodies can muster. They can’t help themselves sometimes, and all we can do is blame ourselves for purchasing them. Keep this in mind the next time you go into a pet store and stare through the glass at those innocent puppy eyes.

My wife and I purchased our Old English Bulldog in May of last year. He was adorable, and impossible to let go of so we ended up taking him home to our apartment that we used to live in. We decided to name him Chewy, which we at times regret naming him. Chewy had the typical puppy upbringing, which meant that there was quite a bit of cursing, haphazard training, and plenty of messes to clean up. By the time we had left our apartment he had successfully destroyed the linoleum in the kitchen, had given the carpet his version of puppy tie-dye, and decided to reenact the movie Shawshank Redemption on random areas of drywall. Keep in mind that this is only one dog, and he had added to the final payout of the apartment to the grand tune of $2200.

My wife and I now own a home, since we decided that paying a mortgage was better than paying rent. We still have Chewy to this day, and luckily he’s been calming down. We’ve discussed renting out the home that we currently live in, since the military has the tendency to move someone from side of the country to the other. Everything seems all fine and dandy, until we come to the point of whether we should allow the potential renters own pets. That’s when the horrible nightmares of our apartment come crashing in. In all honesty, when we were renting the apartment, the amount of messes that my dog made meant very little to me and could be cleaned with carpet cleaner. But when you apply those same thoughts and place that into the minds of potential renters, the thought sickens me. I wouldn’t want somebody else’s pet destroying the value of my property due to their animal instincts of marking territory. Think about it, every time a dog pops a squat on the floor, that’s a ruined carpet, plus the potential of a ruined foundation The thought of claws scraping across the laminate, is equivalent to the sound of nails across the chalk board. The list goes on and on, and you should be actively thinking of whether you should allow, or not allow renters to own pets. My advice for those starting out in rental properties would be to not allow pets, but for those that feel it’s too harsh a restriction, should accommodate for this by increasing the security deposit and applying a monthly pet fee to cover any potential pet mishaps.

Stop… It’s a Trap

In today’s markets, you have thousands of companies to choose from to place your money into. Everyday we’re bombarded with hot stock tips about which tickers are going to be the next big thing, and with these hot stock tips come compelling stories as to why these companies are going to blow their competitors away. Why do I say this? Because I got caught in a emotion trap, that to this day I still get frustrated about.

I received a tip that was promoting a company called DHT. I didn’t research much about it, but only enough to learn its name and market price (already off to a bad start). I had sold off my 200 shares of Gidan Activewear Inc. (GIL) earlier in the month, because I felt that the stock wasn’t going anywhere, and with the ship’s lousy Internet connection, I didn’t want to miss out on a $800 profit minus commissions. Feeling good about the recent profit I made, I decided to take a chance with it all and purchase as many shares as possible of DHT Holding Inc. (DHT), figuring that the person originally writing the article must have a good reason to do so, so why shouldn’t I try it as well?

I’m going to take some time now to explain some very amateur, if not very stupid mistakes that I made with this company. The first big mistake was the fact that I followed the advice of an unknown source and believed in it. The emotional side of investing can be your worst nightmare. It plays tricks with your mental game and prevents you from conducting a sound, if not decent analysis on the company you’re potentially about to buy. Secondly, when I sold my Gildan Activewear Inc. (GIL) shares at the time, I was basing my selling point upon the chances of missing out on a short-term profit, as opposed to sticking with a company over the long-haul. Who cares if the price dropped a little lower during the week out to sea with no Internet connection? I shouldn’t have because I had bought into the company at a decent margin of safety price roughly at $16.50, and the remaining shares roughly at $17.55 and the last remaining shares at $19.60. The share purchase were under my calculated margin of safety price the formulas from Rule #1 gave me, yet I sold at $21.63 for no particular reason other than I panicked at (GIL)’s current ticker status, and the fact that I wouldn’t be able to sell if the company’s stock price dropped any further during the week with no Internet connection.  The part I should have realized was that just because the price dropped briefly, I shouldn’t have been so quick to sell. The company’s fundamentals all checked out and I had bought their shares at a discount. Long story short, Gildan went on to around $26 a share, whereas DHT, which I had bet the house and the kitchen sink on, crapped the bed and robbed me of nearly $1400.

The lesson here is invest in companies that you know, or at least have a decent understanding of. When you start dipping into companies that sound exotic, in which you know nothing about, the chances of you being successful, are about as high as the chance of you being able to properly pronounce the company’s name the correct way. My recommendation still stands firm, do the proper amount of research into a company, before you even consider purchasing the company and what it entails.

90% Mental… 10% Physical

   Here I am, working on my tedious little tasks here and there and finally get a break for the day. First thing that comes to mind is, “I wonder how my stock picks are doing.” I’ve read about how you should detach yourself emotionally from your investments and even other tidbits where you should be confident enough in your picks to the point where, if there wasn’t a stock ticker to follow, you wouldn’t care. For the most part I stick to the rules, yet there are times where I find myself anxious, especially when there isn’t much to do while sailing around.

 I feel ecstatic when I take a look at www.google.com/finance and notice that the two companies that I have put my hard-earned dollars into have gone up in price for the day, and on the contrary, on the verge of panic when they are showing negative percentages. Nobody ever likes to see the price start dropping once they have bought into a company, and nobody ever likes to read negative reviews written by authors who appear to have intelligence far beyond my own. That little voice inside your head starts to play tricks with you, and is always helpful in suggesting that you’ve might have made a mistake.

 So what am I supposed to do when the negatives of a company that I own feel like they’re piling up? Laugh, ignore and tell myself aloud that I’ve read their financials, read their statements, and have done my homework on trying to decide whether the company that I’m buying into is worth my time or not. In the end, the only person who can make the call is I. After that, I’m good to go and gladly accept the greater discount for a company I believe in that others are selling. 10% of your time is used researching a company, whereas the remaining 90% is spent defending your reasoning for purchasing its stock. The stock market is a never-ending mental grind if you watch the ticker day in and day out. My best advice for those starting out, would be to go to your happy place when you’re starting to doubt and give yourself a mental vacation, because then it’ll give you one less thing to worry and gripe about for the day.