My First Set of Short Term Financial Goals

My first set of financial goals were simple enough:

1. Deposit $3,000 to my dividend investment fund
2. Get my Home improvement fund up to $1,000
3. Pay $500 towards my student loan principal
4. Save $500 in my Son’s 529 Plan

I can’t believe I was able to save/invest $5,000 in just 6 short weeks!  That doesn’t include my standard contributions and debt repayments I had. It was a perfect storm as I had some clients finishing up estate plans and a tax refund coming to me.  I don’t think the next $5,000 will be as quick.

My Second Set of Short Term Financial Goals

Start date of June 1, 2013 my short term financial goals (in no particular order) will be:

1. Contribute $500 to my Traditional IRA
2. Save $500 into my Son’s 529
3. Save $1,000 in cash towards a future house purchase
4. Invest $1,500 into my Dividend Portfolio
5. Save up $750 to allocate to my whole life insurance policies
6. Save $750 in the house repair fund (The $1,000 was already used for a few things – mainly 13 trees for the backyard, who the hell knew trees were expensive?)

One of my favorite quotes from law school on the subject is from Judge Learned Hand (yup, real name) in Helvering v. Gregory (1934),

Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes and public duty to pay more than the law demands.

Why doesn’t that quote apply to Apple? Is it because it is a corporation? I don’t buy that – corporations whether they are United States based or Foriegn are still made up of people (not sure where I fall on Citizens United).  Is it because of the sum? That is just bullshit class warfare. Is it because it is just icky? I assume that is what most idiots who watch MSNBC believe.

If Apple was doing anything legally wrong there would be a different headline, one that read “Apple sued by Federal Government” or if you were lucky enough to have the New York Post in your area it would read “Tim Cook(ed) Apple.”

So, like the great Ice-T once said (but didn’t originate),

Don’t hate the player, hate the game

Want someone to blame? Blame your elected officials, and don’t give me the bullshit de facto – lynch the conservative republicans.  If I remember correctly it wasn’t too long ago when the Democrats controlled both Houses in Congress and the Executive Branch.

Who else can quote both Ice-T and one of the greatest legal minds in our history?

Quality vs Quantity over Time – Laptops

I am not a fan of apple products, but I am going to put my distaste aside for a moment and just pretend it is a better product.  Even if it is a better product, the guts of it are the guts (processor, ram etc), and if I can find a comparable windows based product for half the price (that is no exaggeration) then why wouldn’t I want 2 mid-range machines (or maybe even 3) over the lifetime of one superior apple laptop? Meaning I can buy a mid-range machine today then in 3 or so years buy another mid range and so even if the apple laptop lasts 8 years, I have 2 new products vs just one (assuming) superior product.

In addition the technology changes.  An apple laptop which may still be in existence despite being built and bought in 2006 wouldn’t have futures of your common laptop today (for example HDMI output).

Quality vs Quantity over Time – BBQs

I remember when I was researching BBQs a few years ago, everyone told me to go with a Weber because “they are the best” and last the longest.  I was all in until I went to the store to see that if the most basic and smallest model was double (if not more).  Again, my thought process turned to the fact that even if I had to buy 2 BBQs in the same time that it took one Weber to break I would have two new products instead of just one!

I could be looking at this all wrong, but sometimes my gut says go with quantity over time rather than just buying a quality product…or maybe I am just trying to justify the fact that I feel guilty making unnecessary purchases.

I Still Love Talking About Finances With Most People

I am not a financial planner, but I love discussing personal finance topics with anyone that wants to talk about it.  Whether it is running calculations for friends, running this blog, my investment club, etc. I love doing it all (well the investment club is trying at certain times)!

I have just found myself commenting less and less when I read a blog post about someone who is so dumb it would make the Evan of 4 years ago irate.  Similarly, I don’t push friends and/or family anymore on topic of spending, investing, etc., unless they engage first.

I have come up with two possible explanations that are not mutually exclusive:

• I have accepted the fact that a lot of people just don’t care about their future finances; and
• I know I am doing the right thing by my family

End of Random Thought

Sell Whatever You Can

If you have lived on this earth for more than 10 years, I guarantee that you have stuff you can sell. Take a look around your house right now from where you’re sitting. Those little knick-knacks, that chair you never sit in, some of your books that you’ll most likely never read again. People will buy these things from you! If you are really in trouble financially, don’t be afraid to sell some of the stuff you might actually use, but could do without. How about that expensive coffee maker? You could do without that for a few months. How about that snow-blower? Sure, it’s handy, but you own a shovel that could do the job too. Plus, that snow-blower could easily sell for a couple hundred bucks, which would keep you surviving. If you don’t need it to live and you’re in a tight financial situation, just sell it. You’ll be glad you did, and you’d be surprised on how few things you need to live.

Minimize Your Borrowing

Do you currently have a car that you’re making payments on? You might not realize it, but that car is one of your biggest problems when it comes to your monthly cash flow. You might want to debate me on this, but really think about it. How much does it cost you in payments each month? $300? And since you borrowed money to buy it you most likely have to fully insure it, which costs you another $150 a month (at least). That’s $450 a month that you’re tied to paying out each month, which is most likely more than 10% of your monthly earnings. That’s a pretty huge chunk! If you could sell your car for more than what you owe, I would suggest that you sell it and buy a decent running beater car for a while. With an extra $400 a month or so, you could get out of your financial problems pretty quickly.

Borrow From Peter to Pay Paul

If you are truly desperate for some cash, perhaps you’ll just have to borrow it to survive the next week or two (consider cashwindow.co.uk as an option), but be sure to have a plan in place for how you’re going to pay back your quick cash loan. Let’s say you absolutely need $200 today so you get a cash loan for a week. If you get paid next week, be sure that you’ll have that $200 as well as some extra for your other bills, food, and minor emergencies.

I was excited to see a recent Wall Street Journal article titled, “Chances of an Audit Grow With Income” which actually backed up my assumptions,

At first glance, the answer appears simple: very low. The IRS has audited only about 1% of all individual income-tax returns in each of the past several years.

***

Last year, the IRS audited nearly 4% of those making between $500,000 and $1 million. It audited nearly 9% of those making $1 million to $5 million. For those making $5 million to $10 million, the audit rate was 18%. For those who made $10 million or more, the audit rate was more than 27%.

The article also says,

IRS officials are keenly interested in taxpayers who own their own businesses, file what is known as “Schedule D,” and deal in large amounts of cash.

The cash and owning your own business makes sense but what about a Schedule D? According to the IRS you use a Schedule D when,The sale or exchange of a capital asset not reported on another form or schedule.

• Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit.
• Capital gain distributions not reported directly on Form 1040 (or effectively connected capital gain distributions not reported directly on Form 1040NR).
• Nonbusiness bad debts.

Bullet points 1 and 3 make sense, which I guess brings bullet point 2 in by default.

Cashwindow.co.uk is a leading lender of short term cash available online, from your mobile and in 200 stores across the UK and provides instant access to cash when you need it most.  Whether it’s an urgent bill, the car’s broken down or you need to buy that special gift for a loved one cash window is there to take the strain when the cash machine has ran dry.

Getting credit can be a headache but instant cash and payday loans can be a godsend when there’s nobody else to turn to and providing you are in employment it’s easy to get that short term solution.  But it’ s important to remember that as a lender cash window takes credit very seriously and  is committed to being a responsible lender.  Look closely at your finances before taking out short term loans and make sure you are able to pay back what you owe and the interest charged before signing the agreement. Make sure you understand how much you will be paying back and the rate of APR you are agreeing to pay before you accept the cash.

With the cost of living rising more and more people are turning to loans and short term loans to meet day to day expenses and as the banks are turning more and more people down for credit cash loans companies are on the increase as the friendly face of credit on the high street.

The most impressive business cards should represent the ethos of the company and careful thought should have already been given to the branding and logo of that company.  The best designs have a strong logo and colours which are highly memorable.  Studies have shown that logos are very powerful and the best ones will be remembered by the individual even when just a small section of that logo is visible just by the colour scheme, typeface and even font which is used.   The logo and colours used on the business cards must appeal to the target audience, for instance a dance teacher will use fun vibrant colours on her cards with upbeat designs whereas a funeral director needs something more sombre and tasteful. Business cards can be purchased from many places, InstantPrint.co.uk business cards are one of the cheaper and dependable options around.

Keeping it simple is usually the key to a good business card with the face of the card spacious and largely uncluttered, use the reverse of the card when possible to create a clean look.  Add tag lines of slogans to your cards but again keep these simple and stick to no more than five words to get your message to your audience.   Some companies like to add pictures to their business cards, whether it be a cartoon character or caricature but if you prefer to add the face of an employee this is a method proven to attract the attention of a prospective client  and make it less likely to end up in the bin.

There are two reasons why you should look into your life insurance sooner than later.  One has to do with the life insurance companies and the other is you.

Life Insurance is Becoming More Expensive

I can tell you firsthand that the company I work with has repriced almost every product we sell (Read Reprice = More Expensive) and as “Tyler Durden” once said, I work for a major one.  Notwithstanding my experience CNN recently highlighted an increase in price with regards to term life insurance,

Following a decade in which prices fell to all-time lows, premiums for new term policies last year rose an average of 3%, says online agency IntelliQuote, which forecasts more increases this year.

The culprit? Sickly yields on bonds, in which insurers invest most of customers’ premiums.

Those same “sickly” bond yields are affecting permanent products as well.

You Aren’t Getting Younger and You Are Probably Not Getting Healthier

Bond prices are hurting the bottom line of insurance companies.  It is only natural considering they have to invest the uncredited premiums somewhere.  Obviously the return of an insurance company isn’t the only thing that affects your monthly premium.  The major piece of it is your health and age.

Every year you will get older (Profound, right?).  Every year you are likely to get less healthy (probably not but as absolute as the last statement).  Those two pieces will obviously increase the price of your insurance.

So if the insurance companies are starting to increase in price and you are getting older – why the hell are you waiting to get insurance? For me it was trying to figure out how much I could spend.  I don’t believe that is the case for most people since most buy cheap term, so stop being lazy!

This (along with every other) update takes a snapshot of certain metrics.  Ideally, I would revisit these metrics every single time I went to buy stocks, but my investment schedule is erratic based on unpredictable income and these updates take 90mins+ since everything is done by hand.  If anyone knows of a program or site that would do everything I did in my screen I’d really appreciate it if you shared.

I think this particular update should be interesting in the years to come, because today (as well as a few days over the past few weeks) the market as a whole hit new highs.  As such, I believe it is more important than ever to find stocks which may be undervalued so if there is a correction maybe the market won’t throw out the baby with the bathwater.  

My Dividend Investment Portfolio Screening Criteria

1. They have to actually be on the Dividend Champion list – This is a list of stocks that have increased their dividend for the past 25+ years.  It is a bit different than the Dividend aristocrat list.  The dividend champion list is updated monthly.
2. The stock has to have a Price to Earning that is lower than their industry average.  New to this month I also eliminated any stock that has a P/E over 30 regardless of it beats the industry average.
3. Their Operating Margin has to be in line with the particular stock’s industry average.  I want profitable companies!
4. This monthly update the Dividend Yield should be above 2.5% (changes whenever I update the list depending how many stocks I have left after the first 3 steps)
5. Price to Book Value Should be Reasonable.  Again this changes depending on how many stocks I have left after the first couple of steps.  This monthly update I used the number 4.

You may notice that some of the stocks aren’t eliminated if they barely fail a metric test. This is because I don’t want to eliminate a stock that is within a range that eyeball since I am taking a snapshot.

Definitions of Metrics Used for my Dividend Investment Portfolio

Since not everyone knows what the hell I am talking about above I harve provided definitions (all taken from Investopedia):

• Dividend Champions are those dividend paying American companies that have increased their dividend for the past 25 years. Unlike the Dividend Aristocrat list they do not have to be part of the S&P500.
• P/E is Price is “a valuation ratio of a company’s current share price compared to its per-share Earnings.”
• Operating margin is “a measurement of what proportion of a company’s revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt.”
• Dividend Yield a “Financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Dividend yield is calculated by dividing Annual Dividends per Share by Price Per Share”
• Price to book is a ratio used to compare a stock’s market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter’s book value per share.

Dividend Champion Price to Earnings by Stock’s Industry

The first Stocks I their eliminated were those whose Price to Earnings Ratios were out of line with their industry average. This has the unintended consequence of eliminating a lot of well known companies since investors seem to build in a premium.

 

Dividend Champion Operating Margin by Stock’s Industry

Next I eliminated those stocks whose operating margin was not better than its peers in the industry. I want the companies I invest in to be more profitable than their peers. This way unless there is a huge problem with the industry they’d be less likely to stop doing something (i.e. paying increasing dividends) that they have been doing for the past 25 years

 

Dividend Champion Dividend Yield

While I am not ‘chasing yields’ I am attempting to create a dividend portfolio, so the next elimination step was to remove any stocks with a dividend yield of less than 2.5%. As stated, this is a moving target depending on how many stocks I have left to choose from. Sometimes I go for 2% sometimes 4%.

 

Dividend Champion Price to Book

Lastly, I was looking for those stocks whose price to book value is low as to further evidence that it is undervalued. This has an unintended consequence of choosing stocks with a lot of tangible or financial assets on the books.

 

Remaining Dividend Aristocrats that I hope are near their 52 week low

For the next month or two I will be looking at the following stocks hoping some come near their 52 week low:

• 1st Source Corp.    SRCE
• Air Products & Chem.    APD
• AT&T Inc.    T
• Atmos Energy    ATO
• Bemis Company    BMS
• Black Hills Corp.    BKH
• Chevron Corp.    CVX
• Community Trust Banc.    CTBI
• Consolidated Edison    ED
• ExxonMobil Corp.    XOM
• Johnson & Johnson    JNJ
• Leggett & Platt Inc.    LEG
• MGE Energy Inc.    MGEE
• Northwest Natural Gas    NWN
• Piedmont Natural Gas    PNY
• Procter & Gamble Co.    PG
• Sonoco Products Co.    SON
• United Bankshares Inc.    UBSI
• Vectren Corp.    VVC
• Weyco Group Inc.    WEYS
• WGL Holdings Inc.    WGL

Unfortunately many of these particular stocks are closer to their 52 week high than their 52 week low.  Notwithstanding, I think there may be 1 or 2 I can purchase over the next month or so.  For example, it is unlikely I’ll add to my JNJ position because it is 27% away (as of this posting) from their 52 week low and only 1% off from its 52 week high.  Meaning I need to hope for a new 52 week high rather than just recapture the high which was already there.