Am I Saving Enough For Retirement?

I recently logged in to my Personal Capital account and received the following message;

27% of users like you have saved more.

You’ve saved 73% of the average tax-deferred investments (like IRA & 401K) for your age group among Personal Capital users. Is it time to start saving more? Learn more about saving more and even retiring early. How can I save more?

So, Personal Capital is telling me that I am in the 73rd percentile in my age group when it comes to retirement savings. I appear to stack up pretty well against my fellow Millennial retirement savers. I also like how Personal Capital frames the statement; they actually are encouraging me to save even more. They are telling me that 27% of users like me actually save more. I love the fact that they are really trying to push me to save more.

I can’t argue with this logic because it does push me to want to save more for retirement. Currently I am saving 15% of my income towards retirement. I then receive a 11.5% match from my employer. On top of that, both my wife and I max out Roth IRA accounts. In 2018 I do plan on increasing my retirement savings even more…even if it is by just a couple percentage points.

Millennials, you too, need to push yourself to keep saving more. We should all be striving for an early retirement. And, if you decide to work longer and well into your 60’s, then great, you now have more than enough for retirement in that scenario.

Last Week Stock Market Recap (October 9-13, 2017)

Last week, October 9-13, 2017, all U.S. stock indices reached new all-time highs. The NASDAQ is leading the charge in 2017, with a year-to-date return of nearly 23%. Interesting note; the NASDAQ has logged its 57th all-time high.

Stocks have been setting new highs and interest rates remain low, pushing investment returns well-above their long-term averages. Over the past five years, U.S. stocks returned almost 15% per year, which is roughly twice as much as projected long-term returns most financial experts are predicting (approximately 7% annually).

Last Week’s Stock and Bond Index Performance (October 9-13, 2017)

  • NASDAQ 0.2% (YTD 22.7%)
  • Dow Jones Industrial Average 0.4% (YTD 15.7%)
  • S&P 500 Index 0.2% (YTD 14.0%)
  • U.S. Aggregate Bond Index 0.5% (YTD 3.6%)

Last Week’s Retirement Portfolio Performance Report
(October 9-13, 2017)?

Below is a snapshot of my three biggest retirement portfolio mutual fund movers in terms of percentage gained (or lost!) last week.

How Did My 401k Do Last Week?

Last week my retirement accounts were up 0.52%, whereas the S&P 500 was only up 0.20%. Overall this year, which is 288-days into 2017, my retirement portfolio is up 14.6%. So I am actually slightly beating the market. Slightly.

The Vanguard Target Retirement 2040 Fund (VFORX) is up 14.9% so far in 2017. This is my personal benchmark because I could invest all my retirement portfolio into one account or choose a number of index funds to diversify. I am doing the latter and this year I am losing to the 2040 Target Date Fund. Again, slightly. But, more on why I am not using the 2040 retirement fund later.

Can I Beat the Stock Market?

I am actually not trying to “beat the market” with my retirement portfolio…I am trying to match it. I do have alternative indexes in my retirement portfolio to help possibly beat the market, e.g. Small Cap Value, REITs, International, and Emerging Markets. Through lots of reading and research on my part, I’ve found that a number of these assets classes “zig” when the market “zags”.

With that said, if I can beat the market I will absolutely take it (obviously)! Last year in 2016 my retirement portfolio returned 13.01% versus 9.54% from the S&P 500. In addition to the S&P 500, I like to measure my portfolio performance against Target Date Retirement Funds. I specifically like to use the Vanguard Target Retirement 2040 Fund (VFORX) because that is what I used to invest in before I went to all index funds. But if I can’t beat the Vanguard 2040 fund, then why not simply invest in it (one fund) versus the 10+ mutual funds I am in now? Well in 2016 the Vanguard 2040 fund was up only 8.73%. So it under performed the market (S&P 500) by nearly 1%, and I personally beat it by nearly 5%. So that tells me I am on the right track with my well diversified portfolio.




Millennial Personal Finance Blog

My goal with this Millennial personal finance blog is to show all Millennial’s that you have the power to take control of your personal finances through self-education and self-development on money and finances, and by striving to become financially literate. That is what I have been doing for years now, focusing on becoming an expert in financial literacy, so I can one day become financially independent. I’m trying to prove to Millennial’s that we can all do this and thrive with money. We Millennial’s have the greatest resource on our side to become financially independent and build wealth…time! Save, invest, and let compound interest do the rest.

Follow my blog as I highlight relevant personal finance and retirement topics pertaining to us Millennial’s. You can also join my journey as I track the true cost to raise a child these days. Most of my research shows that on average it costs $14,000 per year to raise a child, which equates to roughly $250,000 to raise a child from birth through high school (the cost of college is not included in this $250,000). I am trying to defy that price tag and show that a Millennial family can raise a child on well less than $250,000…or I will come to the sad realization that this number is dead on. Time will tell.




Cost of Raising a Child in 2017: 7-Month Old

How Much Does it Cost to Have a Baby?

My wife and I are first time parents and we are now 7-months into the “parenting” process. I made it a goal to track all of our childcare expenses so I could truly report on the cost of raising a child. I invite all of my personal finance readers to follow along our journey as I diligently track all expenses involved in truly raising a child these days in middle class America.

Prior to us having a child I did some research and the consensus was that it costs roughly $14,000 per year to raise a child, which equates to roughly $240,000 (without college). Don’t get me started on how much college will cost for my child

So the consensus was from my research that it costs $14,000/annually to raise a child in 2017. Well, we are halfway through year one and we have spent just over $3,000 on our baby girl thus far. It is very early and she is still very young, but we are on pace to spend less than half of that $14k per year average. However, its obvious that what we spend in year one will (and should be) far less than what we’ll probably spend in, say, year 8 and/or 12 and beyond when expenses really rise to raise a child. But I like the pace we are on and currently setting.




How Much Does It Cost to Raise a Child?

We are 7-months in and thus far we have spent $3,743 on my daughter in total. We have lucked out and received a number of hand-me-down clothes and toys, as well as a ton of gifts and gift cards from our baby shower that are still holding us over. We are nearing the end of our baby shower gift cards, but I estimate that we have about $200 left to various stores.

Last month our biggest expense for our daughter was her new swim lessons. This month we didn’t have any expenses like that. We just had the usual, nanny care and 529, as well as some actual baby food and a couple outfits.

We bought baby food because my daughter is now transitioning to actual food, along with her formula. We are virtually only feeding my daughter formula now, as my wife is now longer producing breast milk. So our baby food expenses may begin to increase a bit. We also bought two new fall weather outfits for her now that the weather is beginning to change in our state.

Child Care/Nanny

We use a part-time nanny to watch our daughter two days a week. We consider ourselves very lucky though, as we have a nanny who comes to our house twice a week, a nanny our daughter loves, who really doesn’t costs us that much.

My wife is off two days during the week and then a family member watches her another day, so we only need to “pay” for two days of child care. Thus far we have spent a grand total of $2,400 on childcare.

Cost to Raise a Child in 2017: 7-Month Old

  • 1st month = $414
  • 2nd month = $105
  • 3rd month = $545
  • 4th month = $643
  • 5th month = $520
  • 6th month = $866
  • 7th month = $650
  • Since inception (March, 2017) = $3,743

 

September

Item Price
529 contribution $50
Child care $560
Baby food $20
Clothes $20
Total $650




Personal Finance 101: Build an Emergency Fund

In this personal finance 101 series I am going to focus on why all Millennials need to establish an emergency fund. The general consensus from virtually all financial experts is that you should save between 3-6 months worth of living expenses as your emergency fund, aka your “rainy day” fund.

How Much Should I Have In An Emergency Fund?

Unfortunately, most American’s have less than $1,000 in savings. According to MarketWatch, more than 60% of American’s have less than $1,000 set aside for an emergency fund. And more than 20% have no savings account whatsoever. So unfortunately most American’s can’t afford what life throws at them; car repair, water heater, ER visit, etc. Let alone a layoff!

As I stated earlier, I believe most Millennials should have 3-6 months living expenses set aside as their emergency fund. That number does vary based off your current situation. Is your job stable? Are you salaried or self-employed? Are you single or do you have dual income? Everyone’s situation is different. But if you have a stable job that you feel very secure in, then I think you are correct leaning towards the low end of 3-months living expenses. But if you are self-employed and your pay varies based off contracts/work, then you should absolutely skew higher on the emergency fund side and aim for 6-months.

Do You Have $400 for an Emergency?

I was recently listening to an episode of Motley Fool Answers, one of my favorite money podcasts for Millennials, and they too were discussing how most American’s don’t have enough money in savings to cover a $400 emergency. This was actually a study done by the Federal Reserve, and it wasn’t just for low income families, as it even applied to families with a $100,000 income.

That is just terrible. And I am sure most people don’t think they need it because they can simply put an emergency expense on a credit card. Says the person who probably has a boatload of credit card debt, I’m assuming…




How Much Is In My Emergency Fund?

I am a Millennial and I am married with one child. I personally have 5-months of living expenses in my emergency fund. I am salaried and in a very secure position with a very stable company. My wife, however, is self-employed but her income has been consistently stable for the last decade. We also both max out Roth IRA’s each year. I have no intentions of using these for an emergency, but they are there just in case. Especially my Roth IRA because I already have a well funded Roth 401(k) at work, with a healthy company match.

To be honest, my wife and I never really established an emergency fund until about 2 years ago. I started getting hooked on Dave Ramsey and we began to budget and manage our personal finances much more diligently. We now have no debt, other than our house, and a fully funded emergency fund. The peace of mind we’ve had the last couple years because of this emergency fund is indescribable. We sleep better at night and we rarely stress out about money. It is a fantastic feeling.

Emergencies Happen

Just this past summer, our emergency fund saved us from some major stresses. It May we had saved up to re-sod our backyard, which costs us $2,500. Big hit, but we saved up for it. But then life hit and our emergency fund got taxed. In June our hot water heater went out and that costs us $1,200. Then in July our garage door broke and we had to replace that, which costs us another $600. August was light, thankfully, but then in September my 10-year old SUV needed some work; rear brakes and a new sway bar. That too was another $600.

Our fully funded emergency fund saved our bacon big time this summer. We were able to take from there, then replenish. But then we were hit again. But we again replenished our emergency fund.

On this same note, I recall reading a number of stories about Houston families and residents who were unable to evacuate prior to Hurricane Harvey making landfall on August 25, 2017. It saddens me that so many people not only didn’t have an emergency fund, but they had virtually no money in savings to get their family to safely. I read a few stories that since the storm hit at the end of the month the family was out of money, because they obviously live paycheck to paycheck. Gas, hotels, meals and safety wasn’t an option for them at the end of the month.

Stories like this should be a teachable moment for us Millennials. Save for an emergency…and save aggressively now. Stop putting it off.

Did you know that if you saved just $25/week for 2 years you would end up with $2,600. If you can triple that to $75/week you would end up with $7,800. Now that probably doesn’t fully fund your emergency fund, but its a great start with very doable, and very conservative savings amounts.




What is Wealth?

What is Considered Wealthy?

How does one define wealth? The dictionary defines wealth as an abundance of valuable possessions or money, or the state of being rich and having material prosperity, or even simply having a plentiful supply of a particular resource (money?). You could break it down even further and define wealth by generation. A Millennial may define wealth differently from someone in Gen X or a Baby Boomer.

So how do you define wealth? I wanted to touch on this subject because I recently came across a number of different articles and research papers that I read on the subject. All of very fascination, and enlightening, but very different, because the definition of wealth varies so much by age, generation, and even more so by region and demographics. A Baby Boomer in small-town Iowa is going to have a very different idea of what being “wealthy” means when compared to a Millennial in San Diego or Boston.

Charles Schwab performed a study on the subject, called the ‘Modern Wealth Index’ and came to the conclusion that we, as American’s, overall define wealth as having a lot of money, enjoying life, being able to afford whatever they want, and ultimately living stress-free. Pretty simple definition of wealth…but just how much money is considered a lot to enjoy life and afford whatever you want?




How Much Money Makes You Wealthy?

  • The average American says they need $2.4M to be wealthy.
  • The average American says they need a net worth of $1.1M to be financially comfortable.
  • Philadelphia and Houston had the lowest wealth threshold of the participating metros at $1.7 million each.
  • Boston and Denver came in just below average ($2.4M), with a desired net worth of $2.1M to be wealthy.
  • San Diego residents say they need a net worth of $2.7M, while Los Angeles residents say they need $2.6M.
  • New York residents came in at the highest, with a needed net worth of $3.2M in order to be considered wealthy.

Note: net worth is assets minus liabilities. For many people, home equity can make up a big share of net worth, followed by retirement and investable assets.

How Are We Improving our Wealth Accumulation?

The true way to build wealth is by budgeting, which allows you to live below your means. Next, you must set up a financial plan and corresponding financial goals, while saving and investing toward said goals. And then it’s all about staying on track with your budget, savings, and financial goals; you must stay the course, for a very long time, in order to truly achieve wealth.

  • About two-thirds of Americans have a financial plan, but only a quarter has plans in writing.
  • 74% of Millennials have a financial plan; 34% have one in writing and 40% have a financial plan, but just not in written form.
  • 62% of Gen X have a financial plan; 21% in writing and 41% have an unwritten plan.
  • 58% of Baby Boomers have a financial plan; 18% in writing and 40% have an unwritten plan.
  • Those with a written financial plan are more likely to have a budget, a rainy day fund, and a monthly savings goal.
  • Millennials and those with a written financial plan are most likely to have engaged with their work-sponsored retirement account.
  • 84% of Millennials and those with a written financial plan are most likely to be aware of brokerage/investment account fees.
  • 75% of Gen X’ers and 65% of Baby Boomers are aware of account fees.
  • 35% of Millennials are “very confident” in reaching their primary financial goals, compared to only 17% of Gen X’er’s and a paltry 13% of Baby Boomers. Obviously time comes into play here…Baby Boomers are approaching retirement and know exactly where they stand, whereas us Millennials have nothing but time on our side to help correct any issues.

Note: I am so very proud of my Millennial cohort here! Look at us planning out our financial futures so much better than our elders. That sets us up nicely for a well-to-do retirement. Funny how Millennials still get a bad reputation for over-spending (avocado toast, Millennials?).

10% of Americans are Worth $1 Million

Few people achieve the aforementioned “wealthy” and millionaire status I just laid out. Only about 10% of Americans are worth $1 million or more, according to a 2017 report by investor research firm Spectrem Group. In fact, to be considered wealthy by this new criteria, you’d need to have about 30 times more than the approximately $80,000 net worth of the average U.S. household, according to the most recent data collected by the U.S. Census Bureau.

Modern Wealth Index from Charles Schwab & Co. – June 2017




Last Week Stock Market Recap (September 11-15, 2017)

Last week, September 11-15, U.S. stocks reached new highs. The S&P 500 was up 1.6% and reached 2,500, which puts the S&P 500’s year-to-date earnings at 11.7%.

Last Week’s Stock and Bond Index Performance (September 11-15, 2017)

  • NASDAQ 1.4% (YTD 19.8%)
  • Dow Jones Industrial Average 2.2% (YTD 12.7%)
  • S&P 500 Index 1.6% (YTD 11.7%)
  • U.S. Aggregate Bond Index -0.5% (YTD 3.4%)

Last Week’s Retirement Portfolio Performance Report
(September 11-15, 2017)?

Below is a snapshot of my three biggest retirement portfolio mutual fund movers in terms of percentage gained (or lost!) last week.

How Did My 401k Do Last Week?

Last week my retirement accounts matched the S&P 500 performance exactly; up 1.6% on the week ending Friday, September 15, 2017. This year, which is 260 days into 2017, my retirement portfolio is up 9.07%. So I am under-performing the “market”, e.g. the S&P 500 greatly (nearly 3%) as the S&P 500 is up 11.7% so far. On top of that, the Vanguard Target Retirement 2040 Fund is up 12.9% so far in 2017. This is my personal benchmark because I could invest all my retirement portfolio into one account or choose a number of index funds to diversify. I am doing the latter and this year I am losing to the 2040 Target Date Fund.

Can I Beat the Stock Market?

I am actually not trying to “beat the market” with my retirement portfolio…I am trying to match it. I do have alternative indexes in my retirement portfolio to help possibly beat the market, e.g. Small Cap Value, REITs, International, and Emerging Markets. Through lots of reading and research on my part, I’ve found that a number of these assets classes “zig” when the market “zags”.

With that said, if I can beat the market I will absolutely take it (obviously)! Last year in 2016 my retirement portfolio returned 13.01% versus 9.54% from the S&P 500. In addition to the S&P 500, I like to measure my portfolio performance against Target Date Retirement Funds. I specifically like to use the Vanguard Target Retirement 2040 Fund (VFORX) because that is what I used to invest in before I went to all index funds. But if I can’t beat the Vanguard 2040 fund, then why not simply invest in it (one fund) versus the 10+ mutual funds I am in now? Well in 2016 the Vanguard 2040 fund was up only 8.73%. So it under performed the market (S&P 500) by nearly 1%, and I personally beat it by nearly 5%. So that tells me I am on the right track with my well diversified portfolio.




Millennial Personal Finance Blog

My goal with this Millennial personal finance blog is to show all Millennial’s that you have the power to take control of your personal finances through self-education and self-development on money and finances, and by striving to become financially literate. That is what I have been doing for years now, focusing on becoming an expert in financial literacy, so I can one day become financially independent. I’m trying to prove to Millennial’s that we can all do this and thrive with money. We Millennial’s have the greatest resource on our side to become financially independent and build wealth…time! Save, invest, and let compound interest do the rest.

Follow my blog as I highlight relevant personal finance and retirement topics pertaining to us Millennial’s. You can also join my journey as I track the true cost to raise a child these days. Most of my research shows that on average it costs $14,000 per year to raise a child, which equates to roughly $250,000 to raise a child from birth through high school (the cost of college is not included in this $250,000). I am trying to defy that price tag and show that a Millennial family can raise a child on well less than $250,000…or I will come to the sad realization that this number is dead on. Time will tell.




Cost of Raising a Child in 2017: 6-Month Old

How Much Does it Cost to Have a Baby?

My wife and I are first time parents and we are now 6-months into the “parenting” process. So we’ve made it halfway through year one…hooray us!

I made it a goal to track all of our child care expenses so I could truly report on the cost of raising a child. I invite all of my personal finance readers to follow along our journey as I diligently track all expenses involved in truly raising a child these days in middle class America.

Prior to us having a child I did some research and the consensus was that it costs roughly $14,000 per year to raise a child, which equates to roughly $240,000 (without college). Don’t get me started on how much college will cost for my child

So the consensus was from my research that it costs $14,000/annually to raise a child in 2017. Well, we are halfway through year one and we have spent just over $3,000 on our baby girl thus far. It is very early and she is still very young, but we are on pace to spend less than half of that $14k per year average. However, its obvious that what we spend in year one will (and should be) far less than what we’ll probably spend in, say, year 8 and/or 12 and beyond when expenses really rise to raise a child. But I like the pace we are on and currently setting.




How Much Does It Cost to Raise a Child?

We are six months in and thus far we have spent $3,093 on my daughter in total. We have lucked out and received a number of hand-me-down clothes and toys, as well as a ton of gifts and gift cards from our baby shower that are still holding us over.

Albeit, we’re about out of gift cards now. However, we are still going strong on the diapers we received via our baby shower diaper raffle. That was still a great idea, because I remember pre-child my biggest (expense) fear was the cost of diapers. I truly thought we were going to be spending like $100 to $200 a month on diapers. I was that naive to the costs of raising a child and how much diapers were.

Speaking of diapers, last month I wrote about how our baby girl was still in newborn diapers, which we were out of from our baby shower diaper raffle. Well, she has finally grown enough 6-months in to fit into the size 1 diapers that we have an abundance of. So we shouldn’t need to buy diapers for the next couple on months (at least).

Baby Swim Lessons

Outside of paying for our nanny last month, our largest child care expense in August was swim lessons. We paid $256 for 18 lessons, which equates to just over $14 per lesson. Each lesson is only 20 minutes.

We knew we wanted to start our daughter early in swim lessons to get her used to the water and truly enjoy it. She was just over 5-months old when she took her first swim lesson, and she actually wasn’t even the youngest in her class.

Thus far she loves the water, loves her lessons, and her mom and I enjoy alternating each week as we get into the pool with her for swim class. Its indescribable how much fun it is watching your baby play in a pool and back-float as a 6-month old infant. Worth every penny for the lessons.

Child Care/Nanny

We use a part-time nanny to watch our daughter two days a week. We consider ourselves very lucky though, as we have a nanny who comes to our house twice a week, a nanny our daughter loves, who really doesn’t costs us that much.

My wife is off two days during the week and then a family member watches her another day, so we only need to “pay” for two days of child care. We are 4-months in to paying for a nanny/child care, and have spent a grand total of $1,840.

Cost to Raise a Child in 2017: 6-Month Old

  • 1st month = $414
  • 2nd month = $105
  • 3rd month = $545
  • 4th month = $643
  • 5th month = $520
  • 6th month = $866
  • Since inception (March, 2017) = $3,093

 

August 2017
Item Price
529 contribution $50
Child care $560
Swim lessons $256
Total $866




Personal Finance 101: Save for College

In this personal finance 101 series I want to focus on college savings for our children. I am a Millennial and our generation is drowning in student loan debt. The average college graduate is finishing school with nearly $38,000 in student loans. That is crazy and its taking most of us Millennials one to two decades to repay that.

Open a 529 for Your Child

I was lucky enough to become a dad for the first time this year in 2017, and I knew I wanted to get a 529 account up and running ASAP. I don’t use this personal finance blog to brag, but I would like to say that I am thrilled to state that I made my daughter’s first 529 account contribution when she was just 6 days old.

My goal for this post is to encourage all other Millennial parents out there to begin saving now for their child’s college education. Don’t let your child be in the same debt the rest of us Millennials are in. This is your chance to create a better future for your child…a future with way less student loan debt!

Cost of College in 2035?

College is expensive and that is not news to anyone. The problem is most college tuition rates have been increasing between 6-10% each year…way more than inflation. The cost of college is soaring out of control! I anticipate my baby girl to attend college around the year 2035 and the calculations I received off a few future college estimator calculators is utterly shocking.

I calculated the cost of attending two different in-state schools in my state; the first is my alma mater, which unfortunately is the most expensive state university in my state. And the second is a quality in-state university, a much smaller university, but one that is far cheaper, while still providing a quality education. I love my alma mater, but I am absolutely leaning towards the latter (cheaper) in-state university.




In-State Public College #1 (Alma Mater)

Tuition and fees alone I expect to cost approximately $170,000 in the year 2035, if I want my daughter to attend my alma mater. This cost is for four years of schooling.

If I want to cover all expenses, tuition, fees, room and board, I expect that to cost roughly $310,000 in the year 2035.

In-State Public College #2 (Smaller and Much Cheaper)

Tuition and fees alone I expect to cost approximately $92,000 in the year 2035, for my daughter to attend a smaller, in-state university (which I am 100% on board with…and I am encouraging this school actually). This cost is for four years of schooling.

If I want to cover all expenses, tuition, fees, room and board, I expect that to cost roughly $111,000 in the year 2035.

How Much to Save for Future College Expenses?

I don’t know if I can afford to pay for all of my daughter’s college education, but I am certainly going to save early and often so that I can help her (and my wife and I) to avoid as much student loan debt as possible.

If we simply save $50/month for the next 18 years, I estimate that we’ll have roughly $23,000 to put towards my daughters education. It’s not a lot, but that is 25% of school #2…which is better than nothing!

If we can increase that to $100/month, we could expect $45,000 by the year 2035.

And if I can double that to $200/month, we could expect $90,000, which would pay all tuition and fees for school #2.