Friday, January 23, 2015

FIRE Hybrid Model



Here is a rough framework for how I plan on funding my early retirement.




In December I posted my 2015 goals and two of them are to create a hybrid retirement strategy and another (exponentially more difficult) is to start using the HTML button and improve my blogging skills.

As you may have noticed, I have been working on both of these goals.

I must admit I have even impressed myself with this chart shown above. I successfully jumped back and forth between the Compose and HTML buttons. I then proceeded to make surgical-like adjustements to both widths and heights within the string of code.

Then I successful managed to insert a (br /)command so I can start typing below the spreadsheet.  As I typed this last sentenced I just realized that you don't want to be in the HTML mode as you type that break command or you will actually create a break. Duh.

Who says you can't teach an old dog new tricks?

Hell I may just start hanging out in the HTML during all my posts. It's kind of cool in there....NOT!!

Ok so maybe I won't be getting a job as a programmer at Google anytime soon, but slow and I mean REALLY slow and steady progress is fine with me.


Anyway here are some of the assumptions that I have made to reach FI at age 47.

  • First and most difficult is that I maintain a very high paying job during the next four years.
  • Raise my yearly dividend by $2500 a year for the next for years. (With a cleaner portfolio)
  • Accumulate $320,000 in savings outside my taxable portfolio. (This will be a MFer)
  • I assumed an average of 2.5% interest rate over time on my savings. If it is less, that OK too
  • Dividend growth rate of 3% (Conservative because I have bonds also)
  • Begin accessing 401k using equal installment payments (72-t) at age 50.
  • Delay social security until age 70 (if it still exists that is)
  • I have also a assumed a 2% increase in SS. It certainly could be more or less.
  • While I will only have 25 years in the work force I will have maxed the payroll tax contributions in half of those years so I feel comfortable at $1500/month at age 70.

Don't worry about the mule being blind, just load the wagon.

There are so many moving parts within this plan that it is most certainly will be altered a bit each year. In fact, I feel like Christopher Columbus when he first started his journey from Spain to America. Should he pack sandles and sun tan lotion or a heavy wool coat. I think that I have done a good job packing for all weather conditions with this model.

The one thing I do know is that I am heading west and if I have sunny weather and a nice strong breeze behind my sails that would be wonderful. If the waves are rocky and I have to use the oars during the entire trip, then fair enough. I am certainly no stranger to putting oars in the water and struggling against fierce opposition to reach my goals. Hell sometimes  a  few people have to be thrown overboard to lighten the vessel (I am referring to future expenses here, not real people).

Now that I have my FI voyage mapped out, I am excited and eager to continue on my journey.


Where are the life rafts on the cruise ship?


If you have ever been on a cruise ship, you know that there is an emergency training exercise which requires the passengers to head towards their designated life boats in the event of an emergency. When I get on the cruise ship I am all over this process. While my wife is trying to nap or worse find ways to spend money on things like massages, overpriced excursions, and on board souvenirs, etc. I am planning worst case scenarios knowing full well they won't ever happen. That's why she is probably napping? Oh well, what can I say....I am a pragmatist.

Hope for the best and plan for the worst is my motto.

Even the best laid plans don't always go according to plans. Like I mentioned above there are a lot of unknowns that can and most likely change things over the coming years. But then again, life is full of unknown pitfalls and opportunities and I will certainly embrace either as they present themselves to me.

The biggest potential problem would be a rapid job loss. This could result from dissatisfaction with my job performance, the company being sold, a dramatic change in economic conditions, etc. These are all real possibilites and would cause me to  quickly change course with my FI plans. Health conditions are certainly another factor. I could also simply choose to not continue with a 6 day a week, 10-12 hour daily schedule. In fact this is probably more likely than the first set of problems I mentioned.

Other jobs and side hustles could fill the void that would be created in the "Cash Withdrawal" column. There are a lot of opportunities to bridge the divide between income and expenses and I am not overly worried about this problem.


Living like a third world refugee is absolutely not in my FI plans


I will NOT retire eating Ramen noodles, canceling my cable, keeping the heater at 60 in the winter, living without AC in the summer, spending hours cutting coupons, playing board games at home for entertainment, wearing 30 year old suits, mending socks with holes in them, etc.....but I would without a doubt and with zero hesitation do exactly these things which I would HATE and much more dramatic things if necessary.....ALL HELL would have to break loose though.

Enough with the gloom and doom talk. FI is awesome concept, but living on $1500 a month for the next 40 years is not what I considering living the American Dream. It wasn't 20 years ago when I was 23 years old starting out in life, it isn't at 43, and it damn sure won't be when I am 63.

And yes I realize that working 60-70 hours a week is equally shitty and I will not continue down the fucked up path much longer. I just need to find a healthy balance between these two extremes

If I have offended anyone, it was not my intention. I do realize that we all have different wants and needs and that some of my career decisions seem without a doubt seem equally idiotic.

I just hate seeing potential wasted as it can result in regrets later on in life.


Isn't this a dividend FI blog???

As a side note, I truly would have liked to create a dividend only retirement plan, however I just don't have the time to build that large of a portfolio and I believe that it would be too inefficient for me.

Waiting another 10 years so I can have a $1,200,000 portfolio creating $40,000 a year sounds great in theory but is not practical in my view. I know I know....I may be forced to turn in my Dividend Communtiy Member badge. I really like it though.

Dividends will still be large part of my overall strategy, although I just don't see the benefit in having a 1.2 million dollar portfolio at 53, a 2.5 million dollar portolio at 63, and 5 million at age 73. This would be overkill in my opinion and a lot of the capital would end up unused or underused.

I also like the idea of my retirement airliner have four separate and independent engines rather than one engine that could malfunction or worse just stop. The cash withdrawal and 401k withdrawal components provide the shock absorbers that hopefully will allow me to sleep well each night.

Also the idea of having dividends, cash, and a small withdrawal program from my 401k seems to be a safe, balanced approach that will give me freedom sooner rather than later.

At this point I am open to all POSITVE FEEDBACK, suggestions, comments, questions, compliments, complaints, hostile discourse, and most importantly encouraging words.......and did I mention POSITIVE FEEDBACK?

MDP

CORRECTION

I just noticed that I show $10k a year taken out of my 401k after the age of 70. It will obviously be much higher than that as my current balance is $244k and the IRS requires a withdrawal per year based on life expectency. I obviously don't know what the balance will be 27 years from now or what the laws will be, but I should definitely increase that yearly number.


Wednesday, January 21, 2015

KMI raises dividend --- New yield is 4.29%


Today Kinder Morgan announced that it is raising its quarterly dividend to $.45 which is up from $.44 last quarter. It also represents a 9.76% increase from the year ago dividend of $.41.

The ex-dividend date is Jan 29th and the pay date is Feb 17th.

Since I own 233.76 shares, my yearly dividends will increase $9.35 if there are no more increases during the next year.

Tuesday, January 20, 2015

Weekly Sharebuilder Purchases


Here are my automatic investments for this week.

  • GE:  10.28 shares @ $23.63 --- Yield  3.89%
  • MCD:  2.75 shares @ $90.90 --- Yield  3.74%
  • CAT:  2.99 shares @ $83.51 --- Yield  3.35%  (initial position)

Total capital invested is $750 ($250 in each company). The combined yield on these purchase is 3.66% and will add $27.45 to my year dividends.

This is the first week in what seems like forever that I did not add to my energy positions. I still believe that there is tremendous opportunity within the energy sector, but my portfolio is becoming a bit tilted so I decided to take advantage of some weakness in other sectors.

Companies that I will be watching closely include the three listed above as well as JNJ, UL, TD, JPM, CVX, PM, T, XOM, and RDS-b.


Tuesday, January 13, 2015

Weekly Sharebuilder Purchases



Here are my automatic investments for this week.

  • RDS-b: 3.09 shares @ $64.79 --- Yield  5.80%
  • GE:  8.29 shares @ $24.12 --- Yield  3.81%
  • IBM: 1.25 shares @ $159.47 --- Yield  2.76%

Total capital invested is $600 ($200 in each company). The combined yield on these purchases is 4.12% and this will add $24.74 to my yearly dividends.

Originally I was going to only add to my energy holdings, but I decided to add to GE and IBM on recent weakness.

Stocks on my radar for next week: Honestly I have no idea right now. Some days I think about just buying T, PG, KO, XOM, and JNJ and not making a change for the entire year. Recently I may be over-analyzing things a bit and maybe just adding to these five companies indefinitely would be the best idea.

Another idea I had was to just add to the small dogs periodically. This strategy typically finds undervalued companies with excellent starting yields. Unfortunately the telecoms (T, VZ) usually comprise one or two slots. Last year the members included T,  INTC, GE, CSCO, and PFE.

In 2014 I added a lot of capital early last year using this strategy and the results were very impressive. The only downside is that I have fairly large positions in most of these companies. I should also note that all five companies raised their dividends during the year.

If all else fails, I can always get the dart board out of the attic.

Monday, January 12, 2015

Stock Purchase: TD



Today I initiated a position in Toronto-Dominion (TD).

  • TD:  110 shares @ 43.36 --- Yield  3.74% (initial position)

Total capital invested is $4779.60 and this will increase my yearly dividends by $178.20.

This investment is slightly off the beaten path for me as I really don't like the banking sector. While TD has fallen quite a bit over the past six months, its PE ratio is still around 12. Buying shares of bank with a PE over 10 is a bit dangerous in my opinion, however I tend to stay away from safe investments as is evidenced by my recent buying spree in the energy sector.

I really wanted to take a 3 month break from heavy investments, but I have found myself with my finger on the trigger over the past week. GE looks pretty good here in the $23 range. GE already is one of my largest positions so I opted to diversify with this block purchase.

Energy companies continue to dominate the headlines and I will certainly be adding to my positions tomorrow.

Friday, January 9, 2015

MDP turns 1



I can't believe a few days ago this blog had a birthday.  It is amazing how fast time flies and it is even more amazing to me that I am still making weekly entries. I will continue to do this as it has become very enjoyable for me.

For someone that has never kept any type of journal or diary, I must say that I never knew what I was missing. This has been a pretty cool experience and more importantly my interest in investing, passive income, and financial independence has only increased during the past year.

The public record of my investing ideas and monthly results has certainly increased my focus on accountability, but more important following along the journeys of many other like-minded individuals has reassured me that my FI plans are not unrealistic or INSANE!

While I may not have ever kept a journal per se, I have tracked my monthly net worth for over ten years now. This act alone, much like writing and setting goals, dramatically reinforced my commitment to making sound financial decisions (paying off debt, saving, keeping expenses low, etc).


Casting pearls before swine

As I have mentioned before, I have a pretty f*cked up work/life balance so I literally spend more time with my "work friends" than I do with my family and friends. While there is a relatively high overall turnover rate at work, there are about six people that I have worked with for over fifteen years and around another ten or so that I have worked with over ten years. I have been trying to get them to see the benefits of long term wealth management for years with no results.

Many of these individuals make a lot of money ($150k+) and yet have little or no net worth. Boom and Bust cycles are just a normal part of life to them and nothing ever changes. The funny thing is many of them come to me looking for investing advice, but what they really are looking for is a Lotto Ticket. When I try to explain to them how real wealth is created, they typically lose interest and go back to searching for deals on the internet. A few days later I see them looking for an advance on their commissions. It can be crazy sometimes.

Here is an just one example of my frustration. In May of 2009 I hired a young college grad who wanted to start a career in sales. Obviously things were slow and I explained to him that I really didn't need any extra help, but he practically begged me for the job, so I thought "What the hell...why not give him a shot."

For the first six months he constantly screwed up simple tasks, pissed off customers, and was on the chopping block every month. He reminded me of  Tommy Boy trying to make sales. I kept thinking I cannot believe a college grad is this incompetent and is working essentially for minimum wage. Finally I told him that he needed to get his shit together and to start competing with the other salespeople otherwise he could take his sorry ass and his resume to Taco Bell. I know that is a bit harsh, but I needed for the kid to get better for his sake and mine. I really do hate wasted potential.

Anyway, he took the conversation to heart and took drastic action. This meant outworking others, using his "spare time" developing his skills, making sacrifices that many refuse to make even during the hardest of times. Little by little he started improving and evenually he became one of my top salespeople. In 2011, 2012, and 2013 he finished number two in the company in total sales. This year he was Salesmen of the Year. I couldn't be more proud of his professional development and he will no doubt have a bright future.................BUT

I said this was just one example of my frustration. In early 2012 after he had made $80k....again in 2009 he was making just above minimum wage. Since I personally took an interest in this kid and felt responsible for his continued development I thought I would give him the advice I ignored when I was his age. He was 25 at the time.

I took the time to create an Excel spreadsheet which showed him how investing 3k a month for around 5 years could make him financially independent by the time he hit his mid 40s. He paid me lip service and proceeded to buy a $35k Cadillac. I asked him about the Excel spreadsheet that I had given him earlier in the month. He mumbled something about the Cadillac being the nicest car his family had ever seen. He will learn that life's lessons can be hard.

I congratulated him on a fine looking car and then explained to him the same $35k invested conservatively would become $70k in ten years. The Cadillac's value, on the other hand, mostly likely would dimish to $3k. Then I explained that if he makes too many other "investments" like the Caddy he will have a very difficult time trying to recover later on.

He then proceeded to explain to me that he wouldn't keep the car that long and besides he didn't pay $35k cash, he kept his money and financed it. I raised the white flag of surrender at this point and decided I would not let the impulsive, foolish decisions of others ruin my mood anymore. I also decided that some my plans for the future would remain in stealth mode.

After a while my passion for investing and FI only increased, only I really didn't have anyone to share my ideas with since I was on an island so to speak. Around 2013 I started doing some investment research on the internet and eventually stumbled upon many FI and investing blogs that were amazing. I never dreamed people blogged about this stuff. The stories I was reading were so amazing and different than anything else out there.

Yahoo and MSN broadcasted 10% saving rates and work extra years so you can get the higher SS rates when you retire. I was already living in a paid off house and saving 60% of my take home pay and thought the "expert advice" was more suitable for the working zombies.

Anyway as I started reading more and more blogs, I thought "These are my People!!!"

I can't remember whose blog it was that I was reading, but the author encouraged his readers to do something bold and start your own blog. My original thought was "Well that is some of the stupidest shit I have ever read. What kind of loser would do something like that?"


Jan 4, 2014.....Blog entry #1

After creating my blogger account, I was ready to go. As I have mentioned on a few occasion, my IT skills suck so I decided to keep things simple....I mean Really simple.

I am always telling my sales staff to constantly be filling their pipelines with prospects to ensure success, so that is where I came up with the name "My Dividend Pipeline"

Next I found the most desolate looking, Mad Max, post apocalyptic, landscape I could find and then Voila we have ourselves a blog!

After a couple of weeks I noticed many other blogs had their posts enclosed with a pretty border. I watched numerous Youtube videos and made several google searches in order to enclose my posts. For some reason the first code created squared borders that would turn red whenever I hovered over  the posts with a mouse. This looked ridiculous and besides I wanted rounded borders like many of you have.

A few days later I randomly found another string of code that created rounded borders and didn't change colors like a Christmas tree. This worked very well until a month ago.

Eventually I decided to enable the Adsense feature. That was back on December 20 and after a painful amount of tinkering, I actually got it working. Most days I earn between $.40 and $.60, but I also have earned as little as $.02 and as much as $3.00 in one day. That was so cool.

I must apologize for the ads being weird shapes and sizes and in some cases not fitting properly. I will not make any more adjustments simply because it is working and I don't want to screw it up.

Successfully activating Adsense gave me new found confidence that unfortunately would fade quickly.

Next, I decided to add a "Continue Reading" to my posts and somehow managed to wipe out all of my borders. On top of that, I still do not have a "Continue Reading" command. After hours of trying to restore my borders, my blog remains borderless. I can't begin to explain how frustrating this sort of stuff continues to be.

While I stated that one of my 2015 goals is to improve my blog, the HTML button is not my friend and never will be. In fact I hate that f*cking button. I feel like a 7 year old who is sitting inside the cockpit of a 747 trying to land smoothly. It is never going to happen, and I have accepted it.

Now that I have manage to successfully drift all over the place with this post, I feel better now and should stop while I am behind . This has been a great experience and I have no regrets. I really am looking for to Year #2 and beyond!

MDP

Tuesday, January 6, 2015

Weekly Sharebuilder Purchases




Sometimes it takes a WOLF to see if you have built a strong house.


It will be interesting to see how some of the energy companies out there hold up to extreme pressure. I feel like the three I purchased today have brick-like characteristics. We shall see.

  • BBL:  6.15 shares @ $40.66 --- Yield  6.10%
  • RDS-B:  3.84 shares @ $65.10 --- Yield  5.78% 
  • CVX:  2.32 shares @ $107.78 --- Yield  3.97%

Total capital invested is $750 ($250 in each company).  The combined yield on these purchases is 5.28% and will add $39.62 to my yearly dividends.

Falling oil prices continue to be story as it has been for the past several months. If there is ever a time to focus on my energy position it is now. I have no idea if a bottom is forming, but I will continue to average down my energy positions. Exxon continues to be the most resilient of the group and I would love to buy more shares, but I will be patient.

As I look at my portfolio, it is amazing to see how relentless and ferocious the storm has been. Many of my energy and oil positions are hovering at 25-35% unrealized losses. To many people it may seem a bit silly to receive a 4-5% dividend when it realistically could take many years to get back to even. That is not what long term investing is about and many people are running for the hills with a lot of blood trailing behind them. I will stay the course even though it is a bit scary right now.

What helps me sleep at night and continue forging ahead building my energy positions is the knowledge this is a long term process and I will not get overly frustrated during downturns or overly exuberant during massive upswings.

If suddenly P&G, Clorox, Pepsi, or JNJ were trading in the 50s, I would without any emotion or hesitation change course and start buying those companies. If only that would happen....:-)

I feel very confident that someday I will look back on these months and say to myself..."Why weren't you more aggressive during this period? Energy was a no brainer."

Stocks on my radar for next week are UL, TD, RDS-b, CVX, T, VZ, PM, CAT, and CVX.