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Having a Plan For Your Money on a Regular Basis Virtually Guarantees That You Will Have More Money in the Future

There is a famous saying about planning attributed to Benjamin Franklin:

“If you fail to plan you plan to fail”

The same goes with money. If you don’t have a plan for your money you have great odds of “failing”. 

In this case we will define failing as “not having sufficient reserves and not increasing your financial worth to the value it could have been should you have a plan.

Some call it a budget, others call it a spending plan, today we are just going to ask you to have a plan for what you do with a portion of your money.

The Planner vs the Leftover

Over the years we have discovered, in regards to finance, there tends to be two groups of people:

  • I put investing first and I pay myself first
  • I save/invest with what’s left over when I have it

One of our goals here at Bridges Twins is to get you to be part of the group that puts yourself first. We want you to pay yourself before you pay for anything else. This will help put you ahead in the future. It may not sound exciting however we think it can be.

Today we want you to look at two individuals. 

  • Individual 1. They want to pay themselves first. They have made a commitment to their future self. They are willing to have maybe 1 or 2 less trips to Starbucks. They don’t buy the top end car but they still buy the car they want. It just may have a few less features. They don’t keep up in the latest fashions annually but enjoy having nice clothes that they can find on sale or on outlets. They don’t track every penny as they want to live. They want a better future for themselves. They participate in the retirement plan at their job however they want to have additional funds so they can either buy more real estate down the road or improve their current home.
  • Individual 2. They figure it’s all going to work out. They want to live for today. They can’t be bothered with tracking expenses even in the least. Often they are out of money with a few days left in the month. They often borrow from their emergency fund for non emergencies. They enjoy going out on a regular basis. They look at opportunities to save as beneath them. They grew up having to cut corners and vowed they wouldn’t do that when they grew up. They are willing to invest but only after they have had fun and if there is something left over.

In our example today each individual looks at their monthly expenses and decides the following:

  • Person A. They make a commitment to $175 a month. They will do this regardless of bills. They put this bill first and work around this. The bill is a non negotiable amount
  • Person B. Since they are only saving what’s left over they rarely have more than $50 left at the end of the month. They decide that $50 is all they can do and sure if they somehow get a raise or some money comes up they will invest it but won’t promise anything.

How does this play out?

In the example below they both put the funds in a low cost index fund. They estimate that future returns will be less than the S&P 500 historical average of 10% and have used a conservative 8% return.

Planner vs. Leftover

In 3 years the difference is already nearly $5K in favor of person A. Since person A has made a steady habit their advantage continues to grow over time.

Over 20 years their advantage is over $70K.

They have sacrificed very little on a monthly basis in the grand scheme of things. Over that time they only went out to eat 1 less time monthly and gave up a couple of runs to Starbucks. Over the 20 years they have reaped the rewards of a steady habit.

Person B, while they enjoyed a few more luxuries, has few options in the future.

Which future do you want? Do you want more options? Do you want to be able to make moves? Because of compounding and time small inputs today can make a very large impact on your future finances.

Twins Rules for Financial Success

As with all of our content here we want to encourage you to follow three core rules :

  • Have an Emergency Fund/Squirrel Funds
  • Invest for the Long Term
  • Invest Automatically & Consistently

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How much are you paying for your checking account?

Checking accounts have traditionally been a right of passage of growth in one’s financial future.  While most of us start with a savings account that could have been gifted to us by a god parent or parent, when you open a checking account it is usually a sign that you have grown in some aspect of financial responsibility as a checking account can be used for such glorious tasks such as depositing a paycheck or even paying bills.

Even though it may be a right of passage don’t let the traditional banking fees eat away at your best possible financial future.

Big Bank Checking Accounts

When most people think of a checking account they think of the big banks.  This is not to say that “everyone” does, it is merely to say that most think of the big 4 banks as they dominate market share (which is evaluated by value of deposits).  The big 4 banks account for 34% of the total market share with Bank of America, Chase, and Wells Fargo each holding over 10% each of market share.

With these banks leading the way domestically and having branches on what may seem like on every corner in the major metro markets, consider the following fees you could be paying with anyone of the big 4:

  • Bank of America – Checking fees can range from $0 to $25/mo.
  • Chase – Checking fees can range from $0 to $25/mo.
  • Wells Fargo – Checking fees can range from $0 to $30/mo.
  • Citibank – Checking fees can range from $0 to $30/mo for their most common checking accounts.

On an initial review you will notice that the topline fees are strikingly similar and that you have the potential to pay $0 each month as well.  As you look at this potential fee list, we invite you to check your account statement to see how much you are paying.

How can you get to $0 monthly with the Big Banks?

To help you continue growing towards your best financial future it is advantageous to minimize fees on items that are required in the modern world.  Even though you might not need “checks” a checking account is certainly a necessity and if you can pay $0 then that means you can invest that money or maybe the monthly fees pays for some of your monthly fun (i.e. without banking fees you can enjoy Netflix guilt free).

To get to $0 with the big banks usually means you will need to meet one of the following requirements:

  • Age Restriction: To attract a younger audience one of the most common methods is to offer a youth oriented account (i.e. one is generally under the age of someone who would have graduated college, around 22 or younger).  This can be a good option to get the benefits of a big bank while you are young, but consider changing banks when you graduate to avoid the monthly fees.
  • Direct Deposit: With Bank of America there is a checking account option that allows you to pay $0 monthly if you have at least one $250 direct deposit per statement cycle.  This is a great option for those that are starting out, but if you are in the entrepreneurial world you might not have a direct deposit which can be a challenge with any of the banks to avoid the minimum monthly fee.
  • Minimum Balance: The minimum balance requirements can have a wide range with such large requirements (i.e. Citibank has products that require a minimum $1,000,000 combined balances) or a bit more reasonable minimum balance requirements from BofA at $10,000 minimum balances.  Still $10,000 isn’t a small amount to keep around and if it is sitting earning .1% or even less then that might not be helping you to reach your financial goals.

Each bank has multiple checking account options and can have different ways to get to the $0 monthly fees. When you are evaluating your checking account options make sure to clearly understand how you can get to $0 to make sure it fits within your financial profile.

Look at the Fine Print

Fine print and banking? Banks are notorious for the fine print and they will have a statement of fees (sometimes called a schedule of fees).  Look at this document in detail to make sure you understand the fees that are possible. While it can seem troubling to do so, fees can eat up $100’s a year that could often be avoided. A few fees that you might want to specifically look at which are more common are:

  • Overdraft Fees: These can be $35 or more per occurrence. Ask if there is a way to connect a savings account or even a credit card in the case of a low balance scenario to avoid this fee.
  • Specialty Fees (i.e. wires): Wires can be $25+ per wire and can be used from a deposit in a real estate transaction and much more. If you need wires often find out if there is an account type which offers this for free or even a reduced cost.

Changing Times of Checking Accounts…Online Competition Can Give You the Win

While the big banks dominate branch locations Online Banks have developed powerful product offerings that help you to earn more on a monthly basis from the interest paid to having truly no fee options (not needing to worry about direct deposits or anything and pay $0 monthly). We certainly can dive into greater detail with the online bank checking account options, but as you are considering what you are paying for checking consider the following two leaders for online checking:

We started with CapitalOne many years ago when they were known as Ing Direct as they had great savings rates and they made it easy to save.  The online banks are known for powerful apps and can allow you to do the majority of your banking…with the exception of making it easy to access cash.

Access to Cash

Having access to cash is one of the biggest drawbacks of online banks. The advent of digital payment services such as Venmo, Zelle, etc. make it a bit easier to make person to person payments without cash. When the need arises for paying traditional vendors most of the online banks allow you the ability to pay with services such as Apple Pay, Google Pay or Samsung Pay.

Understanding what you are paying for your checking account is a key part of your financial future.  Whether you go with a big bank or with an online bank we invite you to keep tabs on fees to help you make the most of your hard earned money.

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What is 1 habit you could change or adapt?

Habits are a funny thing.  You can have good habits that propel you to greater health, success, happiness or you can have habits that hamper your health, cause you to struggle financially, and even contribute to depression.  As we are focused on financial wellness we thought it best to address habits that can help you achieve greater success financially. 

Now before you think that this is going to be a post about cutting coupons or eliminating your favorite coffee don’t worry.  Habits differ for each person and our objective in sharing about different habits is to give you a way of looking at your habits and adjusting them to help you enjoy the financial success you have envisioned.

Spending Oriented Habits

Spending oriented habits are those activities where you spend on a regular basis.  Now this is not to be confused with spending that is mandatory such as gas or food, this is referring to those spending activities which are optional.

Take for example one of the most common habits that has been addressed online, on podcasts, mocked on memes…the Starbucks habit.  Now the popular advice would be to simply ditch your purchases at Starbucks.  Afterall, the logic goes, if you are spending ~$2+ dollars a day, x5 times a week then you could be saving $50+ dollars a month.  Do that for an entire year and you can be $600+ in the positive…sounds great, right?

While eliminating a spending habit such as Starbucks sounds like a great way to save the reality is that you are unlikely to stick with it.  We would say that when you look at your spending oriented habits it is unrealistic to think that you are going to eliminate them entirely.  Instead of trying to eliminate the spending habit, try making an adjustment that allows you to keep up the enjoyment but realize savings.  For example if you love Starbucks consider the following adjustments:

  • Starbucks 2x a week: $2+ each visit
  • At home Keurig Starbucks 3x a week: .63-.71 a serving

While this might be a small change you can still end up realizing $10-$15 a month in savings that can contribute to your goal of finding at least $50 a month in savings.

Automated Investing to Create a Savings Habit

Starting a savings habit is one of the more difficult for those new to financial wellness to start. Of course when it comes to creating a savings habit there is nothing finer than setting up a habit that allows you to be successful…even if you forget.  If you have struggled with building up your savings then we invite you to consider setting up an automated savings plan.  If you are just getting going with automated investing the amount isn’t important, it is more important to simply start.  

For many people starting an automated investing plan seems foreign but oddly it seems perfectly normal to have Netflix, Apple Music, Disney+, etc. hit your card.  When you have the psychology that investing is a form of reward (to your future self) then it will be much easier to start and continue an automated investing plan.

Savings from Spending

Changing your habits can be a challenge and we understand that.  What if, instead of changing a spending habit, that you could save while you continue to spend?  While we certainly would recommend looking at your spending there are apps that allow you to start the journey of saving or even investing while you spend.  Consider a few of the following apps to help transform your spending habit into one that gets you closer to financial freedom.

  • Acorn – https://www.acorns.com/pricing/ – While acorn does have a checking account as an option the focus of their app is that of investment.  Instead of some applications that are free Acorn starts at $1 per month for their platform.  The unique aspect about Acorn is that it focuses on investments from your spare change which gives you a greater chance to grow as you spend.
  • Guac – https://www.guacapp.com/ – Guac is an app that gets tied to your checking account and helps you save a set percentage of your spending for specific goals.  For example you could set your savings percentage at 10% and you spend $100 then it would send $10 to your Guac account.  Being able to set a goal and a % is a great way to build up savings.
  • BofA – Keep the Change – We started with BofA prior to going to USC and have kept them to this day.  One program they have, that is tied to your Debit Card, is called Keep the Change.  The Keep the Change program rounds up to the nearest dollar on transactions from your Debit Card and puts it into your savings account.  If you are accustomed to using your debit card on a regular basis this is a great way to start building up your savings.

Whether you change your spending habit, start automated investing, or even start saving with your existing spending the key is to start.  It can be tough to start, but select a strategy that works best for you and stick with it.

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A Review of Learn to Earn by Peter Lynch and John Rothchild

With so much information available on the internet sometimes it’s hard to imagine a world before information was all at our fingertips.

We regularly read and review different finance books. Why? You can learn a ton from different finance books especially the ones written by the investing legends.

Who is Peter Lynch?

Peter Lynch is truly an investing legend. There aren’t many top 10 lists of investing legends that don’t include him in the top 10. He is mentioned in John Bogle’s little red book of investing among others.

His claim to fame? He ran the Magellan Fund at Fidelity from 1977 to 1990 and beat the S&P 11 out of 13 years. The average return was 29.2% and was for a time it was the best performing mutual fund in the world. 

If you are reading this and you were born after 1990 that’s great it’s a recent history lesson. Lynch has a net worth in excess of $300 million so you can say he is most certainly a legend.

Core Lessons from Learn to Earn

In the book which spans 263 pages or so Lynch and Rothchild outline the case for investing as well as some interesting history on capitalism. The core at all of it is that you are making choices throughout your life that affect your current and future financial situation.

You Must Make a Choice About How You Spend Money

Peter Lynch is clear in that everyone, regardless of what job you have, has a choice to make. They can buy items for today, such as a nicer car, or they can choose to invest. It is clearly written about the choice you are willing to make when it comes down to the money you make and where you want to be down the road.

Are You Willing to Learn About Companies to Select Winners

In the book they make the case that anyone can learn to read a company’s financial statement. While it doesn’t go into detail about the financial statement the book provides you enough details where you can begin to look at financial statements without all the numbers looking like they are just thrown on the page.

The finance section is’t really the main point. They really discuss that you must make a choice to want to learn about companies before you spend your hard earned dollars. If you aren’t willing to learn he is suggesting that you invest in mutual funds where they make up a group of companies. Lynch aligns with Bogle in that selecting a mutual fund that follows an index such as the S&P 500 with low fees will give you a share of the market returns.

Join an Investing Club or Support Group

We aren’t sure if investing clubs are as common as they were when Lynch and Rothchild were writing this book. They mention joining a club and then you could pool your money together with this group to buy shares in a company.

Today so many brokerages offer the ability to buy fractional shares of companies that one may not need to pool money in a group. The group aspect would be important to getting started and you have a group here at Bridges Twins and many available on social media where you can find like minded folks who want to change their financial future.

Peter Lynch’s View of Looking at the next 10 years and Companies He Picked Right Years Ago

The case is made that when you are buying a company you are buying them for what they are going to do, not what they have done. While past performance provides you some clues it’s really about where the market is going.

In the book Lynch provides cases such as the railroad boom in the United States and how everyone rushed in and many of those companies didn’t make it. If that sounds oddly familiar to the Internet boom and bust of the early 2000’s it should as it nearly mirrored the railroad boom and bust.

So Lynch outlines the case that you have to look at a company, the economy, and see how this company is going to handle the future.

One of the many companies Lynch picked correctly was Nike. It may seem strange now that Nike was a risky pick however back in the 80’s and 90’s it was not the powerhouse of a company that it is today.

The book was published in 1995, prior to Amazon and all of the big Internet stocks, and yet Lynch provides a list of companies he sees as doing well over the next decade plus that have provided astronomical returns if you had purchased stocks in these companies.

Please keep in mind it’s tempting to say “Oh I would have picked those” as we have time on our side. When Lynch picked these companies they weren’t nearly the same size as they are today.

A few companies that Lynch outlines as winners. In fact back when Lynch wrote this book the ones below were considered “small” companies and are now large companies.

  • Amgen
  • Disney
  • Home Depot
  • Microsoft
  • FedEx
  • Oracle
  • Walmart

These companies have all become core of many portfolio’s now however they were not back then.

Even a legend such as Lynch doesn’t get them all correct which shows you how hard it is. In his list of small companies he has Circuit City and Toys R Us. While those companies are no longer with us if you had owned them for 10 years you still would have made a tidy profit provided you sold. 

Another key lesson in the book is that it’s rare for a company to stay on top forever so you must always review your holdings and see if they are positioned well for the future.

Who should read this book?

For those looking to get started on their investing knowledge this is a solid book. You will discover that while the names change the strategies to select winners do not. In every stage you must be diligent in the companies you select to invest in and look at not just what they have done recently but what they will do in the next 10 years plus.

Have you read this book? Share with us your thoughts.

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Investing in the Companies that You Buy From on a Monthly, Weekly, or Daily Basis – Part 2

We continue our series where you evaluate your everyday interactions from the point of an investor. As an investor it’s important to be aware of the opportunity that surrounds you. You might be missing out on a future gold mine!

If you missed part 1 of the series you can check it out and determine if the watch you wear or the cell phone service you use are opportunities for your investing dollars.

Today we are going to evaluate an automaker and an insurance company. If you drive a car then you have insurance. In theory every driver could also be an investor in the very company that they drive daily.

Is Your Car Insurance Company An Opportunity For Your Investment Dollars

Insurance companies have long been considered a safe haven for investors. Why? They are built to handle what could be large costs for an individual yet small for a large company. When managed well these companies can provide investors with a steady dividend and security.

All insurance companies are not created equal so it’s important to dig into the financials of each company, determine where they are in the market, and if they are worthy of your investing dollars.

Today we look at Mercury General (MCY).

Mercury may not be well knowing to everyone depending on what part of the country you live in. For us here at Bridges Twins, while we don’t currently own the stock, we have been long time customers.

A few highlights of the company:1

  • The dividend yield is at 4.74% which is greater than 90% of companies in the space
  • Their operating margin is 8.02% which is better than 61% f their peers
  • Their debt to equity ratio is .2 and overall they have used debt less aggressively than 70% of their peers in growth
  • Institutional ownership is 42%

What does all of this mean? If you are looking for a company that is less aggressive with debt and conservative this just might be your jam. 

Why does institutional ownership matter? Large groups like retirement funds for workers can’t afford to take big risks. They have many people depending on them. They invest in companies that are established and have less risk. Institutional ownership, while not an exact measurement of risk, provides you insight into how large groups, who need safety, view the stock.

Should You Own Stock In the Maker of Your Car or Truck?

If you travel to work in a car or truck it’s likely a publicly traded company made that vehicle. It takes large economies of scale to produce automobiles and that tends to mean they are publicly traded.

Let’s say you drive to work in the #1 selling truck in America. That would mean you would be driving an F-series pickup from Ford (F). More than likely you are driving an F150. They sell roughly 600K+ of this truck on an annual basis.

A few neat facts about Ford before we get into some of the financials.

  • Ford was founded in 1903
  • They gained fame for creating one of the first truly affordable vehicles made on an assembly line (although Henry Ford did not invent the assembly line)
  • They have consistently made the #1 selling truck in America for years with the F150

Do these facts mean you should invest in Ford? A great history doesn’t necessarily mean the company is worthy of your hard earned investing dollars.2

  • Ford’s debt to equity is 4.75X and they have used debt more aggressive than 96% of their peers
  • Their gross margin is 5.54% which is less than 71% of their peers
  • Institutional ownership sits at 50.81%
  • Ford has suspended their dividend during the pandemic of 2020 to save cash that would be needed for operations

Lately Ford stock has seen an uptick in demand. This is related to the new Bronco and the new electric Mustang that are slated to come out in the current year.

In full disclosure Ford is a stock that we have liked here at BridgesTwins before it became popular. We had believed that it was undervalued when it was at $9 per share and when it hit a 52 week low we invested additional dollars as we felt the stock was “on sale”.

Does this mean you should invest in Ford?

This really depends on where you see Ford going in the future. They continue to focus on producing trucks and electric vehicles. We continue to see Ford with a positive view however ultimately it’s up to you!

Twins Rules for Financial Success

As with all of our content here we want to encourage you to follow three core rules :

  • Have an Emergency Fund/Squirrel Funds
  • Invest for the Long Term
  • Invest Automatically & Consistently

Information in this section from research done via etrade. We recommend all investors independently complete their own research and evaluation
2Information in the bullets comes from research on eTrade

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Investing in the Companies that You Buy From on a Monthly, Weekly, or Daily Basis

Once you start investing you start to see every transaction differently. Let’s look at a quick example. 

You might drive daily to the coffee shop to get…you guessed it a cup of coffee.

A simple act of heading to the coffee shop can involve you interacting with several publicly traded companies. Let’s outline a simple trip to the coffee shop and see how you might be interacting with publicly traded companies.

  • If you drove to the coffee shop in a Camry that’s made by Toyota (TM)
  • On your Toyota you may have been riding on a set of Goodyear tires (GT)
  • Ordering coffee from iPhone which is made by Apple
  • You ordered from Starbucks
  • Your cellular service was provided by AT&T

In the above example you have interacted with no less than 5 publicly traded companies. We didn’t even discuss the clothes you might be wearing or the insurance that covers your car. Your clothes might be made by Nike and your insurance by Mercury Insurance.

Every time you spend money with these companies you are contributing to their revenue. That revenue contributes to their bottom line which helps to drive growth so the stock price can go up.

Today our goal is we would like you to start to look at your interactions in the world from the point of an investor. Our hope is that you will look at the different industries below and you might find one that is more interesting. That interest will lead you to do some investigation and you might find a stock that you want to put your hard earned money to work.

Look at the Watch On Your Wrist, If You Wear One, and See Who Makes It

There is a chance if you wear a watch it’s made by Apple. The Apple Watch has become the number one selling watch in the world. At a record of 31 million watches sold in 2019 the volume of this wearable tech continues to climb.

Does this mean you should own Apple stock? It might. Apple is an extremely popular stock and if you own an S&P Index Fund as we have suggested in the past you will have shares of Apple as a part of that fund.

You might have an iPhone and AirPods and that would make you more heavily invested in Apple as a consumer. You might want to look at how you can own Apple Stock directly as part of your portfolio to beat the market. They have a wide variety of products, have a loyal consumer base, and continue to innovate in the market.

While Apple is the #1 selling watch company in the world there are other companies that make watches. You might be into cycling or running, like we do here, and want a watch or cycling computer built for the task. In that case you might look at Garmin (GRMN).

Garmin is a diversified technology company that many have not heard of. They make devices from smart watches to cycling computers to marine and aviation equipment. They are worth looking at in your evaluation should you desire to invest in this sector.

What Services Do You Use Daily That You Can’t Imagine Living Without

There are probably two services that most feel they can’t live without. Those would be cell and Internet services. It used to be that you had two separate companies that provided these services to you. Consolidation within the industry now allows customers to get cell and Internet from one company.

  • AT&T – A company with a long history of paying dividends and a stock price that is affordable and usually in the high $20’s to $30’s range. Dividend yield at the time of this writing is well above 6%. They aren’t just in the business of providing Internet and cell phone they are also in the content providing business with their purchase of Warner Brothers. If you like HBO that’s good because they own that as well. You get a diversified media company with AT&T.
  • Comcast – is another company. You might have their xfinity cable service however Comcast owns NBC, Xfinity, Telemundo, Dreamworks and even Universal Orlando Resort. With Comcast you are getting a provider of access to the Internet as well as content.

Twins Rules for Financial Success

As with all of our content here we want to encourage you to follow three core rules :

  • Have an Emergency Fund/Squirrel Funds
  • Invest for the Long Term
  • Invest Automatically & Consistently

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3 Steps to Opening Your First Investment Account

The Hardest Part Can be Taking the First Step

You might be the first one in your family to talk about investing. You might be the first one among your friends or co-workers who talks about finances.

We understand, we support you, and we want to help you take that first step.

The first step can be the hardest. We understand as we were there one time and it can seem daunting. Today we are going to walk you through a few steps to help you get started. Our goal is to make it as easy as possible.

Step 1 – How Much Do You Want to Start With?

Most folks start with “where should I invest?”. We want you to start with how much. We want you to start with an amount that you won’t miss. An amount that you can do on a regular basis without making dramatic changes in your life.

Why?

It’s the first step and we want to make sure you keep going. Think about if you went to the gym and in the first workout the trainer made you do 1,000 push ups, 1,000 situps, 2 hours of cardio, 2 hours of weight lifting….after you told them you hadn’t ever worked out.

You might never go back to the gym. We want to help you create a habit that lasts a lifetime.

A few starter amounts that we recommend people get started with are listed below. Could you do more?

Absolutely! 

Our only goal with the options below is to help you get started. So for the first step write down, put a note in your phone, or commit to memory a number from the list below.

  • $25
  • $50
  • $75
  • $100
  • $125

Step 2 – What is the Goal for the Money?

This is a key part of taking the first step and it can be overwhelming. One of the other ways to look at it is to say how long can I live without this money?

Let’s look at a few common goals or options for investment dollars that we have had folks ask us in the past.

  • Home Purchase
  • Investment Property Purchase
  • Retirement
  • College Savings
  • More Options in the Future

For today let’s just say you want to have more options. You aren’t sure what you would like to do with your funds, you just want to make sure that you have additional funds available.

Step 3 – Choosing a Place to Start

We hope by now you have an amount to get started with and a goal. The next step is selecting a place to get started.

This is where many individuals get hung up. There are commercials on TV, hundreds of companies running magazine ads, and don’t get us started with the 3 billion search results that show up on Google with you type “financial companies”.

For taking the first step we are going to recommend a few things:

  • You want a company that has a solid financial background
  • You want a company that has accounts that you can get open with $0 
  • You want a company that offers a broad range of services and products that you can grow with over time

A few companies that fit the bill:

  • Fidelity
  • Schwab
  • Etrade
  • TD Ameritrade

A few questions that come up when we provide this list to individuals:

  • Why don’t you list Vanguard? You guys are always talking about Vanguard! Vanguard has minimums that may not make it a great place to start. Minimums at Vanguard start at $1,000 and we want to help people get started whether they have $25, $50 a month or $1,000 to open an account.
  • Why don’t you list apps/companies like RobinHood? They are a newer company and have fewer options, today, that can allow you to grow with. We don’t have an issue with them 🙂 it’s just not on our current recommended list.

Most of all we hope you take the first step. What we promise is that once you start you will never look at money the same. You will start to look at every expense differently. You will question whether you need something now or you want to invest for the future.

Twins Rules for Financial Success

As with all of our content here we want to encourage you to follow three core rules :

  • Have an Emergency Fund/Squirrel Funds
  • Invest for the Long Term
  • Invest Automatically & Consistently

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Enjoy a Night Out and You Can Still Save

When one hears the word “discipline” it is not usually associated with “fun” or “enjoyment”.  By adding “finance” into the mix then surely that must not be fun.  Of course we all know that mastering financial discipline is a journey and not a destination.  One of the reasons that many people give up on the journey of achieving their utmost financial freedom is because they associate the success with finances as only sacrifice instead of an on-going compromise to maximize the journey.

An aspect of finances that is often a budget killer is that of going out to eat.  Especially as income increases one of the most common ways to enjoy that additional income on a regular basis is going out to eat but that can also be a sure fire way to prevent you from maximizing your best financial goals.  We aren’t going to suggest that you give up going out to eat because we feel that won’t allow you to stick with your overall budget and financial planning.  Consider the following methods to enjoy a night out and still help you to keep on track with your financial goals.

Appetizer Night

This is one that we have each enjoyed with our spouses.  When you go out with the goal of having appetizers you can bring your overall bill down dramatically and even capitalize on happy hour specials.  This method gives you the opportunity to enjoy going out and likely even try a few items on the menu that you might not otherwise (afterall you don’t have to get just a single appetizer). 

Sharing a Meal

Meal portions over the years have grown substantially.  One study on food portions done a number of years ago showed that hamburgers had increased by 23%, Mexican food increased by 27% and those were just a few of the items cited.  With portions having increased take the opportunity to share a meal with your significant other.  

By sharing a meal you get the following benefits:

  • Save some calories: Most of us are trying to save calories and splitting a main course gives an opportunity for calorie savings.  Of course in any given relationship it can be tough to agree on one meal so you might need to offer up that one person gets to pick one time and the other person gets to pick the next time.
  • Save on expense: This is certainly the biggest financial aspect as instead of 2 meals at $16-$20 a piece you only are purchasing one and that adds up if you go out to eat 3-4 times a month.

Coupons…Yes Coupons

For many, using a coupon isn’t difficult. We aren’t sure why but as we have discussed finances with people we have found that, in particular as income increases, there is a lack of desire for coupons. The reality is that company’s wouldn’t create coupons if they didn’t want you to use them.

Now you likely won’t get a coupon to your fine dining locations such as Ruth’s Chris; however, you will find that coupons are readily available to great locations such as Buffalo Wild Wings, Rubios, TGI Friday’s and much more. Whether you save the coupons that often get mailed to your house or you hunt on the internet, taking a little bit of time to find coupons can have you enjoying a great night out for much less than you’d expect.

To keep moving forward on your financial goals we encourage you to keep up habits such as going out…we think making a small adjustment in how you do that though will have you reaching your goals and still enjoying the process.

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Book Review: The Little Book of Common Sense Investing

Looking for more investing knowledge? Do a search for “best investing books” on Google and one of the books you are likely to see is The Little Book of Common Sense Investing.

The quote on the cover is from legendary investor Warren Buffet. The author, John C Bogle, is an investing legend himself.

Just because someone is a legendary investor doesn’t make them a great author. In Bogle’s case this book is amazing. 

In our book review series our goal is to give you highlights of the book. We will provide you with a little bit about the author, lessons from the book as well as reasons to read it if you so choose.

Who is John C Bogle?

John C Bogle invented the Index Mutual Fund. He set out to create a way for investors to get their fair share of market returns.

He founded Vanguard in 1974. It is the largest issuer of mutual funds in the world and the second largest issuer of ETF’s according to investopedia. They are continually focused on delivering low cost mutual funds. Many of their mutual funds charge 94% less than the rest of the industry and some are the lowest in the industry.

The company he built and led from 1974 to 1996 was built on putting investors first. It is a company that is owned by the investors. Along the way he also wrote 10+ books and has been praised by such investing legends as Warren Buffet for his strategies.

Core Lessons from The Little Book of Common Sense Investing

This book, while it has Little in the title, packs a ton of information. Mr. Bogle lays out the case how investors are not getting their fair share of the market. He outlines how costs need to be watched. Bogle details how the majority will not beat the market so it’s better to get your maximum share of the market gains. 

Let’s dig deeper into a few core lessons from the book.

Costs Matter…More Than Many Investors Care to Admit

Costs are how mutual fund companies make money. It affects the investors return. Bogle is clear in that he believes investors should look after themselves. 

Bogle uses the example for both active and passive index funds. Active funds are where a manager tries to beat the market. Passive funds follow the market with little manager involvement.

Comparing passive or index funds where one fund charges .03% and the other charges .44% is a .41% difference in favor of the mutual fund company. While this may seem like a small amount of money it adds up over time. Bogle has charts, graphs, and data to show that the smart investor is giving up money for no reason.

You will learn to look at what your mutual fund company is charging you and to make sure that you know what you are paying and why.

Reversion to the Mean…Understanding this is Key to Fund Selection

This was a new concept that we hadn’t learned before. It’s always nice to learn something new. Reversion to the mean is the theory, which Bogle proves in the book, that mutual funds will eventually go back toward the mean.  In this case the mean is the average of the S&P 500 average as a whole.

Trying to outsmart the market is difficult. As Bogle points out very few have done it for a consistent period of time. Even the legendary Warren Buffet, often quoted in the book, has said after his passing he wants the majority of his wife’s estate put in an index fund.

Simply put many managers are beneficiaries of good timing, luck, and the cost for their services don’t pay out in the long term.

Taxes Matter & They Need to Be Minimized

I don’t think I have ever heard anyone seriously state “I want to pay more taxes!”. Bogle is quick to point out that actively managed funds, as a result of strategy, can increase the taxes owed to an investor. As a result this needs to be calculated prior to making an investment decision.

Start Early, Be Consistent, & Don’t Stop

It’s often been said that retiring with a large nest egg is simple, however not easy. Bogle makes the case that the best investors should start early and consistently invest. Selecting a low cost market index fund and a low cost bond fund is a simple yet proven strategy.

Don’t Buy the Mutual Fund Industry Hype

Bogle is very practical. He outlines a fund created in the .com hype of 2000 that was created by Merrill Lynch. It raised just over $1.1 billion dollars. Unfortunately less than two year later investors had lost 71.6% of their money.

History can repeat itself if you fail to study. As Bogle points out, an investor who had kept their money in a S&P Index fund would not have suffered the same fate. 

Who should read this book?

This book is a great read for the investor who isn’t sure if mutual funds should be a part of their portfolio. If you were on the fence of whether you should invest in mutual funds this book will have you chanting…low fees…low fees…low fees. 

You may also come away from reading this book that a S&P Index Fund or a Total market fund should be the core of your portfolio. It’s something we believe here at Bridges Twins and we hope you will adopt it as well. Your future self will thank you.

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What is Your Finance Mindset?

Understanding Your Financial Mindset Can Help You to Achieve New Levels of Growth

When it comes to achieving one’s goals in investing we have found that people can get trapped with common roadblocks.  In fact, over the years we have found there are a myriad of reasons why people either:

  1. Don’t invest
  2. Invest only minimally
  3. Don’t stick with their investment plan

While the individual answers on why someone lands in one of the above three tend to vary we have found there are common themes that keep people trapped into one of the above scenarios.  Especially if you have never tried investing, it is essential to understand your financial mindset to help you achieve long-term success.

Those Who Don’t Invest

Not investing is the hardest hurdle to overcome…because you haven’t started!  And sadly, no a savings account isn’t investing.  We of course are not putting down a savings account, we are big believers in having a traditional savings account; however, with the interest rates that are paid by traditional banks (or even online banks) they aren’t really investments.  Savings accounts are merely ways to keep money on hand in case of an emergency, but we won’t digress.  Those who don’t divest generally identify in one of the following areas:

Investing is a Punishment

Investing, for many, isn’t viewed as fun.  If something isn’t fun then it probably isn’t good…right?  We can’t tell you exactly why many look at investing as punishment, but we tend to think it comes from early childhood where people are told “put some away for a rainy day”.  A rainy day isn’t looked at fondly and if you are only saving/investing for a rainy day then you won’t stick with it for long as you will feel you would no day could be quite that rainy.

Scared of Losing Money

More often than not people who don’t invest in the markets (stocks, mutual funds, alternative investments, etc.) are scared of losing their capital investment.  This is a natural fear and one that is more understandable because it can often take quite some time to save up enough for that first investment…and you don’t want to think of that $3,000 going to $0!  To help you overcome this fear we invite you to consider the following:

  • When you go on vacation and spend $3,000, do you get a monetary return on that investment?
  • If you invested in a Vanguard Fund or major stock (i.e. MSFT, WMT, etc.) what are the odds it would actually go to $0 / per share?

Of course vacations don’t give you a monetary return, but somehow everyone is ok with that “investment” because you can have some fun.  If you can think of investing as fun then it will be easy to get started.  In regards to a major cap stock going to $0 or a Vanguard fund doing the same, you have better odds of getting struck by lightning.  Most of the fears around not investing aren’t well founded and the adage of “scared money never made money” certainly holds true…you just need to jump in and start.

Investing Only Minimally

Investing is very similar to working out…the more you put in the more you get out. When we have spoken to those who want to grow their financial futures and we look at their overall budgets we have found that those who invest minimally fall into one of two common categories of investing.

Thinking of Your Investments as Bill

When you invest minimally the thought process is that the investment is a bill. It is understood that it is something one “should do” but just like not wanting to pay too much for electricity they tend to do just enough to be in the market, but not necessarily enough (as a % of their net income) to experience real growth. Bills, for the most part, aren’t a positive outlook on investing and we would challenge you to avoid thinking of investing as a bill, but rather as an opportunity for a different life/lifestyle or even something that can provide a different opportunity for generations to come.

Goals aren’t big enough

Goal setting for finances are great; however, if your goals aren’t big enough then your investing strategy will only rise to the minimal goal level. For example if you wanted to invest in the market to save for a down payment on a car and your down payment goal was $5,000 but you gave yourself 5 years to achieve that goal then your monthly commitment would be $83.33 a month…and that is without any potential gain in the value of your investment. Setting practical and achievable goals is great; however, if the goal isn’t big enough then you might divert funds into more wasteful activities which could impact your longer term ability for greater financial freedom.

Take the time to really evaluate your goals, make sure they are big enough…to the point where you might not even be sure you can achieve them in a given time period as that will help you to evaluate investments that will really help you to your goal vs. having to do it all on your own through pure savings.

Don’t stick with their investment plan

Investing for greater financial freedom truly takes sticking to a plan, just like a diet or an exercise regimen. For over 8 years Joe and I have had an annual goal of “3,000 miles”. This goal is our annual accountability of running/cycling/swimming at least 3,000 miles in a calendar year and we have a tracking sheet that we fill out daily/weekly/monthly to see how we are progressing on our annual goal. Some years we have barely made it (it still counts when you are riding on December 31) and other years we have missed (broke my collarbone one year which really hampered the miles). While that example is related to working out we have found the themes of sticking with an investment plan are strikingly similar.

Lack of Accountability

Accountability in sticking with an investment plan is a tough one for many because people find it difficult to talk about finances (that’s one of the reasons we started this podcast!). People don’t want to talk about money with their peers and may not feel ready for a financial planner but that doesn’t mean you have to give up on accountability all together. Accountability can be gained through creating a report and talking about your progress with your parents or even a successful relative. Share with them that you have the goal of greater financial freedom and most will be more than happy to look over your investments on a quarterly or annual basis to become a sounding board. And if you can’t find someone you are comfortable with that you know you can always share your goals with Joe and I as we have been through ups and downs and can help provide guidance and thoughts as you progress on your financial journey

Investments are No Longer “Fun”

The same mindset that grenades fitness progress is one that can deter financial progress as well. Investing money each month in mutual funds and stocks can often get mundane (even when you are making money) and when you lose enthusiasm then you might deter funds away to items that won’t help you achieve true financial freedom. If your current investment plan isn’t “fun” anymore we would challenge you to try an alternative investment as that can be an exciting way to try something entirely new and keep your finances headed in the right direction.

No matter where you fall in the financial mindset model the key part is to truly be honest with yourself.  Ask yourself if you truly are investing as much as you can for your bigger goals…look at your goals and make sure they are big enough too!  As twins we get lucky enough to bounce our ideas off of each other and if you are listening/reading to us then we would be happy to hear where you feel you are in your financial mindset to help you continue your growth.