Monthly Archives: April 2017

London on a Budget

 

 

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In August, my wife and I are traveling to London for our 10th wedding anniversary.  In the past, we have avoided traveling to London because it is one of the most expensive cites in the world.  In October of 2016, as the result of the uncertainty surrounding Brexit, we were able to book a trip to London for an amazing price.  We managed to book our trip for only $2,500.  That price included airfare from New York and 7 nights at a 4-star hotel in Kensington.

The first major part of planning the trip is complete.  Now we have to work on establishing a budget.  We will have to budget for food, guided tours, as well as having money for enjoying the city.

Food:

My wife and I are foodies, so exploring the eclectic flavors that London offers is exciting.  Now we need to create a budget for our meals.  When booking the trip, we selected a hotel that included a daily breakfast.  That would save us about $140 for the week.

For lunch, we are going to budget for $30 per day.  We are just planning for sandwiches or kebabs.  We are satisfied with eating lunch at street vendors.

For dinner, we are going to budget for $40 per evening.  Our dinners will mainly consist of going out for Indian or Chinese food.  We also would like to visit a pub for a traditional British meal.  We don’t drink alcohol, so that will save us money.

We will bring our own snacks from home.  We will pack almonds, jerky, protein bars and other snacks. That will cost about $50.  While in London, we will buy fruit or beverages for our hotel room.  We will budget $50 for the snacks and drinks we buy in London.

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Guided Tours:

The next section of our budget is for guided tours.  We are planning on enjoying two full day guided tours.  A large part of our budget will be spent on these tours.

Our first tour is to Windsor, Stonehenge, and Bath.  My wife is excited to see the English countryside.  This tour will cost a total of $202.

Our second tour is an anniversary gift to my wife.  It is a one day guided tour of Paris.  It includes the Eurostar passes, Eiffel Tower, Louvre Museum, and Seine River Cruise.  This tour will cost $620.  It is pricy, but it is a special occasion.

Pocket Money:

The rest of our vacation will be spent exploring London.  We will visit all of the tourist hot spots.  I want to go to Piccadilly Circus.  My wife wants to see Big Ben.  We will also go on a bus tour of the city.  I have gone on bus tours in other cities and you do get a good feel for a city that way.  We will budget about $400 for roaming around the city.

We don’t tend to buy too many souvenirs when we travel.  We do buy street art when we find something we like.  A painting is a souvenir that lasts forever.  We will budget $300 to be safe.

Total Budget:

Our total budget adds up to about $2100.  That is most likely on the high side.  It is our 10th anniversary, so I am not going to focus too much on the budget.  This trip is just about having fun and celebrating our special occasion.   I am  happy, however, with the thought of enjoying a fun filled week in London for under $5K total.

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Saving $100,000 by age 30


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Saving my first one hundred thousand dollars was the hardest.  When I started on the road to financial independence (FI), I was only 20 years old.  I wanted financial independence and reaching my first $100K was the first goal that I set.  I was aware that it was a lofty goal, but I embraced the challenge.  I wanted to reach this milestone by age 30.  On my way to reaching this goal, here is what I did:

Work

I had to land a job and start earning money.  When I looked for a job, my options were limited.  I did not have a college degree yet.  The economy where I lived was not great.  My options were a factory job, construction, or working in the food industry.  I selected working on an assembly line in a mattress factory.  There was nothing glamorous about the job.  It paid a decent hourly wage for unskilled labor.  It was a means to an end, so I was grateful to have it.

Learning to Save

To reach my goal of building a net worth of $100K by the age of 30, I had to save.  Saving came easy to me.  I was working hard for the paycheck and did not want to waste the money.  Every month, I would put at least $500 away towards my long-term goal.  I also put additional money away for vacations, car expenses, and costs associated with college.

Investing

I had to learn how to invest the money that I was saving.  It was the year 1997.  It seemed as if growth and technology stocks were soaring to new market highs daily.  There were often commercials on television advertising new day-trading platforms.  I was fortunate to have read a few books that taught me to stay away from such speculative approaches.  I learned to invest in mutual funds that tracked indexes such as the S&P 500.

I needed to earn 8% on my investments based on my savings and time horizon.  Historically, the stock market earned 10%.  I was confident in the information that I read.  I dollar cost averaged money into my investment account every month.  I ignored the market volatility and just kept moving forward.

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Education

Getting a good college education was important to me.  I knew going to college would help me to learn skills that would put me in a better position to earn a larger salary.  College was, however, a financial challenge to manage on my path to reaching $100K by age 30.  I did not want to incur a large student loan balance.  To avoid that, I took 60 credits at the local community college.  I paid cash for those credits.  That allowed me to incur only $18K in student loans for the additional 60 credits I needed to complete my BS degree.

Conclusion

Yes, I did reach the first goal on my journey to financial independence.  By age 30, I saved almost $120K.  The only debt I had was my student loan of $18K, so that left me with a net worth of over $100K.

Looking back, I did put a great deal of pressure on myself to reach this goal because my salary never exceeded $30K per year during this period.  It was, however, worth it.  It set me up with a solid foundation to build upon towards my next goal of a $1M net worth.

Yes, my 20s were productive, but I also had a great time.  I went on nice vacations, went out with my friends, and dated the girl who later became my wife.  I would not go back and change it if I could.

 

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Meeting the Bogleheads

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In February, I attended my first Bogleheads chapter meeting.  It was a long drive.  I drove over 100 miles to the Philadelphia meeting in King of Prussia, Pa.  I have been a follower of the Bogleheads.org forum for many years and have spent countless hours reading the Bogleheads.org forum.

The Bogleheads take their name from John C. Bogle who founded Vanguard in 1975.  He created the Vanguard 500 Index Fund (VFINX).  The Vanguard 500 Index fund (VFINX) was the first index fund available to individual investors that tracks the S&P 500.  John C Bogle has also made a career of being a champion for small investors.  His approach to investing is to build a portfolio of low-cost index funds that are tax efficient and to stay the course during all market conditions.

The Bogleheads are a group of people who follow the investment teachings of John C. Bogle.  They have a forum Bogleheads.org.  They also have written The Bogleheads Guide to Investing and the Bogleheads guide to Retirement Planning.  The Bogleheads are an altruistic group.  They help others learn about investing at no cost and have donated the proceeds from their books to charity.  A person can post a question about investing, education, careers, consumer goods, as well as other topics related to personal finance on the forum.  Most questions receive many answers by highly knowledgeable and experienced investors.

I did not know what to expect since it was my first meeting.  Everyone was friendly and welcoming.  They were happy to see everyone who was in attendance.  Even though I did not know anyone, it was like a meeting with old friends.

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There were about 30 people who attended the meeting.  They said that it was one of the larger chapter meetings.  Some people were long time members.  Others were first timers, such as myself.  There were people in attendance from Philadelphia, Maryland, New Jersey, Washington D.C., and the Poconos.

It was nice to put a face to some of the avatars that are regular contributors on the forum.  It was a pleasure to meet “Lady Geek”.  If you follow the forum, you know her as the moderator who regularly monitors the posts.  She makes sure that the rules are followed.  If someone strays from following the rules, the post will be removed or the thread will be locked.  The Bogleheads forum is as close as it comes to being a perfect online community.  That is due to the hard work that the moderators put in to keeping it positive and educational.  No politics, religion, trolling, or solicitation is allowed.

The topics that were discussed over the course of two hours were:

  • Retiree Portfolio Model, a highly informative lecture on Roth conversions (think MBA level).
  • Social Security tax impact calculator, how a Roth Conversion can impact your Social Security taxes (think Ph.D. Level).
  • Asset allocation, Lady Geek gave a great lecture on asset allocation based on risk tolerance (think undergrad level for newcomers).

It was truly an intense 2-hour lecture.  It was almost information overload.  I left the meeting feeling stimulated and exhausted.  I cannot wait to attend the next meeting in May to listen to the lectures on tax loss harvesting.

The Bogleheads have chapter meetings in most major U.S. cities.  They are free to attend.  I highly recommend attending if you are into reaching FI and FIRE.  If you are interested, there is a local chapter section on the forum to find a meeting near you.  Also, if you are interested in the calculator and more detailed notes from the February 2017 meeting, they can be found under the Philadelphia chapter meeting section on the Forum.

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How I learned about money


I learned about money from my Grandmother.  I was a precocious kid.  As an only child, I spent a great amount of time with adults.  The adults in my life had the tendency to try to have dialog with me as if I too were an adult.  Friends from school would come over to my house to play quite often, but I remember spending a great amount of time with my Grandmother.

My Grandmother owned her own small business.  She was a seamstress.  She worked for a few different bridal shops.  She also worked for a men’s clothing store.  Most days, she would pick me up after school and take me to her shop.  She would watch me until my Mother would pick me up on her way home from work.

It did not take me long to catch on to the theory of commerce.  Her customers would drop off cloths to be altered.  She would make the alterations with her sewing machine.  The customers would pick up their cloths and pay her.  When I earned good grades, she would take me to KB Toys and buy me Star Wars action figures.  Even though I was only 5 or 6, I understood this process.

There were also times when I would ask her to buy me a toy and she would say that she could not afford it.  She would explain that business was slow and she did not earn much money that week.  She said that she only had money for food, gas for her car, and other needs.  She taught me at a young age that if you want money, you must work to earn it.

That was a complex theory to comprehend at such a young age.  I was only in first grade.  I do not have a psychology degree.   I can, however, see that my frugal ways and entrepreneurial spirit were shaped by her teaching me how business worked.

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The second lesson that she taught me was equally as profound.  She and I would sit together in her shop.  I would do my school work and she would be sewing.  I would spend about one hour per day with her.  We would have conversations.  She would ask what I learned at school that day?  She would tell me about her work and other stories.  She would talk about her life when she was growing up, her church, and money.

Money was her favorite topic.  She once told me that she invested in CDs that had paid out an interest rate of 13%.  She would double her money in 6 years.  She was so excited.  I am now referring to the early 1980s when inflation and interest rates were sky high.  She explained that she would let the bank borrow $1000 from her and in 6 years they would give her $2000 back.  I found that fascinating.  Now remember, I did not understand compound interest.  I was not introduced to multiplication yet.

This first blog post is a tribute to my Grandmother.  Looking back, she truly shaped my view of money.  If you want money, you must work for it.  Also, if you have money, you should invest it.

In case you might be interested, my Grandmother is still alive.  My parents take care of her now.  She is 94 and ran her business until she was in her 80s.  She had to finally give it up because her body was breaking down.  Sewing was her passion.  At the end of her career, she was just doing alternations for her neighbors.  I don’t think she even charged them.  She just liked them coming over to talk with her.

Occasionally, my Grandmother will call my wife and ask her to come over for a visit.  She wants to teach her how to use her sewing machine and pass on her legacy.  Maybe she will also share some investing tips with her too.  We have never consistently earned 13% returns on our portfolio.

How did you learn about money?

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