One Year Into Robinhood

I’ve posted before about Robinhood, a free investment platform that I started using a year ago, but I thought I would post about it again for two reasons:

  1. Apparently Joe H decided to join Robinhood and it looks like he used an old invite link  that I had posted, so I received a free stock. I received one share of Under Armor. This is by far my highest price free share yet (UAA closed Friday at $21.36, where as my previous highest value free share was about $4). Thanks Joe! I hope you got a nice share like my brother did Рhe received a free share of Apple.
  2. I’ve been investing speculatively through Robinhood for a year now so I could judge how I have done.

As you can see from the graphic attached to the post my return for the year was 13.75%, whereas the S&P 500 for the same dates brought a return of 10.783%. Thus I beat the S&P by 2.967%. Of course, that is counting my free shares for referring people to Robinhood, and the S&P doesn’t get those, so I probably lost to the S&P.

Maybe it is a good thing that I don’t handle anyone else’s retirement. ūüôā BTW if you want to try Robinhood and want a free stock use this link¬† http://share.robinhood.com/robertt429. I’ve had a blast doing a small amount of speculative investing through Robinhood.

Retirement Thoughts

Over the past two days I have had 4 separate conversations with 4 different people/couples concerning finances. Therefore, I thought I would post a few of my thoughts concerning financial planning and preparing for retirement. Please remember that I am neither a personal finance planner, nor the child of a personal finance planner so you should takes these thoughts as what they are – the ravings of a minister who thinks he is a fan of personal finance information but is probably off his block.

The Bible & Retirement

So first let’s talk about the Bible and retirement planning. I’ve heard some believers in Jesus say that you shouldn’t plan for retirement because retirement is an unbiblical concept. I’m going to disagree with part of this belief. I do agree that the idea of retirement as luxury and self-interest is unbiblical. We were created with work as a part of who we are –¬†¬†“The Lord God took the man and put him in the Garden of Eden to work it and take care of it” (Genesis 2:15). I don’t see anything in scripture indicating that we will ever reach a point in our lives where we will live out the cultural fantasy of just sitting our drinking mai tai’s on a eternal vacation just focused on ourselves. Of course, that doesn’t mean that the amount and nature of work can’t change as we get older. Retirement can mean that you have planned in such a manner that you no longer have to work just to make ends meet. This frees one up to volunteer and work jobs that benefit our communities. Most of the retirees I know aren’t retired in the mai tai selfishness manner, but instead in the “I am free to volunteer” manner and the community I live is better because of them. Some of the busiest people I know are retirees who live our the “I am free to volunteer” mindset.

I’ve also heard a few people use the parable of the rich fool (Luke 12:13-21) to say that a Christian shouldn’t save for retirement. After all the passage ends with Jesus stating “This is how it will be with whoever stores up things for themselves but is not rich toward God.” But this sentence isn’t an either/or statement and this parable isn’t telling us not to save. This parable isn’t about retirement planning. Retirement planning in Ancient Near Eastern Hebrew life was focused on land and family. The rich fool already had barns in which to store, presumably, enough grain for him to live. He had what would be necessary to take care of himself,¬† but he wanted bigger barns for more grain. He wanted to have enough to do nothing but “take life easy; eat, drink and be merry.” This parable isn’t about retirement planning. It is about greed.

At least that is what Jesus tells us, at the very beginning of the passage, the parable is warning us against, “Be on your guard against all kinds of greed; life does not consist in an abundance of possessions.” Planning for our future isn’t a lack of trust in God, but we have to watch out for saving in such a manner that our trust is actually in our “abundance of possessions” rather than in Jesus. We must focus on being “rich toward God” while we are still planning for a future without as much income for support.

My Advice – Start Early

So let’s talk practicals, and my first practical bit of advice is to start EARLY. Time is your friend when it comes to investing for retirement. The earlier you start the better. For the first 5 years that Pam and I were married one of us was in school. This meant that one of was earning the income for the family and paying for the other person’s schooling. These were very lean times for us. After those first 5 years we were both out of school, but it was important to us that one of us was home with Adam (and then Noah), so we maintained a single income. The thing was that now that single income was supporting a family of four.¬† Once again lean times.

Still we contributed to our retirement plans. There wasn’t much left for us to contribute after giving to God’s work and expenses, but we still managed to put a little bit each month into our retirement. Time has been our friend. Our small contributions from those lean times have thus far grown 4 to 5 times the value of our contributions.

Time is on your side so start early. If you are 18 years old or older and earn income you can setup a Roth IRA. The beauty of a Roth IRA, beside tax free withdrawals when you retire, is that the funds you contribute to your Roth can be withdrawn in case of an emergency after 5 years. This is just for the funds you contribute, not the earnings. Thus a Roth can also count as an extended emergency fund. That’s an additional benefit, and everyone needs an emergency fund (I would encourage you to have a real emergency fund that isn’t your Roth and only use your Roth is things every get REALLY desperate).

I’m hitting hard on starting early because I deal with a number of young people through Tapestry and chaplaining. Please start early. I believe the disciplines of giving money to God’s work (we usually call this “tithing”), charitable giving, and saving for retirement are not only helpful in the long run, but they also help to develop a mindset concerning money that helps a person to control their finances rather than being controlled by their finances.

My Advice – Get Your Match

My second bit of advice is to not give up free money. If you work for a company that matches part of you income that you put towards retirement then you should put in at least what is necessary to get that match. For example, the company that I chaplain through, Corporate Chaplains of America, and the denominational state convention of which Tapestry is a part, the Minnesota-Wisconsin Baptist Convention, both match part of my contributions to Guidestone. There are other companies whose funds outperform the funds that I am able to get through Guidestone and other companies whose fees are less expensive than Guidestone, but not many that outperform my funds in Guidestone when you add the matching to my performance. Employer matching is free money and it takes a really terrible investment fund for it not to be worth at least putting the minimum in to get the matching.

Now this doesn’t mean I believe you should put all your money into the employer funds from which you get matching. Put what you need to get the matching and then consider other funds whose expenses are less and/or whose funds perform better. Even better, if you are at a point when you need it (remember we are not to trust in and develop an “abundance of possessions”) max out your company 401k (403b in my case), where you hopefully get matching, and max out a Roth IRA at a low cost high performing fund group (My personal recommendation is Vanguard or Fidelity)

My Advice – Go Low Cost

Many people will tell you that they can manage your money better than the market, and they will charge handsomely you for the privilege of letting them do so. Warren Buffet, who knows a thing or two about investing, doesn’t subscribe to that belief. His recommendation is that we buy low cost index funds.¬† He just won a bet, and gave it to charity, proving his thought that the index funds would do better than the hedge funds against which he bet. Low cost index funds usually outperform high cost managed funds.

Index funds just match components of various market indexes. To quote CNN Money indexes

have been set up to track how a particular part of the stock market – or the stock market as a whole – is doing. There are indexes that track large-cap companies, small-cap companies, the entire stock market and so on. One of the most common indexes is the Standard & Poor’s 500, known as the S&P 500, which represents a broad cross section of 500 large American companies.

Index funds are boring. You buy them and forget about them. They are also usually cheap, and cheap is very good (You can buy some that’s aren’t cheap and you should probably avoid them). An index fund may rarely outperform the market but it also doesn’t charge you 5% on the front end and then 1% yearly. For example, Vanguard’s 500 Index fund has an expense ratio of 0.04%. Your actual return will very often be much greater on a boring fund that does what the market does but costs you little, versus an excited managed fund that may look like it makes a great return (though often it doesn’t) and then drops your actual return with lots of fees.

In addition to index funds I think people should use age targeted/target date funds. These are funds that adjust your investment strategy based on your age. For example, one of my funds operates under the belief that I will retire in the year 2035. As an investor I should become more concerned with safety as I get closer to that date. I can adsorb more risk early on in my investing than I can later.  A target date fund adjust its investing philosophy from risk to safety as I get closer to retirement.

In Conclusion

So here’s what I would like to say to wrap all this up – I believe every household should spend a little time each week thinking about how they are using and how they want to use their money. If we never think about such things then we won’t be purposeful in our finances. You don’t have to spend a ton of time thinking about your money (in fact, I would encourage you not to spend a ton of time doing so). Maybe 30 minutes a week asking some simple questions, like “did we use our money wisely this week?” Retirement should be one of the questions you address every so often. There are plenty of resources out for help concerning finances and retirement. For now I will simply list a few podcasts that I listen to concerning the subject:

NOTE – The above podcasts are in alphabetical order and not in order of greatness, except for Clark Howard. Yes “C” is before “M” but if this was order of greatness the Clark Howard Podcast would be first. Clark is the best!

BTW, remember these are just the ravings of a minister who likes reading and thinking about personal finances. If you are fool enough to do any of the things I suggest and they work then the credit goes to you. If you are fool enough to do any of the things I suggest and they bomb on you, well, that’s your fault too. ūüôā

Money & Marriage Inventories

Recently I have had the privileged of doing some sessions on marriage enrichment/relationship coaching at one of the companies for which I serve as a chaplain. These sessions are really just meant to be a taste with the goal of encouraging everyone to focus on doing intentional work on their relationships. One of my absolute favorite things to do as a minister is pre-marital counseling and one of the big topics I focus on with couples is how they view and deal with their finances as individuals and as a couple.

The pre-marital counseling that Pam and I went through really helped us to start out on a good foot in our marriage. One of the things that it helped us to consider was how money was viewed and used in both of our families of origin. The counseling helped us to get on the same page concerning how money would be viewed and used in our marriage. Pam and I have gone through easier and more difficult times financially, but never really disagreed on the “meaning” of money which has made how we handle money much easier.

Money can have different emotional values for different people. How much must you have in savings to feel secure? Is using a credit card ever an option? New or used? Eating out or eating at home? So many of the things we do with money have emotional value that we might not recognize and when two people have different associated emotional reactions to the same thing that can be a VERY big deal. Thankfully Pam and I were helped to start our marriage by discussing these issues. Therefore, I like to help others do the same thing.

Tomorrow during the coaching I am leading I will use a couple of modified inventories from Prepare-Enrich (a relationship inventory I use for pre-marital counseling) to help the people in each session consider how they and their significant other view and treat money. I thought I would post the two modified inventories here in case anyone wanted to look at them for themselves.

Clark Stinks

One of the things that I really appreciate about Clark Howard is how adamant he is about confronting his own errors. He encourages those he works with and those who listen to him to correct him when he is wrong. As a method of doing this he setup a message board with the wonderful url¬†clarkstinks.com¬†for people to discuss when they believe that he has given bad advice. Each week his staff picks some of their favorite “clark stinks” moments and Clark discusses them on his radio show/podcast. This is literally a weekly segment of his show. I love that he is this open to other people’s criticism, rightly or wrongly, to acknowledging when he gives bad advice, or makes a mistake.

I trust Clark Howard much more, rather than less, because of the fact that corrections are regularly a part of his show. Unfortunately for many the exact opposite reaction is the first and only thing that comes to mind. Instead of admitting their failures, mistakes, or mere ignorance they often “puff up” and deny the truth. Even worse sometimes they even blame the one who pointed out the error. Everyone gets things wrong. The people I trust the most admit this fact and don’t hide from their mistakes. Clark Howard is one such person. He is a great example of how to get better by recognizing when you get something wrong.

Personal Finance Podcasts

Since I talked about personal finance with 4 separate people today whiling chaplaining and I am now a little over half-way finished with Pam’s and my income tax forms I thought I would that a quick break and post the podcasts I am presently listening to concerning personal finance.

Here they are in the order in which I like them.

I do a good bit of driving, walking, and running throughout my day so I get to listen to a lot of podcasts. I find these helpful. I listen to Clark Howard pretty much immediately and then work my way through the others as I feel like it, have time, or how I feel about the subject they are talking about.

My biggest encouragement to anyone is the following list of actions:

  • Take control of your spending – Personally I don’t care how you do it, just do it. A budget is great. Getting rid of unnecessary expenses (i.e. downsizing on lots of things) is also great. I believe giving to God should be part of this, first because it is the right thing to do, and second, because it helps you to gain control of your spending. Just do something.
  • Freeze your credit – this is closest thing to “sure fire” credit identity theft protection you can have right now (there is no such thing ass “sure fire” which is why I said “closest thing to”).
  • Start a Roth IRA (unless you are in rarefied air where tax-wise it makes better sense to contribute to retirement pre-tax) – Not only are you saving and planning for your retirement but you are also building an emergency fund because you can pull your contributions out of a Roth IRA without penalty for an emergency.
  • Learn more of what you should do – Habits grow by consistently working on them. I don’t ever want anyone focused on their money (mammon makes a lousy god) and learning new and better ways to control your finances is a great way of keeping your finances from controlling you.

Budgets Don’t Matter, People Do What They Have To Do

If I were to do something else for a living I think I would enjoy doing something related to personal finance. Not only do I like studying personal finance for my own good but I deal with personal financial issues a great deal as a pastor and a chaplain. So I listen to quite a few podcasts on personal (and broader) financial issues, as well we reading as much as I can on the subject. Here are the personal finance podcasts that I am listening to right now (I listen to every episode of the ones in bold) :

Anyhow, I recently heard a podcast that took a famous line from Vice President Dick Cheney and reshaped it for good personal financial advice for the new year. The quote is “deficits don’t matter”. The paraphrase, which I believe was from “Stacking Benjamins” (but I’m not sure), is “‘budgets’ don’t matter” with “people do what they have to do” added to it. The point was that if you are trying to increase saving/retirement don’t start by combing through your budget (if you have one) trying to find spare dollars. Instead setup an additional automatic deduction for a small amount to go to your saving/retirement forcing yourself to adjust to it.

The mindset is that if you have to find the spare money you never will, but you will adjust to money that is “missing” because it was automatically removed from your funds. If you do this each year your savings will slowly but surely go up significantly. If you aren’t saving at all this will get you started at a pace at which you can and will adjust. If you aren’t saving enough for retirement (the amount depends upon the age you started saving and how much you have already saved) this will help get you a little closer each year.

Get a raise? Adjust your saving/retirement. Smartly decided to search your current expenses and found something you no longer needed (finally stopped your Columbia House Music Club subscription) take the money you just found at adjust your saving/retirement. Each little bit adds up till you are at an amount that reaches your goals.

Every little bit makes a difference in taking control of your finances. If you don’t control your finances they will control you. At any rate, I obviously bumped our retirement contribution up a little bit. ūüôā