The law a diminishing returns. When saving for tomorrow hurts today.

If you are part of the FIRE movement then you probably have a very high rate of savings, on average people pursuing early retirement have a forty percent or higher savings rate. Maybe you aren’t that hardcore about retiring early but are interested in saving for a normal retirement, either way you are making a decision to delay instant gratification for a reward later in life. Now for the FIRE community the delay in gratification is geared towards amassing a large enough portfolio of assets to throw off enough passive income to replace their earned income. The problem with this pursuit arises when the saving for tomorrow begins to hurt the present. Don’t get me wrong, working hard and saving a huge percent of income to leave the work force early and have more time to spend with the people we love and do the things that truly bring us joy is a very noble goal and in my opinion worth the sacrifice. Luckily I live in a beautiful city that has lots of green space and plenty of free or low cost activities for us to do. I also am a naturally frugal person and don’t require much to make me happy, so personally it is easy for me to not spend much money. On the other hand since I am not a single man but rather a family man with four teenagers and a beautiful wife, I have to take their best interest into account when deciding on family finances and how to spend our money. For starters my wife is also fairly frugal and luckily for me she shares the same interest in low cost outdoor activities, in fact her favorite thing to do is research waterfalls for us to go discover. This usually cost us some gas, some trail mix, and jerky, maybe if we decide to splurge we will stop for lunch. My kids on the other hand are all very different and unique individuals who have widely varying likes and dislikes. For starters going out to eat can be similar to an election, each kid will debate hard for their favorite place, often times joining forces with another candidate to strengthen their position. Rarely do they ever consider the cost of said restaurant or their parents dining preferences, they absolutely positively do not think about delaying present gratification so that I could allocate some of the funds to their 529 accounts. In some ways I admire that youthful ignorance of fear about the future. The kids also each have different activities they enjoy and we try to entertain those interest as much as possible. Those activities include, wrestling, martial arts, rock climbing, cross country, cheering, video games, shopping, and what seems like a never ending assortment of birthday parties and school related activities. As both loving parents who want to raise well rounded adults and give them every opportunity possible to discover what interest them, we have to also be financially responsible for both their future as well as ours. This often causes us to have to make tough decisions on how we budget our family money. The way we choose to do this is allocate a certain amount of money to kids activities and then divide that by four, that gives us a per kid budget for their activities. Now since some activities such as being a cheer leader are more expensive by nature, we ask our kids to decide if they want to only do one expensive activity or multiple activities, honestly sometimes we spend a little more on certain kids due to them going to state tournaments but this is a decision we make and we usually try to make it a family event.

kid s plating water on grass field during daytime

The point is that we can’t prioritize saving for tomorrow at the expense of today. Some of my best memories are of playing sports growing up and while I may not play contact sports today, I do enjoy playing tennis or shooting baskets from time to time. I also believe that being a part of a team and learning to work together to overcome obstacles, as well as learning to be a good sport regardless of winning or losing has helped me as an adult learning to navigate the business world, having a healthy sense of competition doesn’t hurt either. I know that by spending money on the present whether on the kids or on dates with my wife, or on family vacations may delay our exit from the workforce, however they are also investments in our current happiness and in our future selves.

two person carrying black inflatable pool float on brown wooden bridge near waterfalls

One of the best books I ever read was “Man’s Search for Meaning” which is set in the Nazi concentration camps and is seen through the eyes of a survivor. The book tells of the horrible living conditions as well as the abusive and inhuman treatment that took place, but analyzed as to what kept some prisoners going and made some give up and die. All were extremely malnourished, abused mentally and physically, as well as having all hope for the future stolen from them. Just imagine having everything you own taken from you, being ripped apart from your family and not knowing what horrible things were being done to them, being forced to work without shoes in the snow, and not being fed enough food for a small child to live on. However the author discovered that it was the people that were able to find some good, some small thing to be thankful for, that were able to survive. Every time I am going through a difficult situation I return to that book to get a perspective of gratefulness. The more I practice being grateful for even the little things in life as well as being present in the moment the less I feel a sense of delayed gratification.

silhouette of man touching woman against sunset sky

Many things that are good for us such as religion, exercise, dieting, and saving can be great for us and give us great outcomes, however all of them can also be taken to an extreme that have equally devastating consequences. In religion you see the extremist that are willing to kill others for their religion, in dieting and exercise you see people that develop eating disorders due to a negative view of themselves, in the savings arena we see people that go to such extremes that they not only drastically decrease their current enjoyment of life but also those around them. All of my prior examples usually stem from an underlying disorder and no matter how much weight someone loses or how much money they save, they will never feel satisfied.

In closing it is up to us to find a balance between our future goals and our present lives. It is just as important to enjoy the present as it is to plan for our future enjoyment as well. Regardless of whether we decide to allocate more money towards today or towards tomorrow, if we don’t learn how to be grateful for things in our present life, we will never be truly satisfied with any achievement.

Thanks for reading and I hope you enjoyed it.

CHEF ON FIRE

Stocks VS Real Estate – A debate between two friends

If you follow me at all you know I am a big advocate of being a buy and hold investor of Stocks. My friend is a die hard Real Estate investor who also invest in stocks but is way more focused on Real Estate. The other day we had a nice discussion on which was the better investment, the conversation started because he is helping me find a nice multi-family property to buy, however unlike him I am somewhat debt adverse so I will be making a large down payment, of course he tells me that will lower my cash on cash return but it will help me sleep at night. Alright let’s get into the meat of the debate.

brown and gray painted house in front of road

Returns – Returns are the holy grail of investing, I mean what is the first thing that most people brag about, returns. Being an index fund investor and keeping it as simple as possible, I basically invest in four funds, total stock market, total international non-US, Total bond, and a REIT index fund. This gives me exposure to a diverse group of investments and helps keep my investing as passive as possible, I basically set my desired portfolio allocation of each fund and once a year make any necessary changes to get everything back on that desired allocation. Now over the past 9 years I have earned some pretty nice returns but of course that was on some large losses prior to that and of course I foresee some more losses on the horizon as interest rates begin to creep higher and trade wars continue to create havoc in the markets. The great thing about this type of investing is that it is completely passive and I only spend my time earning income from my job and spend almost no time managing my investments. Contrast this with my friend the real estate investor, he puts small down payments towards properties that he then must convince a bank or lender to put up the remaining funds, this is after he has gone back and forth with the seller of the property or the agent representing them. Once an agreement is made with the seller and the bank, he then enlist multiple professionals to help him do his due diligence of inspecting the property. This inspection involves not just structural issues but studying the rent rolls, individual leases, contractual obligations with anyone providing services, and much much more. During this time if anything jumps out as an issue he will once again open up negotiations with the seller to request a discount on the purchasing price or that the seller make the necessary repairs. Is it just me or are you getting tired and stressed just reading this. After finally closing on the property he then will assign a property management company to manage the property and begin making improvement s to the property to increase rental rates, which will increase the cash flow of the property and directly increase the overall value of the property. Now even though this sounds like a lot of work, he is mostly just coordinating with his team of people he uses like his agent, inspector, contractor, and property management company, so not as passive as index investing but he’s not breaking a sweat. As far as returns go, I’ll admit he blows my returns out of the water. By only having to put up a small down payment he can spread his personal capital around to multiple deals and since he is borrowing today’s dollars at a fixed interest rates but paying them back with tomorrow’s inflated dollars over a 30 year period he is making a killing. In fact he isn’t even paying the loan, his tenants are and they are simultaneously paying down the debt, increasing his equity stance, and giving him cash flow which is the difference between rental income and the debt repayments. So he is making out like a bandit and add this to the fact that he only buys properties that he can get at least 20% below market value and that he sees instant ways to add immediate value to the property.

So as far as returns go THE WINNER IS – REAL ESTATE………..

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Taxes – Once someone begins to make a good income taxes become one of the largest cost and biggest opportunity to save money from. So for me the stock investor, I shelter $18,500 a year from taxation by maxing out my 401K and get a tax credit of about $5,500 per year by investing in an IRA. Combined that is about $24,000 that I not only don’t pay taxes on but that will also grow tax free until I begin making withdrawals, this not only shelters that money from taxes but also lowers my marginal tax rate that all my other income is taxed at.  After that I put other investments into after tax accounts which I pay tax on the dividends (around 15%) and no tax on the growth or appreciation in the value of the stocks unless I sell them, this is why I only invest in growth stocks and not high dividend paying stocks in my taxable accounts. Okay now for real estate, my friend is obviously much more knowledgeable about the tax benefits of investing in real estate but here is my best shot at explaining what he does. First is depreciation, this blew me away, he get to claim a tax deduction for the property (Structure, not land) “losing value” or depreciating over time, however in reality the property is actually appreciating or growing in value. Second is just as amazing, mortgage interest deduction!!! So like I said he is borrowing in today’s dollars and paying the bank back with tomorrow’s inflated dollars but he also gets to deduct the interest he’s paying on the loan, WHAT!!! I’m pretty sure I couldn’t do that by purchasing shares on margin. Last but not least is capital appreciation, like I said his properties are not only appreciating in value over time but the tenants are actually paying down the loan, which increases his equity position in the property, equity being the difference between what he owes on the property and what it’s worth. So similar to my stocks his assets are growing in value but not being taxed on the growth, however what happens when he goes to sell them? Enter the 1031 exchange!!! My friend can actually sell his properties and roll all the profit into another investment without incurring any capital gains tax, even better he can then start the depreciation deduction all over again on new property. Another big advantage is that since he deeds all his properties to an LLC he can also write off just about every expense imaginable, mortgage insurance, property taxes, repair and maintenance expenses, home office expenses, insurance, professional services and travel expenses related to visiting properties. Now since I also own a company that is structured as an LLC I also benefit from many of those deductions but they aren’t related to my stock investing.

So as far as TAXES go, the winner is…………. REAL ESTATE. However we both agree that owning a business is by far the single best thing anyone can do to get ahead in America.

advertising blue blur business

Income – This is something that will become even more important as we age and get closer to retirement, that is when we will both be dependent on our investments to provide income to replace our working salaries. My plan centers around 3 thoughts, first to reduce my monthly expenses as much as possible by eliminating all debt and secondly to accumulate 30 times my annual expenses and then be able to withdraw around 3.5% annually to live off of. Lastly to acquire enough shares in my after tax accounts of VNQ a REIT that pays a hefty dividend and VYM an index fund that tracks quality high paying dividend stocks, by doing this I should be able to have a nice supplemental income from the dividend payments without having to sell any shares. My friends plan blows mine away, he plans to acquire enough properties to provide a very nice income from the cash flow or profit of the rents without ever having to sell the properties. In fact he is already living rent free by staying in a vacant unit of a complex he owns. He utilizes the 1031 exchange to basically trade up his residential properties to commercial multi-family properties that he says offer better cash flow and are easier to build equity in since they are valued based off of income and operating expenses versus just comparable homes like residential, so any small improvements that he makes that allow him to increase rents or heck just the annual 2-3% rent increase he levies make the properties more valuable while simultaneously putting more profit in his pocket every month. His plan is to eventually consolidate his holdings and pay off the debts which will make all rental payments almost pure profit except for what he pays his management company and what he sets aside for repairs, so imagine 100+ people paying you hundreds of dollars every month, sounds pretty nice to me.

So as for INCOME, the winner is……………… REAL ESTATE

black and white sport fight boxer

So as for our debate I feel like he won, in fact I am now becoming a multi-family real estate investor, my plan is to acquire one duplex or four plex and allow it to slowly pay the mortgage off so that when we get ready to retire we can down size from our current home and use it as a rental, plus have four other people sending us checks every month. With a paid off house and a frugal style that will basically function as a pension I never got to have.

Thanks for reading and I hope you enjoyed it, remember this is just my thoughts on investing and not meant to be advice, everyone should consult a professional before making any investing decisions.

CHEF ON FIRE

 

 

How to save hundreds of dollars every month on your grocery bill.

Being a chef I know first hand how easy it is to overspend on food and as a father of 4 teenagers I know how hard it is to keep everyone happy while still staying on budget. I need to make it clear that even though I am a classically trained chef and do it professionally for a living, it is actually my beautiful wife who does most of the cooking for our family, this is comparable to the landscaper who has to worst looking yard in the neighborhood because after doing something for 8-12 hours a day, the last thing you want to do is come home and do it again. I am a big believer that we should all treat our homes like a business and constantly monitor our income and expenses and look for ways to increase or decrease either. In food service establishments we refer to the major expenses as Prime Costprime cost are Food, Labor, and Alcohol. We refer to them as prime cost because they are the primary non-fixed cost of running your business and if you control them you can significantly increase your profit margins. The long standing industry average for food cost is 32%, meaning that 32 cents of every dollar earned went to purchasing food. Obviously just like our households every business is different and will have a different food cost percentage goal, think fast food versus fine dining. Often times as a consultant I spend long hours breaking down individual menu items food cost to see where we can save money or if we need to charge more, some items will have a higher food cost by than others, like a burger compared to a steak. It is interesting to note that even though the fast food restaurant may have a lower food cost percentage the steak house may actually make more profit per plate sold, think a burger that cost $1.00 to make and is sold for $3.25 versus a steak that cost $10 to make but sells for $24.99, the steak may have a higher food cost as a percentage but you are putting $14.99 in your pocket each time you sell one versus $2.25 per burger sold, now obviously the fast food restaurant probably has a much higher volume than the fine dining restaurant so their money is made through sheer volume.

selective focus photography of beef steak with sauce

Now how does all of this relate to our everyday household food budgets? Well to start with the first thing a good restaurant owner would do is set a budget for food purchases based off of expected sales for a certain period, this would be the same for us and each household would be different based off of the number of people living in the house and the income being earned in the home. Since we don’t sell the food we purchase to anyone and only produce it for our own consumption we need to reverse the food cost equation to represent food purchases as a percentage of our personal or household income. So someone earning $45,000 a year who wanted to set a food spend budget of 15% of income, should plan to spend $6,750 a year. Now since a year is a long time to wait to see if you are on track or not, we need to break that down into smaller periods to help us track our expenditures a little closer. Let’s say monthly, so $6,750 per year would give you $562.50 to spend on food that would need to last at least 30 days. Here is where we get back to the point that each household just like restaurants are individual entities and need to be treated as so. A household of one is different than a household of four, the household of one will only need to cover their own consumption so will obviously spend less money overall than the family but because most items aren’t sold in single servings the single person will most likely spend a larger percentage per person on food each month. The family of four will likely spend less per person and depending on whether it’s a single or double income household it may have a much larger food cost percentage of income but because the food can be prepared in larger quantities and each item needed will be stretched across a wider use, they will probably have a cheaper per person cost overall.

photo of woman eating pizza

Now all of this is great but how do we save money? Well now that you have a budget to stick to and a period to spend that money in, we can now plan out four weeks worth of meals with our budget in mind. The first week of the period will have a much higher cost as we will need to purchase items that we don’t currently have but that will last for not only this period but most likely several months, things like salt, pepper, oil, seasonings, dressings, condiments, etc… Next we need to purchase the actual food to make the dishes on our menu, the most highly perishable and in most cases the biggest waste of money in homes is produce, therefore produce should be purchased as close to the planned day of use as possible and rotated appropriately. Next the more expensive items like meat and dairy should be purchased with an eye on quality and value. Once the first week’s food is purchased we can see how realistic our budget is and how much we have left to spend for the remaining weeks in the period, we will also see if our forecast for consumption amounts are correct, are we eating more or less than planned. Once all of this is figured out we can now plan around any life events such a birthday parties, anniversaries, etc.. and allocate extra money to those weeks. One of the most important things going forward is to take a weekly inventory of the items you have left over form week one, we do this first to make sure we don’t purchase these items again unnecessarily and to see if maybe we need to make some slight adjustment to our upcoming week’s menu to utilize leftovers. I can not stress this enough, controlling loss of produce from spoilage, honing in on production amounts, and taking good inventories of what we have on our shelves will save a family thousands of dollars each year alone. Once this is perfected then additional savings will be found in learning to cook with less desirable cuts of meat, to greatly reduce the overall cost of a dish and looking for good sales on staple items.

adult blond board brunette

So how do you forecast how much food to make and how much food to buy, it’s very easy. Let’s look at the family of four. We have 4 people who will eat 6 ounces of meat and 3 ounces of each side, so 4 x 6/16 =1.5 pounds of meat needed. Easy right, well wait anytime you cook something you have what I call production waste which is basically the loss of water and or fat which causes the end product to weigh less than it started out at. so let’s say we will lose 10% of the weight during cooking, so (4 x 6)/16 x 0.10 = 0.15 pounds or 2.4 ounces, in this example we would need to add 10% to our original amount needed to compensate for the lost weight during cooking. With the sides this isn’t really an issue and with items such as rice or pasta they will actually multiply both weight and volume during cooking by as much as three times the original amount. If you can control your protein cost also known as “Center of the Plate Cost” your sides will not add much to the overall cost of the plate.

chef cooking food kitchen

So to sum it up, make a budget, plan menus around that budget, figure out amount of food needed to produce meals, purchase food, and record leftovers or shortages to help better forecast for next week. Keep track of expenditures from week to week to see if you are running a surplus or deficit of funds in the food budget to make sure we don’t exceed our budget in the last week of the month. All of will add up to massive savings that can be used to fund a Roth IRA or even a 529 account for a child’s college tuition, saving $3,000 or more per year would go a long way to covering your children’s education cost or towards your retirement goals. Just as we discussed a restaurants PRIME cost of food, labor, and alcohol, if you can stay away form debt and control your housing, food, and transportation cost you will be well on your way to financial success.

Thanks for reading.

CHEF on FIRE

Separating the FI from the RE in FI/RE.

The “FIRE” (Financial Independence – Retire Early) lifestyle has been receiving a whole lot of outside press lately, while this is obviously a good thing as it has the power to greatly improve the lives of those that choose to adopt it’s lifestyle and philosophies, it also has drawn the wrath of many that choose to focus on the Early Retirement aspect alone and point out how it may or may not be actually feasible as a long term plan. To be able to properly separate the two ideas we first need to define them.

silhouette photography of group of people jumping during golden time

Many people in the FIRE community may have first been introduced to personal finance by Dave Ramsey and his Financial Peace program, Dave preaches that debt creates bondage in the form of financial obligations from the lender to the borrower. Financial Independence is a very similar concept in that once someone reaches FI they have the peace of mind to know that they are in a financial situation to make choices that are not afforded to people who are living paycheck to paycheck. Financial Independence in a nutshell is the point where an individual has accumulated enough income producing assets to live off of without having to work any longer, this freedom allows them to choose to either continue what they are doing or pursue either another career or even stop working all together. For most in the FI community the game plan seems to be the accumulation off a large enough investment portfolio to withdraw 4% of the principle to cover living expenses, while allowing the interest earned over and above the 4% withdrawal to continue to accumulate, thus creating a perpetual money machine. There are of course many other routes such as rental income form real estate and passive income from ownership in private businesses. There are different stages of Financial Independence, from having enough saved to be able to take time off from work or to accept a lower paying position that offers a better quality of life, to having enough money saved to never have to work again. Financial Independence allows an individual to have many options not available to most people and one of those options is Early Retirement.

man and woman holding hand walking beside body of water during sunset

Early Retirement or the “RE” in FI/RE is as mentioned earlier when someone has accumulated enough assets to live off of the earnings and no longer depend on outside income derived from another person or entity. Everyone has a different path to Financial Independence and therefore will arrive at the crossroad of continuing work or Retiring Early at different times and stages in their lives.  Retiring Early is an option only afforded to someone that has already achieved Financial Independence. Many detractors of the Early Retirement movement point to the fact that there is not much data to back test to see whether the 4% rule will actually work over a 40-50 year retirement period, however they fail to see that the main point is that the individual has achieved financial independence at an early age, something that the majority of people may not ever actually achieve in their entire life, this is great evidence that Financially Independent people are extremely good at handling their personal finances and that if a problem does arise in the future they will most likely be able to resolve it with the same hard work, focus, and discipline that got them to financial independence at such an early age. Another thing to keep in mind is that the 4% withdrawal rate was not just picked out of thin air but actually derived from a study known as the trinity study that sought to find the highest withdrawal rate that would allow for complete certainty of never running out of income and in fact the majority of the time the scenarios in the study had someone using the 4% rule end up with much more money than they started with 30 years later, even after making yearly withdrawals of 4%. This is because the stock market on average returns much more than 4% and thus allows the principle to continue to grow over time.

man and woman holding hands walking on seashore during sunrise

Fortunately their are many young and extremely intelligent bloggers in the FIRE community that are there to help and not just offer generic advice but give highly specific and specialized advice to people of all walks of life, so regardless if you are a physician, a mechanic, a pharmacist, a chef, a military officer, or even a single parent, there is a blog out there just for you that offers specific advice that can not only save you money but time and frustration from trying to comb through what seems like never ending advertisements from investment firms wanting to charge you to invest your money.

As you can probably tell from the name Chef on FIRE, I mostly speak to the restaurant and service industry segment about how to maximize their incomes and investments. I have a personal love for those that choose to serve others and feel that they deserve to be able to retire in confidence and hopefully enjoy having someone serve them for a change. While this is the audience that I focus on, I am constantly learning from reading post from other bloggers and think that they offer a great insight into the lives that other professions offer. It is great to know that regardless of the type of career one chooses, they have to ability to become Financially Independent if they are willing to work hard, save money, and learn to invest it wisely.

Screw F.I.R.E – Don’t retire early, create a legacy.

People today have become so self centered and inwardly focused on themselves that their only concern is to create just enough Financial success to enjoy a modest life and  free them from the obligations of earning income from trading time for money. Now don’t get me wrong I have nothing against people choosing not to work or to stop earning income, I do think that to save just enough to afford a modest lifestyle for you and your family is slightly selfish, I mean for one thing if anything was to happen to either you, your spouse, or a child, that minimum income to support that modest lifestyle will create almost certain financial ruin, don’t believe me, spend time in a hospital or retirement home speaking to patients or residents and you’ll learn just how uncertain life is and how easily unplanned medical issues can derail a life.

adult doctors gloves health

If we look back in time men were not just providers but they were builders, warriors, conquerors, and empire builders. They didn’t plant just enough crop to barely make it through the winter, they planted as much as they could and if they had excess above their family’s needs they either sold it or gave it to a neighbor. What happened to our desire to grow wealth, create a family name, and create a fortune? Instead of saving the minimum amount to meet our minimum needs for contentment, why not use the excess money we have above our family’s needs to continue to further our family’s wealth and standing in society?

The playbook to wealth is very simple.

Find a source of income that exceeds your monthly expenses

Focus on creating more income while keeping expenses as low as possible

Invest excess finances in assets that increase in value and create more income.

Rinse and repeat.

Yes this is simple but it should be. In modern times this would include getting a job, gaining education or experience to make your time more valuable, when you begin earning more don’t allow your lifestyle or spending to increase but instead invest the difference in index funds, rental property, and start a side business that you can earn income from and hopefully grow as well. See our ancestors did this as well, they first had to make sure they could meet their basic needs of food and shelter, after that they would sell their excess goods or services, they would then invest those proceeds into buying more land and livestock which had a compounding effect for them, many would eventually invest in selling goods made from the land or animals such as wood, wool, hay, etc… The only difference is that those generations knew how hard life was and that nothing is promised so they didn’t barely meet their basic needs and stop, they continued to acquire land and livestock for not only them but for their kids and their grandchildren. They would teach their children to run the farm and insist on them having a better life than they had had.

man field rice colombia

Now the question is why don’t we do that? Why should we be so selfish to save just enough to cover our immediate needs and stop working towards furthering our families standing? If our incomes are the largest contributor to our net worth or our family’s security, why cease to use it? Personally I feel obligated to earn as much as I can in my life and to acquire as much as possible to leave to the next generations to come. I could easily stop working and downgrade my standard of living so that I wouldn’t have to work anymore but I’m not that selfish. I want to ensure that I not only meet my needs but that if something happens to me and I require long term medical care, that not only will I be able to receive excellent care but it will not leave my spouse broke, I want to not only meet my needs but create a long runway for my kids to take off from and to be able to help them get a financial head start in life. I want to be able to help care for the aging parents of my wife and I, I want to be able to bless multiple generations of my family, I want my grandchildren to have the option to attend private school, to take music lessons, to take vacations, and to enjoy a life that is full of options. This is called self sacrifice and it is the greatest form of love that one can express. Just as Jesus paid the ultimate sacrifice by giving his life so we could be saved, I choose to give my life, my time, my effort, and my attention to not just making my life as easy and enjoyable as possible but to sacrifice so that generations of my family can be Financially secure. Health is a gift and choosing to exit the workforce at the prime of your earning potential is pure selfishness, not only are you shortchanging yourself but also mankind as you are no longer contributing to the greater good of society. Just as past generations taught their kids to plow a field or milk a cow, I teach my children to budget, to invest, and how to make themselves more valuable to society, however not only do I teach them these essential skills I also give them a head start, this is my duty as a father. When you take a wife and have kids, you are no longer just responsible for yourself but you are responsible for their safety and well being and in today’s time it is less about defending them from physical starvation or the elements as it is about ensuring their financial futures.

battle black blur board game

So in closing, MEN……. Be MEN, be not only providers and protectors, be defenders of freedom, be conquerors, build an empire that your grandchildren can be proud of, don’t fall into the trap of becoming satisfied with barely getting by but strive for the best life possible. Do you want your legacy to be “Well grandpa saved some money and retired at 30, then just kinda hung out?” Yes it’s nice being around young kids but as they get older they probably won’t want to be around you so much and when you are dead and gone, I’m sure they would rather have large inheritances than memories of you laying around on the couch……………

Thanks for reading,

CHEF ON FIRE

Dividends

If you own stocks you are probably somewhat familiar with dividends, but what exactly are they? In simple terms a dividend is a portion of the excess revenue a company has available after paying all operating cost that they choose to distribute to  owners/shareholders. That sounds great but is it? Personally I love dividends and see them as a sign of both maturity and stability, this is because usually a new company will reserve most of if not all earnings to re-invest in the company for growth, this isn’t bad because that growth allows them to increase earnings which will hopefully result in an increase in the value per share of the company. In contrast a large and established company may not have much room for further growth except through acquisitions, since they don’t need to employee excess revenue they choose to pay it out in the form of dividends which is attractive to many investors, especially older investors looking for income and stability. The dividend investor may also benefit from share appreciation but nowhere near the same rate as the younger faster growing company, in fact the per share price will actually fall after the dividend payout due to the fact that the company just moved hundreds of thousands of dollars off of their books, of course that money went straight to you the shareholder so it’s not really a loss but a way to earn passive income. Currently income from dividend payouts is taxed at different rates depending on your gross income, see the chart below.

Qualified Dividend Tax Rate Single Filing Status Married Filing Jointly Head of Household Married Filing Separately
0% $0-$38,600 $0-$77,200 $0-$51,700 $0-$38,600
15% $38,601-$425,800 $77,201-$479,000 $51,701-$452,400 $38,601-$239,500
20% $425,801 or more $479,001 or more $452,401 or more $239,501 or more

close up photography of people holding coca cola bottles

Some of my favorite dividend paying stocks are listed below with their current dividend yield.

Coca-Cola – 3.37% – Dividend has grown each year for 55 years

Pepsi – 3.36% – Dividend has grown each year for 45 years

AT&T – 6.08% – Dividend has grown each year for 33 years

person holding pepsi can

Now we can’t talk about dividends without mentioning the Dividend Aristocrats, to meet the criteria to be called a Dividend Aristocrat, a company must be a member of the S&P 500 index and have a minimum of one dividend increase annually for at least the last 25 consecutive years. The first list of Dividend Aristocrats was published in 1989, with 26 companies on the list, this list is often times considered a list of some of the strongest and most dominant companies in the world since to have been able to earn excess profits from operations even through all the bear markets and recessions, the companies must have a great operating system and strong competitive advantages.

For the die hard index fund investor there are dividend funds that track high paying dividend stocks, two of my favorite are listed below with their dividend yields.

VYM – 3.26% – Expense ratio of 0.08%

VIG – 2.03 – Expense ratio of 0.08%

apartment architecture buildings business

Of Course a discussion of dividends wouldn’t be complete without mentioning REITs, better known as Real Estate Investment Trust. In simple terms a REIT is a fund that owns and operates income producing land and or real estate, this usually consist of a mix of commercial properties such as retail spaces, office buildings, storage facilities, and apartments. The REIT investor/shareholder benefits from the steady stream of rental payment made by the tenants and the best part is that by law a REIT must pay out at least 90% of it’s taxable income to shareholders. Below is a list of my favorite REITs along with their current dividend yields.

VNQ – 4.29% – Expense ration 0.12%

Personally I own both VNQ and VYM in my ROTH IRA as well as the three single stock companies listed earlier with about 3 other high yield dividend stocks, however I am not nor do I plan to increase my holdings in the single stock, only in the index and REIT funds. I like owning them in my ROTH because the dividend income is earned tax free and is a not only a long term holding for me but an inheritance vehicle for my children that I hope will benefit from a steady source of tax free income for someday. I must say that I also own both VOO and VTI as well as VEU, in both my ROTH and my Traditional IRA for long term capital appreciation but I have always loved dividend stocks since my first purchase of Coca Cola stock many years ago and I still remember seeing the first dividend payment in my account:)

I hope you enjoyed this article and appreciate you taking the time to read it.

CHEF ON FIRE

 

 

 

 

Pan Seared Salmon over Toasted Farro with Lemon Scented Asparagus

6 ounce Atlantic Salmon

1 Cup Farro

1/2 Tomato medium diced

1/4 yellow onion small diced

1/4 Cup Chopped Parsley

1/8 Cup Olive Oil

1/2 Lemon

6 Spears Asparagus – trim at ends 2-3 inches from bottom

Salt, Pepper

 

In a small pot add 2 tablespoons of olive oil and when hot add farro, with a spatula move continuously around the pan until lightly toasted, add 1 – 3/4 Cups of water or stock, season with salt and pepper, and turn to low, cover pan and simmer for 20 minutes or until farro is tender. Remove from heat and add in tomato, onion, and chopped parsley, Add 1 teaspoon of olive oil and toss

Turn oven to 350 degrees, Turn stove eye to medium, Add Oil to a saute pan, when hot add salmon skin side down, let cook for 1-2 minutes season with salt and pepper and flip over, with fork gentle remove skin and season again with salt and pepper, let the salmon cook until it gets a nice sear and then flip back over and put in oven for 5 minutes, toss asparagus in a small amount of oil and season with salt and pepper, add asparagus to the salmon pan over salmon and return to oven for 4 minutes.

Remove salmon pan from oven and let sit for 3-4 minutes, put farro mix in middle of plate and top with Salmon seared side up, lay the asparagus over the plate resting on the salmon and squeeze the lemon over the entire plate being careful to not drop any seeds, eat and enjoy.

 

Calories – 681

Protein – 43

Carbs – 57