Mr. Hobo Millionaire Observations on Life and Money

AuthorMr. Hobo Millionaire

I blog about money, financial independence, life, and entrepreneurship. I got rich slowly (over 20+ years) with a niche software business. I also failed at a number of other things (and mild success with a few others). I share what I did right along the way, and a lot of what I did wrong, with a goal to encourage you think differently about life and money.

The Road Grader

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As a child growing up in the country, and I mean way in the country, I lived at the end of a mile long dirt road. “Randy Road” was the name of this dirt road. Being it was a dirt/gravel road, it required monthly (maybe even bi-weekly — I can’t remember it’s been so long ago) maintenance to keep it flat, smooth, and drive-able. The maintenance was performed by an older man driving a large road grader (slightly smaller than the one pictured). Without the maintenance, the road would develop deep holes and bumps due to rain.

As a small boy, as you can imagine, this road grader was larger-than-life. Enormous. It had to move kind of slow to do a good job flattening the road. With it’s rumbling and roaring engine and grading of the road, I could hear it coming when it got to within a quarter to half a mile away. I would sprint down our driveway to watch the big machine go by our house (actually it was a trailer/mobile home).

Seeing the big machine would have been special for this little boy in-and-of-itself, but you see, the old man driving and waving at me made it just a bit more special… he would throw bubble gum to me from the big rig! Super Bubble gum to be exact. I’m tearing up while writing this… just remembering the excitement I had of this childhood memory. This would be the highlight of my week. I have no idea of this mans name, and I’m sure by this time he has since passed away. I hope he knows how special he made my childhood (and many other kids). You see, he wasn’t just giving out gum, he was giving out love, joy, and happiness. I, of course, didn’t see it that way as a child, but I sure do as an adult.

My point of this story? Be the road grader to someone (especially a child).

It’s not how much we give but how much love we put into giving.

Mother Teresa

Be the road grader to someone.

Mr. Hobo Millionaire

 

A Very Basic Intro to Investing and the Stock Market

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An investment in knowledge pays the best interest.

Benjamin Franklin

A knowledge of investment builds wealth.

Mr. Hobo Millionaire

First and foremost, I want you to remember this one thing from this article, even if you don’t remember anything else… YOU need to know and understand YOUR money and investments.

  • Never stop reading and studying about money and investing.
  • Do not depend on others to handle your money.
  • No one will put your interests first like you.

With that said, here’s a few basic terms and things to understand about investing and the stock market…

  • Stocks are share of ownership in a company.
  • Stocks go up and down in value.
  • You make money (build wealth) from stock ownership either by buying a stock at a lower price and selling it at a higher price or by earning a dividend from the ownership of the stock.
  • Some stocks have dividends, some do not.
  • Dividends are when a company, that you own at least one stock in, decides to share it’s quarterly profits with shareholders. If a company pays a $1 dividend for the quarter, this is $1 per share that you own. If you own 10 shares, and the dividend is $1, you made a $10 dividend. If the company paid the same dividend over 30 years, and they paid the $1 dividend every quarter, those same 10 shares that you bought at the beginning would pay you $40 in dividends per year, for 30 years. That’s $1200 for doing nothing other than holding a stock for 30 years.
  • Companies that pay dividends can stop paying dividends if they choose to. There are no guarantees that a company will always pay dividends, although most large companies do continue to do so. For example, Microsoft (MSFT), AT&T (T), and IBM (IBM) have paid quarterly dividends consistently for the last 10-15 years. I am not recommending these stocks to purchase specifically, simply giving an example using well-known companies.
  • Some companies also reduce dividends. Some increase dividends. Again, they can do so when they choose.
  • A risky way to try and build wealth is to buy and sell stocks in very short periods of time. This is what “day traders” do.
  • One conservative way to try and build wealth is to buy stocks over your lifetime (buy and hold stocks over 30-50 years) that pay dividends, and use those dividends to buy even more stock. This is called “dividend investing”.
  • A stocks dividend yield is the yearly dividend amount (all 4 quarters of dividends added together) divided by the stock price. A yearly $5 dividend on a $100 stock equals a 5% dividend yield. A yearly $3 dividend on a $100 stock equals a 3% dividend yield.
  • Imagine owning a wide range of dividend stocks, valued at $1,000,000. Let’s say they have an average dividend yield of 5%. Every year, you will make $50,000 in dividends for doing absolutely nothing. Now imagine having $5,000,000 in dividend stocks… and you earn $250,000 per year, doing nothing, with that same 5% dividend yield.
  • You can sell a stock at any time. If you sell at a higher price than your purchase price, you’ve made money on that stock. If you sell at a lower price that your purchase price, you’ve lost money on that stock.
  • If you sell a dividend stock, you will not continue to receive dividends. You do get to keep any dividends you’ve made prior to selling the stock though.
  • Mutual funds are a large group of stocks that you purchase by putting money into the mutual fund itself. It’s called a “mutual” fund because many people put there money in as a group and buy large amounts of stock together. You are not in control of the stocks purchased or sold in this mutual fund. You are are investing in the fund itself, not so much the stocks. If you have no idea what stocks to buy, it is considered a conservative approach to invest in mutual funds. That said, as I pointed out at the beginning, I don’t believe in buying/investing in anything you don’t understand, and I don’t believe throwing money into mutual funds is conservative if you don’t know what you’re buying. Not all mutual funds are the same.
  • An extremely conservative approach to investing in the stock market is buying into a fund that purchase shares in a stock market index. If you look at historical data, there have been ups and downs (serious ups and downs), but over the history of the stock market, it always ends up, not down. You may have to wait years for a full recovery though. The stock market is not a short term investment plan. For example, the most recent “crash” was in 2009. From 2007 to 2009, the stock market trended down (per Dow Jones Industrial Average), dropping from 14,000 to 6,600. That’s over a 50% loss in value. So if you owned this group of 30 stocks, and average value of each stock was $100, they were valued at $50. If you panicked and sold at the bottom, you lost half the value of your investment. Here’s the good news, though. Since that time, the DOW market has recovered and gone to about 26,000! If you held those stocks, they’ve recovered and now would be valued at almost $200. And better yet, if you bought MORE shares at the bottom of the market, your money has quadrupled. If you bought $10,000 of shares at the bottom, those same shares are worth about $40,000 now. Dow Jones is what’s considered a market indicator. Just because it goes up or down doesn’t mean your stocks go up or down (unless you own those specific 30 stocks). The bottom line is if you can buy and hold investments for a long period, you’ll more-than-likely come out ahead. You never lose investment money until you sell the investment (at a lower price).
  • Generally speaking, when a stock that you believe in goes down, you should buy even more shares. If it was worth buying at $25, isn’t it worth even more to buy at $15?
  • There are income tax considerations with making and losing money in the stock market, too. Don’t let this scare you. Just be aware. This blog is about building wealth, so we’re encouraging you to save, not withdraw/spend. If you take money out of retirement accounts before you are of retirement age, there are usually penalties. There are pre-tax ways to save and post-tax ways to save. There are IRAs, 401ks, and SEPs… for the most part if you invest and save in these accounts, you do not pay taxes on it until you pull the money out at retirement. You’ll want to get more financial advice from a CPA in terms of taxes and tax planning.
  • Bonus note: You used to get an actual piece of paper when you purchased shares of stock. It would have the company logo on it, your name, the value, and how many shares you owned. It used to be a cool gift to buy shares of stock in a company and gift them to a newborn. This is all handled electronically now.

There are many ways to make and lose money investing in stocks. With this post, I simply wanted to highlight some basics. I probably went a little more into it than I planned when I started. But I wanted to make sure I covered most of the basics. There are a number of financial blogs out there (just google “financial blogs”). Hopefully, this gives you a more basic understanding than you had when you started.

  • Keep reading and learning.
  • Don’t take any one persons advice on money.
  • Learn and make your OWN decisions.
  • And RUN from anyone who tells you they know everything about money — of they have a “for sure” investment deal.

 

 

Summer Camp 1984 Changed My Life

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Believe in yourself! Have faith in your abilities! Without a humble but reasonable confidence in your own powers you cannot be successful or happy.

Norman Vincent Peale

Don’t let anyone determine who you are or what you do in life.

Mr. Hobo Millionaire

You know how some teens are great at sports (gifted naturally to be the quarterback, running back, linebackers), popular because of their good looks, or super smart? That was not me. I was only a slightly above-average teen. I say “slightly above average” only because I was I was a pretty good kid, respectful to others and my parents. I was also a member of a church-based boys group much like the Boy Scouts, and I achieved the highest possible rank/awards in that program (achievements were mostly related to camping and nature). That said, I was not super popular, not picked first for sports teams, not the teenager everyone thinks of first (or even second or third). I wasn’t necessarily odd or picked on… just kind of normal and unseen. That all changed for me the summer of 1984.

Every summer from the age of 13-17, I went to a one-week youth camp in July. Here teenagers from all over the state got together, camped out in dorms, played co-ed sports, and did church stuff (but this story isn’t about the church stuff). The group of teens that went there from my own tiny church was about 25 people. The total camp was about 750 teenagers. My “social ranking” within my own church was in the middle or just below, so at the youth camp, it would have been in the bottom 30% by default.

One odd thing at these camps (and really a good thing) was that you hardly ever got grouped or teamed with anyone from your church. The camp leaders randomly divided all the kids coming in into mixed groups of teams so you could compete in softball, volleyball, and the likes. When teams were formed at the beginning of the week, the counselors would always ask who wanted to play what position. Of course, the popular people would always play infield in softball, and the short-stop position was the most popular.  At the end of every week, there would be an All-Star game with the best/most popular person from each team participating (usually this was the short-stop or pitcher). The All-Stars would play a softball game against the camp counselors and leaders.

I wasn’t terrible at softball, but I wasn’t that good either, but a switch flipped in my brain that summer of 1984. When the counselor asked the teens in my group who wanted to play what position, I immediately (and confidently) spoke up to play short-stop. And somehow, magically, I played the position like I never could before. I made zero short-stop mistakes during the week (until the All-Star game). And yes… I made the All-Stars that week! I was the only person from my church to make the All-Stars. It was surreal. I had always wanted to be “that guy”, and I made it!

Look, I know teen events don’t make a lifetime, and I’m sure no one remembers me from that summer camp. I’ve never even spoken to those folks again. But that summer changed my life. I realized I could be anyone or anything — it was up to me. Even if I had to leave my normal world to move to a new world, I wasn’t ever going to let anyone who knew me or believed I was someone else to limit me. I was a different guy when I got back from that trip (even with my own church friends).  I moved away from home a year later to go to college in Texas. In Texas, no one knew me or my past, and I had a blank slate to be whoever I wanted to be. And I had the confidence to do it because of the Summer of ’84. 

What does this have to do with wealth? Simply to encourage you to pursue and do whatever it is that you want to pursue. Don’t let anyone or anything hold you back. I’m not saying don’t get advice or listen to someone else’s wisdom (like mine!), but don’t let someone else’s negative feelings or emotions prevent you from pursuing what you’re passionate about.

An old picture of the actual campgrounds

What about you? Any life-changing moments from your teen years? Please comment below.

 

Cars Are Money Pits and Kill Wealth Building

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Money may not buy happiness, but I’d rather cry in a Jaguar than on a bus.

Françoise Sagan

You will really cry when you see how much money (wealth) you lost on cars over your lifetime.

Mr. Hobo Millionaire

 

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Million Dollar Mistake?

Raise your hand if you’ve heard the following: “Cars depreciate 20% when you drive off the lot.”

I had heard that many times in my life, but it never really sunk in until later in life when I started analyzing common expenses and building wealth. My goal with this post is for that saying (and MUCH more) to sink in, regarding what buying cars (especially new cars) does to your wealth building.

A $30,000 car financed over 5 years is about $500 per month. Most people look at a $500 car payment these days as no big deal. If you’re saving at least 3 x’s that amount per month AND you’re going to keep the car for 10 years, MAYBE you can justify doing 5 years of payments on a 30k car. Maybe. I still don’t advise it, but at least you’re using the car a long time AND you’re saving $1500/month to build wealth. For the rest of you, if you do this your entire life, and have little-to-no wealth built in 30-40 years, you have basically driven multi-million dollars cars your whole life. I hope you really enjoyed them! Because if you had spent less and saved the difference, you would have added millions in wealth. Don’t believe me? Check out these numbers:

If you took your $500 payment and reduced it to $200 per month, and saved the difference ($300 per month) for 40 years, this is how much wealth you would accumulate:

  • 0% return: $144,000
  • 6% return: $557,143.08
  • 8% return: $932,603.47
  • 10% return: $1,593,333.20
  • 12% return: $2,761,529.11

Think of all the people you know that are in their 60’s or later that have driven many large new cars over their lifetime and are broke. Think of all the young people (late teens and 20’s) that drive 30k+ cars. How much are they losing? I used that picture of the 4×4 truck above, because I see so many 20-somethings driving these in the South. It’s nuts. For the record, when I need a new ride, I pay cash for a used, 3 year old, Ford F-150.

Most people simply do not consider how much they are spending on cars. I have a friend who hasn’t built any wealth, who recently bought a 75k sports car on payments. He’s probably 20 years from retirement. Let’s assume he was going to spend 25k either way to buy a new car… he still spent an extra 50k that will be 100% lost over time. Do you know how much money he REALLY lost because of how that 50k could have increased his wealth:

  • 0% return: $50,000
  • 6% return: $160,356.77
  • 8% return: $233,047.86
  • 10% return: $336,375.00
  • 12% return: $482,314.65

That’s how much that extra 50k in car cost him over the next 20 years.

When you waste money on cars, you are decreasing your wealth… your net worth. If you wanted to “blow money” on something nice, buy a house. Blow all your money on a house. At least it won’t go down 20% in value as soon as you buy it (under normal circumstances). In most cases it will go up in value over time. A car, except in extremely “struck by lightning” circumstances, never goes up in value.

You say, yeah, but I’ve got a to have a new car to be safe or to not worry about it breaking down. That doesn’t take a 30k car. For that matter, you can generally get a really great, safe, used car for 10k. Until you build a large amount of wealth, you should probably drive good, solid, 10k used cars.

Build wealth and you can buy whatever you want when you’re rich. Check out this used car bargain…

Used Lamborghini Gallardo - A Bargain at $100,000
Used Lamborghini Gallardo – A Bargain at $100,000 (They Are 500k+ Brand New)

You’re welcome to argue how much you should spend monthly on a car, but you can’t really argue the numbers are astounding for saving just $300 a month over 40 years.

Question Everything

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Question those in authority.

Question your political beliefs.

Question your spiritual beliefs.

Question everything.

Believe only half of what you see and nothing that you hear.

Edgar Allan Poe

Believe none of what you hear, and only half of what you see.

Benjamin Franklin

Question everything.

Mr. Hobo Millionaire

You are taught as a child to listen to (and mind) your parents, teachers, and leaders. You’re taught never to question anything (except strangers — don’t talk to strangers).

The older you get, and for some it may take many, many years… but at some point you’ll realize that SOME of the things you have believed in your life are flat out WRONG. Personally speaking, I came to that conclusion with my spiritual beliefs, and I came to it with my political beliefs. I’m not going to share what those beliefs were or are now, because I’m not looking to influence your personal beliefs… other than to encourage you to question whatever they are.

If your political beliefs go one way, listen to people from the other side, or the other middle. You will hear many people with one political belief turn off listening to other political beliefs completely.

You can learn a lot by listening to your enemies.

Mr. Hobo Millionaire

Since I’ve changed my opinion of certain spiritual beliefs, I’ve asked old friends and acquaintances that I grew up with and/or knew in my teens/twenties “Have ANY of your beliefs changed, at all, in the last 10/20/30 years?” And there response is either “No, not at all.” Or “No, why?”

Are you kidding me?! You’re 40, 50, 60 years old, and your belief is EVERYTHING you learned or was taught over your life was 100% correct?

I once asked a 50-something year old minister if he really believed EVERYTHING he preached was 100% correct. His answer was yes. So I said, out of all the world religions, all the different denominations, believers and non-believers in whatever, YOU, you are the single person in the world that has figured out religion for the entire world for all eternity? He said yes. It takes a special kind of narcissist to believe that.

Some people question what they see on the news. Some question whether the Earth is laid out the way we’re taught it is. Some question whether we really landed on the moon. Some question if we’re really exploring Mars now. Some question why certain wars were started. Some question what the government tells us. Some people think Edward Snowden is a traitor, some do not. Is it crazy to question those things? No (ok, well maybe one or two of those things). Everything should be questioned.

What does this have to do with wealth? Well, a lot of people have beliefs about money that deserve questioning (ie. they might be wrong). Beliefs like…

Money is the root of evil.

Anyone with money is evil, and they either inherited it or stole it.

People with money are selfish.

Money is bad. I’d rather be poor.

Rich people are spoiled.

Life is against me. I’ll never be successful.

Rich people are lucky.

Any of those sound familiar? Of course. And if you’re someone who believes any of those lines, you will probably never attain any kind of wealth. That’s what this has to do with wealth. Those are limiting beliefs in my opinion — but please, question me, if you disagree.

You will never change your beliefs or learn anything new if you always turn off the other opinion. Read books. Read other peoples opinions. Open your mind. Open your heart. Never stop learning. Question everything!

What beliefs have you done a 180 on in your lifetime? Please comment below.

 

 

Don’t Screw People Over

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A lot of people will do anything, or more specifically, say anything to get a deal done. It doesn’t matter if it hurts the other party. As long as I get the sell or close the deal or win the negotiation… as long as I “win” that’s all that matters.

You reap what you sow.

God

Don’t screw people over. You’ll eventually get screwed over, and then you will know how bad it feels.

Mr. Hobo Millionaire

No, that isn’t all that matters. Karma matters. The Golden Rule matters.

There’s a natural law of karma that vindictive people, who go out of their way to hurt others, will end up broke and alone.

Sylvester Stallone

Have you ever been sold something you really didn’t need? Has a car salesman gotten you to do $2,000 in upgrades that you really had no business buying? I’ve had banks and other financial entities mess me over with fine print… sure it was my fault I didn’t read it closer, but I trusted them… and they betrayed that trust.

I’m a true believer in karma. You get what you give, whether it’s bad or good.

Sandra Bullock

Don’t betray people’s trust. There’s nothing cool or smart about getting one over on someone.  It’s easy to “con” someone if you have their trust. That’s where “con” comes from… “confidence”. You build someone’s confidence/trust in you, and then you take advantage of them. Again, it’s really easy to win a deal once you get someone to trust you. If you’re an honest person, this is a wonderful sales technique. If you’re not honest, or simply trying to sell something to get a commission, there is nothing smart or honorable in that.

Don’t only look out for yourself in a business transaction. How the other person feels about the deal later matters. Even if you don’t offer a money back guarantee, treat every deal as if you do. What if you had to give the money back or undo any deal if the other person wasn’t happy. Try to do every deal like that.

March 17, 2010, AP Photo/Journal Times, Scott Anderson, File
March 17, 2010, AP Photo/Journal Times, Scott Anderson

Remember Blockbuster video? A lot of people think Netflix put them out of business. No. Blockbuster put themselves out of business. Back in the old days, before Netflix, you used to have to go to a video store to rent movies. Blockbuster became famous for screwing over their customers. If you were one minute late, 12:01 midnight, dropping off your rental, they would charge you another day of fees. Not 25 cents… the full $3.50 or $5.00… whatever the rental cost was. They did this for years. They made big money for a little while, but just as soon as customers had a choice (Netflix) … they fled in droves. It was not really the convenience of Netflix… it was the bad will (bad karma) Blockbuster built up over years of abusing customers.

I’m not saying don’t win something in a negotiation or business deal. I’m saying, when it’s all said and done, the other person should not feel like you took advantage of them, lied, cheated, or abused their trust. It’s even OK if they are unhappy with THEIR decision later… as long as their decision wasn’t based on deception from you. And lastly, if you ever have your own business, you’ll make WAY more money taking good care of people over the years, than you will simply closing one deal. Think of all negotiations as a life long partnership that you want to keep positive. Treat others always as you would want to be treated.

Do unto others as you would have them do unto you.

The Golden Rule

Tell me about a time your trust was betrayed. How did it make you feel? Please comment below.

Hard Work And Getting Ahead

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I am so thankful my father taught me (and led by example) the value of a strong work ethic. Nothing beats the feeling of accomplishment hard work gives a man (or woman). A sense of pride, self esteem. I am all for helping someone down on their luck, but I want to see genuine effort from them to improve their lives, too. For THEIR sake, not mine. I’m fine whether they improve their lives or not.

Opportunity is missed by most people, because it is dressed in overalls and looks like work.

Thomas Edison

Success (and wealth) looks a lot like hard work.

Mr. Hobo Millionaire
(with a hat tip to Mr. Edison)

A lot of people complain they just can’t get ahead, yet they work 40 hours or less per week. News flash… you’ll never “get ahead” working 40 hours a week. You must put in extra effort/extra time to get ahead. If 40 hours were all that was required to get ahead, nearly everyone WOULD be ahead.

There are 168 hours in a week. Do you realize 40 hours is less than 1/4th of the total hours in a week? 1/4th!!! Throw in sleeping 8 hours a night and 3 more hours for driving, eating, and bathing per day… you still have 51 hours left!!! What are you doing with your 51 EXTRA hours per week? Oh… and that’s 51 hours per week… Over 2500 extra hours per year. Do you realize if you simply decided to work these extra 2500 hours a year for 10 years, make an average of $10/hour… you could save $25,000 a year for 10 years. That’s $250,000 in savings in 10 years. If you did that from age 20 to 30, invested the $250,000, and went back to a normal 40 hour work-week at age 30, for the rest of your life, you would be set for retirement if you never added another dime.  By age 65, that money would turn into 1.3 million at 5% interest or 3.6 million at 8% interest. Again, that’s if you never added another dime to it. Oh, and if you got a 5% return over the initial 10 year period of saving $25,000/year… that would actually be $355,000 that would compound for 35 years, not $250,000, making our age 65 numbers 1.9 million at 5% and 5.2 million at 8% interest.

Oh, and you say you don’t want to work an extra 2500 hours a year for 10 years, then work half that. The numbers are still pretty incredible. If you’re young, work HARD and SAVE. The compounding interest math is CRAZY. It will pay off for you in the long run.

What do you think? Is it insane to work more than 40 hours a week to get ahead? Please comment below.

 

Wealth, Not Retirement

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The idea of saving for retirement can be boring. If you’re 50 or older and haven’t saved, saving for retirement can feel like life-or-death, but when you’re in your 20’s, 30’s, and early 40’s, retirement is the last thing on your mind. I’m hoping to help change your mind by not making saving about retirement, but about building wealth.

Too many people spend money they earned… to buy things they don’t want… to impress people that they don’t like.

Will Rogers

Focus on building wealth, not retirement.

Mr. Hobo Millionaire

When you think about saving for retirement, you think about not dying broke. Not being dependent on government support. Those are valid concerns, but building wealth is so much more than that.

The sooner you build wealth, the sooner you have more peace of mind of your future. You have choices about where you want to live. You have choices about where you want to travel. You have choice about your kids college and future. You have choices period. Other than stuff you imagine buying or experiencing, you also have the choice to GIVE, to help others. Broke people can’t afford to help others, and there is no bigger reward in life than to be able to help someone out financially that’s down on their luck.

Building wealth is SO much more than growing old and retiring. Some folks who are into building wealth refer to it as “financial independence” (FI). FI is more of a term related to saving enough money (building enough wealth) that you can, in theory, never run out of money. “FI” is also referred to as “FIRE” or “financial independence retire early”. I’m not much for retiring early, but I am for working on what you want to work. We’ll talk more about FI and FIRE in an upcoming article.

The main goal of this initial article is singular. Don’t think about saving as money for retirement and old age. Think about saving money as building wealth (and the freedom it gives you at ANY age).

What do you think? What is financial independence to you? Please comment below.

Mr. Hobo Millionaire Observations on Life and Money

Mr. Hobo Millionaire

I blog about money, financial independence, life, and entrepreneurship. I got rich slowly (over 20+ years) with a niche software business. I also failed at a number of other things (and mild success with a few others). I share what I did right along the way, and a lot of what I did wrong, with a goal to encourage you think differently about life and money.

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