Gutshot Hello

[Hyper]

Hello, 47 yo. Was let go at 45 after 18 1/2 yrs during the co I worked for second down turn. Weathered the first downturn and after seeing so many petrified co workers turn on each other to keep their positions I'd had enough. I could have stayed but it was a horrible environment so I went with it, looked quite a while for another job but didn't want to go back to what I was doing and honestly got to liking time to myself. Wife and I are very conservative and with the Lords help have worked our back sides off. We're not real bright but have monster work ethics. Figure we have probably worked about three average lifetimes all ready. 0-debt, 600k+, 300k+ 401ks, 300k+ in real estate we plan to sell soon hopefully. We do every last bit of our own maintenance, car, home, etc, so our expenses are reasonable that way, We are humble and in no way materialistic. I like going and we do have a considerable vehicle gas bill. We have lived the last yr and half off the wife's income + about 2k out of savings per year. Her income will likely not raise significantly in the future except for minor raises and regardless of what she says she will probably work as long as she can, but I would like her to be able to also stop should she want to. She enjoys working. I did start a very small business with no returns yet but possibly in the future. It's a small niche thing so may not go over at all but has been good for our taxes. Now it's time I get my finances in order for the future and I need HELP, lots of it, because I would rather not go back to work for someone. I really need to start making some kind of return. Hyper

[MBAustin]

Welcome, Hyper!

You sound like the resourceful and resilient type, and you'll find lots of friendly company here. The "FIRE and Money" forum might be a good place for you to start looking for ideas.

If you have some specific questions now, go ahead and ask them here - many members are happy to contribute ideas.

Your experience will also be valued by others so feel free to jump in!

[rodi]

Hi Hyper -

Sounds like you've made the transition from employee to part-time business owner pretty well.

I can relate to what you describe of surviving layoffs during downturns and seeing folks turn on each other. The mega-employer I was with for almost 20 years had regular RIFs and some folks got really nasty about throwing other folks under the bus.

Welcome to the forum.

[Hyper]

Thank you. We weren't very invested but jumped in big I believe back in 2001 and with 9/11 immediately lost 150k which we rode out and we did get that back by 2006ish just in time to get nailed again by the recession and bailed after loosing over 40k and after that put everything as safe as possible with the 401ks in guaranteed funds. So we have never really actually made any $ in the markets and are EXTREMELY CHICKEN now, which is why I feel gutshot! Wife would like to stay miles away from the market but I feel we need to do something to make a return. I hadn't heard much about Ibonds until I read that thread so maybe that is one place to start. I don't like the long terms for a CD. I want to learn as much as possible about how the more conservative types invest. We made what we have off our backs, not by our brains. Our backs are gone. If we lose, chances are we won't be able to get it back. Hyper

[someguy]

Welcome Hyper! I hope you'll stay active reading and posting here since you bring a relatively uncommon perspective here.

I recommend you are careful with your small business if it keeps posting a loss. The IRS requires that a business intend to make a profit (otherwise it is considered a hobby), so showing consistent years of loss can be a red flag.

Regarding where you put your money: keep in mind that over time inflation averages around 2% per year. If you put $100K under your mattress today and inflation over the next 10 years is 2% per year, you've essentially thrown away $19K and have today's equivalent of $82K. If inflation were 3% over the same period, you'd have $74K in today's dollars!

A more concrete example is the cost of gasoline. I remember about 20 years ago when gas first crossed the $1 mark. Now it's at least $2.50 and has been over $4 at times. That's inflation at work.

[brewer12345]

Quote:

Originally Posted by Hyper Thank you. We weren't very invested but jumped in big I believe back in 2001 and with 9/11 immediately lost 150k which we rode out and we did get that back by 2006ish just in time to get nailed again by the recession and bailed after loosing over 40k and after that put everything as safe as possible with the 401ks in guaranteed funds. So we have never really actually made any $ in the markets and are EXTREMELY CHICKEN now, which is why I feel gutshot! Wife would like to stay miles away from the market but I feel we need to do something to make a return. I hadn't heard much about Ibonds until I read that thread so maybe that is one place to start. I don't like the long terms for a CD. I want to learn as much as possible about how the more conservative types invest. We made what we have off our backs, not by our brains. Our backs are gone. If we lose, chances are we won't be able to get it back. Hyper

Sorry, but this is a case of pick your poison. If you don't take some asset risk, inflation slowly but surely eats you alive.

[someguy]

Hyper, a bit more detail about inflation and where to park your money. It sounds like you may have chosen far too risky of an asset allocation (AA) in your previous forays. Riskier AA's tend to average larger average gains in the long run but also tend to be more volatile (have more and bigger swings up and down).

[Hyper]

I think your right. In the past I would look for the fund with the highest rate of return over the longest timeframe and usually go with that fund, thinking that if I could make half of what they claimed the return to be, I would be satisfied. This must be the wrong way because all I've done is lose except for the guaranteed fund I currently have my 401k in, which is returning 1.65% I believe.

[someguy]

Quote:

Originally Posted by Hyper I think your right. In the past I would look for the fund with the highest rate of return over the longest timeframe and usually go with that fund, thinking that if I could make half of what they claimed the return to be, I would be satisfied. This must be the wrong way because all I've done is lose except for the guaranteed fund I currently have my 401k in, which is returning 1.65% I believe.

That is a pretty sure way to end up with the most risky options. A very simple portfolio more in line with your risk tolerance would be a mix of Vanguard Total Bond Index and Vanguard Total Stock Market (US) Index. If you wanted a little more diversity to spread risk around, you could add a third fund: Vanguard Total International Stock. Basically the higher the percentage of bonds the lower the risk and volatility and the lower the likely return. The higher the percentage of stock index(es), the higher the risk and volatility and the higher the likely return. Since you want to be conservative, you might consider something like 70% bond index. And then either 30% US Stock Index or 15% US Stock Index plus 15% International Stock Index.

If inflation averages 2%/year, you are losing money guaranteed every year with your guaranteed return fund.

[racy]

Hi Hyper,
Here are 10 short videos that are packed with information on how to invest in a way that has shown over time to produce good results: Video:Bogleheads® investment philosophy - Bogleheads

And, pay special attention to #5!