Since everyone is doing it, I figure why not review 2012. First, I will start with some goals I made for the year and see what I was able to accomplish.
Smart Financial Goals
Starting with the financial goals, I was not able to eliminate PMI on the rental house (yet). I looked into it during the first part of the year and found out that I would have to have a lot more equity to be able to do so. However, I have started the process of refinancing 5 of my rentals and will be able to eliminate private mortgage insurance with the refi. So, it may work out after all but in 13 months instead of 12. Grade B+
I also had a goal of paying off the business line of credit. This was in fact accomplished during the spring. However, one of the tenants lost the air conditioning in May and I had to put in a whole new unit to the tune of about $4500. Currently, the line of credit is not paid off. Grade C-
I also wanted to get the Discover Card paid off. I paid it off in November, although with other loan proceeds. Nevertheless, the interest rate is much lower. However, I recently got an offer in the mail for zero percent balance transfer with Discover for 6 months with no fees. So I paid a big chunk against another card. While not perfect, it is some progress. Grade B
I also made it a goal to make $30,000 through blogging this year. Not even close. I figure I will make slightly more than last year. Plus I made a profit. But it didn’t happen at all. I won’t give myself an F since I at least made something and didn’t cost myself anything. Grade D-
Smart Personal Goals
I did make some personal goals as well. I wanted to lose weight and get below 200 pounds. It didn’t happen. In fact, I am currently close to the highest I have ever been at 228. When I weighed at the end of the day, I was 229.2, but I had just eaten. This morning I was at 227.4. Obviously a BIG FAIL! This will become another goal this year. I may not hit 200 and won’t even set that as a goal, but I need to see something positive happen. Grade F-
As far as the de-cluttering goes, I did clean my closet. But my room is a mess. Much of it is from my daughter’s room when she moved to the basement. We have a foreign exchange student from China so had to clean out a bedroom and rearrange sleeping quarters on short notice so there is still residual chaos. We will work on it this year. Also, the basement and garage are improved but nowhere near where they should be. Grade C
Popular Posts Now, let’s take a look at the 5 most popular posts for CFM this year:
1. Does One Million Dollars Make You Rich?–This post was in response to someone who won the lottery and was still on food stamps. Now I am not sure that one million before taxes is enough to make one “rich”, but I do think that one million dollars after taxes can be used to create some decent cash flow. At least that is what I would do with it.
2. Warren Buffett, Intel, and Me–This was one of the most popular posts for 2011 as well. I guess when you make it to the first page of Google for people searching “Warren Buffett and Intel” which is what happened for a time, then your post is quite popular. However, now that he has sold his position, it is likely to get less press. I, too, sold out my position in Intel. I made about 7.5% capital gains on my Intel investment that I held for about a year. I also made 4% in dividends during that time. Not bad considering the time frame from late August 2011 to early September 2012. I would consider Intel again.
3. What Would I Do with $50,000–Again this is one of those posts which looks at my thoughts regarding investing and cash flow. Not that I have $50,000 lying around, but if I did, I would be working on getting some cash flow out of it. Currently, I would look at paying off some debt which would free up room in the budget and provide me with a guaranteed return.
4. CFM Celebrating 100 Posts with Cash Giveaway–Who doesn’t love winning cash? No wonder this post ended up being so popular. Unfortunately, earnings during the year didn’t keep up the pace that I would have liked, so I have been unable to conduct another giveaway. Maybe this year will end up being better.
5. Gotta Love Dividend Stocks–Investing and making money are some popular topics. I was making good progress on my dividend stock investing in my retirement account. Too bad that I had to pay some back taxes and cash that out. But now the taxes are paid and there is more room in the budget. Focusing on debt pay down during 2013 will be the plan.
Goals for 2013
I will be making and outlining my goals for 2013 over the next few days. I had hoped to get this post out a day or two sooner, but it didn’t happen. Nevertheless, I enjoyed the holidays so all is good.
Well, the past two weeks have been incredibly busy and it feels like I am doing all I can to keep my head above water, but it feels like it isn’t working. Last week, I put in 75 hours and work. This week, I was out of town yesterday and today and was very busy during the day with minimal internet access. Now, it is 11 pm in the hotel so I will be making this short so that I can get some sleep.
Options Expired Today
Today was options expiration which will end up being a good thing for me since I have some puts that will be exercised. The most important one for me is the ONXX $46 strike puts which I purchased a few weeks back when ONXX was making a spike in price (back when the DOW was over 13,000). I did this because I could lock in a profit compared to my basis.
Well, ONXX closed today at $41.82 so I will be selling those shares for $46! Yippee! Now I plan on picking up some Nucor shares next week since that is part of my dividend plan. I will still have a few ONXX shares left so I purchased some additional June $38 puts today. I will have to let you know what the new basis becomes, but it will likely be close to $42 per share. Then I could sell the June $42 calls and end up with a profit if called.
I will also sell some DRYS and SLW shares as well when their puts get exercised. I will be replacing those shares at a cheaper price so will be able to profit by the price differential. This is what the summer will likely be about. Hopefully, it won’t be a repeat of 2008, but you just never know so it helps to have a plan.
Here are some carnivals that have featured my three blogs:
Carnival of Financial Camaraderie #30 – PT
Plus a few more:
I recently ran across a video at Kitco’s Video News page that featured an interview with Kevin O’Leary who is a Canadian entrepreneur who founded SoftKey, a software company that eventually acquired The Learning Company before selling out to Mattel. Apparently, he is also on the show Shark Tank on ABC which I have heard about but never bothered to watch.
I don’t think it is important to watch the full video, but I do think that he made one very important point which I will share with you and which I am working on implementing:
- Never buy a stock that doesn’t pay a dividend!
It is really quite simple and makes a lot of sense. He doesn’t look at earnings when evaluating a stock. He looks at free cash flow and wants to make sure that some of that cash is being returned to the owners (the shareholders) of the company.
A Transition in Thinking
I am starting to see from where he is coming. Much of the market’s return has been the result of dividends. Just take a look at the following graph which I found at The Market Oracle:
If this graph doesn’t convince you of the importance of dividends, which account for over half of the S&P 500’s, then how about I show you another graph that looks at the performance of the Dogs of the Dow vs the S&P 500. In case you didn’t realize it, the Dogs of the Dow are those stocks in the 30 from the DJIA that have gotten so beat up in terms of price, that their dividend yield is among the top 10 of those 30 stocks.
So had you been holding stocks that paid dividends, there really would not have been a lost decade. You would have received consistent payments of cash to add to your portfolio enabling it to grow and make money. You can just look at the graph and see that the S&P 500 lost money during the decade that saw two major shocks. And yet, stocks that paid dividends (namely, the Dogs of the Dow) actually made money.
Fortunately, it is possible to teach this old dog some new tricks. That is why I am simply working on changing all the stocks in my retirement accounts to dividend paying stocks and tracking my dividend income this year. I did manage to hit my goal for the 1st quarter. Over the next 25 years, I will allow those accounts to grow and reinvest those dividends into more stocks.
In fact, I will probably buy some more STX and INTC this week since they have been holding up quite nicely during this recent market decline. I will also watch the ONXX $46 puts get exercised on Friday so I can start my purchase of Nucor (NUE) next week. I won’t get the dividend for this quarter, but should be in a position to pick it up in the third quarter. The same holds true for INTC and STX since the ex-dividend date has passed. Nevertheless, adding to these positions is just a good idea.
Obviously, I will continue to publish the quarterly update on the dividend progress and see if it continues to grow. According to the charts above, it should be a great plan!