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General Discussion => Share Your Badassity => Topic started by: TrulyStashin on June 03, 2013, 11:01:43 AM

Title: Reward temptation-resistance with dividends
Post by: TrulyStashin on June 03, 2013, 11:01:43 AM
On Saturday at my son's Little League game, I was seriously craving french fries.  The smell wafted over the ball park and I almost gave in.  That prompted my New Rule:

Anytime I successfully fight off the temptation to waste money, I am allowed to transfer the amount I would have wasted into my Roth IRA brokerage account.

As a result of my new rule, I fought off the FF craving ($2) and later that weekend fought off the ice cream craving at the supermarket ($4).  I transferred $6 into my Roth IRA last night.  It will be interesting to see how quickly this adds up.  After Q1 dividends, I had about $78 in cash waiting to be reinvested.  Now I have $84 which is almost enough for 3 more shares of a company I've been watching closely.

I'd rather have stock than French Fries.
Title: Re: Reward temptation-resistance with dividends
Post by: Sparafusile on June 03, 2013, 11:12:08 AM
How will you resist the temptation to put yourself in a positions where you have temptations to resist just to allow yourself to put more money in your Roth IRA? In other words, if you have the money, why not just invest it how you want to begin with?
Title: Re: Reward temptation-resistance with dividends
Post by: Will on June 03, 2013, 11:24:07 AM
It is kind of like ImpulseSave.  Sounds good, but how practical is it?  Yeah, it is better than impulse spending.  But mutual funds are better than stocks too.
Title: Re: Reward temptation-resistance with dividends
Post by: TrulyStashin on June 03, 2013, 11:51:07 AM
My goal is to build my "frugal muscle."  This gives me a tool to refocus my thinking away from the instant gratification of French Fries and toward long term wealth.  I suppose some people might have an issue with generating artificial temptations but that seems contorted and odd.  Even if it happens, I'd still be saving/ investing.

I have ETF's in my 401k and 12 years in the state pension system from teaching but I've been educating myself on value investing since 2010 and have a Roth IRA brokerage account just for this.  When I left teaching in 2008, I rolled my meager 403b ($13,000) into a Traditional IRA then rolled it into the Roth brokerage.  I started picking my own stocks in 2010 and it has changed my sense of my own power in ways that mutual funds don't -- frankly, they're boring.   When I research a company and decide to buy, I'm invested for more than just money.   It's fun and more engaging that a mutual fund over which I have no control, really.

I've had some dogs since 2010 but I've also had some phenomenal successes with at least 4 of my choices up 120% plus.  I started with $13,000 in 2010 and have added no cash since then (I was a pauper in law school).  The value just cracked $20k all because of my research and my faith in myself (I bought Netflix at $70 ish in 2010 and have hung on through the wild valuations -- hurray for me).  Generating 63% growth over 3 years on my tiny kitty of money makes me feel powerful over my choices, my money and my future. 

That wasn't the work of some wonky investment banker/ fund manager.  That was MY DOING.  Hell yeah.
Title: Re: Reward temptation-resistance with dividends
Post by: markstache on June 03, 2013, 01:12:31 PM
I debated bothering with this post, but I have to do it.

Have you compared your picks against an index? For most of 2010, the Vanguard Total Market index (VTI) was about at 60 (give or take). Now it is at 85. That's an increase of 42%. To get to 20k from 13k is an increase of 54%. You beat the index, but maybe not as much as you thought.

Am I saying don't ever buy individual stocks? No. But pretty much everyone who stayed in the market after 2009 did will in that period.

The way I look at it, I have an army of literally millions of researchers constantly adjusting the prices and finding opportunities for investment. Could I add to that sum of knowledge? Sure, but I could only add a little bit, so I would only allocate a small portion of my portfolio to it.

I like your idea of rewarding yourself for avoiding temptations. I've been looking at some ways to make saving more fun after knocking down the lowest hanging fruit. Since Vanguard doesn't charge me per transaction, this could add a little excitement at no additional cost.
Title: Re: Reward temptation-resistance with dividends
Post by: TrulyStashin on June 03, 2013, 01:26:41 PM
Well, you might be right that I'm not beating the market by some brilliant margin but it was still all my doing and that makes me feel like a badass.  I rounded my numbers here for simplicity -- it was about $12,700 to start and is just under $21k now, depending on the day.  According to my Scorecard on Motley Fool, I'm beating the market by about 4 points. 

Would I put my entire investment future in my own hands?  No.  I don't -- thus, the state pension and the 401K in ETF's.

Perhaps I'm not stating it clearly enough but what I'm effecting here is a change in thinking and perspective.

My Roth has replaced the shopping mall.  In the past, I'd drool over the Nordstrom catalog and pick out those shoes with that dress and the cute belt from page 12.  Now, I "shop" for companies to buy stock in (or otherwise adjust my portfolio).  I can trade stocks for a flat $8.95 fee, which I consider equivalent to the cost of lunch at the mall.  I'll look over my allocation (metaphorically "my outfit") and see what needs adjusting, for instance -- do I need more small caps (instead of that cure pair of flats)? 

The whole point of embracing MMM's philosophy is to de-program ourselves away from consumerism and toward constant optimization.  This new rule pushes me along that road.
Title: Re: Reward temptation-resistance with dividends
Post by: hybrid on June 03, 2013, 01:57:51 PM
I say if your motivation tool works for you then run with it....  Avoiding temptation is hard, and temptation is everywhere.  Use anything in your tool kit to keep it at bay.
Title: Re: Reward temptation-resistance with dividends
Post by: rugorak on June 03, 2013, 02:01:44 PM
Agreed, if this works for you keep it up. Only suggestion I might make is try and max out your Roth anyway and instead shift this to a taxable account. This way you can take full advantage of the tax break a Roth brings and flex your extra stache muscles with the taxable stuff and get even more. Basically try and be even more badass!
Title: Re: Reward temptation-resistance with dividends
Post by: CorpRaider on June 05, 2013, 08:51:37 AM
I sort of did a similar thing a few years ago to give up smoking.  I figured out the daily expense and when I quit I set up a weekly payment of that amount on a loan.  It worked very well to keep me motivated.  If you enjoy investing and that helps incentivize you to build your capital that's a good thing, imop.  Not sure how you got NFLX into a value portfolio, but kudos! 
Title: Re: Reward temptation-resistance with dividends
Post by: davisgang90 on June 05, 2013, 02:03:43 PM
Picking stocks is fun, but I wouldn't do a brokerage for your entire retirement fund.

I have about $5k in an IRA brokerage account for stock picking.  The rest of my retirement funds are in IRAs and the TSP almost entirely in S&P500 index funds.