Personal Finance Lessons Learned in 2021
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2021 Overview
As I am reflecting on the past year, all I can think is wow, what a crazy year for the overall macroeconomy, stock market, housing market, and realistically any market you can invest in. In the United States, the CPI (consumer price index) - the government metric used to measure inflation rate - for the month of November saw a year-over-year increase of 6.8%, the highest reported inflation rate in nearly 40 years. Because of high inflation, it is more important now than ever to invest your money in order to grow your wealth. Both writers have been investing for a little while and are by no means experts, but throughout this year we’ve both learned a few things about investing and we’re going to share our biggest takeaways here!
Brandon’s Biggest Lesson in 2021: The Power of Real Estate
I’ve said this a few times before, but this year I truly witnessed the power of real estate first hand with my only property (which I wrote about here). If you haven’t read the article about it, you may want to in order to get some content about my lesson. Initially the duplex I purchased did not go as planned, with quite a few hurdles and issues with the house. It took a few months of headaches and stress dealing with contractors and getting the house fixed up, and the house is by no means at the point I’d like it to be at, but in this year I’ve seen my house appreciate over 40% and the rent increase by the same amount. So not only am I gaining a ton of equity by simply living in the house, my expenses have decreased significantly over the past year. On top of it all, I purchased the property with an FHA loan so I was able to purchase the property with a loan-to-value of 96.5% of borrowed money and of that borrowed money, my property value has drastically increased giving me equity in the property from borrowed money. Oh and on top of it all, my interest rate on my property is a low 2.75%. If you read the intro paragraph, you’d know that reported interest is 6.8% as of November of 2021, therefore it would be unwise for me to pay off this loan quickly because of how low the interest rate is. AND on top of all of that when I move out the property, my tenants will pay down the mortgage I will just hold the liability.
Now, although all these advantages seem great I do realize the glaring negative from all of this inflation: it is now harder than ever to obtain rental properties. In my opinion this just means you need to be willing to go the extra mile, make more connections with contractors and others in the real estate space in your local area, and be willing to try house hacking! House hacking is a great initial strategy and I firmly believe that anyone that tries it, it will change their life and wealth trajectory dramatically. I look forward to 2022 as I will try to obtain another property and I’ll be bringing you all in on my journey for property number 2, so wish me luck!
Dan’s Biggest Lesson in 2021: Daily Cost Averaging
This may seem like an overly simple lesson, but throughout 2021 I really came to accept that “daily” cost averaging is the best strategy for investing (at least for me). I put “daily” in quotes here because most of my averaging is actually over 2 week periods, as I get paid every two weeks. Even in an environment where “stocks only go up” - which was more or less true throughout 2021 - I find it much easier to allocate a portion of every paycheck to my portfolio and make purchases on paydays. After selecting companies I have long-term (next 3-5 years) confidence in, it’s much easier for me to simply purchase a set dollar amount every time I make a deposit. There are even simple-to-use tools that will allow you to automate this process by setting up auto-deposits and recurring purchases. While I don’t use these tools for traditional stock buys, I have recently started using a similar platform - Strike - to hourly cost average BTC. With Strike, I have automated hourly purchases of $0.50 of BTC. Even though I “daily” cost average on companies I have confidence in, it’s important to occasionally check in on how the companies are performing - I do this by generally following news stories related to my investments (e.g., changes in leadership, executive board members showing up on Epstein’s flight logs, etc.) and reading quarterly reports. When a company I previously had confidence in is not playing out as I expected, I may pause further purchases and consider selling the stock (but will typically give it time to turn around). So, here’s to a great 2022, filled with many more DCA and HCA purchases. Happy New Year and thank you all so much for taking the time to engage with our content!
If you’re new to alternative asset investing, check out our introduction to alternative asset investing series:
Precious Metals (coming soon!)
If you’re new to stock investing, check out our introduction to stock investing series:
If you’re new to real estate investing, check out our real estate investing series:
We hope you have a great New Year celebration!
Brandon & Dan
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Disclosure: The article was written by Daniel Kuhman and Brandon Keys, and it expresses the author's own opinions. The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock, asset, or cryptocurrency. Brandon and Daniel are not financial advisors. We encourage all readers to do further research and do your own due diligence before making any investments.