If you are one of my three avid readers, then you may have wondered if I was ever going regale you with more (true) stories about my rather substantial money mistakes. Well wonder no more, the time has come. And while this story does not have the “I sold 300 shares of Amazon in 2004 to buy a house in the height of the market in Southern California” hook that An Unintentional Meander Up Grumpy Avenue Part 1 did; it does have an otherwise avoidable $20,000 dollar tax bill waiting at the end of it. Not as memorable as my $750,000 opportunity cost? Fair enough, that sum still makes me light-headed. However, what if I told you I paid someone for the privilege of the $20,000 tax bill? And it was potentially avoidable? Stick with me and by the end of the story if you are not busting out the tried and true “Man that Grumpus is an idiot” line, then I promise you a full refund on your time and a beer next time we meet.
Not everyone learns the same way. Some people learn through reading, others learn through the spoken word, and others yet learn visually. I am a mix between reader and listener. I will also concede that I am a rather verbose writer, and am aware that I have written extensively on creating a financial plan. As a result, I wanted to try something different with this post.
Every now and then I like to push myself out of my comfort zone, so I thought I would build a financial plan by drawing some pictures. I should warn you, I am graphically challenged. And since I suck at drawing, I thought the use of Power Point might assist in producing something discernible. As most military officers know, nothing makes us more stupid than attempting to boil a complex topic down to a few power point slides — which is exactly what I did. I feel thoroughly chastened by the experience. Regardless, I hope all the visual learners out there enjoy the product of arts and craft day here at the Grumpus Maximus HQ.
Grumpus Maximus Comment: I originally wrote this post with the intent to create a clear and concise step-by-step on how to calculate your Gap Number. Turns out I wrote another tome. Some of you may prefer my ramblings. If so you are probably one of my relatives or friends. Or maybe you are waiting to laugh at another of my $750,000 dollar financial mistakes. Fair enough, all I can do is laugh about it too. But in case you don’t prefer my ramblings, I thought I would quickly refer you to some other resources that are clear and concise.
(**Grumpus Maximus is an Amazon affiliate. See Disclosures for more details.**)
OK, I’ve written two monster posts over the past two weeks, one of which I felt was a personal best. The other covered an extremely complicated topic which required a lot of research and rewrites. Even with all the scrutiny, Grumpus Brotherus The Younger still had to catch a few mistakes in the first published version of my last article.
(Quick segue: For all you fresh faced bloggers out there, it turns out this blogging thing is a lot harder than it looks. Not only do you have to create awesome content, but you need to make it look appealing with stock photography; think up terribly witty [or plainly terrible] captions; hotlink references to your previous posts; and promote your persona and site on social media. Admittedly I cannot keep that pace of work up alone, so I am taking on some easier subjects and topics until I find a blogging assistant. I am interviewing for the job in case you are interested. You can submit your resume in the form of a 1000 word essay at firstname.lastname@example.org.)
Do you have a favorite teacher from your time at school? How about one that particularly challenged you to be a better student? It could be a primary, secondary or college instructor who you remember particularly fondly. I had one in 5th and 6th grade (I went to a weird school where we had the same teachers for two grades in a row). Let’s call her Strictus Academicus. She was strict but fair and taught me how to channel my smarts and energy in a positive direction. I thrived under her tutelage, and the academic discipline she forged within me carried on for the rest of my life.
Much like Strictus Academicus, I am going to break out the ruler and be stern but fair with you. Don’t worry, no one’s knuckles are getting rapped, and no one will be staying after class. However, I am assigning some prerequisite reading and podcast listening. The prerequisites are for those of you not familiar with the difference between Traditional and Roth retirement savings vehicles. Many apologies for doing this, but I cannot allow you to continue reading the bulk of this post until you read or listen to the following articles.
I can hear the groans already. Yet, I need to talk higher level stuff, and if you don’t have the basics down, then I am afraid I will lose you. I may loose you anyways because this stuff is not the most exciting. The knowledge could save you money, time, and hassle though. And I would rather loose your attention out of boredom than confusion. As for your assignment, since other people have explained the basics much better than me, it will be easier if you to simply learn from them. For those of you Roth and Traditional Retirement Account (TRA) novices, see the bullet points below prior to class convening. And don’t worry I was just like you two years ago. Continue reading University of the Golden Albatross: Roth Options Vs. Traditional Retirement Accounts
“You only have to do a very few things right in your life so long as you don’t do too many things wrong.” — Warren Buffett
Learning Lessons the Hard Way
In the fall of 2004, I sold 300 shares of Amazon stock as part of a down payment on my first, and to this point only, home. Wait, before you say “Man, that Grumpus is an idiot” there is more to the story. To further rub salt in my wounds, I was buying a home in Southern California only eighteen months before we hit the height of the housing bubble. For those of you unfamiliar with historical SOCAL housing prices, I’ve posted the below chart of what housing prices did in San Diego from 1987 to 2015:
Yep, that’s bad. So bad that my home’s value only recently passed the price I originally paid for it, for the first time since the bubble burst. In the meantime the amount of Amazon stock I sold in 2004 would have done this: