I love my older brother. I would do anything in the world for him. I think, care and worry about him all of the time. No, nothing is wrong, at all. It’s not that kind of worry, so readers, please don’t, “worry”. I always think about how great of a person he is and the potential taking on life, in full force, as he has just as much energy as I do. The one HUGE area he has potential in, is guess what? His finances. He’s not completely awful with money, but it’s moreso that he has so much potential to be that much better with money. When it comes to family, finances is an area that you would kill to make sure that they are taking advantage of every single opportunity that they have. I want him to be right there with me, if possible, or even have his finances in better order than mine! That’s what we do as family. However, it wasn’t looking like that was going to happen and after years of working with, talking to and showing him what can happen, he did one thing. He finally said, “Lanny, please help me be better”. That has been the best statement I heard from him all year.
Every few months, when we have a good amount of time to be together, we have plenty of heart to heart conversations, usually very intense, because of how hyped up our conversations become. The topics could be about money, work, Cleveland sports, relationships, relatives or even WWE (my brothers are AVID fans). Similarly, it was approximately 3-4 weeks ago and I was over at the house with him, and he showed me, first, that his old 401(k) plan was being terminated with his former employer, due to how long he was inactive/not employed there. He had left that company 5 years ago, and it looks like they are trying to save money, by purging inactive accounts. Therefore, that was topic one.
Then, I always bring up his student loans to him, to re-finance and then have two options. Option one is to either save more money per month or option two, which is making the same payment, just pay them off sooner. That was big topic number two.
After debate, discussion and seeing the full picture, he asked if I could help him fix this situation and make it better!
Going back to the first topic, it actually goes hand-in-hand with what we did towards mid-April, tax filing season. He finally was okay with opening a traditional IRA account for him (YES! YES! YES!), in order to reduce his tax liability by an extreme amount (Tax Saving Strategy #3). Therefore, we took that initial first step. We did not expect him to receive a notice to move his old 401(K). Therefore, having opened that account, was going to make things very easy. When he received that notice, he asked what we should do. This was an easy decision and we simply did the paperwork to transfer or roll his old pre-tax 401(k) into his new traditional IRA account! That was around May 9th, and let me tell you – it definitely takes a LONG time to get that transfer finished. Literally, as of this writing on the 24th, the funds have finally settled into the new traditional IRA account.
He knows about my dividend investing passion. He is finally starting to understand it a little more. He asked me to help him manage it and buy easy companies that would be around forever. Heck, he even said that, though he loves WWE stock, that he prefers other companies to have a better yield and even longer growth rate track-record. This is my kind of guy! I put together a framework for him, for stocks to consider, hell – there is a reason why I ask – is this a Dividend Investor’s stock market? What layout did I put together for him, you ask? Here is the breakdown:
What do you see above? Just a few dividend aristocrats in PG, T, PEP and XOM. What else? Oh, you know, a few top 5 foundation dividend stocks of course! I wanted to spread the love around, gather strong yield, consistency in dividend growth and have a basket of companies that have been through thick and thin in this global economy.
Very excited and pumped for him, especially because these are stocks the dividend community is buying, not to mention Bert and myself scooping up a few of these dividend stocks where we can! The average yield of this portfolio will be approximately 4.35%, not too shabby brother, not too shabby.
Now, it was time to refinance. He had two sets of loans – one set that is at everyone’s friend – Great Lakes and the other at Navient (NAVI). The set at NAVI, had a weighted average interest rate of… grab something… 10.30%!!! Holy crap, I thought. That was utterly & insanely high, and I just had to put a stop to it. The loans at Great Lakes were around 5.5-6.00%, so my focus was on package one. So on May 11th, we submitted everything to be re-financed. Who did we re-finance with? The one and only… Earnest! The process was so easy, simple and all we had to do was submit the loans, two pay stubs and they had access to his bank account. I highly recommend.
So what rate did we get?! We were able to reduce that weighted average rate of 10.30% down to… drum roll please… 5.22%!!! That is with an auto-payment enrollment reduction of 0.25%, as well. The rate is fixed and is set to mature at the same time period of when the loans were set to mature at NAVI. The big difference here is that he is saving around $50 or so per month! Also – that’s a referral in the links above for my brother, don’t hesitate to check out your rate and sign up! I know my brother would appreciate it : )
Now, my brother is set to roll full-steam ahead come June, when he will receive his first dividend income check! Well, technically not a check, but at least an automatic reinvestment into more shares. The two stocks that have been purchased thus far are Pepsi (PEP) and Exxon Mobil (XOM)! Those dividends will arrive in June. Therefore, the dividend reinvestment engine is going to be turned on autopilot going forward, as of right now.
Additionally, he now has $50 of NEW cash flow opened. We have a few options, and the readers can let me know what you think on them. We can use that $50 and take advantage of the tax benefits, by automatically setting a $50 deposit into the same traditional IRA account on a monthly basis. That way, from June until December, that would turn into a nice $350 from that 7 month stretch. The other option could be to apply that $50 to the student loan balance and generate the guaranteed return of 5.22%, which would be far above the dividend yield on his portfolio. The other option would be for him just to have extra cash on whatever else he may need.
I would be very curious on what you think on the above items! What option would you employ with the extra $50 per month?
Lastly, I just want to say that I am so damn happy for my brother. I love him through thick and thin and am so excited control is going back into his court for his money. I hope to the Lord above these are just the few steps in a long, fun journey ahead and that there will be much more to come from him, once he sees the fruit from these actions! There will be more to come in a few months, hopefully, as I will share his progress this year. Thank you again, everyone, for reading one of the best things that has happened, so far, this year.