Ingredients vs. Recipe

By Josh January 30, 2019

Back in the early 1990s, a restaurant chain called Chi-Chi’s spread rapidly across the United States. On one visit to my local Chi-Chi’s, I overheard someone in the restaurant tell his dinner guest, (paraphrasing) “Mexican restaurants are going to take off around the country. All of the dishes have the same ingredients, so they are able to keep their food costs low and their margins high.” I was too young at the time to understand business fundamentals, or to know what margins were, but I was able to see that every plate coming to my table had the same basic ingredients: a tortilla (flour or corn, hard or soft), some cheese, meat, tomatoes, lettuce, onion, rice and beans. Later on, guacamole would become a popular addition, thrilling Millennials everywhere 😊 I’m kidding…

And just as that restaurant soothsayer predicted, Mexican restaurants would take off in popularity through the late 90s to today. Chi-Chi’s would not be able to make it, due to some of the same things that befell later Mexican-food brand Chipotle, although incredulously, Chipotle seems to be able to keep bouncing back.

 

So why am I writing about Mexican food on a personal finance blog? Well, I recently had the revelation that we all have the same financial ingredients available at our disposal, but our individual situation and choices will determine the recipe that we choose to pursue. Instead of tortillas, cheese, meat, tomatoes, lettuce, onion, rice and beans, we have Mutual funds, ETFs, Stocks, Bonds, Real Estate, and Cash. We even have hard or soft shells (401ks & IRAs vs. brokerages and savings accounts).

Where Chipotle, Moe’s and Qdoba have quick service fast-casual, Roboadvisors like Betterment and Wealthsimple make saving and investing hassle-free and quick to set up. The fast-casual places also offer catering, and Roboadvisors often provide tax-loss harvesting or individual recommendations from an advisor.

You might choose shredded or ground beef, or some carne asada for your tacos, but you can choose US stocks, International stocks or REITs to do heavy lifting in your portfolio. For a lighter choice, you might stick to chicken or a vegetarian option, but in your portfolio you can fill up with dividend-paying stocks or corporate bonds to help provide income but limit your downside risk.

Most people like to mix things up a bit by adding guac, sour cream, or a side of salsa, and investors often do the same thing by adding a putting a few percentage points of their portfolio into individual stocks, crypto-currencies, or precious metals like gold & silver. These things can jazz up your returns, or they can fall flat like some brown guacamole.

Whatever mix of these ingredients you choose, you can make a worthwhile portfolio. Just don’t fill up on the free chips and salsa; stick to your spending and investment plans so you can enjoy the recipe you are building!

Chips & Salsa
Chips and habanero salsa at Cabo’s Cantina, in Downtown Fort Myers, FL

Our backgrounds will decide some of this for us. Someone working in government might have a 457 plan that is perfect for early retirement, but these often have 0 match from the employer. That means a high savings rate and aggressive investing will need to do the heavy lifting of building the recipe to the desired amount. Someone working in the private sector may have a 401k at their disposal, with a generous match (FREE MONEY) from their employer. This person is also likely paid more than their government counterpart, so they are more easily able to max out that 401k or their IRA, and their investments won’t necessarily have to work as hard for them because there’s more money to do the work of compounding.

After building your recipe, stick it in the oven (or in the words of Jim Gaffigan “a dirty microwave”) and wait for the heat to do its work. You can always keep it interesting by building a side portfolio of fun stuff like a few shares of your favorite companies, and treat that like dessert (fried ice cream is my favorite)!

And look out for specials! The lunch combos can be a great deal, just like when stocks temporarily go down in cost. While it can be terrifying to see your life’s savings go down in value, it is also a great time to splurge on some of your favorite ingredients to help make that recipe extra tasty for the future.

Investment fees are like the Montezuma’s Revenge of the investing world. Things can seem to be going along great, until something in the water strikes and cleans out a portion of your accounts! These fees can seem low, insidious little 1% or so here and there, and over time they can take over 30% of your portfolio. Be extra mindful of any account fees or loads that are charged in your accounts, and always maintain a buffer in your cash accounts to pay an unexpectedly-high bill or hospital visit.

So you may have guessed by now (over 800 words in) that I’m not much of a foodie or a cook. I order cheese enchiladas or a cheese quesadilla pretty much always when I go out for Mexican food. I stick with VTSAX (Total US Stock Market Index fund from Vanguard) for over 2/3 of my total allocation. I’m pretty tame with my drink choices (Sprite or a <<cerveza>> if celebrating something) and that echoes my high cash allocation right now. I have very little in bonds, some International stocks, and I’m slowly removing Peer-to-Peer loans and Precious metals from my holdings, so my personal recipe has just a dash of hot sauce. It might not be for everyone, but I like it and it seems to be working for my needs.

So reader, what is your favorite Mexican dish? Does it have any correlation to your investment philosophy, or am I a total weirdo when comparing the two? As always, I thank you *both* for reading 😊 Haha!

2 thoughts on “Ingredients vs. Recipe”

  1. The dirty microwave bit made me smile 😀 I love walks down memory lane! Remember when Chipotle and McDonald’s were a thing!?! Also, I still miss Chi-Chis to this day.

    ::insert thoughts about money here…Go Vanguard!::

    1. I had a lot of fun writing this one! I only ever ordered the kids grilled cheese and french fries at Chi-Chi’s, even after I reached about age 20… But I still remember the taste of that place

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