Category Archives: Building Wealth

Social Security Payment Increase

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Social Security Administration warned that Americans will stop receiving their full Social Security benefits in roughly 13 years without actions to shore up the program.

Seniors and other Social Security recipients, as all Americans, are being clobbered by four decades high inflation, which has outpaced increases in Social Security benefits this year.

Historically, Social Security recipients receive one cost-of-living adjustment, or COLA, each year, which is based on inflation and is supposed to keep their benefits in line with rising prices.

But this year, beneficiaries are seeing their purchasing power erode as inflation overtakes their latest COLA increase of 5.9%. Inflation in May rose 8.6% from a year ago, a four-decade high that pushed up the cost of food, shelter, transportation and energy.

Congressional lawmakers have proposed a new bill, The Social Security Expansion Act, which will boost Social Security payments by $2,400 per recipient annually, while also shoring up the program financially. 

The new bill would seek to lessen the strain on people collecting Social Security by boosting each recipient’s monthly check by $200 — an annual increase of $2,400. 

“With half of older Americans having no retirement savings, and millions living in poverty, it’s far past time to address the future of Social Security,” Rep. Steve Cohen, D.-Tennessee.

Anyone who is a current Social Security recipient or who will turn 62 in 2023 — the earliest age at which an individual can claim Social Security — would receive an extra $200 per monthly check. 

Anyone who is a current Social Security recipient or who will turn 62 in 2023 — the earliest age at which an individual can claim Social Security — would receive an extra $200 per monthly check. 

The bill would increase the Social Security payroll tax on higher-income workers.

Currently, workers pay the Social Security tax on their first $147,000 of earnings. Higher-income workers who make more than $147,000 annually don’t pay the Social Security tax on any earnings above that level. 

Under the bill, the payroll tax would kick in again for people earning above $250,000. Only the top 7% of earners would see their taxes go up as a result.

References:

  1. Aimee Picchi, “Social Security bill would give seniors an extra $2,400 a year. Here’s how it would work”, MoneyWatch, June 16, 2022, https://www.cbsnews.com/news/social-security-benefits-inflation-extra-2400-a-year-social-security-expansion-act-retirement/

Grant Sabatier: The 7 Levels of Financial Freedom

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“It’s important to view money not as something that allows you to buy things, but view it as a means of giving you more choices in how you want to live.”

Grant Sabatier, the author of “Financial Freedom”, views money not as something that allows you to buy things, but as a means of giving you more choices in how you want to live. “With every dollar you save, you give yourself more freedom and options in life,” he said. “Based on how much you have saved and invested, ask yourself, ‘How many months of freedom have you acquired?’”

Sabatier’s 7 levels of financial freedom

Level 1: Clarity

The first step is taking stock of your financial situation — how much money you have, how much you owe, and what your goals are. “You can’t get to where you want to go without knowing where you’re starting from,” Sabatier says.

Level 2: Self-Sufficiency

Next, you’ll want to be standing on your own two feet, financially speaking. This means earning enough to cover your expenses without any outside help, such as contributions from Mom and Dad.

At this level, Sabatier notes, you may be living paycheck-to-paycheck or taking on loans to make ends meet.

Level 3: Breathing room

People at Level 3 have money left over after living expenses that they can put toward goals such as building an emergency fund and investing for retirement.

Escaping Level 2 means giving yourself some financial leeway, which Sabatier notes doesn’t necessarily mean making a much bigger salary. Indeed, 31% of working Americans making over $100,000 live paycheck-to-paycheck, according to MagnifyMoney.

“Just because you make a lot of money doesn’t mean you’re actually saving that money,” Sabatier says. “Most people in this country live through debt.”

Level 4: Stability

Those who reach Level 4 have paid down high interest rate debt, such as credit card debt, and have stashed away six months’ worth of living expenses in an emergency fund. Building up emergency savings helps ensure that your finances won’t be thrown off track by unexpected circumstances.

“At this level, you’re not worried if you lose your job or if you have to move to a different city,” Sabatier says.

When calculating how much you’d need to have saved, thinking about what your financial picture might look like understand exigent circumstances, rather then your regular, everyday expenses, financial experts say.

“If you have a job loss, you’d make some changes. You’d probably cut your gym membership and get rid of your subscriptions, for instance,” Christine Benz, director of personal finance and retirement planning at Morningstar, told Grow. “Think about the bare minimum you’d need to get by.”

Level 5: Flexibility

People at Level 5 have at least two years’ worth of living expenses saved. With those kinds of savings, Sabatier suggests, you have the ability to think about your money terms of the time it can buy you: “You could take a year off from your job if you wanted to.”

You needn’t carry all of this money in cash, Sabatier notes: It could be a sum total from your savings and investment accounts. As long as you’re able to access that money somehow, if you need it, you have the flexibility to untether yourself, at least temporarily, from the workforce.

Level 6: Financial Independence

People who have achieved financial independence can live solely off the income generated from their investments, according to Sabatier’s framework.

“You generally have one of two things,” says Sabatier. “You either have a large pile of money in an investment portfolio that’s generating interest, or you have rental properties, and cashflow from the rent covers your living expenses, or a hybrid of the two.”

To get here, you’ll have to invest a high percentage of your income, which could require you to shift to a more modest lifestyle to drastically lower your cost of living. Pursuing this lifestyle requires a change in thinking away from the traditional paradigms of personal finance, Sabatier says.

“People are being taught to save 5%, 10%, 15% of their income, and maybe you’ll be able to retire when you’re 65,” he says. “Thankfully, more young people are starting to understand that if I aggressively save and invest, I can work less and have more control over my future and my destiny.”

Level 7: Abundant Wealth

Financially independent folks who live off their portfolio income rely on the “4% rule” — a retirement rule of thumb that posits that an investor can safely withdraw 4%, adjusted for inflation, from a balanced portfolio of stocks and bonds each year, and be relatively certain that the money will continue to grow and won’t run out.

Although economists debate whether 4% is the optimal number (some more conservative observers think the right figure might be closer to 3.3%), the calculation behind it serves as the basis for establishing a FIRE number — the amount of money you’d need to retire and earn an annual income you could comfortably live on.

While those in Level 6 need to monitor swings in their portfolio to make sure their retirement is still going according to plan, those in Level 7 have no such worries. “Level 7 is abundant wealth — having more money than you’ll ever need,” Sabatier says. “You don’t have to worry about money, and it’s not essential to your day-to-day existence.”

References:

  1. https://grow.acorns.com/self-made-millionaire-grant-sabatier-levels-of-financial-freedom/
  2. https://www.cnbc.com/2022/05/10/the-7-levels-of-financial-freedom-according-to-a-millionaire-50percent-of-us-workers-are-at-level-2.html

Ten Critical Investing Lessons

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Investing in assets is a great way to grow your money or to put your capital to work.

If there’s any lessons investors relearned in 2022, when investing in stocks, bonds, derivatives and real estate, it’s that the markets will be unpredictable, defy logic and offer unexpected surprises.

Sometimes investors can correctly anticipate what’s coming based on our past investing experience and macro economic information. Other times, investors are reminded no matter what they thought they knew, the market always knows better.

For these reasons, it’s important to remember you can always become a better, more patient and disciplined investor, whether you’re learning lessons the hard way, reminded of lessons you previously learned, but forgot, or learning from the good or bad experiences of others.

Here are 10 Critical investing lessons you wish you could teach your younger, novice self:

1) Personal finances first – Master and manage your personal finances first and foremost. Dealing with volatility is never easy, but it’s so much easier when your personal finances are rock-solid (no bad or debilitating debt, positive cash flow and net worth, emergency fund established). Know and strengthen your personal balance and cash flow statements. And, always have some cash on hand to take advantage of market dips and pullbacks.

2) Expect to be wrong often when investing – You’re going to be wrong when investing. You’re going to be wrong a lot. Your goal isn’t to bat 1.000 (that’s impossible). Your goal is to increase your odds of success. Even the best investors are wrong approximately 2 out of 5 times.

3) Sell slow – Don’t be in a rush to sell – It’s tempting to book a profit quickly or sell when you get scared. One investor sold MSFT at $24. Current price: $268. Selling a mega-winner early is the most expensive investing mistake you can or will make. And, don’t forget about taxes when you earn income or sell assets. Any income (or profit) you earn from selling assets is taxable. Before you sell any appreciated asset or take any income, make sure you have enough money for the taxes so that your gains will not be wiped out by taxes alone.

4) Watch the business – Watch the business, not the stock. The two are not linked at all in the short-term. But are 100% linked in the long-term. Always remember, you’re buying a piece of a business, do understand the business and how that business generates cash flow.

5) Buy quality – Capital is precious. Making money and putting money to work for you are hard. Saving it and growing it are harder. Buy the highest-quality investments you can find. Avoid everything else. When you focus on buying quality, opportunities can be found in any market whether it be up (bull) or down (bear). Thus, stick to your long-term plan of buying quality companies every month and forget about how everybody else is performing.

6) Add to winners, not losers – Add more capital to your winners, not your losers. “Winners” means the business is executing. “Losers” means the business isn’t. Add to the best companies you can find at better and better value points.

7) Patience above all – Your biggest edge and investing super power is patience. Don’t waste it. Compounding over the long term is the greatest power of investing. Your holding period for an investment asset should be measured is in decades, not days.

8) Do nothing is usually correct – “Do nothing” (being a long term investor) sounds easy, until you start investing your capital. Investing should be more like watching paint dry than a Las Vegas casino. More often than not, it’s the correct thing to do. Ninety-nine percent of good investing is doing nothing. It’s essential to ignore the noise and the hysteria of Mr. Market. Never Let Short-Term Volatility Dictate Your Long-Term Investment Decisions.

9) Learn valuation – Know what valuation metrics matter and when they matter. P/E Ratio is great, but it’s not universally applicable, and it only works when a company is in mature (stage 4). Consider ROIC, P/FCF, and P/Sales. Remember: Every investment is the present value of all future cash flow.

10) Network with others – Connect with other trusted long-term investors and experts. A good community is worth its weight in gold. Especially when bear markets appear.

Final thought: Have a plan – A financial plan is paramount to your financial success. During periods of volatility, you often hear that investors should “stay the course”, but there is not a course to stay without having a comprehensive financial plan.

The plan should be based upon your goals, values, purpose and dreams for the future, short and long term. It is a roadmap for your financial future and it should provide a guide for how you invest. The plan should also address other areas such as retirement planning, estate planning, risk management, asset allocation review, and cash flow planning.

In all things, be grateful! Appreciate and be grateful for all aspects for your current life and the abundance of opportunities. Gratitude influences your state of mind, your behavior, your relationships and your perspective on the world.

Roman philosopher Cicero said that, “Gratitude is not only the greatest of the virtues but the parent of all the others.”

Source: Brian Feroldi, 10 Critical Investing Lessons, Twitter, June 25, 2022.

Older Americans Have Not Saved for Retirement

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Nearly one-third of older Americans have less than $10,000 saved for retirement.

Almost three in 10 older Americans between 55 and 67 years old have less than $10,000 saved for retirement, according to a new survey from Sagewell Financial, a banking and financial technology company focused on seniors’ money management.

Whereas, four in 10 older Americans had less than $50,000 saved for retirement. 

Paying for retirement by older Americans

The Sagewell Senior Certainty Survey of older Americans revealed:

  • 27% have less than $10K saved for retirement, and 40% have less than $50K
  • 57% are concerned that they will run out of money
  • 82% do not feel confident about their access to cash or liquidity in retirement
  • 73% said they welcome some income smoothing (receiving consistent income in the form of 1 or 2 consolidated monthly checks.)

“It is disheartening to learn that more than a quarter of Baby Boomers have less than $10K saved for retirement – that number jumps to 32% among women,” said Sam Zimmerman, co-founder and CEO of Sagewell. “Nearly 60% of seniors expect to live on less than $3K a month in retirement. We are at a crisis point now, and it will worsen unless we take drastic steps to improve the way our seniors plan for and live in retirement.”

Inflation and Recession

Older Americans are being hit hard by soaring inflation, painfully high gas prices, and fear of a looming recession which has outpaced increases in their benefits this year. These challenges have many older Americans worrying about their financial security and future. 

“If you have inflation and a recession combined together, it’s a whole different beast,” said Zimmerman. “This is a time for action. The quicker you move, the more agency you have in reducing the impact of a recession.”

Given the darkening forecast, it’s not too soon to plan ahead and prepare for a possible recession.

First, don’t do this

While there are money moves you can take to help ride out a downturn, that generally shouldn’t include bailing out of the stock market.  

“The worst thing people can do is they get nervous and pull money out the market,” said Jordan Rippy, a personal finance expert and accounting professor at Johns Hopkins Carey Business School. “Most people should be invested in the market for the long term.” 

Cut your budget

Instead, look for ways to trim your monthly budget. That can mean culling things like subscriptions and streaming services, while also negotiating discounts on your cable, cell phone and other bills. 

Pay off your debt 

It’s expensive to carry debt in an inflationary environment. In particular, you want to pay off credit card debt — or any kind of debt with a variable interest rate — right away. That’s because those interest rates will rise and add more debt. 

Keep contributing to your 401(k)

Do not press pause on saving for retirement. Indeed, if possible keep stashing the same fixed percentage of your income in your 401(k) or other retirement savings plan. Even if the market is volatile your assets will grow over time if you don’t try to time the market. 

This approach, known as dollar-cost averaging, ensures that people look past the usual dizzying swings in the stock market and keep building their nest egg.

Create new revenue streams

Try to diversify your income sources so that if your company downsizes and you lose your job, you’ll still have money coming in.

The Sagewell Senior Certainty Index is an online, random sample survey of 1,004 Americans between 55 – 67 who are approaching retirement or recently retired. The survey was conducted to gauge how seniors, particularly those who are online, view the certainty of their retirement planning. 

References:

  1. Jeff H, (June 21, 2022), Sagewell Senior Certainty Index, https://www.msn.com/en-us/money/retirement/nearly-one-third-of-older-americans-have-less-than-2410000-saved-for-retirement/ar-AAYHJVK
  2. https://www.sagewellfinancial.com/sagewell-senior-certainty-index-june-2022/
  3. https://www.cbsnews.com/news/inflation-recession-saving-money-tips-gas-how-to-prepare-financially/

Start Early to Build Wealth

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The single most important thing you can do to build wealth is to start early. Getting started is more important than becoming a financial expert and the easiest way to manage your money is to take one small step at a time.

You, like most people, do not need a financial adviser to help you build wealth. Instead, you need to set up accounts at financial institutions, such as Fideltiy or Vanguard, automate the day-to-day money management (including bills, savings, investing and paying off debt). And, you need to know a few things to invest in, and then be patient and wait thirty years for your money to grow.

But, that’s not cool or exciting. Instead of listening to the noise of the financial entertainment media, instead you want your money to go where you want it to go in accordance with your goals and values. You want your money to grow automatically, in accounts that don’t nickel-and-dime you with excessive expenses and fees.

It’s essential to start today to learn about building wealth and take small steps to save, invest and manage your money. You don’t have to be a genius or financial expert to build wealth. Successful wealth building takes time, discipline and patience.

What do I want to do with my life–and how can I use my wealth to do it!

Investing early is the best thing you can do; ‘doing nothing’ ranks right up there with trying to drive a car without tires; it’s a bad idea and it won’t get you anywhere.

The single most important thing you can do to build wealth is to start early.

Here’s a great example of why investing early matters, that puts it in numbers:

  • If you invest $5,000 every year (which is $417/month) for 10 years, from age 25 to age 35 and then never invest again, you’d still have more money at retirement, than someone who starts at age 35 and invests $5,000 every year until they retire.
  • The 25 year old starter invests $55,000 and ends up with $615,000 (given an 8% annual return, which is close to the average return of the stock market per year). The 35 year old invests $130,000 and ends up with $431,000.

So, remember the adage “The best time to start building wealth is twenty years ago. The second best time is today.” You can save and invest modest amounts, like $20 a monty, and over time realize thousands of dollars in gains.

There are a lot of societal problems, but it’s important to focus on what you can control. Don’t be a passenger in life. It’s a lot more fun to be a captain of your own ship, even if you go off course a few dozen times. Building wealth does require some work. But, the benefits and rewards will surpass the effort.

Take a long term view. The economy grows and contracts in cycles ( business cycle). Fear is no excuse to do nothing with your money. You cam automate your saving and investing, thus you can continue to save and invest whiles others respond to emotions of fear.

Investing for average stock market returns (8% to 9%) is great since most retail and so call smart money fail to beat the average returns of the stock market. Moreover, theses investors tend to do the things that guarantee their failure: trade frequently, make outlandish investments, incur high taxes and pay unnecessary fees. The single most important factor to building wealth is getting started.

The challenges and opportunities with building wealth, and the corresponding solution, are you. Your mindset, behaviors and actions are the number one problem.

  1. You’re the only one responsible for your financial problems.
  2. Know how much money you have coming in and then automatically direct it where you want it to end up.
  3. It’s essential to start early and to start investing today, even if it’s just $1.

References:

  1. https://fourminutebooks.com/i-will-teach-you-to-be-rich-summary/

Gratitude and Building Wealth

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“Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.” – Oprah Winfrey

Gratitude is the secret to building wealth! Why? Because gratitude turns what you have into enough. This is what makes gratitude a foundational element to wealth building. Gratitude allows you to find joy in what you already have. Keeping up with the Jones is the silent stealer of wealth.  Comparison is the thief of joy.  

Gratitude, the practice of appreciating all that the stuff you currently own, is an essential factor in building wealth over the long term. For example,

Gratitude allows you to appreciate and focus on the assets you already own.

“Gratitude in advance is the most powerful creative force in the universe. Most people do not know this, yet it is true. Expressing thankfulness in advance is the way of all Masters. So do not wait for a thing to happen and then give thanks. Give thanks before it happens, and watch energies swirl! To thank God before something occurs is an act of extraordinary faith. And that, of course, is where the power comes from.” — Neale Donald Walsch

The way to your best life is owning every moment and staking a claim to the here and now, according to Oprah Winfrey. “I live in the space of thankfulness — and for that, I have been rewarded a million times over. I started out giving thanks for small things, and the more thankful I became, the more my bounty increased. That’s because — for sure — what you focus on expands. When you focus on the goodness in life, you create more of it.”

Oprah says when she started keeping a gratitude journal more than 2 decades ago, it was one of the most important things she’s done. The daily practice of writing down five things to be grateful for balanced her life in subtle and inspiring ways. “It sounds simple,” Oprah says, “but when you go through the day staying conscious about what you put on your gratitude list, it shifts the lens through which you see the world.”

The practice of gratitude begins with being grateful for all the things you currently have – family, friends, experiences, and assets. Gratitude is focusing on all that you have and being thankful.

Wealth is much more than material things and owning assets. It is the presence of having a life filled with happiness in being, doing, and having what you want in life.

All too often, you fail to recognize your accomplishment because you are too busy moving onto the next task on your agenda. Yet, much of your success has to do with the people around you who have helped you focus on what’s important and helped you reach your goals.

Always remember, success, like wealth building, is a journey.

Building Wealth Takes Time

Some people are reluctant to make a wealth-building plan because they don’t want to wait 10 years. They would rather enjoy their money now.

The folly with this type of thinking is that most of us are going to be alive in 10 years. The question is whether or not you will be better off 10 years from now than you are today. Where you are right now is the sum total of the decisions you have made in the past. Practicing gratitude now can line you up for success and wealth building in the future.

Measure and focus on what you want more of. What you focus on expands.

You may think of money and wealth when you hear of measuring what you want more of, however; the same holds true for expressing gratitude. Make a list of things you are grateful for or write out what you are grateful for in a journal.

Complaining, blaming, or venting puts your focus on the negative things in life. You may wonder why some people seem more abundant than others.

To build wealth, it’s best to follow the two strategies that have the highest chances of success. And that is to practice gratitude, and to get into the habit of saving and investing early and to keep it up.

Gratitude is the key to building wealth

You might think building wealth is all about money, but it’s also very much about mindset. If you want to cultivate a money mindset that helps you build wealth, gratitude is a key component. Because gratitude can help shift your mindset from scarcity to abundance, help you spend less, and feel better. 

There is so much abundance in front of you if you choose to see it. The more you intentionally work to change your mindset, the easier it will become to see the abundance in life.

Actively practicing gratitude helps you realize how much you have to be grateful for right now instead of focusing on what’s missing. 

A scarcity mindset focuses on what’s missing and always wants more. It feels like there is never enough. This mindset can be harmful to your financial health because you can make poor decisions out of fear.

When you are in an abundance mindset, you realize your opportunities are limitless. You believe there’s never enough, instead you think there is always more than enough. Focusing on abundance can help you attract more money and have a healthier money mindset. 

Gratitude can help build that abundance muscle. Let’s say that you have a studio apartment but you dream of having your own 2-bedroom house. You don’t have the car you want now but imagine getting a Tesla. 

When you focus on gratitude, you focus on the fact that you have a roof over your head, that you’re healthy, and that your car still works instead of focusing on the fact that you don’t have a 2-bedroom house or Tesla yet. 

When you focus on gratitude and appreciate what you have now, you start to realize that you need even less than you thought. In today’s culture, we are conditioned to want more, to seek bigger and better, which of course affects our spending. 

Being content with what you have now can lead to less spending because you realize you have everything you need. That doesn’t mean that you can’t strive for more. It means that you can truly enjoy the journey rather than feel the emptiness of what’s missing. 

When you acknowledge and are grateful for whatever you have, it allows more to be drawn to you and changes the way you experience life. The more grateful you are, the more wealth that you have.

“Feeling grateful or appreciative of someone or something in your life actually attracts more of the things that you appreciate and value into your life.” — Christiane Northrup

References:

  1. https://debrakasowski.com/2014/02/22/what-does-gratitude-have-to-do-with-wealth-building/
  2. https://www.goalcast.com/7-oprah-winfrey-quotes-to-charge-your-day-with-gratitude/
  3. https://www.oprah.com/own-podcasts/oprah-winfrey-grace-and-gratitude
  4. https://www.newretirement.com/retirement/keys-to-building-wealth-after-50/
  5. https://www.thebalance.com/how-to-become-wealthy-356376
  6. https://grow.acorns.com/self-made-millionaire-money-habits/

10 Powerful Quotes ~ “The Psychology of Money”

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“Rich is the current income. Wealth is income not spent. Wealth is hard because it requires self-control.” Morgan Housel

10 Powerful Quotes from “The Psychology of Money” by “Morgan Housel”

  1. “Spending money to show people how much money you have is the fastest way to have less money.”
  2. “Getting money is one thing. Keeping it is another.”
  3. “Be nicer and less flashy. No one is impressed with your possessions as much as you are.”
  4. “You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration.”
  5. “Use money to gain control over your time.”
  6. “Saving is the gap between your ego and your income.”
  7. “Savings can be created by spending less. You can spend less if you desire less. And you will desire less if you care less about what others think of you. Money relies more on psychology than finance.”
  8. “Rich is the current income. Wealth is income not spent. Wealth is hard because it requires self-control.”
  9. “Happiness is just results minus expectations.”
  10. “In fact, the most important part of every plan is planning on your plan not going according to plan.”

https://twitter.com/books_dq/status/1517815934056075264

A few bonus quotes:

“”Be more patient” in investing is the “sleep 8 hours” of health. It sounds too simple to take seriously but will probably make a bigger difference than anything else you do.”

“The formula for how to do well with money is simple. The behaviors you battle while implementing that formula are hard.”

“”Save more money and be more patient” is too simple for most people to take seriously, but it’s the best solution to most financial problems.”

References:

  1. https://www.collaborativefund.com/blog/rules-truths-beliefs/
  2. https://www.collaborativefund.com/blog/$/

Investing 101: Building Long-Term Wealth

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Managing your money and building wealth has to be a priority if you ever want to be in a better financial situation than you are today. Ramit Sethi

If you’re like most people, you probably think investing is something only people with a lot of money can do. But here’s the truth: anyone can invest and everyone should be investing.

Everyone with expendable monthly income should be investing. Even if you aren’t making major bucks and even if you are still paying your student loans, you should be investing. Investing is a great long-term wealth building option that yields major rewards if you’re patient and smart about your investments.

Despite what you see on TV and social media, you don’t need to be (or even have) a stockbroker to get in on investing. In fact, it’s easier than ever to go at it alone, thanks to platforms like Charles Schwab, E-Trade and Robinhood. These sites (and others) offer no or low fee options for individual investors to start building a portfolio. Even better, some also give you access to financial planners who can provide investing tips and help answer questions along your investment journey.

Ready to start investing. Below are six investing tips from Brian Baker, investing and retirement reporter at Bankrate.com.

1. Think about your investing goals. First, people new to investing should ask themselves one simple question before getting started: How soon are you looking to see a return on your money? Or, how soon will you need the money you’ve invested?

If the answer is sooner, like less than six months, then you should skip investing in stocks and instead put your cash in a money market mutual fund or high yield savings account. These options won’t offer as big of a return as investing, but you’ll see steady increases over time. More importantly, all of your money will remain relatively safe and still be there if you need it in a hurry.

On the other hand, if you don’t anticipate needing the money any time soon, then investing is a good option. Successful investing often requires a long-term approach and patience because the market can fluctuate. Over time, however, it often yields positive results for many investors.

Or, you can do both. You can put some of your expendable income in a money market mutual fund or high yield savings account and then use some for investing.

2. Consider how much you can afford to invest. If after you’ve paid all your bills and set aside some cash in a savings account, you still have money left over, great. You’re in the perfect position to start saving. While choosing how much to invest all depends on your personal expenses, investing 10% off your income is a great place to start if you’re able.

That last bit is important, though. Not everyone is able to invest 10%, and that’s okay. When you’re just starting out, invest only how much and when you’re able to. What you shouldn’t do is miss important bill payments or slack off on traditional savings just to put more toward your investments.

Another investing no-no? Prioritizing your investments over paying off your debts. This is especially true when you look at interest rates. While the money you invest may yield a 7-8% return, the interest rates on debt are often much higher than that. If that is the case with the debt you’re carrying, you should prioritize paying off your loans before putting lots of your money in the stock market.

3. Choose the right platform for you. Given the rise in popularity in investing, there are lots of different online brokerages and platforms for individual investors to choose from. Some of the most reputable and popular are Marcus Invest, SOFI, Acorns and Robinhood. Here are a few questions to ask when deciding which is best for you:

  • Are there account minimums? Many of the online brokers available to individual investors who are new to investing don’t have any account minimums, so most people can easily get started with whatever amount of money they have saved.
  • What are the account fees? You’ll want to find out if there are any fees associated with having an account with the specific online broker you’re interested in. Additionally, find out if they charge you for making trades or new investments. Platforms like Charles Schwab, E-Trade and Robinhood all offer commission-free trading.
  • Do they offer fractional shares? Many of the brokerages are also now offering fractional shares, which are great if you don’t have enough money to buy a full share of a popular stock like Amazon or Alphabet.
  • What investment research is available to you as a member? Chances are you’ll have questions as you begin investing. Some online brokers offer investment research to their members, which can be helpful when you’re just getting started.
  • What else do they offer? Some brokerages offer other services like tax planning or access to financial advisors. Others offer different types of accounts like retirement that might be of interest.

4. Start with a diversified spread. Rather than trying to buy shares from specific companies that are buzzy right now, new investors should begin their journey with a more diversified spread. Focusing too much on individual companies often means you’ll need to have an in-depth knowledge of that company and its long-term strategy or plans. Most novice investors don’t have access to that kind of information, nor the time required to acquire it. Thus, it’s better to start by putting your money toward an S&P 500 Index Fund. “That’s going to give you a diversified portfolio of U.S. stocks at a very low cost, and that can be purchased through a mutual fund or through an exchange-traded fund (ETF),” Baker explains.

5. Know when to check in on your investments. If you’re following the more traditional investment strategy above, where you’re putting some savings into a diversified portfolio each month, you really don’t need to check your portfolio every day or even every week. Because this is a long-term investing strategy, checking your brokerage accounts monthly is more than sufficient.

6. Steer clear of common investing mistakes. When you’re finally ready to start investing, it can feel exciting, like you’re finally getting in on the action. But don’t get ahead of yourself. Here are three of the worst things you can do when you first start investing.

  • Don’t trade often. “Lots of trading activity is not the path to long-term investment success,” Baker says.
  • Don’t obsessively check your account. “If you’ve made long-term investments, there’s really no need to check your portfolio every day,” Baker reiterates.
  • Don’t get overly emotional. “Emotion is another enemy of investment success,” Baker says. “No one likes to see their portfolio decline, but stocks are inherently volatile, and it’s inevitable they will go down sometimes. People should keep their eye on their long-term goals,” he adds.

In conclusion, investing can be confusing if you don’t know where to start. Everyone’s circumstances are different, which means what’s right for you may not be right for someone else.

Take the time to evaluate your personal investing options and choose what works best for you. And research shows that investing is the best way to build long-term wealth and achieve your financial goals.

“Keep your eye on the [long term wealth building] goal, keep moving toward your target.” ~ T. Harv Eker, Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth

References:

  1. https://www.intheknow.com/post/investing-tips/
  2. https://www.bankrate.com/investing/how-to-invest/

Differences Between Price and Value

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“Price is what you pay; value is what you get.” Warren Buffett

“Don’t judge a company’s stock by its share price.” Many people incorrectly assume that a stock with a low dollar price is cheap, while another one with a four-digit dollar price is expensive. In fact, a stock’s price says little about that stock’s value. Moreover, it says nothing at all about whether that the market price of a company is headed higher or lower.

The most important distinction between the ‘market price you pay’ and the ‘intrinsic value you get’ is the fact that price is arbitrary and value is fundamental.

  • Price is the amount paid for the product or service.
  • Cost is the aggregate monetary value of the inputs used in the production of the goods or services.
  • Value of a product or service is the utility or worth of the product or service for an individual.

To effectively deploy this strategy, it’s essential to find a company that you understand, that has solid fundamentals — then be patient and wait until the company’s stock price falls below its intrinsic value before you purchase the company.

Regarding ‘understanding’ a company, it’s important for investors to know how a company makes its money–revenue, profits and free cash flow.

At some point, a stock’s market price over the long term adjusts to its intrinsic value. This fact is how successful investors such as Warren Buffet have used to make billions over the long term.

“Finding differences between price and value is by far the most effective investment strategy”, writes Phil Townes, founder of Rule One Investing . “Not recognizing differences between price and value is also what causes many investors to lose their shirts, as companies are just as often overpriced as they are underpriced.”

How do you find companies that are on sale for less than their true value is to evaluate companies using a set of standards that look beyond the company’s current price tag. Phil Town call these standards the four Ms:

  • Meaning,
  • Moat,
  • Management and
  • Margin of Safety

The first step is to make sure you understand the company and the company you invest in has meaning to you as an investor. If it does, you’ll understand it better, be more likely to research it and be more passionate about investing in it.

The second step is to choose a company that has a moat. This means that there is something inherent about the company that makes it difficult for competitors to step in and carve away part of their market share.

The third step is to look at the company’s management. Companies live and die by the people managing them, and if you are going to invest in a company, you need to make sure their management is talented and trustworthy.

Finally, calculate the company’s intrinsic value and determine a margin of safety. Margin of safety is the price at which you can buy shares of a company, being more likely that you won’t lose money and have increased confident that you will make a good return on your invested capital.

When the market price of a company is lower than the company’s intrinsic value number, the company is deemed underpriced and represents a great investment opportunity.

“Leveraging differences between price and value is as simple as that”, said Town. “Find a company that you believe in, that has solid fundamentals — then wait until their price falls below their value. If you do this, you can buy companies on sale, sell them for their true value and make a lot of money in the process.”

The goal is to identify stocks that are undervalued—that is, their market prices do not reflect their true intrinsic value.

References:

  1. https://www.forbes.com/sites/forbesfinancecouncil/2018/01/04/the-important-differences-between-price-and-value/
  2. https://keydifferences.com/difference-between-price-cost-and-value.html
  3. https://www.investopedia.com/articles/stocks/08/stock-prices-fool.asp

The overriding goal is to help individuals learn how to successfully invest in assets, to build long term wealth and achieve lifetime financial freedom. 

Working on Your Goals and Expressing Gratitude Everyday

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“With whatever you are struggling to master in your life, create a small habit or routine that gets you one step closer to it each and every day. ” Brendon Burchard

Now more than ever is the time to really appreciate the small, meaningful moments in life. It’s time you stop waiting for ” the anvil of purpose” to fall onto your head and suddenly everything, like life’s vision, purpose and meaning, become clear!

Instead, sit down with yourself and really think about what that purpose, that meaning, that vision for your life can really be.

There is no better time than the present to start this journey of self-exploration and find the ways in which you can truly feel alive, fulfilled, and happy in this life.

Thus, it’s important to make getting better everyday and self-improvement a way of life. It’s important to:

  • Begin the journey to think about and clarify your life’s vision, purpose and meaning.
  • Focus more on expressing gratitude and incorporating everyday wins back into your week and taking the time to appreciate them and let them sink in.
  • Focus more on your habits and long-term goals, and connecting back to your vision and purpose.

In the past, how many times did you achieve something or have special moments with your kids, spouse or friends, only to quickly move on to the next thing?

Life is so short to breeze by these special moments and not appreciate them. Really take the time to feel the day and fill your heart with gratitude. You’ll be happier too!

There’s still time to reclaim your day and schedule activities that add real value and meaning back into your routine. By pursuing your dream for 2 minutes or even 30 minutes every single day.

Don’t wait until next weekend when you might have the time for your goals and vision. Tomorrow isn’t guaranteed and that big dream of yours isn’t going to materialize if you keep pushing it off.

Break down your big audacious goals into quarterly, monthly, weekly, and daily goals. Work on your goals every single day and you will move the needle in your progress and success.

Additionally, if you want to achieve your goals, you should develop a growth mindset. A growth mindset allows you to explore more, take more risks, try new things, and grow more into what you’re capable.

The Power of Reflection

Clarity only happens when you reflect on your long term goals, habits and relationships — daily. It might be time to take a hard, unflinching look at your own performance in these important areas of your life.

When you live a life with intention each day, that brings about true purpose and meaning to your life. And when your days are filled with more purpose and meaning — more happiness and fulfillment tends to follow. And isn’t that the ultimate goal? To live a happy, purposeful and meaningful life.

Personal growth, goals and purpose are things that must be worked on everyday, otherwise you will lose touch with them.

Your Wealth Building and Financial Freedom Coach,

References:

  1. https://growthday.com
  2. https://www.growthday.com/hps-v4

Small, daily actions can gather momentum to become an unstoppable force of change.

  • Outcome – goals and vision
  • Process – habits and systems
  • Identity – mindset, beliefs and thoughts

It’s not too late to prioritize your health and wellness, explains Brendon Burchard,

! If you haven’t already, put your health at the forefront and do everything you can to get your healthy eating, sleep, and exercise routine in place. Because small, daily actions can gather momentum to become an unstoppable force of change.