Work allows you to earn an income.
Income allows you to purchase assets.
Assets allow you to create wealth.
Wealth allows you to buy freedom.
Category Archives: Financial Freedom
Quotes
“Quality of life is having the freedom to make choices that are not fear based. Whether it’s the ability to choose the kinds of projects I want to take on and can learn from, or the ability to take a month off to travel. Freedom to choose is the ultimate luxury.”
~ Interior designer Danielle Colding on the ultimate luxury
Source: In the Company of Women
Not everyone wants to wait until they’re 65 to retire. Here’s how you can retire at 45 with $40,000 in passive income every year. https://t.co/nLcRl96uxA pic.twitter.com/UnmNESI5da
— CNBC (@CNBC) January 17, 2023
How to Invest for Beginners: Peter Lynch
Investing can be for anybody, but is certainly not for everybody.
Only a handful of professional investors can compare to the legendary Peter Lynch. He rose to investing stardom in 1977 when he was appointed the fund manager of Fidelity’s Magellan Fund.
When Lynch took over, the fund had around $18 million in assets under management. After 13 years at the helm, Lynch increased the fund’s size by almost a thousand-fold.
In 1990, the Magellan Fund, and its over $14 billion in assets under management, became the biggest mutual fund in the world. At times, the fund held over 1,000 different stocks in its portfolio. Also, there was a period when it had an average annual return of 29.9%.
It doesn’t matter if you don’t know anything about investing, since there are actions a beginning investor can take to learn how to invest and how to manage their money and finances. One of the most important actions for new investors is to get started early.
Investing doesn’t have to be hard. Yet, it’s important to learn the basics of investing and what type of investments are the best depending on your financial situation and the amount of money you want to make.
When you make it a point to save money, you are protecting yourself against life’s unforeseen difficulties. And when you invest, if you choose to do so, you will have a chance to earn much more than you would have expected to, growing your money exponentially.
Time Period
Long-term investing is one of the key concepts in Lynch’s and many of the most successful investor’s investment philosophy. Lynch argued that the value of stocks was rather easy to predict over a 10 to 20-year period, while short term predictions were pretty much useless and effectively impossible to make accurately due to market volatility.
Source: Brian Feroldi
Therefore, he strongly urged investors to always select stocks of companies that they understand, believe in and be patient to wait for them to go up over a long period of time rather than selling for profits.
According to research, if you invest a $1,000 every year on the highest day for a period of 30 years, you can expect a 10.6% annualized return. On the other hand, if you invest the same sum on the lowest day of the year, you can expect an 11.7% compounded return over the same period.
Peter Lynch also encouraged the reader to look for the tenbagger stocks.
A tenbagger is a stock that rises in value 10-fold or 1,000%. He advises against selling when the stock goes up 40% or even 100%. Instead, he urges investors to hold onto them for the long-term, despite the common trend of many investors to take profits by selling appreciated stocks.
References:
Grant Sabatier: The 7 Levels of Financial Freedom
“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.
The 7 levels of financial freedom, according to a millionaire — 50% of U.S. workers are at Level 2. (via @CNBCMakeIt) https://t.co/ze81Wvu46q
— CNBC (@CNBC) June 19, 2022
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:
10 Powerful Quotes ~ “The Psychology of Money”
“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”
- “Spending money to show people how much money you have is the fastest way to have less money.”
- “Getting money is one thing. Keeping it is another.”
- “Be nicer and less flashy. No one is impressed with your possessions as much as you are.”
- “You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration.”
- “Use money to gain control over your time.”
- “Saving is the gap between your ego and your income.”
- “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.”
- “Rich is the current income. Wealth is income not spent. Wealth is hard because it requires self-control.”
- “Happiness is just results minus expectations.”
- “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:
12 Timeless Rules of Investing
Guidelines Every Investor Should Embrace, But Few Actually Do
An Investment U White Paper Report written by Dr. Steve Sjuggerud, Advisory Panelist, Investment U
In the the white paper report, Dr. Sjuggerud identified 12 classic investing rules that every investor can use throughout their lifetimes.
These guidelines are provided to help investors achieve their goals, sometimes in capitalizing on gains and sometimes in mitigating losses.
1. An attempt at making a quick buck often leads to losing much of that buck.
- The people who suffer the worst losses are those who overreach.
- If the investment sounds too good to be true, it is.
- The best hot tip is “there is no such thing as a hot tip.”
2. Don’t let a small loss become large.
- Don’t keep losing money just to “prove you are right.”
- Never throw good money after bad (don’t buy more of a loser).
- When all you’re left with is hope, get out.
3. Cut your losers; let your winners ride.
- Avoid limited-upside, unlimited-downside investments.
- Don’t fall in love with your investment; it won’t fall in love with you.
4. A rising tide raises all ships, and vice versa. So assess the tide, not the ships.
- Fighting the prevailing “trend” is generally a recipe for disaster.
- Stocks will fall more than you think and rise higher than you can imagine.
- In the short run, values don’t matter. In the long run, valuations do matter.
5. When a stock hits a new high, it’s not time to sell something that is going right.
- When a stock hits a new low, it’s not time to buy something that is going wrong.
6. Buy and hold doesn’t ALWAYS work.
- If stocks don’t seem cheap, stand aside.
7. Bear markets begin in good times. Bull markets begin in bad times.
8. If you don’t understand the investment, don’t buy it.
- Don’t be wooed. Either make an effort to understand it or say “no thanks.”
- You can’t know everything, so don’t stray far from what you know.
9. Buy value, and sell hysteria.
- Paying less than the underlying asset’s value is a proven successful investing strategy.
- Buying overvalued stocks has proven to under perform the market.
- Neglected sectors often offer good values.
- The “popular” sectors are often overvalued.
10. Investing in what’s popular never ends up making you any money.
- Avoid popular stocks, fad industries and new ventures.
- Buy an investment when it has few friends.
11. When it’s time to act, don’t hesitate.
- Once you’re in, be patient and don’t be rattled by fluctuations.
- Stick with your plan… but when you make a mistake, don’t hesitate.
- Learn more from your bad moves than your good ones.
12. Expert investors care about risk; novice investors shop for returns.
- If you focus on the risks, the returns will eventually come for you.
- If you focus on the returns, the risks will eventually come for you.
Good investing.
References:
Food, Sleep, and Exercise Impacts Your Success
The secret to becoming successful in life and business starts with how healthy you are. And that means that you’re eating healthy, getting enough sleep, and exercising daily.
Health is wealth. Why food, sleep, and exercise can impact your success?
You Are What You Eat
When it comes to your productivity, you are what you eat!
Writing in the Harvard Business Review, Ron Friedman states, “Food has a direct impact on our cognitive performance, which is why a poor decision at lunch can derail an entire afternoon.”
“Just about everything we eat is converted by our body into glucose, which provides the energy our brains need to stay alert,” Fredman continues. “When we’re running low on glucose, we have a tough time staying focused and our attention drifts. This explains why it’s hard to concentrate on an empty stomach.”
Certain foods like pasta, bread, cereal and soda, “release their glucose quickly, leading to a burst of energy followed by a slump.” High fat meals, however, “(think cheeseburgers and BLTs) provide more sustained energy, but require our digestive system to work harder, reducing oxygen levels in the brain and making us groggy.”
Replace that junk food with options like kale, blueberries, fish, walnuts, and green tea if you want to give your cognitive functions a boost.
Get a Good Night’s Sleep
Adequate, quality rest each night is essential for good health. Sleep provides the foundation for all our daily habits and decisions. A lack of quality sleep can negatively impact our mood as well as our ability to focus on daily tasks and activities.
The Division of Sleep Medicine at Harvard Medical School reiterates how essential a good night’s sleep is. “Lack of sleep exacts a toll on perception and judgment. In the workplace, its effects can be seen in reduced efficiency and productivity, errors, and accidents. Sometimes the effects can even be deadly, as in the case of drowsy driving fatalities.”
While sleep is important, it doesn’t have to be eight hours. In fact, only 27% of highly successful people sleep between 7-8 hours. Another 27% get 6-7 hours, while 32% only sleep for 5-6 hours. Most of these individuals sleep from the hours of 11pm to 5am as well.
To get a good night’s sleep, create a schedule and stick to it. You should also avoid drinking alcohol and regular coffee, keep you room dark and cool (between 60 and 67 degrees is ideal), have a comfortable mattress, and have a relaxing ritual before you go to bed, such as reading or meditating.
Exercise – Get Your Sweat On
One highly effective habit of successful individuals is daily exercise. Besides keeping off unwanted pounds, exercising daily can help with;
- Decreasing stress,
- Boosting your immune system,
- Keeping you productive, and
- Helping you sleep better at night.
Even if you can’t go to the gym for an hour everyday, you can always start taking baby steps. For example, you could start using a standing desk, taking the stairs instead of the escalator or elevator.
These small actions add-up and ensure that you stay at your best physically, mentally, and emotionally.
Food, sleep, and exercise can impact your success. Thus, it’s important that you make your health a priority.
References:
Building Wealth
Jack Ma the richest man in China said, “If you put the Banana and Money infront of a monkey. The monkey will choose Banana because the monkey don’t know that money can buy alot of Bananas.
In fact, if you offer Work and Business to most people, they will choose to Work because most people don’t know that a Business can make more money than salary.
One of the reason most people fail to build wealth is because they have not been educated or trained to recognise the entrepreneurial opportunity.
They spend alot of time in school and what they learn in school is work for a salary instead of working for themselves.
Profit is better than wages because wages can support you, but profits and owning assets can make you wealthy.
Source: https://www.facebook.com/109901988144184/posts/165519812582401/