Tag: wealth

Money principle #1

Pay yourself first…make sure that you have automatic payments set up to invest in yourself. Ideally, you want this set up going to a low fee index fund. Time and compound interest will be your best friends. The earlier you can start regularly contributing to this fund, the better off you’ll be. The best part about having it automatically set up is that you don’t have to remember to keep investing every month. If you want to invest more, you can. But here, it’s basically like a subscription model (set it and forget it).

If you’re saving up for a specific purchase like a vacation, a new car, a house, etc, set up a separate account and automatically transfer money to that account. Have it set up for every paycheck. If you don’t “see the money” in your regular checking account then you’ll be far less likely to spend it. This will help you actually hit your saving goals and then you won’t have to use credit to purchase your consumer goods.

Discipline, forward-thinking, and your success

Do what you need to do now, even if you don’t want to, so you can set yourself up for success and reap the rewards later.
“I hated every minute of training, but I said, ‘Don’t quit. Suffer now and live the rest of your life as a champion.’” – Muhammad Ali

Do what you need to do now, even if you don’t feel like it, so you can set yourself up for success and reap the rewards later.

Does a farmer plant seeds only when he feels like it? No, because then when he needs to harvest his crop, it won’t be there!

Success takes time, it takes hard work, and it takes consistent action. If you work out once, you’re not going to have six pack abs. If you save money to invest one month, you’re not going to be able to retire off of it. But if you do those things consistently over time, you’ll eventually achieve things that most people aren’t disciplined enough to do.

“Suffer” now. “Sacrifice” now. Live below your means, take care of your mind, body, and spirit now. Do these things consistently and continued take massive actions daily, weekly, and monthly towards your goals, and you will achieve success. Think about your future self, not just about what you feel like doing right now.

Smart debt versus dumb debt

If you’re buying an asset that makes you more money (whether through appreciation, cash flow/dividends, or tax benefits) than it costs to borrow (paying down your principal and interest while more than keeping pace with inflation), you can make a legitimate argument to go into debt to invest in that asset.

If you’re going into debt to buy something that doesn’t make you money, you’re giving into your inner child.

Only borrow money to buy things that go up in value. Otherwise pay all cash for it or not at all.

Using cash or using debt?

Are you a “cash” only person (like Dave Ramsey) or do you prefer to utilize debt on your behalf?

Honestly, I see the pros and cons to both sides. Being more financially risk averse/conservative, I get the appeal of only using “cash” (or, even if I’m putting it on a debit/credit card, only buying what I can afford to pay at that very moment). It’s a safer position from the standpoint that you aren’t going to get yourself into massive debt. This strategy makes a ton of sense for those trying to minimize spending on things they don’t need (mostly consumer products that contribute to lifestyle creep).

But if you leverage debt to buy assets (like real estate), where someone else is paying the loan down for you, you can scale much more quickly.

Imagine wanting to buy a rental property. Let’s say you’re looking to buy a single family home for $120,000. If you have to pay cash for it, it will take you a long time to save up $120k. Even if you’re investing it, unless it’s in a self-directed IRA, when you pull your money out to purchase the property you’ll get hit with taxes. But if you only had to save up $30k (for a 25% down payment on an investment property) or even $4,200 (for a 3.5% FHA loan, where you have to live in the property for at least one year), you can get started much sooner.

Leverage works both ways. It can help propel you to success or drive you into the ground. But as long as you’re taking on appropriate risks (preferably starting small unless you have a ton of experience and expertise in what you’re investing in), you can build wealth at a greater pace by leveraging debt as opposed to paying all “cash” for everything.

What are your thoughts/how do you prefer to invest?

Impact and self-worth

Don’t get your sense of self worth from what you do for money or how much you have of it. Instead, think of what value you bring to those around you.

How will others remember you when you die? If you were to ask everyone you know what 3 adjectives describe you, what would they say? Would you be happy with how others think of you or do you need to start living differently?

Your impact on others will be remembered far greater than how much money you earned or what you did professionally…