Debt is like any other trap, easy enough to get into, but hard enough to get out of. –Josh Billings
That’s right. Avoid debt like the plague. Well there you go. The secret to building wealth is wide open. Cat’s out.
I will give you some great insight here. You cannot go bankrupt if you are debt free. When you owe $0, then you are truly free my friends.
Nothing puts people in a financial fiasco quicker than leverage.
Debt, we’ve learned, is the match that lights the fire of every crisis. Every crisis has its own set of villains – pick your favorite: bankers, regulators, central bankers, politicians, overzealous consumers, credit rating agencies – but all require one similar ingredient to create a true crisis: too much leverage. – Andrew Ross Sorkin
Let me provide you with some cautionary tales. They are truly scary. So please avert the kids eyes when you are reading this.
Okay, here it goes. I am no Chaucer, but I will do my best to make this plot jump right out to you. Hopefully it will inspire you to action. Please be forewarned. STAY. AWAY. FROM. DEBT. It has the ability to turn happy people into bitter human beings. People are more likely to tell you about their political, romantic, or extracurricular actives than they are the amount of credit card debt they are in.
Cautionary tale numero uno: Adrian Peterson. According to CNBC, NFL star Adrian Peterson made close to $100 million but apparently can’t pay his debts. The star running back is in court against a McAdoo, Pennsylvania-based creditor over failure to pay a $5.2 million loan. With interest and legal fees, the sum claimed is about $6.6 million.
He currently owes a total of $10 million in debt obligations, but recently signed an NFL contract for a two-year extension for $5 million.
Now I’m no mathematician, but if I subtract 10 from 5 that would equal 5. Meaning he is $5 million dollars short of being able to pay what he owes. This does not include any other cost of living expenses he has. In addition, Mr. Peterson is in his twilight years.
Just investing 1 percent of his $100 million in earnings, $1 million, could have netted him another cool million in investment returns if he earned 8 percent. That is without catching another pass, running an interception, or even showing up for work. He LITERALLY would have only had to keep breathing to make that money.
Losing $100 million is my worst nightmare. This is one of the worst horror tales I have ever read and that is because this is reality: Pure fact and not fiction.
Cautionary tale numerodos: Pamela Anderson. One of the most recognizable female celebrities in the world as she has graced the covers of hundreds of magazines including having the distinction of being the most photographed Playboy Playmate 1989-2016, with a record 14 Playboy magazine covers.
She too had a run in with Mister Debt. At one point, she was in $1 million of debt due to housing costs. She stated at the time that it happened to a lot of people in Hollywood. Although, she stated that she is now okay, she did state that was a very stressful couple of years.
My suggestion is this: stay away from buying huge homes. Mansions costs tons of money to upkeep.
For example, a $3.6 million-dollar mansion will likely cost you $100,000 annually for maintenance, utilities, property taxes and upkeep. Over 10 years, you would have paid $1 million dollars just to have a place to put those $500 Manolo’s.
Let’s think for a second. A $90 million-dollar mansion in Beverly Hills could cost you $2.5 million annually. Over a decade that is $25 million dollars! I am starting to see how people like Charlie Sheen, who famously once earned over $1 million per episode of Two and a half men, could end up in court stating he is in dire financial straits less than 10 years later. With expenses like these, who can save! I am also starting to see how Nicolas Cage ended up owing $6.2 million to the IRS! My last tale will surely leave you shaking in your financial boots (hopefully paid for with cash).
Cautionary tale numerodos:Johnny Depp. After earning $20 million-dollar paychecks with Pirates of the Caribbean (Disney fired him from this role in 2019), and estimated lifetime career earnings of $650 million, it was revealed that Captain Jack had a spending and debt problem.
According to CNBC, this is what Mr. Depp spent every month:
$30,000 on wine
$300,000 on staff, including 40 full-time employees
$150,000 on security for himself and his family
$200,000 for a private jet
You could support small countries on what he is spending!
For $30,000 a month on wine, it better heal the sick, make the blind see again, and wash away all sins!
This last fiscal tale truly has me quaking in my paid for running shoes.
In every story I have ever heard or read, people built their wealth by living on less than they earn.
That is how I was able to pay off $50,000 of debt and then begin saving and investing over 40 percent of my income. I did it by earning and saving one dollar at a time.
Ditch the plastic and embrace cash my friends. It seems the folks in Hollywood all have humongous mortgages that are handcuffing their wallets and keeping their financials in a tailspin. Please do the opposite and keep low fixed expenses. Thank you for listening. I’ll be here all week.
I’m a lot like Cardi Bin that song Money and I like it because like her, Now I like dollars, I like diamonds! However, in order to fund that lifestyle you have to have money in the bank.
I want deep-pockets; therefore, I avoid debt, save and invest.
And between you and me, I can’t stand debt. That’s no secret if you have been reading my blog. It just weighs you down.
I figured out a way to make myself feel better about paying off debt. I tend to use the debt-snowball method. I like small wins. And you should too, if it helps you continue to work on paying off your debt over several years, which can be 2-5 years.
The debt–snowball method is a debt reduction strategy, whereby one who owes on more than one account pays off the accounts starting with the smallest balances first, while paying the minimum payment on larger debts. You typically use this method when paying off revolving credit card debt.
Dave Ramsey discusses this and the debt avalanche, paying off debt with highest interest rate first, both are good methods of paying off debt.
But my favorite is the debt-snowball method. This strategy is where you pay off debt in order of smallest to largest, gaining momentum as you knock out each balance.
When the smallest debt is paid in full, you roll the money you were paying on that debt into the next smallest balance. You get a chance to celebrate your hard work by knocking out small debts and slowly working your way toward paying them all off.
For example, I have done the following:
Paying off my payday loan in the early 2000’s, I wrote the final check for $333.
Paying off my car note in 2009, once it got down to under $2,000, I wrote the final check for $1,500 and paid that sucker off!
Paying off my personal loan for $20,000, once I got down to the end, I wrote the final check for $3,500.
Paying off my credit card I got in 2005, once I got it down under $15,000, I wrote the final check (electronic) payment for $14,745, so then I could continue to live my best life.
I did this by saving up my money, paying the minimums on all my accounts until I saved up a certain dollar amount and then I wrote big fat checks to pay off what I owe. I like to pay in lump sums and pay off huge chunks of debt at a time. It makes me feel better. I call it the debt-chunk method. I like to see big results.
I got this idea from reading personal finance blogs like Millennial Money and books like I Will Teach You To Be Rich and Set For Life. In addition to studying the self-made. I combined my knowledge of reading about the money habits of Grammy-winner John Legend and Millennial Money founder Grant Sabatier.
Basically, I combined two different philosophies on saving and debt.
From John Legend I learned that once you have money in your hand you should pay off your debt IMMEDIATELY. If you have the full amount, then pay it all off. Thereby, paying off debt in huge chunks!
From Millennial Money I learned to save huge amounts of money over time by making small increases in may savings rate. I also make sure to take other good advice as well.
For instance, over the years, I have learned to listen to the following:
My partner Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage – Warren Buffett
Find ways to advertise for less or free. Leverage what you know by thinking outside the box. – Daymond John, The Power Of Broke
Find ways to start or build a business for less, cheaper alternatives out there or for $0 to start. – Zac Bissonnette, Debt Free U
There has never been a time when reading a book has not helped me. Work 10X harder, get 10X the results. – Grant Cardone, The 10X Rule
Work out. Have Discipline. Save and invest your money. I started in real estate and built wealth that allowed me to devote more time to the things I wanted to do. – Arnold Schwarzenegger
Try to save $5 a day. And increase your savings by 1% a month or more. Network. I bought coffee for those I wanted to learn from every week! – Grant Sabatier, Millennial Money
Save $25,000 to stop living paycheck-to-paycheck. Spend more on fun not less. Spend money on the things you care about and cut spending on the things you don’t. – Scott Trench. Set For Life, Bigger Pockets podcast
Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t. – Ramit Sethi
Focus your energy on the big wins!
If you can cut your housing and car costs, your stand a chance to save $500 or more per month. That is a nice amount to start stashing away in your 401k.
Cutting out $5 lattes and couponing alone are not going to get you to amassing a fortune. But first, before you do anything, you must save!
It is far easier to control and cut your spending than it is to go out and earn more.
Besides, the more you make the more Uncle Sam takes! I am all for people earning more money, but it will make no difference if you spend every last dime.
Therefore, start focusing on slashing expenses, cutting costs, saving an emergency fund (for big expenses), a rainy day fund (for short-term expenses i.e. a flat tire) and paying off ALL YOUR DEBT!!! Doing those five things can start you on the path from broke millennial to millionaire.
And that is because all millionaires know you get there by saving $10 bucks at a time. – Mr. Money Mustache
Therefore, if you want to get rich, just start by saving $10 bucks at a time.
You get what you give. What you put into things is what you get out of them. – Jennifer Lopez
I took this picture while I was waiting to get in to the concert.
I have learned to choose experiences over things. You put those pair of expensive jeans on a credit card and 10 years later those $80 jeans could really cost you $300 with 25 percent interest attached. That wasn’t on the price tag! Those jeans will be long gone by then, but that time you went camping with your family and friends will be great memories that last a lifetime.
In the last several years, I have decided to spend money more on experiences. After seeing that episode of Gilmore Girls Concert Interruptus, I knew one day I would go to a concert so I could be as happy as Loreali and Sookie was to go see their favorite band. Those great feelings you get from actually doing something and paying for it with cash are priceless.
That is exactly what I did on July 17, 2019. I went to see Jennifer Lopez in concert. And I loved every minute of it!
Went to the JLo concert. It was awesome.@JLo says: You can be anything you want to be with hard work.
Took this short video on my phone while at the concert.
She stopped by DC and performed at Capital One Arena after doing her make-up concert in Madison Square Garden in NY after the blackout on Saturday July 13. What a professional.
And let me tell you. I looked into what it takes to do concerts and JLo’s setlist and tour dates. Performing is grueling work.
Jennifer Lopez – It’s My Party – The Forum – Inglewood, California – June 7 2019 – setlist
Want to help celebrate JLO’s birthday with her! See remaining tour dates below. Jennifer Lopez – It’s My Party Tour dates: June 10 – San Diego, CA – Pechanga Arena June 12 – Sacramento, CA – Golden 1 Center June 13 – San Jose, CA – SAP Center June 15 – Las Vegas, NV – T-Mobile Arena June 16 – Phoenix, AZ – Talking Stick Resort Arena June 19 – Denver, CO – Pepsi Center June 21 – San Antonio, TX – AT&T Center June 22 – Edinburg, TX – Bert Ogden Arena June 24 – Dallas, TX – American Airlines Center June 25 – Houston, TX – Toyota Center June 28 – St. Paul, MN – Xcel Energy Center June 29 – Chicago, IL – United Center July 3 – Milwaukee, WI – Summerfest July 5 – Detroit, MI – Little Caesar’s Arena July 7 – Toronto, ON, CA – Scotiabank Arena July 10 – Montreal, QC, CA – Centre Ball July 12 – New York, NY – Madison Square Garden July 16 – Mansfield, MA – Xfinity Center July 17 – Washington, DC – Capital One Arena July 19 – Newark, NJ – Prudential Arena July 20 – Philadelphia, PA – Wells Fargo Center July 22 – Atlanta, GA – State Farm Arena July 23 – Orlando, FL – Amway Center July 25 – Miami, FL – American Airlines Arena
Instead of spending a fortune and being close enough to the stage to reach out and touch the artist and see the white of their eyes, I selected a seat that just fine to see how different my experience would be. My seat cost $49.95 and I have a blast!
You do not have to go in debt or sell your belongings on Craigslist or drive for Uber or Lyft just to spend $500 on concert tickets. The jumbo screens show you all the action just fine in my book.
This was also her first tour since ending her Las Vegas Residency which made like $100 million in ticket sales!
For a night out on the town it cost me about $100 bucks!
So if you want to paint the tow red, I suggest you stay in the black and pay cash and not go in the red and use credit. Cause you know your girl Greenbacks Magnet is all about saving a dollar!
If you read my tweets then you know I can’t stand debt. I would stop doing just about everything in order to save up huge chunks of money to pay off debt. I once saved up $15,000 to pay off $14,745 worth of debt! Paying debt off in chunks feels awesome.
I learned to pay off my credit card and other debt in lump sums from reading about how Grammy award-winning artist John Legend doing it after he got his first big paycheck. Smart!
Just hearing about another pro athlete going broke is enough for me to change my free willing money spending ways.
Breaking News: Adrian Peterson is in debt after making $100 million in earnings in the NFL. This is my version of Scared Straight. Scared Debt Straight that is. Is he not reading my blog?!!!
I encourage you all out there to stop what you are doing and find a way to start saving 5 percent of your income.
Start with just $500 in the bank and work your way up to one month of expenses. That Is how I went from $25 in the bank to $5,000. Save for the things you want. Paying with cash is freedom.
It’s like JLo says, “you get what you give.” You have to work for what you want. She says she gets nothing for free. And that she has to pay for everything.
The harder you work, the more you get. I’m taking my money earning and saving cues from Jlo. I like to study the self-made. And Jenny from the Bronx is as self-made as they come. So happy birthday JLo. Make a wish. I’ll tell you mine. It’s simple really. I want to always spend less than I earn. Your turn.
My two biggest influences are Archie comics and Dennis the Menace.- Gilberto Hernandez Guerrero
I have always been a huge fan of Archie Comics.
Archie Comics is a owned by Archie Comic Publications, Inc. is an American comic book publisher headquartered in Pelham, New York. The company’s many titles feature the fictional teenagers Archie Andrews, Jughead Jones, Betty Cooper, Veronica Lodge, Reggie Mantle, Sabrina Spellman, and Josie and the Pussycats.
Growing up an Archie comics fan or Archiekins fan, as I like to call it, was a lot of fun. Loved the stories. The comedy was top notch. The drawings were colorful. The stories were insightful. And even though the star was Archie Andrews, my favorites were best friends and worst enemies – Betty Cooper and Veronica Lodge. Their love triangle and rivalry over Archie goes back over 70 years! Since about 1942. They been fighting over this red-headed punk since the 50’s! Call it what you want. Madness or chaos or for better or worse, Betty & Veronica are in it to the very end to fight over the affections of Mr. Andrews.
The comics are still popular. So much so that The CW show Riverdale was created for television.
“Don’t underestimate her and don’t bet against her.” – Archie Andrews, KJ Apa in Riverdale
However, this post is going to focus on their financial lives. Here are 3 money tips I learned from Betty & Veronica!
MONEY TIP ONE: SPENDING LOTS OF MONEY WILL NOT EVER LEAVE YOU SATISFIED
You think blowing tons of dough on shopping sprees will make you happier? Then think again.
If you have ever seen Uninterrupted Kenading Dough, pun intended, then you know even millionaire NBA players are watching their finances. In an episode with Draymond John, The Golden State Warrior talks his first big check, how he learned how to manage his finances and more.
He is trying to create generational wealth for his family. Mighty important in my money playbook! In addition, that he wants to be a billionaire by age 40. That is not a typo. I did not stutter. He said billionaire with a B and not millionaire with an M.
How is that possible? Well, if you invest instead of spend, you can make your wildest dreams come true.
Think of it like this. If you have a $1,000,000 invested with an 8 percent return over 40 years, it would net you $10 million. So imagine if you have that $10 million from the start. You could have over $200 million in that same 40 year time period by just letting it ride.
Therefore, when you think of life, money, saving, and investing: Think Bigger!
MONEY TIP TWO: ONLY HIRE A PROFESSIONAL IF YOU DO NOT THINK YOU CAN DO IT YOURSELF
Some of you may not know it out there, but where you invest your money matters. One of the reasons many bloggers like myself prefer Vanguard are the fees.
Many other brokerages may charge anywhere from 1 percent or higher. Vanguard typically charges less that 1% for all of its funds. It’s admiral funds are among the cheapest!
Saving 1% in fees can mean the difference of having an additional 10 years of retirement income.
Therefore, my suggestion is that you focus on limiting the amount of fees you pay for your investments, if you want to get and stay rich; pay less in fees.
Betty was always the rational, cool and level-headed one of the trio. She was good-natured and down to earth compared to the glamorous vamp Veronica.
Mature beyond her years and nice, Betty, was the calm in the otherwise hectic dating storm that was between the girls and Archie.
Veronica was rich and spoiled, but Betty was middle-income and demure. If you want to live lavish, then be my guest.
However, if you are unprepared when the credit card bills arrive, then you are in trouble. Being sued by your land lord because you spent all your money at the mall looking cute is just plain idiotic.
Worse yet, living in your parents basement with maxed out credit cards while you pay $0 in rent!
Focus on keeping your housing, transportation, and food bills low so you can keep your savings high.
It was a great feeling when I was able to start saving and investing over $10,000 a year. My goal was financial independence.
That would mean I saved and invested $100,000 in 10 years! That does not include any earned interest. With compound interest, I was able to save, invest and earn $50,000 in only 2 additional years!
Forget spending and shopping. Keep your eye on the prize.
Forget Vegas baby! It’s all about Financial Freedom baby!
So those are my 3 tips from Betty & Veronica. I’m signing off now.
For those of you out there that grew up in the in the 90’s, then you may remember a video game by the name of Maniac Mansion.
It was released on October 5, 1987 on multiple platforms such as Apple II, Atari and Nintendo to much fanfare and critical acclaim and was developed by the man who created Luke Skywalker and the Star Wars franchise, George Lucas, through Lucasfilm Games.
This was long before the iphone was released to worldwide sensation back in 2007, which was developed by another pioneer, Steve Jobs of Apple.
What I absolutely loved about this game was the character development. They were so much fun. Interacting with Weird Ed and Edna and the tentacles was a riot!
Even how the characters spoke to each other was hilarious. Let me provide you with this example.
However, as with anything, you have to look below the surface and take a deeper look. Therefore, I wrote this post focusing on the financial aspects of this game in regards to how you can relate money to the world around you. Even a video game.
And do not even get me started on the price of games today! Growing up we thought $60 a pop for one game was outrageous! Boy, were we wrong.
Today, you can spend $80 or more for a subscription to play your Playstation or Xbox console. Another subscription! Come off it marketing departments across America! You know people can’t afford to barely buy toilet paper out here, let alone video game subscriptions!
Don’t believe me?
When the longest government shutdown in United Sates history, it lasted 35 days, happened people were in line at soup kitchens!
Missing one check caused people absolute panic. And I don’t mean at the disco! One lady said that she was down to $1.26 in her checking account; that was all the money she had and she didn’t know what she was going to do.
You see back in the good old days, you would go to the store, buy an item, do the transaction one time, and like Cinderella’s fairy Godmother’s would say, “bibbidi-bobbidi-boo” and you owed the thing free and clear as the transaction was done, over, finito.
This post will show you how to save money, get rich, and maybe decide to put a down payment on some property, but it doesn’t have to be a mansion. So here we go.
5 Money and Life Lessons from Maniac Mansion
But first… What is Maniac Mansion?
Maniac Mansion is a 1987 graphic adventure video game developed and published by Lucasfilm Games.
It follows teenage protagonist Dave Miller as he attempts to rescue his girlfriend from a mad scientist, whose mind has been enslaved by a sentient meteor. The player uses a point-and-click interface to guide Dave and two of his six playable friends through the scientist’s mansion while solving puzzles and avoiding dangers. Gameplay is non-linear, and the game must be completed in different ways based on the player’s choice of characters.
MONEY AND LIFE LESSON ONE: MANSIONS COST MONEY
It has been over twenty years since a mysterious purple meteor came hurtling out of the sky and made a large crater in the front lawn of a large Victorian mansion belonging to the Edison family. Dr. Fred, his wife Nurse Edna, and their son Weird Ed were reclusive people who left the house very rarely, but the meteor’s arrival brought about a strange change in Dr. Fred. Now, a local cheerleader has vanished without a trace. Dave, her boyfriend, has gathered a few of his close comrades on a mission to invade the mansion and save Sandy!
However, if we just focus on the part about the mansion…basically, big homes costs big bucks! For fun, I looked up the cost of Victorian homes.
The Main House at Skywalker Ranch inspired the design of Maniac Mansion‘s setting, which is reported to have cost self-made millionaire George Lucas around $100 million dollars.
The Skywalker Ranch
So unless you are onstage with your two friends Kelly and Michelle or creating the next new franchise, you may want to stick with buying a home you can afford.
Let’s not forget that property taxes are forever! If you can’t pay your taxes, you can still lose your home, even if you own it free and clear.
Taxes are an ongoing expense to owning a home.
Let us not forget that even celebrities have to sell homes for unforeseen reasons and sometimes at a loss.
It was reported that Johnny Depp was suing his management company for $25 million and in the court filing it detailed his spending at at $2 million- a-month! He had considerable property holdings and it was also reported that he was advised to sell a family home located in Paris, France or something along those lines and possibly at a loss at that!
Curtis “50 Cent” Jackson was also recently in the news as his Connecticut manse was costing him $70,000-a-month to maintain. That basically is the cost of running a small boutique hotel or miniature bed-and-breakfast. He ended up selling the property at a loss, he paid $4.1 million and sold at $2.3 million, to stop paying the exorbitant cost of owning the place.
Lastly, Mary J. Blige was reported to own a couple mansion-style properties in New Jersey that were unable to be rented. You read that right. She is paying for properties that are uninhabitable, costing her money every single month night and day, and collecting no rent on the properties. In her divorce filing, she was reported to make over $300,000 a month so it is unclear why exactly these properties are unable to be renovated and sold without a closer look at her financial records and proper accounting.
The reason I refuse to buy a big home is because they along with cars can be wealth suckers.
Doing the math, if you buy a $350,000 at a 5% interest rate and take 30 years to pay it off it will cost you around $700,000! Or a $500,000 home could cost you $1,000,000. Yes, twice what you bought the home for.
And most people are working to pay for this behemoth, fancy vacations, and expensive nights on the town with bottle service meaning they are not even home enough to enjoy paying double the cost of it!
All good things come in time. Building wealth is no exception to the rule.
I started out with a toothbrush, a bag of clothes, and some books.
Now I have a home, paid off vehicle, stocks, investments, and even more books. The point I’m trying to make here is that you accumulate money and things over time. You may not have everything you want right now, but keep working.
Never let yesterday use up too much of today. – Will Rogers
If you are working towards something, the don’t stop or quit for anything. I turned a $450 car payment into $100,000. It took like a decade.
Come to think of it, it usually takes people 10 years or more to perfect whatever it is their doing so you may as well chill out.
The humorist Will Rogers (1879-1935) once told a young John Wayne some sound and simple advice. I will share it with you here.
After John Wayne (1907-1979) complained for a full 10-15 minutes of why he wasn’t being paid more to act on film, he asked Will Rogers what he should do? Will Rogers replied, “Well kid, are you working?” To which, John Wayne replied, “yes.” Then Will Rogers says, “keep working.” And then proceeds to walk away.
So my reply to anyone who wants something NOW, “have patience.” This is me NOW moving on to the next paragraph and lesson in this post, which is my equivalent to Will Rogers walking away. I have given you all the advice you need on that topic. Moving on.
MONEY AND LIFE LESSON THREE: MAKE FRIENDS NOT ENEMIES
One of the best things about the game are the characters. Each have different looks, mannerisms, ways of speaking, talents and abilities. This is part of what makes the game so much fun.
Dave is on a mission. To save his girlfriend Sandy. But he can’t do it alone. He brings along his friends to help him out and watch his back.
This is also sound advice if you want to build a fortune and an empire. Nobody does it alone. Eventually you will need to work with bankers, lawyers, businesses, investment professional, and tax attorneys.
It is always best to make friends than enemies as you never know when it is the next time you will see someone again.
When you are climbing that corporate ladder, those same people you tried to step on on the way up, you may see them again on the way down.
Hopefully, you offered them a piece of the pie instead of one to the face.
Mark Cuban said some great business advice in that if you start a company, then make sure your employees have some stock options invested in it as part of their compensation. That way if the company is successful and gets sold then the employees make money too.
This does two things: 1) eliminates wealth inequality (many of Mark Cuban’s former employees, 300 out of 330, became millions); and 2) encourages people to pay it forward through philanthropy and spend money that gets circulated back into the economy.
MONEY AND LIFE LESSON FOUR: RESCUE THE GIRL OR GUY FROM FINANCIALDUNGEONS
In the game, if you get caught snooping around the mansion, then you are sen t to the dungeon.
The game is notorious for constantly getting you thrown in the dungeon by almost every member of the household if you are seen.
Fortunately, the game has a cheat in which you can get the dungeon key and let yourself and others that have been captured out of the dungeon. Without this trick in the game, you are toast.
Speaking of toast, avocado toast is not causing millennial’s to be broke. It is the ever escalating cost of education, housing, and healthcare that makes it harder to save.
All wealth building starts with saving. Period. A good cash reserves is a must. Here is a tip for you. Pros have cash. Amateurs do not. Pros are not under any kind of financial pressure. They remove the pressure and make rational decisions because they have money in the bank. Only amateurs allow pressure to get to them. Remove much of the pressure in your life by having cash reserves.
I recommend that being $10,000 or more in savings. That is how you are able to rescue yourself from being trapped in a financial dungeon. Just have cash.
MONEY AND LIFE LESSON FIVE: ALWAYS HAVE A BACKUP PLAN
The video game Maniac Mansion has 5 possible endings. Depending on what players you chose to play and what actions you take.
The game allows you to have 3 characters for game play out of about 6. These are the people that have your back in case things should go wrong.
In addition, their different talents and unique abilities allow each kid to be an asset to the team. You must too do this in life. You must have back up…plans that is.
For example, I try to keep a minimum of 2-3 months or more of savings in the bank at ALL TIMES! Then I ramped it up to a goal of $10,000.
In addition, if you can save $233,000 in your 401(k), then you do not have to add another cent! After 20 years, with a return rate of 8 percent, you will have $1,001,857.35 in your retirement account. That’s Plan A. Cant’t envision making that happen? Then go to plan B. Save $168,000 in your 401(k), then do not add another penny. After 25 years, with a return rate of 8 percent, you will have $1,001,358.03 in your retirement account.
Are you starting to get the idea?
You can move the finish line and change your actions according to what is happening in your life, but keep the goal. If necessary, you can have a Plan A, B, C, D, etc. The point is to make it so that you are always moving forward by planning ahead.
Just like you have to do when playing Maniac Mansion.
So let’s get out there, have some fun, and start saving!
Have you ever heard of a hedge fund? If not, I will explain here for you.
A hedge fund is an investment pool with a limited partnership of investors that uses high risk methods, such as investing with borrowed money, in hopes of realizing large capital gains.
A simple hedge fund definition is: a hedge fund is an alternative investment that is designed to protect investment portfolios from market uncertainty, while generating positive returns in both up and down markets. Throughout time investors have looked for ways to maximize profits while minimizing risk.
Hedge funds got their name from investors in funds holding both long and short stocks, to make sure they made money despite market fluctuations (called “hedging”).
According to Jim Cramer’s thestreet.com, because of their nature, hedge funds are typically only open to qualified (read: well off) investors, although not exclusively.
Simply put, a hedge fund, like a hedgehog, has a narrow focus and does one thing really well, which is to make money no matter what. However, in life it is usually the person who has much knowledge, as Rory Gilmore of Gilmore Girls would always say, that tends to do better in life.
Knowing a lot about one thing (like a hedgehog) is great, but knowing a little about a lot of things (like a fox) can be even better.
Truth be told, I just want to collect my compound interest and dividends the same way Sonic the Hedgehog collects those rings.
Sonic, the protagonist, is an anthropomorphic blue hedgehog with supersonic speed. Typically, Sonic must stop antagonist Doctor Eggman’s plans for world domination, often helped by his friends, such as Tails, Amy, and Knuckles.
The game was released in 1991 and is still one of my favorite Sega Genesis games. Solving puzzles, saving his fellow animals, and the world is all part of Sonic’s charm.
The Greek poet Archilochus wrote, “the fox knows many things, but the hedgehog knows one big thing.” So which are you? Are you the hedgehog or the fox when it comes to investing?
IT ALL COMES DOWN TO RISK How risky are you?
Do you dive right in or do you take calculated risks?
In my experience, you should know your limits and then stop right there. Especially, when it comes to your money.
If you cannot afford to lose more than $100, then that is your risk level. If you cannot lose more than $5, then that is your risk level.
Once you decide to cross that mark, then you are in uncharted territory my friend. You do not have to push yourself to the limits.
Unlike Archer, the world’s greatest spy, you do not have a private detective or any other type of agency that will bankroll or bail you out in case of an emergency.
You must provide your own safety net by hedging your bets and always having an emergency fund.
SAVING FOR A RAINY DAY OR A MONSOON, WHICHEVER COMES FIRST You must hope for the best, but prepare for the worst.
Remember prince charming or princess moneybags is not coming. You are ON YOUR OWN!
Once I learned this lesson, I took steps to change my financial life. First, I set a goal. Second, I wrote it down. Third, I executed. Lastly, I watched my bank balance go up. As will you, if you follow this plan.
You need to set a goal. Mine is $100,000 USD in savings. Then you must write it down, as a goal that is only in your head is a wish. Then you make a plan and get to action. Mine was setting a savings goal per year and went like this: Year 1: $600 saved Year 2: $1,200 saved Year 3: $3,500 saved Year 4: $13,333 saved Year 5: 14,000 saved Year 6: $15,000 saved Year 7: $17,000 saved Year 8: $18,000 saved Year 9: $20,000 saved Year 10: $25,000 saved
If you add these yearly amounts, you will see that by year 9 I will have saved $102,633.
My goal will have been met after almost a decade of diligent saving. You are no longer living paycheck-to-paycheck and can handle any emergency that comes your way.
SLY AS A FOX BUT THE FOCUS OF A HEDGEHOG I say why not take attributes from both.
Be agile and cunning when it comes to investing and staying away from actively managed funds in favor of passively managed index funds.
Your laser-like focus will be on index funds just as a hedgehog is good at that one thing, you will be at focusing on one index fund: VTSAX.
This fund is all inclusive as it holds the entire stock market in its hands. You will see that over time the price has gone up. Therefore, as an investor, you must play the long game. When stocks go down, you buy. Basically, whenever there is a recession. When they go up, you hold.
This is solid advice. I need you to listen. Please don’t go. DON’T HANG UP!!! WAIT!! BUT…BUT…
If you want to place your bet on this course of action, I will bet you the same amount as Eddie Murphy and Dan Aykroyd did in Trading Places, $1!!! As that is my risk level, in this instance.
