As of this writing, over 100 million stimulus checks have gone out.
According to CNN, 90% of American households will be eligible for stimulus checks. Individuals earning below $75,000 annually can receive the full amount. You can also receive an additional $1400 per dependent.
This money is set to start hitting bank accounts across American on March 17. That money could go toward living expenses such as rent, food, and utilities.
My top five ways to spend your stimmy could help middle-class families start looking ahead to a time when 100 million American households finally are vaccinated.
First, if you can save it, then do it.
Funding an emergency fund can be a lifeline in times of hardship, as many well know during these challenging times. A flat tire or broken water heater can be an unexpected expense that could put someone in credit card debt.
A friend of mine recently joked that the next unexpected bill or expense will probably be estimated at $1399, right after the stimulus checks go out!
If you are one of the eligible Americans due to get a stimulus, then be sure you have a rainy day fund set up. This stimulus check could be your starting seed money toward a 3-month emergency fund.
Second, pay for the roof over your head.
Paying for any back rent or missed mortgage payments is a must. You need housing. Working out a payment arrangement with a landlord or lender is in your best interest.
This stimmy could help keep you housed and your family safe.
Third, put food on the table.
Food pantries such as Feeding America are seeing 200% increases in food assistance requests. That is happening across the country. Some folks are lining up at the crack of dawn and standing in lines for hours to get free meals.
This would be a good time to put this money to use stocking up your cupboards with non-perishables.
Food insecurity is severely affecting the elderly and the 10 million children in American living in poverty.
Stockpiling canned goods, cereal, grains, and nut butters is a good way to spend this money.
Fourth, pay up the utilities.
Seeing news media discuss $5,000 electricity and heating bills in Texas due to cold storm was enough to make me want to set up a savings account just for utility bills.
The New York Times reported how one man owes a whopping $16,752 energy bill! Although this is not common, utility bills are a necessary expense that households must manage.
Many Texans may get some of these skyrocketing energy bills forgiven or decreased as a winter storm ravaged last month that was completely out of their control. Due to not being on a fixed electricity pricing plan. However, until that happens, bills got to be paid.
Therefore, it is a good idea to have a savings bucket just for keeping the lights on, literally!
If you get these bills reduced, then you can simply pay yourself back any refund you may receive. Those funds will go straight back into the savings pot and are not to be spent.
Trust me, you may need them again someday.
It seems like every 10 years, we are in some sort of major crisis. Plan accordingly.
You heard me. That account you have been waiting to open for the last few years, do it. If you have all the above covered, then you can afford it.
Honestly, you can’t afford not to.
The easiest way to do this is by opening a brokerage account with a company that will allow you to start with something like $100 monthly automatic investments.
Start building wealth for your future. I started a Roth with $50 a month.
Tens of thousands of dollars later, I do not regret that decision one bit.
So there you have it. My top five stimmy alert spending tips. It will only cost you $1399.99. Ha! Just kidding.
I know some of you may think this is mission impossible, but I am here to tell you that anything is possible.
Because if this was truly a mission impossible, then this blog post will self-destruct in five seconds so memorize the above or take a picture on your smartphone!
I’m going to star this blog post with some words of wisdom that my dad text my sister.
The text my sister sent me went down like this: Dad said f*** poor go for the money lol 😂.
That ladies and gentleman was my father in a nutshell.
Growing up my father was always telling it like it was and giving it to people straight. He didn’t really play around with or mince words. He was just raised that way.
My father grew up in the Washington DC area. He was born and raised there. Worked there all his life and retired at the age of 55.
Many of my money habits, I got from my dad. I watched him as a kid be very careful with his money and spending. He always made sure the rent or mortgage was paid first before spending on anything else. He would pay cash for everything.
One of the reasons he was able to retire was because he had a pension.
My father would brown bag it to work for lunch and believed in cooking and eating at home. I always loved watching him make breakfast in the morning. He always seemed so content when he was making breakfast and just doing the simplest of things.
That’s when I also learned the simple things seemed to make people the happiest. Therefore, I made sure to always lead a simple life. However, I also knew that I didn’t want to be broke.
I saw the difference it made to have some money in your pocket. People treat you better, they like you more, and you get better service.
I once read a book called You’re broke because you want to be and it described some sad tales of broke people.
One of the ones that really hit home for me was when a bus driver looked at a person crazy for saying the couldn’t afford the $1 bus fare.
It reminded me of the time I accidently let slip while I was in a cab “oh crap, where’s my wallet!” When the cab driver heard that he hit the brakes so hard, I almost hit the seat in front of me.
Fortunately, I did have my wallet. So the cab driver stopped looking at me like I was crazy and gave me a ride home.
That little episode taught me to keep some money on me at all times including a credit card for emergencies. You don’t want to be stuck in the middle of no where with no cash and no credit because everywhere you go, the first sign you read on any business we accept cash or credit.
I also learned not only from my father, but from Warren Buffet to pay attention to the bottom line.
Buffet knew from a young age that he should focus and surround his life on the flow of money. Therefore, he learned about investing and building businesses. If you want to have money, you need to know how to earn it and how to make it grow. So that’s what I decided to do too.
Now one thing I will tell you is that my preferred method of building wealth is to own stocks. That’s just me. After, reading tons of books and blogs about building wealth, that was my conclusion.
At this point in my life, I want less time focused on working and more time focused on enjoying the fruits of my labor!
I have been blogging for almost 5 years and it’s still one of the most fun things I do. I just combined my passions, talking finance and writing.
I remember when no one read my blog. Now I get hundreds of readers a week from all over the world from as far away as India!
However, everyone is not a fan. I actually had a reader that made a comment that I have a limited knowledge of money. Really? After reading hundreds of books on personal finance, business, and building wealth, I think I am pretty well versed in the subject.
Considering that I have been blogging about money for over four years; I think me and the topic of money are very intimately acquainted with one another.
That being said, everyone is entitled to their opinions. Maybe because I am not constantly quoting stock market gyrations or the yield curve, that individual was not impressed.
What is the yield curve? In finance, the yield curve is a curve showing several yields to maturity or interest rates across different contract lengths for a similar debt contract. The curve shows the relation between the interest rate and the time to maturity, known as the “term”, of the debt for a given borrower in a given currency.
The federal reserve has also dropped its interest rate to 0.00%. That means borrowing will become cheaper and why mortgage interest rates are so low. You know. Stuff like that.
Well guess what? That ain’t my style. And I gotta be me. This is my blog after all.
I am her to give it to you simple in terms you can understand without all the money jargon. If you’re eyes are glazing over when you read my blog, then I ain’t doing my job right.
I want to educate, but I also like to entertain because I know if I can keep you engaged, then you will come back for more and learn something along the way.
What I will say to that person is this, there are tons of blogs out there that do talk in more technical terms and this blog has named many of them here so you are always welcome to check them out too!
The reason I like to keep it so basic is that is how I like people to break things down to me. The reason I have chosen to build my wealth with stocks is because it is the simplest path to wealth.
When I did some research, I found that investing in housing only returned ~4% over 30 years. Over that same period, stocks had returned ~10%. So would you rather earn 4% on your money or ~10%?
Also with real estate, there are lots of carrying costs such as repairs and maintenance of the property, insurance, taxes, and fees. I do not have to water the plants in front of my stocks, or do any repair work to it. There is no private mortgage insurance with stocks either as you only have to pay a small expense for owning it. Therefore, I chose stocks.
Every time you buy a stock, you become an owner in that company. You now have an ownership stake and that company wants to reward you with dividends.
When you put your money to work for you instead of you working for it, you end up making way more. There are only so many hours in the day for you to work physically, but money that is invested has no such limitations.
The money you invest does not call in sick, get tired, take breaks, or even take vacations. It is working for you every single day.
And the earlier you start investing, the more money you can make.
I started investing with $50. I continued to invest aggressively. Then one day I woke up and had $100,000 in my retirement account less than 9 years later.
Interest also compounds. Meaning your money earns money. That is how wealth is made.
I also didn’t want to own 100 stocks. Who wants to manage that? I found that I could own a piece of the entire market by investing in index funds.
You can do this by investing in any fund that says total stock market index like the VTSAX at Vanguard or a 500 index fund like the S&P 500.
You can start small like I did and work your way up. The point is just to start.
Why is investing so important? It’s simple: To beat inflation.
You do not want to keep all your money in the bank and over 30 years later find out your $1 is now only worth the equivalent of 50 cents! That is inflation my friends. It erodes the value of money over time.
You need your money to keep its purchasing power by always earning more of it.
It always puts money into perspective for me on why we need it, when I wake up seeing recent headlines that people’s electricity bills in Texas were skyrocketing to the cost of $10,000! That’s insane. Some families’ emergency fund were being wiped out overnight! That could take many folks years to save. One emergency can set you back years. That is why you plan, save, and invest.
And forget rich quick. Most people I saw try to build wealth on this path ended up broke and worse off than they started. I chose to get rich slow.
If my $100,000 earns ~10% annually, then I would become a millionaire in 30 years. If that’s too long for you, then you must invest more of what you currently make, earn more money or both. I did both! And so can you.
Regardless of your method, just get started. Do a little math. I use a retirement calculator to see how much I need to save to be a millionaire in 10 years. It would take time, perseverance, and sacrifice on my part, but it’s worth it! The money in my retirement account is a scorecard. It shows me all the progress I have made along the way.
That cab driver slamming down his brakes on me and looking to put me out on the street made me realize something. I needed money to live. I needed money for the privilege and convenience of taking a cab and not the bus. That is the reason I say forget broke. Go out there, get to work, and get this money.
Legally and safely, while being socially distanced and 6 feet apart of course.
Had to take a break to batten down the hatches and get things under control at the home front.
Like many other folks out here, I had to stop everything and readjust to life in the pandemic.
March 13, 2020 will go down as a day in infamy.
It went from getting up and going about my day to lock everything down, close up shop, HIDE the wife, HIDE the kids, and LOCK THE DOORS!
Who would have thought that this would still be wreaking havoc on so many of our daily lives almost a year later?
The year 2020 sink into the abyss.
While the fat cats on Wall Street got richer, many of the regular working stiff got the shaft. I ain’t here to put anyone down. I’m here to lift people up.
I want to get you to the places where you want to go. So I am going to show you how the rich are doing it. I know that talking about building wealth during a pandemic may seem callous, but know this, one day the pandemic will end.
And if you are tired of living hand-to-mouth and paycheck-to-paycheck, then you better listen up. I’m trying to change your money mindset to one of sheer hope and abundance dammit!
I feel like Kanye and his song Jesus Walks when he rapped the lyrics,” I ain’t here to argue about his facial features. I’m here to convert atheist’s into believers.” Many will doubt me. But some will listen. And to those that do, your life will change.
I have so many posts on ice that I didn’t even know where to start. So I figured I would just dive right in.
My 5-step plan for surviving COVID.
Number One you need shelter.
If you are beefing or in any type of conflict with your roommates or partner, now is the time to kiss and make up.
This cannot be over-stressed that you need a roof over you head. I saw a ton of chatter online about people not knowing they need to sign a form and submit it to their landlord to stop any possible eviction due to limited funds or no income.
Reach out to local housing authorities, neighbors, 7 on your side or even your Congressman if it will help you. If you can’t afford an apartment, see if you can rent a room. This is top priority. You cannot stay safe without 4 walls and a roof.
Number Two you need food.
Whether it is a local grocery store, Instacart, or a food pantry, doesn’t really matter. You must have food to live.
Stock up on fruits, veggies, milk, bread, and eggs. Anything that helps you make a quick meal. You just need to survive this.
This too shall pass.
Number three you get the household in order.
Forget putting water in the pool, watering the grass, or landscaping.
You have to conserve everything.
You never know when a freak storm or accident could make things more difficult. So limit and cut any unnecessary spending and home maintenance.
Number four you need an emergency fund.
Don’t kid yourself into thinking the government or unemployment is going to save you. It’s not.
Any place you can pull resources from do it!
Even if you do cash advances on a credit card, a cash-out home refinance, or personal loan.
You need MONEY IN THE BANK!
Money is the only legal tender with which to pay bills.
My suggestion is to have a minimum of $5k at all times just in case.
Number five keep stacking that dough.
If you are one of the lucky ones that still have a job or are working from home (about 30 million Americans lost jobs), then you have something to work with.
Keep contributing to your retirement and savings accounts. Do not stop. This fund will be what allows you to one day retire.
Don’t slack now, if you do not have to.
I’ll leave you with this tidbit.
The stock market has averaged over 11 percent from 1975 to 2015.
Over those 40 years, the stock market has minted many millionaires. You could be one of them, as long as you keep stacking and stay the course.
And if you need motivation, tweet me. I’ll be @mjp2520 on twitter.
I took a much needed hiatus for the last few weeks to come to terms with the new world order of life during the COVID-19 lockdown.
I did the usual. Stockpiled water, canned goods, cereal, and toilet paper.
Now I’m back.
If this blog could talk, I am sure it would have asked me this question.
After making sure I had food, water, and medicine to stay physically healthy, my mind started wondering about my fiscal health.
Then I thought, shouldn’t people also be making sure they are staying not only safe, but also financially solvent during the pandemic.
Much like Angela Chase (Claire Danes) was constantly obsessing about her crush Jordan Catalano (Jared Leto) in My So-Called Life (MSCL), I would find myself constantly obsessing over my finances.
For those of you who are unfamiliar with the show, My So-Called Life is an American teen drama television series from the 90’s that aired on ABC and then in reruns on MTV for years after it ended with only one season.
The plot surrounded a young 15-year-old girl that spent much of her time trying to figure out life and navigate being on the cusp on adulthood. The cast also just recently did a virtual reunion and reunited back together in 2020.
Now, back to my story.
I needed a fiscal safety net and plan in place that would allow me to weather and fiscal storm, including the coronavirus.
With over 33 million people filing for unemployment, I needed to shore up my resources.
My So-Called Finances needed my full attention. I was up for the undertaking.
START FROM THE FISCAL BEGINNING
Many of my lessons about money started when I was very young. I knew it was very important to have money so that you could take care of yourself and your family.
I got in the habit of saving when I was only three years old. That habit hasn’t changed. I have technically always been a saver.
However, along the way, I got lost. Kind of the same way that Alice did in Wonderland.
I too found myself in a maze of things I did not understand. I needed those signs like Alice got.
You know the ones. They said things like; Drink me.
By high school, I was an angst ridden teen with a penchant for spending. Then it hit me. Maybe I should start reading about this money stuff.
My 401(k) would be my new boyfriend.
As, time went on, I started obsessing about retirement. The hand-to-mouth existence dd not appeal to me.
I thought about what the heroine, Angela, in MSCL would do. She would probably start reading a book and asking a friend for advice.
I knew the same way Amy March did in Little Women that I would not be pauper.
Fun Fact: Claire Danes also starred as Beth in the 1994 adaption of the book.
Therefore, I had to change some things. They say the first step to solving a problem is admitting that you have one. It hurt to see that low bank balance, but it had to be done. To know where you are going, you have to know where you are.
The first step was to set a goal. If I had something to aim for, then I had a purpose. The goal: A one million-dollar 401(k).
LEARN HOW TO BECOME FI
The Tools to Succeed 1. Learn skills to sell for money You need the skills to become Financially Independent (FI).
I wanted to be fiscally savvy. Therefore, I had to read. Angela started off the show reading the book, The Diary of Anne Frank.
I started my FI journey reading a Kiplinger magazine. Then from there, I started watching the Suze Orman show. I knew I didn’t want to sit at a desk for 12 years only to end up sitting at a desk for another 40. I needed a plan. Being able to escape the rat race sooner rather than later appealed to me.
I started devouring personal finance books and blogs. Some of my personal favorites are The Automatic Millionaire, The Millionaire Next Door and I Will Teach You to be Rich. Then you have to decide on a path. I chose passive investing.
That turned on the light-bulb for me. Wealth building is about action.
Building wealth would take time, sacrifice, and work.
PASSIVE VS ACTIVE WEALTH STRATEGIES
Some people choose to start a business, become doctors, lawyers, actors, musicians, consultants, chefs or to make their fortune. I would get mine by investing.
I still needed a career to get paid. So, I found an employer to buy time form me and I equally willing to sell time to them. You can work in the public or private sector.
You can get further up the income ladder by gaining skills in the public sector and then selling them at a markup in the private sector to arbitrage your valuable skill assets.
I picked a job in finance. Once I got that job offer, I made the choice to start investing ASAP.
The 401(k) offers a maximum contribution of $19,000 and the IRA (Traditional or Roth) offers a max of $6,000. That is a total of $25,000 annually. I got my start with 6% and a match of 3%. Then, I slowly started working my way up by increasing my contributions by 1% a year.
2. Passive strategies There are two strategies here: A. Live below your means (LBYM); B. work smarter not harder.
Your employer wants to make more off of you than they pay you. Your work will not go unrewarded, but will be under-rewarded. Therefore, it is your job to invest in yourself by saving for your retirement.
CREATE AN INVESTMENT ATM
You must save enough to start earning large amounts of interest off your principal investment.
3. Accumulation phase Your job here is to start contributing as much as you can to your 401(k).
After, saving a 6-month emergency fund so you are no longer living paycheck-to-paycheck, start putting in every dollar you can into your accounts. Save until it hurts. Even if all you can afford is $50 a month. Save something. This will eventually become your own personal ATM.
It will be like a vending machine. You step up, put in your request, and the machine hands you what you want.
The RMD has now gone from 70.5 to 72. Therefore, you can let your money ride on the interest gravy train for an additional 1.5 years. On a million-dollar portfolio, that would mean an additional $105,000 with a 7% rate of return.
KEEPING IT PASSIVE
Building up your assets. I started with $5 and then went on to my first $100,000 and beyond. It can be done.
4. Passively build a sizable investment pool Find ways to earn income.
This can be with royalties from writing a book, collecting rent on rental properties, or renting out your parking space.
The goal is to trade time up front to build an income stream that with essentially last forever. Then you can kick back and relax.
If you have to sell 40 hours a week or the sum of 2,080 a year, you should get something out of the deal. Simple math can change your life.
I knew that one-million could spit off $50,000 of income forever with a 5% return. I just had to get there first. When I got to the point where my next money milestone was going to be $300,000, I knew I was on to something.
FREEDOM IS THE ANSWER
Why invest so much money? It’s simple. The answer is freedom.
Free from worry over how to pay bills, over how you spend your time, and quality of life.
Money equals power.
Money lets you be more confident.
Debt consumes as it only takes from you and gives you nothing.
The way to build your confidence is through positive experiences. Paying off debt then saving and investing that money will give you that. This in turn will build your self-esteem.
My favorite scene in MSCL was the one in the episode titled, “self-esteem.”
Confidence is key my friends. It attracts things to you. In Angela’s case, it was Jordan. Oops. I meant to say Jordan Catalano. For some reason on that show, he could never just be Jordan.
So, you see in the end, that you can get what you want. You just have to be patient, ask for it, and work for it. They say ask and you shall receive. Try it. I did.
Here is Suze Orman’s FIRE protection gear: $5 million dollars to retire early. Really? Do tell. Care to elaborate. Absolutely.
It was around late 2018 that I heard talk of Suze Orman’s thoughts on the FIRE movement.
The rumblings in the financial blogsphere was that when Suze was asked her opinion about the FIRE movement on the Paula Pant podcast Afford Anything and she says, “I hate it, I hate it, I hate it.”
Suze told Paula Pant that $2 million isn’t enough for early retirement. At a 4 percent withdrawal rate, that’s $80,000 per year, which she says isn’t enough to protect you “when the floods come.”
“If you only have a few hundred thousand, or a million, or two million dollars, I’m here to tell you … if a catastrophe happens, if something happens, what are you going to do? You are going to burn up alive.”
The “Suze Slapdown” of ’18 was coined. And I thought watching WWE Smackdown was tough. Whew! They ain’t got nothing on Suze when it comes to laying the smackdown on finances.
She made headlines for saying that people who buy a daily latte are “peeing $1 million down the drain as you are drinking that coffee.” On Suze’s watch, spending at Starbucks SBUX is a no-no.
Let’s not drop out of corporate America on a whim and stop working. Get back to work.
Check out the tweet below that 2020 Democratic Presidential candidate Bernie Sanders tweeted out last year to see what I mean.
Wealthy TV "experts" are shaming millennials for buying coffee and avocado toast. But young people are broke because they’re drowning in debt and low wages.
The ruling class wants to divide the young and old to distract us from an economy that’s rigged for the richest 1%. pic.twitter.com/v4LCNpoExU
Suze Orman’s the sky is falling attitude about retiring early is not so far-fetched now during the coronavirus.
For anyone who isn’t up to speed on the FIRE acronym, it stands for Financial Independence, Retire Early. I am all for Financial Independence (FI).
This is me. Financial Independence: count me in!
Retire Early: slow down tito!
The focus of FIRE is to retire early by stopping the corporate grind and ending the rat race in your 30s or 40s, and not 55 or 65.
However, I am not yet ready to be put out to pasture. Luckily, other leaders in the FIRE movement gave some clarification and said that FIRE is not about stopping work, but finding your passion and earning passive income streams that keeps the money flowing.
The goal is to live life On. Your. Terms. So, I thought to myself okay. I can live with that.
Saving 25 times your current income and then retiring before age 40 without continuing to make money is risky.
The notion is that you can then afford to live off of your savings by limiting your withdrawals to just 4% of your assets each year.
Meaning if you earn $75,000 a year, then you need to save about $1.9 million before walking away from work. Money that was supposed to last starting from age 65, now has to starting from age 35.
The millennial had caught the FIRE bug and she was looking to hang it up within two years.
“Well, how much money do you have?” Orman asked. “Two or three million?”
No.
“A million?”
No.
“$250,000?”
Yes, but with some debt.
“Really?” Orman could only shake her head.
“Don’t talk to me about it. If that’s what you want to do, go ahead. But 40 years from now, I hope you remember everything I’ve said.”— Suze Orman, on retiring in your 20s
According to Suze, “time is the most important ingredient in your financial recipe.”
As financial blogger Mr. Money Mustache put it bluntly: “In the interview, Suze Orman goes on and on about what might go wrong, and how you need an incredible amount of money saved to protect you, just in case. But this thinking is completely backwards – money will not cure your fear, as megamillionaire Suze proves so clearly. Most high-income people are still within just a few paychecks of insolvency, because it is possible to blow almost any paycheck, simply by adding or upgrading more cars, houses, and vacations. Physical health FIRST: Salads and barbells every day, no goddamned excuses.”
Real estate financial expert and FIRE member Coach Carson posted some great advice on Suze’s opinion: “As Paula said after the interview, we should all make a practice of listening deeply to others (especially if you disagree). If you can reserve judgment temporarily, you can always learn something.”
Coach Carson says time not money is the most precious thing we have. The biggest regret is time wasted when people are on their deathbed. People do not wish they worked more or spent more time in that cubicle or corner office.
Very true. Washington Post financial columnist, Michelle Singletary, also weighed in on the interview. She says “let’s also put this debate in perspective. Many people aren’t saving enough to retire at all – early or late.”
I remember when my portfolio hit $100,000. It took half the time to get the next $100,000 and zoom to $200,000. Next stop, $250,000. That’s right a quarter of a million.
Then I was looking to moving on up like The Jeffersons to the tune of $300,000, $400,000, $500,000 and beyond. I only move forwards. I never look backwards. I could still work for another 30 years if I want to. Without putting in another penny, if I let this money ride I could have between $1 million and $2.6 million dollars. And that is if I stop investing. There is no way I am doing that.
I live for today. I live in the moment. I stop and smell the roses. I enjoy the present, but save like I am going to live forever.
Stop worrying about the world ending today. It’s already tomorrow in Australia. – Charles M. Schulz, creator of the Peanuts
I like to plan in advance. I have a plan to create a plan.
“If plan A doesn’t work, the alphabet has 25 more letters – 204 if you’re in Japan.”― Claire Cook, Seven Year Switch
If I want something, then I go get if. I get off my duff and go make it happen. Don’t complain. Go do something about it. To quote Mindy Kaling, “We are all just a treadmill and six laser hair removal treatments from being Ryan Reynolds and Blake Lively.”
Ask for credit when you don’t need it. Credit dries up like tears in a recession. That’s just my two cents. Back in the 2008-09 recession, they cut my credit lines in half. Overnight *poof* half my credit limits were gone. Like a puff of smoke.
The thing is that work gives us something to do. It lets humans be productive.
If you have $1.5 million at age 65, you have a much shorter retirement to spend on versus at 37.
What really makes the difference is that by age 55-60 many people are empty nesters, own a home, and already own most of their possessions.
You have a lot less things to buy because you have what you need already.
When you are 35, you may still have no kids, are just starting, or have a young family. You have costs that are still rising like inflation.
Empty nesters are not worried about paying for college. Its paid for. That’s in their rear-view. Juniors 529 is spent.
If you are still raising kids, it is likely you will need a decent income and a job. Kids cost…a lot. Most people are still buying homes, cars and having kids well into their 40s these days.
One of the biggest expenses that a job helps subsidize is healthcare.
Financial blogger Financial Samurai puts this into perspective: “Just know that once you get to your target number, you might find that your needs have changed. Life is unpredictable. A job helps you subsidize health care costs that are increasingly becoming a racket IMO, but it would help reduce our $2,380/month health care bill. However, I am grateful for every day.”
You want to retire early. Here is what Suze has to say.
Orman: “It would have to be in the millions . . . You need at least $5 million, $6 million.” (She later says $10 million to account for taxes.)
FIRE proponents fired back at Orman that she has it all wrong.
Really? When a government shutdown causes people to be in soup kitchen lines, then I beg to differ. Here were some of the things I read online during the 35-day government shutdown last year:
“I only have $1.06 in my bank account. I don’t know what I am going to do.”
“I can’t pay my bills.”
“I can’t afford groceries.”
“I’m scared I won’t be able to pay my rent or mortgage.”
“I can’t miss one paycheck.”
Not even one check? Even I try to keep a minimum of $10,000 in the bank at all times in savings. Just in case sh*t happens. I need that rainy day fund because when it rains it pours. Keeping a 3-6 month rainy day fund is what helps me sleep at night.
My 1-tweet financial plan government #shutdown edition. 😉
1. Save a 9-month emergency fund 2. Instead of maxing Roth IRA use extra funds for your rainy day fund 3. Do not get any student loans 4. Do not buy a new car, home, or go on vacation until rainy day acct 100% funded pic.twitter.com/Xmslbml3qC
Now to be fair, the FIRE movement is about saving and investing your money. The more, the better. If you are practicing FIRE, then, in theory, you should be able to weather any storm.
Meanwhile, Orman isn’t sweating her emergence as somewhat of a villain in the FIRE community.
Now that COVID-19 has swept across the globe, it looks as if Suze may have been on to something when she always says, “hope for the best, but always plan for the worst.”
On one of her most recent podcasts she stated that a lot of her advice on saving that eight-month emergency fund has come to roost. She now thinks you need a 3-year emergency fund.
I have always been more about FI than RE because no matter what happens in this world, I know one thing to be sure; you will always need money in the bank.
Now I’m going to sign off on this post the same way Suze Orman ended her show on CNBC every night, “now you stay safe.”
According to a study done by NYU economist Edward Wolff, 84% of stocks are owned by the richest 10% of American households.
Even more extreme than this is the fact that the top 1% hold 50% of all stocks in America. Meaning a teeny tiny amount of Americans own trillions of dollars, and a vast majority own nothing. That type of inequality is just sad.
So many Americans are locked out of a real wealth machine by not being invested in Mr. Market.
Who is Mr. Market?
The New York Stock Exchange (NYSE) is an American stock exchange on Wall Street in New York City. With a market cap of more than US$16 trillion, the NYSE is the world’s largest stock exchange, averaging US$169 billion in daily trading value in 2013.
That would mean the richest 1% own approximately $8 Trillion worth of stocks.
Sadly, only 52% of Americans were invested in stocks.
GALLUP
Let’s fast forward just five years.
According to Barron’s, the stock market is worth $30 Trillion as of 2018. You see that?! The stock market has almost doubled in size! This is tremendous.
In 2008, most portfolios lost half of their value. Now look at us today. The S&P has more than tripled since the Recession! A trillion here, a trillion there and boom we have almost double the assets we had in 2013, the same year LeBron won his second championship ring with the Miami Heat.
Therefore, as of last year the richest 1% now own $16 Trillion dollars of wealth in the stock market.
The richest 10% has a mind-boggling $25.2 Trillion in stock wealth! Each owing over $900,000 in stocks.
Keep in mind that the bottom 50% of the poorest households have virtually no wealth as many have $0 in savings and investments.
The U.S. stock market has been on fire as it returned 22% last year.
With a 220% increase over the last decade, that means the rich are getting richer.
You need to get a piece of that stock pie in the sky
Why is it so important that you invest in Mr. Market? It’s simple. Investing is how you beat inflation.
With inflation averaging 2-3% annually, you must find a way to out run it. Investing will help you do just that.
I do not want you to miss out on the next $8 Trillion the market may gain over the next decade or so. Don’t sit on the bench! Get out there and get in the game! Nothing ventured nothing gained.
Wealth building takes time.
It’s a long game. You may need a decade or more to build some significant assets.
Did you that know with an interest rate of 10% your money doubles every 7.2 years? It’s true. It is because of the rule of 72, which states that a certain amount of compound interest will dictate how much you can earn over time.
I feel like that scene in Oliver Twist when he asks for more. But instead of food, I want dividends! My advice t to you is to invest!!!
Yes, give me some of that compound interest. It’s raining dividends and capital gains.
The first $100,000 is the hardest!
No matter how much you earn, it will take time to grow your wealth to something much grander over time.
Even with a nice return, the majority of your first $100,000 will come from your savings. The higher amount you save, the faster you achieve this goal.
I cut back on everything to get to through this first hurtle on the wealth accumulation phase.
I skipped the movies, $7 lattes, fancy vacations, new cars, clothes, subscriptions services, and nights out on the town. Put that money to work. Don’t act rich, get rich!
I know some guys that want to be rich, but spend like the world is flat like Columbus said; so they think we are going to fall off the edge and it is all going to end tomorrow, so you gotta treat yourself!
These poor souls decided to buy bottle service for a friends 45th birthday. The cost: $4,000! They split it between like four or five people.
Here is a little background on one of the fellas, let’s call him Scotty.
Scotty is still renting after being unable to afford to buy a home. Instead of banking his money for a down payment, he’s tossing around G’s more than Floyd Mayweather after signing a $100 million-dollar deal.
Sorry my man, hate to break it to you, but you ain’t “Money” Mayweather and don’t have his bank account.
Forget that! I would rather be financially independent than act rich for a couple of hours.
And the ladies loved that he spent that $1,000 on that bottle service. But then you know what happened at the end of the night, when the lights came on? All the ladies left!
I guess it was all about the bottle service. That’s just money down the drain right there. Bad money decisions happen everyday.
Maybe it really is like Jamie Foxx said, “blame it on the alcohol.”
Regardless, I want you to put that money in Mr. Market and let it grow.
If you are worried about downturns, then hedge your bets by putting money into savings as well.
Since it usually takes about 10-16 months for the stock market to recover from a crash, keep that amount of money in your savings. This will let you ride out the storm.
The goals is to not have $0 in your bank account. Something is always better than nothing.
Now save up that first $3,000, go open up a Roth IRA with a discount brokerage firm and go get started.
Don’t have $3,000 just lying around? No problem. If you can spare $100 bucks?
If so, then you can use the Automatic Asset Builder that lets you invest for just $100 a month with places like T. Rowe Price or Charles Schwab.
Now let’s go get this money. No excuses! I just gave you all the information you needed to get started.
Happy investing! And may the odds be ever in your favor.
