Hey if Geoico can have Geicoween, then surely so can we.
On today’s spooktacular blog post, we are talking about why you should avoid the black cat of investing: fees.
They come in all shapes and sizes. From front-load, back-load and even fees you pay to trade stocks.
However, one of the most overlooked of all fees come from commission based salesmen disguised as your friendly neighborhood financial advisors.
They wear the greatest costumes 365/24/7: a suit.
And we are not just talking any suits my friends, but the kind you drop a month’s wages on; think more John Wick and less death of a salesman, as to portray a sense of wealth that make you feel like you be anyone or can do anything and believing you want to run up and kick that football that Lucy is holding.
You are unstoppable.
Then it happens.
You get that investor statement in the mail. You are so excited that you rip the envelope open to see how well you are doing. The market is firing off dividends and capital gains the likes of which you have never seen before. You just know you are making a killing in Mr. Market, right?
Then you see that 2% of your portfolio goes to the fund managers and realize that you just got punked!
You look to your left, you look to your right, but Ashton is nowhere to be found.
Why you must be your own financial advisor
I hate to be the bearer of bad news, but I must confess that being a DYI investor is best.
While reading a plethora of books on the subject of personal finance, I have learned the following:
Don’t invest in anything you don’t understand. It is not enough to buy the product. You must research the company behind the brand.
Know if a company has a competitive edge. For example, once digital cameras came on the market Kodak fell off the face of the earth. The last time I had a Kodak moment was right before Apple unveiled the iphone.
Don’t time the market. If you have money to invest, then do it!
Don’t invest in anything you can’t draw with a crayon.
Invest in index funds instead of individual stocks.
Only invest in funds with an expense ratio of less than 1%.
You can do exchanges between index funds you already own without paying any fees. This is pretty sweet!
Most millionaires are worth between $1 million and $5 million dollars.
90% of millionaires over the last 200 years achieved wealth by investing in real estate.
Forget buying the product and own the stock. Millionaires collect assets – stocks, bonds, real estate, and intellectual property – like monopoly pieces. The poor collect consumer liabilities like big houses, boats, and cars. An asset pays you. Collect assets.
No one cares about your money more than you do
Although self-explanatory let us dig deeper children.
Would you hand over all the passwords to your bank, credit card, and investment accounts over to strangers?
Of course not.
However, in an essence that is what we do when people hand over the financial reins to business partners, financial advisors, and handlers.
Instead of working through the struggles of figuring out how money works, many just give up the responsibility to someone else. Nothing screams “just take some” more than giving people free range access to your money. Nothing attracts grifters more.
Just pick up a few free library books on investing and get started right there.
Heck you can even search online for podcasts or website that talk about money! That is how I got started.
Why you want to have $100,000 in investments
It is simple. If Mr. Market does what he has over the last 90 years, then you can turn $100k into $1M in 30 years. Not bad for a kid that gets picked last to play dodge ball.
Once you hit this number, then the money starts finding you.
Depending on your rate of return you could double your money to $200k in less than 8 years. It took me about 2 to 3 additional years to get that next $50k after the first $100k.
Do you want chocolate Halloween candy or a rock?
If any of you out there have seen The Great Pumpkin Charlie Brown, then you know what I’m taking about.
The reason many of us invest is the same reason kids trick-or-treat because we want the treat, that is something that gives us great pleasure.
You go from house to house looking for a reward for putting together that perfect costume.
Investors buy investment after investment looking for the same thing.
Nobody wants a rock!
I remember a time in school that I sold so much for a fundraiser that I got a chance to go in the money machine (where you stuff money into your pockets for like 60 seconds). I wanted that reward!
But guess what? The night before the big event I stayed up late and overslept the next morning! I missed the whole thing. That could have been my seed money to start this blog! That could have helped me start a Roth IRA at 17! The funny thing about rewards is that you may earn them, but you still have to go and pick them up.
Now I write down everything in a journal so that I do not miss a thing!
I wanted to one day be able to have ‘F everyone’ money like Mark Cuban said: “‘F everyone’ money means you can have your favorite band in your backyard, not care how much it costs, and lend them your jet to get there.” You should invest for your future self to have that option.
If you take nothing else from this post, at least remember this: we like the kind of money that jingles, but we invest so that we can have the kind that folds.
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!
Recently, I began reading the book The Simple Path to Wealth by JL Collins.
The book originated with letters to his daughter about
financing.
On my path towards financial freedom, I have decided to read
the books of other Personal Financial Bloggers.
The book du jour: The Simple Path to Wealth.
Do you believe in coincidence?
I don’t believe in coincidence. I think that all things work together for good. – Kathie Lee Gifford
“I do not believe in meaningless coincidences. I believe every coincidence is a message, a clue about a particular facet of our lives that requires our attention.” – Deepak Chopra
Well, it just so happened that the last finance blogger I interviewed for this website was Dave of Accidental FIRE called: Accidentally Wealthy on Purpose.
In that interview, he informed me that his favorite personal
finance book was The Simple Path by JL Collins.
I mean what are the odds that I would be reading that EXACT BOOK at that EXACT MOMENT. 😲 Pretty slim that is for sure.
I too thought the book was pretty good and gives some sound
financial advice.
I even tweeted out that advice directly from the book. And to my surprise JL Collins gave me a like. I appreciated that! 😉
What I learned about money from JL Collins.
1. Save 50% of your income. 2. Invest 50% of your income. 3. Avoid debt.
After, doing that interview and sending the tweet and the
getting a like form the author, I decided that I must do a book review on this
book. Why? I feel that if you see something three times (3x), then it must be
for a reason. They say things happen in three’s. So I went with it!
Let’s get to it!
Drum roll please.
THEEEEEEE SIMPLE PATH TO WEALTH!!!!
The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life
WHO IS JL COLLINS?
He has been an investor since 1975. In 2011, he wrote a
series of letters to his daughter about money and investing; which morphed into
jlcollinsnh.com and led to this book.
Welcome inside the mind of the man who started the infamous Stock
Series on his blog.
The foreword of his book was by Mr. Money Mustache.
I think that is one of the funniest lines I have read about Personal finance and life from him.
“Let’s face it: Most investment books are boring. Dull.
Uninspired. This book brings managing your money to life.” – Paula Pant, Afford
Anything
“The media claim stock investing is no better than gambling.
Collins cuts through the crap. He demonstrates a simple level-headed way to
wealth that will lead you to a richer life.” – J.D. Roth, Founder Money Boss
and Get Rich Slowly
I have to agree wholeheartedly with J.D. Roth’s assessment. I also got to meet him at FinCon. Nice guy 😉
See my post on FinCon
FinCon 18: The Recap From Your Friendly Neighborhood Greenbacks Magnet Part I and Part II
After reading the book, it was really eye-opening. One of the simplest approaches to investing and building wealth that I have ever read and I read A LOT!
How I felt when I started learning about personal finance.
Finance Lesson numero uno: rent books instead of buying them; it's cheaper.
Now let me tell you why I feel that way about the book.
DEBT IS A BURDEN
There is no free lunch. tweet
There is no such thing as E-Z financing. Credit cards come
with enormous interest rates. If you look on credit card statements today, it
will give you two numbers.
One is how long it will take to pay off your balance paying
the minimum amount.
The other is how long it will take before your balance is
paid in full after three years.
Knowing that you can be paying off that sweater from last
year until your kids are ready to graduate from college should scare most
straight to the path of cash only!
Debt causes too many constraints and limits personal and
financial freedom.
Paying a $10 minimum on a $300 balance is a sure fire way to
the poor house.
If you owe more than 5% interest on any debt, then get rid
of it ASAP. And forget all these consolidation loans and balance transfers.
That’s like robbing Peter to pay Paul. Just work on steadily paying off the one
with the most interest and then continue until all the debt is gone.
Then make being debt free last forever.
WHY YOU NEED F-U MONEY
We all need it.
You know why? Because sh*t happens, that’s why.
What happens if you chip a tooth, get hit by an uninsured
motorist, and the basement floods all in the same week?
You have to pay to handle of these situations. If nothing
else, an insurance deductible; which can run into the thousands as house
flooding can be a deductible as high as $5,000!
He also said comfort is the poison. Too much of it can slow down your progress on the road to wealth. All I mean is to stay hungry. I’m just saying there are different levels of wealth.
So trust me when I say you need F-U Money.
How I feel when I show facts, but people still don't believe me. Then something happens and they tell me I was right. 😐 pic.twitter.com/ovdKxSRHml
Mr. Bogle created the first S & P 500 index fund. Due to its immensely low fees because the investors own Vanguard and not some company or board of directors that want to please shareholders, this book advises an investment in the VTSAX at Vanguard.
JL Collins advice: Invest in index funds with Vanguard and
keep what is yours.
I concur.
I need all my coins. I want ALL of my MONEY! I aim to keep as much of it as possible. I’m almost as bad as Scrooge McDuck. Almost.
Remember that episode of Ducktales when Fenton Crackshell was counting all of Scrooge’s money that he dumped into the lake in “Liquid Assets Part 1.” That’s me! 🤣
This total stock market fund holds the entire U.S. stock
market fund; which includes about 3,700 stocks. As most of these companies are worldwide and
involved in international markets, you only need this one fund. Simple right?
😉
And it is comprised of 80% of all the top funds in the S
& P 500, so no need to diversify as you already have it here.
If that did not convince you, the maybe the best
stock-picker of all time can: Warren Buffet.
He owns the company Berkshire Hathaway (stock symbols; BRK.A
and BRK.B)
In the 2013 Berkshire Hathaway annual shareholder letter,
Buffet advised the following:
“What I advise here is essentially identical to certain
instructions I’ve laid out in my will. One bequest provides that cash will be
delivered to a trustee for my wife’s benefit. My advice to the trustee could
not be more simple: Put 10% of the cash in short-term government bonds and 90%
in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.)”
I am a Vanguard and Berkshire Hathaway investor and I approve this message. 😉
I'm a Smart, Harworking, and Reliable citizen and I approve this message. 👍 https://t.co/ev77LEGLhc
“You have brains in your head. You have feet in your shoes. You can steer yourself any direction you choose.” ― Dr. Seuss, Oh, The Places You’ll Go!
Mannequin was a film released in 1987 starring Andrew McCarthy and Kim Cattrall. The story was about finding love and doing your passion. It was a feel good romantic-comedy (rom-com), that is memorable for its theme song Nothing’s Gonna Stop Us Now.
Mannequin Trailer
PASSION TRUMPS ALL
Find your passion and get paid for it
The main character in the movie, aptly named Jonathan Switcher, as he was constantly switching jobs in the film. Kind of reminds me of John Ritter as Jack Tripper in Three’s Company, as his character was always tripping or falling. Ritter’s character also did lots of pratfalls (falling down) like Chevy Chase would do on Saturday Night Live for laughs as a sight gag dating back to the days of vaudeville.
Anywho, in the film Jonathan was really an artist at heart, but he just couldn’t find the right gig. Finally, as luck would have it, being nice and kind, is what got him his start.
He was walking when a little old lady (Estelle Getty, Sophia from Golden Girls) came into the path of a huge store sign that was falling. He pushed her out of the way and saved her life! She just so happened to be the owner of a major women’s department store and offered him a job on the spot.
This changes the course of his life.
Once she learns what he can do, she gives him a job as a window dresser. This is where his artistry skills come into play. He finally found a way to make a living doing something he loved and was good at. And people were willing to offer him good money. A competitor wanted to offer him big bucks for his skill by doubling his salary. He said he didn’t do it just for the money.
Turn your passion into your career.
He kept his job where he was. This is where the movie truly begins.
Your Fired! Pick up your paycheck and get out of here.
COMPASSION
Compassion for others
Before getting his job as a window dresser, Jonathan had lost his job, his girlfriend (Roxy, played by Carole Davis), had no money, and was just sad and alone. All that changes when he starts dressing a Mannequin who comes to life!
Her name is Emmy. She says she saw him last night in the rain. He looked so sad and lonely. So, she came back to life just for him.
Emmy Comes Alive
DANCE
Dance
It’s good exercise and fun. Singing also can help cure loneliness, sickness, and unhappiness.
So, like I once heard Toni Braxton say to her sistsers on Braxton Family Values, “Don’t be the fun police. Don’t be the fun po-po.” When you go out, have some fun. Don’t be a wallflower. Go out there on the dance floor and dance.
Good health is vital on the road to wealth. You don’t have to lift a ton of weights, but you do need to get moving.
So, sing and dance, will ya.
The absolute most fun and funniest scene in the movie was the dance scene. That is what dancing does, it brings you to life and in this film that means literally.
Dancing scene
NO STEALING
Don’t steal
The men in the film are competitors to Switcher’s company. Once they find out about Emmy and her helping him make a name for himself as an in-demand window dresser, all hell breaks loose. They steal Emmy and then get arrested for it.
Do not steal. That’s all I have to say.
BE NICE
Be nice
Jonathan was a nice guy, but he was nobody’s fool. His kindness to others was always reciprocated back to him. He was nice. Then he got a job offer. He was nice. Easily, he made a friend. He was nice. And found his true love.
Good things can happen when you are nice. Being nice attracts things to you. In this film, it was a job.
Real love is something worth waiting and fighting for
My favorite and best scene of the film was the ending where they get married while the song Nothing’s Gonna Stop Us Now by Starship is playing. This is the most memorable part of the movie. It was a good way to end the film. It was a great scene and it made you feel good. Jonathan had finally found true love with Emmy.
When she came on the scene she informed him that she wanted to escape a loveless marriage from 4000 years ago B.C. She waited to come back to life to find the right man. And she commented to him in the film that she was so glad she picked him. And they only had eyes for each other.
Window Wedding Scene
This life is unpredictable. There are only a few things that are worth fighting for. Love is definitely top of that list.
I remember this movie fondly. It still has a special place in my heart.
This movie is what inspired me to help little old ladies. I had to help a complete stranger get out of a chair at a hotel one time. It just so happened that she was alone and I saw her struggling to get up. I walked over and asked if he needed help getting up. She looked up at me in surprise and said yes.
It sure felt good to help someone in need.
I do it every chance I get. Helping people across the street. Answering questions. I try to tip pretty well.
You know, I just try to treat people the way I would like to be treated.
I am nobody’s doormat, but I try to help the little guys out.
So recap…
Find your passion and get paid for it
Have compassion for others
Dance
Don’t steal. Earn your keep. Work for what you want.
“It is so liberating to really know what I want, what truly makes me happy, what I will not tolerate. I have learned that it is no one else’s job to take care of me but me.” – Beyoncé
Many of you may have heard of the FIRE movement (financial independence, retire early). However, what some of you may not know is that there are different ways to FIRE.
Let’s explore some of those ways shall we.
WHAT IS FIRE?
According to Camp Fire Finance, the elevator pitch for FIRE is this, “When your investments generate enough money to cover your annual expenses you’re financially independent (FI). At that point work is optional and you can retire early (RE) if you want to.”
Basically, you have more than enough money coming in to stop working. Usually, this requires anywhere from $1 million to $5 million dollars depending on what you want or need to spend to maintain your lifestyle or that of the one you dream of having.
For example, if you decide you want to withdraw at least $80,000 a year, you would need to have a $2-million-dollar portfolio.
HOW DO YOU BUILD A $2 MILLION DOLLAR PORTFOLIO?
“Don’t focus on getting to $1 million; focus on getting to $2 million.” – Arnold Schwarzenegger
I heard that little gem when Mr. Schwarzenegger was doing a radio interview.
So, one word: invest.
Property, stocks, art, and stamps can all help you build your net worth.
“Market crashes are the best times to buy,” he said. “When Walmart has a sale, everybody would run in to buy. But when the stock market has a sale, or the real estate market has a sale, everybody runs away. That’s why there’s a difference between rich and poor today because they don’t know a good thing when they see one.” – Robert Kiyosaki quoted from a MarketWatch interview
Do not focus on your income; focus on your net worth.
Earning a high income means nothing, if you spend it all. If you make $85,000, but spend $86,000 you’re in the red. You can blow through just about any paycheck.
PURSUIT OF LIFE, LIBERTY, HAPPINESS AND FINANCIAL FREEDOM
The pursuit of financial freedom takes work and time. I thought this post from Apathy Ends, hit the nail on the financial head on why people are not rich, yet. See my post on Patience is the key to wealth.
I will never forget that episode of America’s Next Top Model (ANTM) when Ms. J was teaching the girls how to walk down the runway. He was fierce and determined. What he got from the girls was gentle and undetermined or undefined and lazy.
He commented to them, while slapping his hands together, with one palm face up against the other hand palm down for emphasis: “I want you to walk like you’re selling it and the rent is due tomorrow.”
I could think of no better way to tell someone that is how you approach your money and your life’s work. Either be all in or don’t do it at all. Passion is what separates the have’s from the have not’s. And in that case, it was a $100,000 prize and modeling contract.
Get a financial education. Learn all you can about money. Make a plan or a budget for your money, but make it sexy. I know for some people talking about interest rates puts them to sleep, but how about we think of the subject differently and come at it from another angle.
I went to a meetup in DC and heard J. Money of BudgetsareSexy say this, “Do you want to learn how to balance a check book? Boring. Or do you want to learn how to save a million dollars?” WHAT?!!!
Did you also know reducing your 401(k) investment fee by 1% can provide you with 10 years of income? Shocking? Yes, I know. I can teach you how to save $1 million and keep $100,000!
Now, those things sound sexy and exciting. Yes, please tell me more.
Once you have a question. Start looking for answers.
THE RULE OF 25
“I can never be safe; I always try and go against the grain. As soon as I accomplish one thing, I just set a higher goal. That’s how I’ve gotten to where I am.” – Beyoncé
If your annual expenses are $55,000 a year, then you need $1.375 million to retire (55,000 x 25) and then this should last you for the next 25 years.
The formula used to calculate your 25 years of expenses is this (expenses x 25 years).
Estimate your FIRE number.
You want more money to retire on? Like Beyoncé says, set a higher goal.
For $100,000 in income, you would need a $2.5-million-dollar portfolio to generate that kind of cash.
“Keep your feet on the ground and keep reaching for the stars.” – Casey Kasem
The 3% rule refers to your withdrawal rate: the annual percentage amount you can safely withdraw from your investment portfolio when you retire.
This allows you to touch your interest earned at a slower pace. Since, you are withdrawing 3% instead of 4%. Meaning your draw down the principal more slowly, if ever. The more you have squirreled away and the less you take, you may not even touch the principal at all.
I know that is really shooting for the stars, but that really is the goal. You never want to touch principal. That way, you live only off the interest forever!
I got this chart from doing another online search and the best I came across was from the blog Financially Alert.
“‘Enough’ is what it takes to not worry about the bills.”
“‘A lot’ is enough that you never have to worry about working again.”
“‘F you’ money means you can rent a jet to go wherever you want, whenever you want, and no party is out of reach.”
“‘F everyone’ money means you can have your favorite band in your backyard, not care how much it costs, and lend them your jet to get there.”
We’re not talking about rich; talking about wealthy. Chris Rock once said, “Shaquille O’Neal is rich. The guy who pays his salary is wealthy.” He also said comfort is the poison. Too much of it can slow down your progress on the road to wealth. All I mean is to stay hungry. I’m just saying there are different levels of wealth.
FIRE IT UP
“Focus on all four of your net worth factors: increasing your income, increasing your savings, increasing your investment returns, and decreasing your cost of living by simplifying your lifestyle.” – T. Harv Eker
Simple math can help you retire rich.
Unfortunately, many people think of math as a foreign language and say it’s too hard to learn.
In my experience, to build wealth you need to know addition, subtraction, division, and multiplication. And that’s about it.
Why FIRE AT ALL?
More control and satisfaction over how you spend your time and money. Finding something you love to do and are passionate about is life changing and fulfilling. What you want is…FREEDOM. Waste less money and work with what you’ve got. Do more with what you have.
What do you want out of life? Write it down. Go seek answers. They say seek and you shall find.
According to Mr. Money Mustache, you should focus more on you than your bank account. Get wiser and healthier so you can increase your probability to get wealthier. My favorite quote of his is this: “Salads and barbells every day.” Become your best self with hard work, dedication, and consistency. Be the Boss.
READY, AIM…FIRE!!!
According to an article by Physician on Fire (POF), called What is fatFIRE?, a Facebook group defined FIRE as the following:
FIRE = Financial Independence. Retire Early.
leanFIRE = FIRE on a shoestring budget.
fatFIRE = FIRE on a generous budget.
Most aspiring to fatFIRE have a target of $2.5 Million or more or the equivalent annual budget of $100,000 or more based on a 4% withdrawal rate.
I found a breakdown of the terms financially speaking on Miniafi on the difference between lean and fat FIRE under the title So Many Terms!
I break it down like this:
LEAN FIRE = $1 million dollar or less portfolio
FIRE = $1.25 to 2-million-dollar portfolio
FAT FIRE = $2.5 million dollar or more portfolio
FIRE is about having enough passive income flows to never work again or to decrease the amount of time you spend doing work you don’t want to do and increasing it on the work you do want to do.
If you use a credit card, you don’t want to be rich. – Mark Cuban star of “Shark Tank”
According to CNBC, Americans have an average credit card balance of $6,375 and owe a record breaking $1 trillion in credit card debt, which is the most ever recorded in history.
Investing that money instead could net you anywhere from $50,000 to $200,000, depending on how long you invest it and getting a return on investment of around 9%.
And that does not include an employer match or if you invest more. You could save and invest your way to a small fortune thanks to compound interest.
Here are some ways to avoid paying interest.
MAKE IT AUTOMATIC
I’m sure to many of your out there this is not new advice. However, how many people are actually doing this is another story.
Setting your bills up on automatic payments is a great way to avoid missing payments.
Credit card companies can levy a hefty fee for missed payments. The most recent I read was $38! Forget that. I rather use that money for gas or some other function. Anything is better than paying fees.
In addition, credit card companies can ratchet up your interest rate to 29.99% for missing a single payment!
That means almost near perfect timing of paying all bills.
The closest you can get to doing this is to make all your payments automatic.
Set up everything you can on autopay.
You can put the gym membership, cell phone, utilities and insurance payments on a credit card. Then set up automatic payments with your bank to pay that credit card off at the end of every month and you’re done.
PAY DOWN YOUR DEBTS
Paying off high interest debt is a must on the road to wealth.
Every dollar you spend towards interest cannot work for you compounding interest instead.
Think about it. If you pay $700 per month servicing debt and pay 50% of that in interest, that money is gone. Dust in the wind my friend.
If you can do the polar opposite, investing the entire $700 and earning interest instead, you have a clear path to building wealth over time.
That is the equivalent of $8,400 a year you are investing as opposed to using that amount to pay debt in which $4,200 goes to principal and the other $4,200 in interest and that money you never see again.
Many may not know this, but credit unions are not allowed to charge more than 18% on loans or credit cards (unless you default).
The savings gain alone from not having to pay some credit companies 22-27% interest is huge!
You could save anywhere from $50-150 bucks or more per month with a lower interest rate. That’s another $600-1,800 per year!
Just something to consider.
REFINANCE YOUR MORTGAGE
If you can lower the interest rate on your mortgage, you can save $100’s or $1,000’s of dollars a year.
In addition, if you can change your repayment period from 30 years to 20, 15, or 10, then you can save a ton of money. Maybe not tons of money monthly or right away, but over the life of the loan.
For example, a $250,000 mortgage at a 3.92% rate over 30 years will cost $425,533. You reduce that to 15 years and total output is $331,058. That is a difference of upwards of $100,000!
If you take that $100,000 and put that into index funds, you could have anywhere from $600,000 to $1 million dollars over 30 years with a minimum 6% return on investment.
Many folks will buy at least 2-3 homes in their lifetimes. If every new purchase resets your debt-free mortgage clock by 30 years, then you are likely to spend most of your working years in debt.
I hate to be the bearer of bad news, but this is actually the norm for most people.
You do not want to be normal. You want to be different and extraordinary because that gets results.
If more folks put down 10-20% and got 15 year mortgages, you would be better off in the long run.
Paying on one item for 30 years is a long time.
A lot can happen in 30 years. Heck, a lot can happen even in 10 years!
Retire that debt ASAP or as fast as you can.
You can build an in-law suite, swimming pool, and remodel the kitchen after the debt is gone and the home is paid off.
People used to have mortgage burning parties, after paying off their home. Let’s try to bring that back shall we.
I have recently read in the news personal finance experts expressing their concerns over mortgage payments that Americans are making.
Most wanted the debt paid just before you retire. Others said get rid of it in your 40’s. Like around age 45. Why you ask? Since, this is the point where you are halfway through your career, it is best to spend the second half of it working toward building capital to fund your nest egg.
That is excellent advice.
Basically, you spend the first 20 years paying off all you owe, and the last 20 years building up your retirement accounts you will need in your golden years.
SUMMING IT UP
All you have to do is follow these four steps and you can avoid paying interest or at least a whole lot less of it.
Remember these 4 steps:
Make it automatic
Pay down your debts
Bank with a credit union
Get a 15 year mortgage
Sounds pretty simple right?
Well, you would be surprised by how many people are not doing any of the things stated above.
Therefore, if you can start doing even one of these things now, you are well on your way to building up your bank account.
And in the illustrious words of Porky the Pig, “That’s All Folks!”
