As I write this, the Biden Administration has extended the payment pause on borrowers enrolled in the SAVE plan for another 6 months.
Might I offer a suggestion: take that money and put it into a rainy day fund or invest it in an index fund (VTSAX) or individual stocks (The Trillion-Dollar Club such as MSFT or META).
Now that I have offered my savings and investment advice, let’s talk about how I got to my first $400K.
They say the first $100K is the hardest. I remember from years ago a time when Drake tweeted that. Don’t remember? That’s cool. I have a copy of his tweet for you to see below.
Well, my money target was higher since I figured I’d go big or go home.
I made my target $400K.
I totally borrowed that title from Her First 100K blog, but I am sure Tori Dunlap will not mind if I borrow it if it helps motivate people to become financial independent.
Although I have a six-figure compensation package now (salary + benefits), it did not start off that way.
You will not believe some of the jobs I have had on my path to becoming a self-made woman millionaire. Let me share 4 of them with you here.
1. Waitress ($2.65 per hour + tips) – Back when I was still in high school I did a summer job as a teenage waitress at Shoney’s. It wasn’t glamourous, but the tips were pretty good. Some days I could clear $50-$100 bucks a night! That’s some good money to a teenager. And the menu there was huge. There was no way I could remember it all. I mean who do they think I am. Sheldon Cooper. I do not have a photographic memory. However, lucky for me, this restaurant had a buffet so it basically sold itself. I was mostly there to bring drinks and the check. It was physically demanding though as it required you to stand virtually all-day. I did get 50% off any food I wanted and the cooks in the back were great. This is my foundation on what it takes to earn a $1. Like Britney Spears says, “work b*tch!”
2. File Clerk/Loan Analyst ($28,000/year) – I was still working my way through college when I got this job. I answered an ad and went in for an on-the-spot job interview and got the job! Essentially, I helped maintain loan documents and helped manage bank customer accounts at a credit union. This job would set me up for what was to come, which was my foray into lending and finance.
3. Night Auditor ($20 an hour + tips) – This was another job I got from answering an ad on Indeed. They were offering $18 but I negotiated $20. Never underestimate the power of negotiation ladies! And the funny thing is when I actually started doing the job, I did so much work that I really should have been making $25 at least! You have answer phones, check-in guests, keep the hotel lobby clean, manage guest complaints and do point-of-sale transactions for the hotel market by the front desk. Then there was the lounge at the hotel that was a mini nightclub that was open until 2am! We did have a few celebrities come through, but I mostly just stayed at the front desk. And did I mention I worked overnight from 11pm – 7am! However, it was fun overall because I had a great coworker. I even had a guest tip me $100 for calling him a cab. Sweet!
4. Associate Director (over $80,000k+/ year) – After college, I applied for another job in lending. Basically, counseling families on how to navigate the financial minefield that is financial aid. I also completed two Master’s degrees and started this blog on the side while doing my job. This blog is my side hustle and it did start to generate some income eventually. However, when asked by Business Insider for the article they published on me, I declined to go into details.
All these jobs helped put me on the path to where I am today, which is female millionaire.
Every time I earned more, I invested more.
I started with a fistful of dollars and turned a small $5,000 investment in Apple into an investment portfolio over $400,000!
As I write this, Deadpool & Wolverine just hit theaters mere days ago on July 26, 2024. It destroyed the weekend box office and broke records with an eye-popping $441 million-dollar opening weekend. That is just massive!
Not too surprising though for a movie that had the backing of one of the biggest movie and production companies in the world, Disney Studios and Marvel Productions. It was reported that Disney dropped $200 million as the budget and another $100 million for marketing.
The movie even went as far as to market to the first 100 ticket holders to receive the movie poster pendant as a way to sell tickets.
Genius in my POV!
What I am here to talk to you about today is what I learned from both actors, not in front of the camera, but what they do on their off time. Namely, investing.
Long before Ryan Reynolds went from party pimp in 2002’s Van Wilder to merc with a mouth in 2016’s Deadpool, he started putting his money to work investing in startups and these companies can be disruptive. The biggest by far was in Mint Mobile.
It was reported that T-Mobile struck a deal with Mint Mobile to purchase it for $1.35 Billion in 2023.
Reynolds, as a 25% owner, his stake would net him $300 Million. That’s probably more money than he’s made from his entire acting career! And his catalogue is pretty huge as he’s been starring in television and film for 30 years.
Publicly traded U.S. telco T-Mobile announced the deal today to acquire Mint’s privately held parent, Ka’ena Corporation, which also houses the Ultra Mobile and Plum brands https://t.co/4jsvBVdGCnpic.twitter.com/Qy2n7hxsXl
His involvement as a celebrity spokesmen caused a huge spike in customer interest and gained the company 12x the customers it had prior. That is more traction and eyeballs gained on them than they got with a $5 Million dollar Super Bowl ad.
He put Mint Mobile on the map and gave them access to a bigger audience just through his 45+ million followers on social media platforms alone.
And Hugh Jackman is no slouch either. Over his decades long career, he had made large paychecks in film, most notably as his Marvel character, Wolverine. He reportedly went from making $500,000 to over $20 Million playing the X-men fan favorite.
However, he did not just let that money sit in the bank. He invested a gobsmacking amount in real estate. Celebrities can actually make more money from endorsements than sheer talent alone. According to publications like the New York Times and New York Post, he is speculated to own approximately $50 Million in real estate in America and Australia.
Although talent has gotten them where they are, their investments keeping working for them long after the camera stops rolling.
Investments don’t need to take a 15-minute smoke break, drink water, go on vacations or sleep. They are working around the clock. Making you money while you sleep.
Learning that is when I put a ton of my focus into investing. I have looked into both entrepreneurial pursuits and being an avid investor. The truth is being an entrepreneur can make you rich, but investing is how you stay rich.
I figured even if any business I ever starts fails, I would still have my investments.
I chose to work on having $1 Million in investable assets so that if I ever choose to walk away from work one day, then I would have the option to.
That’s why I started investing in Google, Apple and more recently AI stocks.
I am closing in on $400,000 in investments. At this rate, the earning are becoming quite considerable and I could hit my target of $1M in less than a decade. If I can get a 10% return on that, I could cross into the multi-millionaire territory in an additional 7 years.
Having $2 Million in investable assets is no small feat.
Since, it’s reported that only 9% of Americans achieve a $1 Million Dollar stock portfolio. You know how many make it to $2-3 Million or more…around 3%.
You would be in the small minority of Americans with a million in investable assets.
One of the tips and tricks I used to build my stock portfolio was to trim 10% of the top of all major purchases and invest the difference in the stock market.
If you budget $3,000 for a European trip, take $300 off the top and invest that in Google or the VTSAX.
Need a new washing machine.
Instead of spending $1,000, trim $100 off the budget and redirect that to your Roth IRA.
Considering that only around 26% of households have saved $100,000 for retirement, means you can definitely aim for this goal and likely reach it. That’s one in four households. Great odds.
However, once you get to $500,000 in retirement savings, this number of households goes down to 9%. You are now in a small minority. Going from a rather large majority of 26% to 9% is the difference of $400,000.
There are now more folks than ever that owe that in mortgages than they have saved for retirement.
I aim to be different. I want the elusive brass ring…to be a millionaire.
I won’t stop until I become part of the double comma club.
It’s a sorority that I have been pledging to become a member of for years.
I figure with enough time, grit and determination I could become that card carrying member. It is an elite club. The barrier to entry remains strict, but not impossible.
You have better odds of getting into this club than you do of being accepted into Harvard with its super low 3.2% acceptance rate.
You can do.
It’s like rapper and actor Master P said; “product outweighs talent.”
When it comes to monetizing your talents, having a product is key 🔑 You can watch the full Assets Over Liabilities interview feat. Master P on Revolt TV’s YouTube Channel. #masterp#talentisoverrated#businesstips
What is this strange new world called financial freedom? The more I watched her show, the more I wanted it.
Essentially, do I take the blue pill or the red pill?
As the title of this post implies, I took the red pill.
Financial Independence. I wanted the ability to do what I wanted, whenever I wanted without being tied down to a 9-to-5. But how would I do it? I needed a plan.
Much like the Scooby gang needed a Scooby trap, I was going to have to plan my way out of the rat race and into financial freedom. A financial road map. That’s what I needed.
It was like what Gail Vaz-Oxlade of Til Debt Do Us Part would always say in the intro of her show, I needed to go from red to black. My investment picture of over more than a decade is listed below.
Here’s a sneak peak behind Greenbacks Magnet financial magic curtain. Up first, from red. Then fade to black. Or in my blogs case, green.
Financial chaos bleeds. Here’s the red.
Oct, 2023: -$16,000 (market + house value ↓ )
Sep, 2022: -$22,000 (market crash + loss of 2nd income)
Feb, 2020: -$19,000 (market crash; where the bleeding really starts)
May, 2019: -$10,000 (market crash)
Dec, 2018: -$14,000 (market crash)
Oct, 2018: -$10,000 (market crash)
Feb 2018: -$4,900 (market crash)
Jan, 2016: -$4,000 (market crash)
Aug, 2015: -$5,000 (market crash)
Jun, 2013: -$4,000 (market crash)
Sept, 2012: -$14,000 (market crash + cash crash + got a new home!)
Feb, 2010 -$1,000 (market crash + got a new job!)
May 2009: -$3,000 (market crash + laid off)
Financial triage has prevailed. Here’s the black.
Nov, 2023: +$27,000(market rebound + 2nd job + house value ⬆)
Oct, 2022: +$17,000 (market up + mad hustlin’ 2nd job)
Mar, 2022: +18,000 (market up + bought condo)
May, 2020: +27,000 (market rebound; the green starts rollin’ in)
Jun, 2019: +$9,800 (market rebound)
Jan, 2019: +$10,000 (market rebound)
Aug, 2018: +$6,300 (market up)
Feb, 2017: +3,900 (market rebound)
Mar, 2016: +$5,000 (market rebound + tax refund)
Oct, 2015: +$6,000 (market rebound)
Feb, 2015: +3,300 (market up)
Aug, 2014: +$2,000 (market up)
Jun, 2010: : +$4,000 (market rebound)
May 2008: +$2,000 (market up)
Dec, 2006: +$1,000 (got a new job!)
First, I got rid of any payday loans and made a promise to myself to not ever sign up for them or any car title loans. Done.
Second, I needed tp pay off my car loan and stay away from car payments. So I paid off my SUV and freed up that monthly payment of $448.65 in 2009. I have not had a car payment since. Done.
I needed to get rid of the $20,000 personal loan I took out for $333 monthly. Done.
I needed to increase my income. So I finished my bachelor’s and got a higher paying job. Done.
I needed a goal to aim for. I decided upon one short-term and one long-term and one sensational dream goal.
Short-term I needed a $10,000 savings emergency fund. Done.
Long-term I wanted to retire a multi-millionaire. So I needed at least $2 million. Sensational dream goal is $10 million. I decided to break this all up into smaller goals. Therefore, I would start by having investable assets of $100,000. Done.
Then $250,000. Done.
Next was $300,000. Done.
Although, having over a quarter of a million-dollars is an incredible feat in itself, I had no time to rest on my laurels. I must keep going.
Then I started to press on toward my next goal of $500,000. After that is accomplished, I will set my sights on $750,000. The next leg in the journey would be $1 million.
At that point, I would be a 401k millionaire.
The next goal is to double my money. I would get to my next several money milestones by increasing my 401k contributions by 1-2% every year.
No vacations unless they were paid for with cash.
I also got a second job to bring in more income.
I signed up for credit card and checking account bonus offers that brought in thousands.
I invested my old car payments in index funds like the VTSAX and individual stocks like Apple, Google and Amazon.
And every time I got paid I would put a small portion in my Roth IRA.
I also make sure to keep track of my investments every month.
I’ll breakdown more of my behavior on how I went from $0 to over $300,000 in my next post.
Merriam-Webster definition: Rockstar: a famous and successful singer or performer of rock music.
Greenbacks Magnet definition: Stockstar: a successful investor of stocks and index funds.
I knew there were only six ways to get rich rich: marry money, inherit money, build a successful business, exploit a talent, get lucky i.e. win the lottery, and spend less than you make and invest your savings wisely over a long period of time. That is basically it. The rest are details.
There are many roads and paths to wealth, but all of them come down to six once you weed out all the details. Wealth has to be pursued. It will not just fall into your lap. You have to work for it. The result of hard work is success. The success is measured in dollars. Even though money is just a tool and one barometer for measuring success it is the yardstick that lets you keep tabs on how far you can come in a job done well.
But as we all know building wealth is easier said than done.
It can be as elusive as getting those Taylor Swift Eras tour concert tickets! And like her, I have a blank space and I’ll plan to write millionaire after my name. Ha!
After reading books like The Automatic Millionaire, The Simple Path to Wealth, Your Money or Your Life and a ton of celebrity autobiographies, it occurred to me that even on a modest income, you can rise out of the poverty ashes and rise like the phoenix to wealth.
You just need a plan. If you tried your hand at the first five ways to wealth and failed, you could always be working on the sixth path of saving and investing your way there simultaneously.
If I could not be a ballplayer, rapper, or business owner, I could always invest my money and be the CEO of my stock portfolio. I could be a stock CEO. I could be a stockstar. No college diploma required.
There are 5.3 million millionaires and 770 billionaires living in the United States. Millionaires make up about 2% of the U.S. adult population. Therefore, if you make it to $1 million in investable assets, you are wealthier than 98% of the U.S. population.
Statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich. Having $1 million will put you in a very exclusive club. The double comma club.
Although, the top 1% can earn as much as $955,000. Those annual earnings can seem far out of reach in a country where less than 10% of all households earn more than $200,000, according to the U.S. Census Bureau.
Working toward $1 million is still a lofty and worthy goal. Forbes reported in 2022 that the bracket’s minimum net worth is much higher — a cool $11.1 million. That would mean to be in the top 10% would be a minimum net worth of $1.1 million. This is an achievable goal. See some of my investments below.
My index funds are shown in dollar and my individual stocks are shown in shares.
Stock Portfolio
Investments
2012
2018
2020
2022/23
VTSAX
$20,000
$100,000
$158,000
$220,000
Amazon
102
Apple
20
50
100
Google
330
Over time, I have increased my exposure in individual stocks while also investing in my index funds. I also decided to open up four different retirement accounts: Traditional IRA (Rollover from a previous job), Roth IRA, 401k and Roth 401k. I was able to get both the Roth and regular 401k from my employer(s) over the years. The IRA’s are what just happened over time.
Each retirement vehicle offers different benefits. In order to have more flexibility with my money I have two of each IRA and 401k. See below for definitions and pros and cons or the Roth 401k and IRA and more her from Empower.
What is a Roth 401k? A Roth 401k is an employer-sponsored retirement plan. But unlike a traditional 401k, contributions are made with after-tax dollars.
The Roth 401k was introduced in 2006 to give Americans a new type of retirement savings vehicle to complement the popular Roth IRA, which was introduced in 1997. Roth IRAs and Roth 401ks are similar, but there are some pretty significant differences you should understand when deciding which one is right for you.
Pros and cons of a Roth 401k A big advantage that the Roth 401k has over the Roth IRA is the possibility of an employer matching your contributions up to a certain percentage. Employer matches are the closest thing there is to “free money,” so if you’re deciding between a Roth 401k vs. a Roth IRA — keep this in mind. It’s also important to note here, though, that if you receive an employer Roth 401k match, the matching funds could also go into a traditional 401k.
A con, however, is that a Roth 401k account can sometimes have fewer investment options than a Roth IRA.
Pros and cons of a Roth IRA On the flip side, Roth IRAs generally offer more investment options than Roth 401ks. With a Roth IRA, you generally have a large number of investments to choose from, including stocks, bonds, cash alternatives, and alternative investments. With a Roth 401k, you are limited to the investment options offered by your employer’s 401k plan.
However, one con of a Roth IRA is the income limit associated with this type of account. If you earn too much money, you won’t be able to contribute to this option. Roth IRAs also aren’t sponsored by an employer, which means that there is no employee contribution match.
The most distinguishing characteristic of 401(k)s, whether Roth or traditional, is the high contribution limit, allowing employees to save up to $22,500 per year in 2023. For workers over age 50, the ceiling is $30,000.
Meanwhile, annual IRA contribution limits are $6,500, while workers over 50 years old may contribute up to $7,500 per year.
A Roth 401(k) has a required minimum distribution beginning at age 73, but starting in 2024, the minimum distribution requirement will be eliminated entirely for Roth 401(k)s thanks to the SECURE Act 2.0, which was passed at the end of 2022. Previously, Roth 401(k) account holders could roll their plans into a Roth IRA and avoid the requirement entirely.
That means if you are one of the lucky ones with access to the Roth 401k, then you can essentially put money away for retirement with after-tax dollars and pay nothing on the earnings when you begin your withdrawals and no tax period in your retirement.
I knew that if I could make sure to always focus on investing a portion of my income that I could build wealth no matter what.
My definition of a stockstar is listed above. However, I have a barometer to measure my goal as well.
In order to be a Stock CEO and be one of the big boys, I looked at the compensation packages of CEOs in America. And CEOs are paid! The average salary of a Fortune 500 CEO is $15.9 million per year. The highest-paid Fortune 500 CEO is Elon Musk. In 2021, Musk saw compensation worth around $23.5 billion. He achieved this by exercising Tesla stock options given in a 2018 multiyear moonshot grant.
CEO pay has skyrocketed 1,460% since 1978.
CEOs were paid 399 times as much as a typical worker in 2021; that is up from 366-to-1 in 2020 and a big increase from 20-to-1 in 1965 and 59-to-1 in 1989.
The average CEO salary in the United States is $821,100 as of May 25, 2023, but the range typically falls between $620,600 and $1,057,900.
However, some CEOs like Warren Buffet accept a salary of $100,000. Some have gone so far as to take a salary of $1. For example, in 2010–11 Oracle’s founder and CEO Larry Ellison made only $1 in salary, but earned over $77 million in other forms of compensation. In some cases, in lieu of a salary, the executives receive stock options. Top CEOs like Elon Musk & Mark Zuckerberg take 1 dollar salary. and know the history of a $1 salary & perks that comes with a one-dollar salary.
Why do CEOs make $1?
The CEOs can afford to earn $1 as they make money through other ways like stocks and equity. This also helps them in avoiding taxes.
Who are the CEOs in the $1 salary club?
Some of the CEOs who take a $1 dollar salary are: Elon Musk (Tesla), Mark Zuckerberg (Meta formerly Facebook), Meg Whitman (Quibi), Larry Page Sergey Brin (Google).
Once I did my homework, I decided that I was going to be a stock CEO.
I may not be running a billion-dollar Fortune 500 company, but could manage a million-dollar stock portfolio.
Every dollar I invest would be my employee.
I would unleash these little worker bees to do their thing and help me build wealth with the power of compounding. That would be my equity pay package and golden parachute when I left work behind.
For example, Presidents / CEOs at companies that have raised Over 30M typically get between 250K and 5M+ shares. However, smaller companies that have raised Under 1M are more generous with their stock compensation as it ranges between 2 and 40%+ for Presidents / CEOs.
Therefore, I could reckon that a CEO of a small firm could get around 100K and between 10K-200K shares. Let’s say a small cap company like Ethan Allen, which has a share rice of $26.40 and a market cap of $667M, then a CEO would have between $263K and $5.28M in stock.
Therefore, if I had bewteen1K and 10K in stocks or index funds such as GOOGL at $125 a share or the VTSAX at $101 a share, I would have $100K to 1.25M in investments. This is a CEO stock equity level right there. Having 10K in shares or $100K-1M in investments means you are a stockstar.
At 550K in investable assets, you are in the top 20% in net worth. At $1.1M, you are in the top 10% of net worth individuals. Think of it like this, if you can’t be a rap star, baller, or Rockstar, you can be a financial Rockstar. Just keep investing.
Like Rihanna, said:
To be what you wish You gotta be what you are Only thing I’m missin’ Is a black guitar index fund
“Patience and perseverance have a magical effect before which difficulties disappear and obstacles vanish.” —John Quincy Adams
Stocks are down and housing prices are up. We have seen a shift in way consumers are spending. Mortgages are in. High-priced stocks are out.
Although the stock market has had an astounding run since the Pandemic began in March 2020, it is the acquisition of housing has most Americans chomping at the bit.
The US has minted more than half the world’s new millionaires over the last few years as investments in equities and tech stocks propelled assets higher. Real estate, is generally considered to be a more stable investment than volatile stocks or fluctuation cryptocurrencies and is a tangible asset. Real estate investing has also created 90% of the world’s millionaires.
However, not too far behind is stocks as nearly 70% of their wealth gains over the past year and a half have come from market gains. The wealthiest 1% know this. That is why they own 89% of all US stocks.
Those at the top of the economic food chain know the wealth comes from the owning of assets. The top 1% own a lot of stock my friends. And those at the bottom of the economic pyramid own so little. Meaning they are not keeping up with the rise of inflation and their purchasing power is steadily decreasing.
The dollar in their pocket is worth less now than it was yesterday. This means you are able to afford less at the grocery market and to purchase other consumer goods. For example, the cost of a pound of brisket was listed as $9 a pound. My sister sent me a screenshot of a 9.67 pound of brisket in her grocery store. The cost: $87.
I am sure somewhere my grandmother is looking down upon us and thinking that the family may very well have to turn vegetarian or severely cut back on meat consumption. I know grandma, I know.
According to Pew Research, the Consumer Price Index, the most widely followed inflation gauge, increased 7.0% from December 2020 to December 2021 – its highest rate in nearly 40 years. Families are spending $30 more per week at the local grocery store or farmer’s market. An increase in prices also mean less that is being invested and saved.
The price of lumber has increased by 288% making the cost of homes go up by an average of $36,000. The average new car price is now $47,000. As of 2021, the average monthly car payment in the US is $575 for new vehicles and $430 for used vehicles.
When I put these numbers in my compound interest calculator, it informs me that if I can invest either one of these amounts monthly for 30 years, I can become a millionaire. Therefore, I have come to the conclusion that new cars are wealth stealers and must be avoided at all costs. Rejecting new cars has made me richer. Things have gotten so far out of whack for the average household that people have begun to put groceries and gas on credit! This an absolute no-no. Building wealth requires cash.
Even if using OPM – other people’s money – you still have to bring some cash to the table to invest in index funds or put a down payment on a home. You must have capital to work with if you want to build wealth.
And companies are all too happy to part you from this wealth whether you have some or not. Case in point, I recently looked up the Kelley Blue Book value of my car. I just wanted to know what it was worth. Little did I know that this information gets sent over to local car dealerships who within mere seconds of me inquiring started sending me a barrage of solicitations for my business to put me into a new car.
I know very well that the average car payment is over $500.
These salespeople are looking to increase their monthly sales quota. I continue to get offers to get me into a new car by email, phone and text over the next week.
At this point, my Spider-sense is tingling. Why are folks still calling me after a week? I get it. Business is all about sales. They make fat commissions of us folks once we sign on the dotted line.
I prefer to keep my money where it is; in my pocket.
Just for kicks, I decide to look up the cost of food, housing and cars from the last 30 years.
After doing all of this research, I have come to the conclusion that the future is going to be expensive.
Therefore, it is unwise to use credit for present consumption with yet unearned future dollars.
We can prepare for the increases in living expenses by investing our dollars today. Don’t believe me. Just take a look at all the charts I provide in this article.
Numbers don’t lie.
The constant outflow of discretionary dollars on basic cost of living has consistently gone up. The cost of homes, education, cars, gas, and food are going through the roof!
I truly feel that incomes have not kept pace with the cost of homes and education. Equity may have increased, but so has the cost of homes.
In 1976, the cost of Harvard University tuition was $3,740. In 2019, it was $54,002. How can they justify it? It is almost like that owl in the how do we get to the center of a Tootsie Pop commercial: the world may never know.
This is a mystery that I do not even think Scooby-Doo and the gang could solve no matter how many Scooby snacks Velma has in her back pocket.
I do not say these things to scare you. I am merely your jedi money guide on this journey. I want you to invest.
Own your primary residence and buy those index funds.
As the stock market goes down, buy the dip. Buy low. Get those high returns to sell high.
I did this back in 2013 when I bought shares of Apple (AAPL) for $258. The stock went on to split twice. Once for a 4-for-1 basis on August 28, 2020, a 7-for-1 basis on June 9, 2014. Prior to each split the stock was trading well over $500. It was $656 in 2014 and $656 in 2020.
It went from a billion-dollar company to a $2 trillion-dollar one. At the time of this writing, it is hovering around a $3 trillion-dollar market cap. Off a small one-time investment, I made tens of thousands of dollars.
And that small home that was purchased years ago. It has increased in value over $100k. The equity has gone up by over $100,000 and counting. That is why we invest my friends. So we can keep earning money in our sleep. Our money can work without taking vacations or sick leave. We can’t.
So here is your homework for this evening. I want you to find a home you would like to buy and a stock you would like to purchase. Figure out how much of a down payment or initial but in you will need. Divide this amount by how long you think it will take you to save up these funds.
For example, the VTSAX has a minimum initial investment of $3k. You decide you want to but this investment in a year. Therefore, you divide $3,000/12 months = $250. That is how much you must save every month to but this index fund. Doing the math will allow you to slowly build your dreams.
Let us not forget the wisdom of one of the greatest investors of all time: Warren Buffet. He reminded us that American living standards advanced seven fold in the 1900s, while the Dow rose from 66 to over 11,000. The Dow now stands at 34,934.27 today in 2022. “The model has worked well for America. If you look at all these disparate businesses, such as if you looked at the Dow Jones as a single entity… (though it rotated)… but going from 66 to 11,000 is doing something right. Owning a group of good business isn’t a bad plan.” Yes, owning is good for your pocketbook in the long run. Now I want you to go out and get some assets.
But before you do here is some more Buffet wisdom, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” And lastly, “The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch.” Patience is key. It will take you to the promised land of financial independence.
When I read the tea leaves on the stock market, I see it rising to 100,000.
Why you ask? A little research.
The Dow Jones industrial average index (DJIA) opened in 2018 just shy of 25,000 on Jan. 2, and a little over two weeks later it already had topped 26,000. The DJIA would need to rise by 20% to hit 30,000. We did that. As reported by Kigplinger, the DJIA has enjoyed an annualized increase of 7.33% since 1950, based on Yahoo Finance historical data. Therefore, the DJIA will double every 10 years (9.82 years, to be exact). If we continue at our 1950-2017 pace, the DJIA index will double, or hit 50,000, in 10 years.
If a $100,000 in the market at a 10% return will net you $1,000,000 in 30 years, then you can become a multi-millionaire with help of the stock market. And that excludes housing equity. So get out there and start putting your dollars to work.
Millionaires know that you get rich by saving $20 bucks at a time.
This is not a post for the faint of heart. So some of you out there may need to do what you did when the nurse swabbed your arm with alcohol right before she gave you the Covid-19 shot, turn your head away and close your eyes!
It was years ago, but I had to make a call. I had to make an executive decision. Would I like to buy a $250,000 home or become a 401(k) Quarter of a Millionaire.
It was almost like flipping a coin. Do you choose heads or tails?
Heads and be a $250k homeowner.
By the way, home values over 30 years have risen about 4% on average but stocks have been able to return 10% over that same time period.
Now back to the coin toss.
Tails and have $250k, that’s right a quarter of a million bucks, in your 401(k).
I chose not to go with the path of least resistance, which is the American dream of being a homeowner, and to put my money in stocks. Best decision I ever made.
After watching the housing crash or 2008-09, it dawned on me to put some money into businesses that pay you dividends instead of a mortgage that you have to pay. Missing even a single payment on a mortgage and never being able to catch up could put you on the short list to foreclosure. Nobody wants that.
Fast forward 10 years later and Covid-19 is not only derailing retirement savings but also increasing the likelihood that many renters will be evicted.
According to CNBC, 20% of renters in America are behind on rent and owe an astounding $57.3 billion. The average amount owed by each renter is $6,000 and they are a minimum of three months behind.
Once you get that far in arrears, rental companies and landlords are quick to start the eviction process.
Especially, mom and pop landlords that cannot afford the losses. They depend on this income to pay their own bills and fund their retirements. I knew after watching millions of Americans lose their homes to foreclosure in 2009 that I did not want to be in that predicament.
Therefore, I made the conscious decision to keep fixed low housing costs and to put my money into stocks. I put my money into index funds because they consist of thousands of stocks. All those businesses are not going to go bankrupt at the same time so it gives your money some security as opposed to putting all your money in one stock and then you lose everything.
The S&P 500 and other indexes will remove any stock that is not meeting its standards. Therefore, you do not have to do this on your own with stock picking. This also insures that your money stays invested in firms with a good balance sheet as the ones that are not pulling their weight are dropped from the index. Thus, you do not lose all your money as you would being invested with only one stock or placing your bets in speculative investments like cryptocurrency and bitcoin.
I actually know someone who says they invested all their money in bitcoin and lost all of their money! What were they thinking? If you are going to invest in bitcoin, then it with money, you can afford to lose and only invest more than 5% of your savings. That is all the risk that is adequate with bitcoin, in my opinion.
Not enough to money to become a bitcoin millionaire, but also not enough to lose your life savings, your home and all your possession in case you bet the farm on a losing investment.
Let us learn from the recently deceased creator of McAfee software founder who invested $25 million in Lehman Brothers bonds and lost every penny after they collapsed and went bankrupt in 2008.
I decided to just put my money into the VTSAX because it includes the total stock market. Want some Tesla stock? Drop some money in the VTSAX. It will only cost you $107.
Instead of buying stocks one by one, you can just get them all for one price. That way you do not have to pay $685 for one share of Tesla.
Don’t even get me started on the S&P 500. One share in this stock will set you back $4,267.
If you have that kind of money just burning a hole in your pocket, then be my guest and buy some. However, if you want a piece of the whole market then just start buying the VTSAX.
I sleep like a baby knowing that my money just can’t fall to zero because the every stock in the fund will not blow up overnight. Even if businesses tank, the fund will correct this by replacing them with a better stock, and I still keep making my money.
I think of it like this, a home you have to feed but your 401(k) feeds you.
As a homeowner, you cannot realize gains until you sell. Therefore, you must feed the beast until you do!
Considering that most American homeowners only stay in their homes for an average of 9 years, all the money spent on maintenance and repairs is burnt if you are foreclosed on. However, according to Fidelity, many 401(k) millionaires keep their accounts for open for 20-30 years to amass that type of fortune. That means people are holding on to stocks longer than homes!
Therefore, on my path to millionaire status, I decided to go for stocks over real estate. Don’t get me wrong, you can make a fortune in real estate, but you have to maintain the property until you sell. I can make my fortune in index funds simply by breathing and automatic investing.
Seeing and listening to the stress of homeownership versus the ease of index investing I think I made a good choice going with stocks. My low housing costs allow me to invest more. This also allows you to pay off debt faster and travel more. However, it is always your call. This is just my 2 cents.
I mean who wouldn’t want to be a Quarter of a Millionaire. I’ll take that any day of the week over being broke!
And just so you know, if you let that money sit and ride it out in the market, you would have $1,000,000 in 14.5 years with a 10% return. That is without adding another cent.
How many homes that were bought for $250k do you think will be worth one million in the same amount of time? None.
I have no problem at all with being a 401(k) millionaire. None whatsoever!
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