I know there are some skeptics out there, but I am here to assure you that it can happen to anyone. How so? Let me explain.
We just got to do some math.
Historically the stock market has returned at least ~10% over the last 30 years vs. real estate that has only returned about ~4%.
If you stick with the market over the course of that time, you can make it into millionaire status.
Compound interest is our friend. If you want to get to 1,000,000, then you just have to set aside some funds every year and then let compound interest do its thing.
If you invest $5,600 a year, over 30 years, you will have over a million saved ($1,013,283.18). Not too shabby.
If 30 years is too long for you, then just play with the numbers.
Investing $9,300 over 25 years, would net you ($1,006,090.42).
Investing $16,000 over 20 years, will net you ($1,008,039.99).
So you see, it is possible.
You just have to be willing and able to put the money aside.
Even after the dot-com bust of the 2000’s, the Great Recession, wars, 9/11, the search for capturing Bin Laden and 6 presidents the market has continued to rise.
After doing some research, the best place to park this money, water it and watch it grow seems to be the Vanguard index fund VTSAX. Why you ask? Basically, this index fund is not only low in cost at ~0.04%, but it includes the entire US equity market with over 3600 stocks!
It is your one stop shop for investing.
It’s the super Walmart of stocks. And like Walmart, it is open and working for you 24/7.
Why not the Vanguard 500 index fund VFIAX? Well this fund is limited in scope as it only includes the 500 largest companies in America. The VTSAX has them all.
In addition, the best part about an index fund is that if a company starts to slide due to bad management, scandal, hostile takeover or a combination of the three, then they are cut form the index and another company that has a stellar performance and track record takes its place.
Thereby, making sure your fund never goes to $0 and you continue to make money no matter whether or not a business goes bankrupt or sells to a competitor.
Meaning you will not ever lose all of your money.
Simply put, it is like if this fund plays in the mud with the other kids, gets dirty, then it will take itself to the car wash and start fresh playing with a new group of kids.
I think the reason most folks don’t get to this level is because they are too busy focusing on today instead of on tomorrow. I remember reading a quote that still has a profound effect on me today.
It went like this: The wealthy plan for three generations. The poor plan for Saturday night.
I get chills every time I think about it.
As humans, we are hard-wired to focus on what is right in front of us. It is difficult to see and plan for something that is years or even decades away.
However, we must. Our future selves are depending on us to do so.
Those years are going to go by anyway so why get so caught up in how long it will take you to save a million. Why not just do it.
I feel too many folks get caught up thinking that they need a high income to get rich.
Hate to break it to you, but tons of high earners go broke!
Folks are so busy worrying about what doctors, lawyers, sports stars or entertainers are making, that they forget what really matters isn’t what you make, it’s what you keep.
I’ve heard of couples making $250k a year saying they broke! What gives? That is more than ~96% of Americans. An income that size puts them in the top ~4% of income. But most folks do not eve have that amount in retirement savings, let alone making it as an annual income.
According to Business Insider, The average 401(k) balance is $92,148, according to a 2019 Vanguard analysis of over 5 million 401(k) plans issued by the company. But most people don’t have that amount of retirement savings. The median 401(k) balance is $22,217, a better indicator of what the majority of Americans have saved for retirement.
So a high income don’t mean squat if you squander it.
Don’t let this be you.
Change the conversation and get your spending under control so you can put that $6,000, $9,300 or $16,000 in your retirement account every year and earn your way to a fortune.
People paying it forward by becoming part of an organization as Denzel Washington and Steve McQueen did with their efforts with the Boys and Girls Club.
*Just FYI: The actor Steve McQueen grew up poor. The Boys and Girls Club gave him a clean and safe place to be in his youth. He paid it forward after he become a famous actor by asking movie studios to give him thousands of white t-shirts, socks, and personal hygiene products as part of his compensation package for starring in their films. He secretly turned around and donated all this material to the Boys and Girls Club to give out to the young men there. Just melts your heart doesn’t it.
Steve McQueen also known as “The King of Cool”
How the Teenage Mutant Ninja Turtles always looked out for the little guy.
TMNT film circa 1990
The friendship between Shaggy and Scooby-Doo. Those two they just warm my heart.
Some of my favorite singers that have turned their talent into success are Whitney Houston, Pat Benatar and Toni Braxton.
One of the things I remember Ms. Braxton saying, “music is not about you just saying what you think, but how you make people feel.” Her music and voice have always made me feel good.
Seeing her up on that stage performing recently at the American Music Awards, reminded me of all the reasons I liked her; she has a gift for making you feel good with the words she sings that transcends whatever hard times you are going through in that moment. She makes you feel happy.
Toni Braxton performs onstage during the 2019 American Music Awards at Microsoft Theater on November 24, 2019, in Los Angeles, California. (Kevin Winter/Getty Images for dcp)
And speaking of people that inspire you with their words, I would like to introduce you today to someone who has not only done that for me, but for millions of people around the world through his writing on personal finance. The one and only Mr. JD Roth.
GBM is the place where we like to get down and dirty into the math behind building wealth, but we keep the jokes clean. Our jokes here are like a Hallmark card, GBM cares enough to send the very best! Even my tweets are called Lipstick Confessions!!! haha 💋Smooches
Below is just a taste of what GBM has to offer. This blog ages like fine wine; it only gets better with time. No topic is off limits!!! Not even French Fries!!
All the reasons I want you to pursue financial indepence.
1. Freedom 2-100 see number one
That is the answer always, in the illustrious words of #buzzlightyear To infinity and beyond. 😂
I’m like Space Ghost Coast to Coast. Booking celebrity guests for my audiences reading and fiscally literate pleasure.
Fun Fact: The original pilot of Space Ghost C2C was produced in a closet, and the guest was Denzel Washington (second mention in this post cause Denzel is just everywhere). It was green-lit as a series on the Cartoon Network in 1994 and went on to huge success.
Therefore, if you are looking to start a podcast, let this be inspiration to know it is okay to start it on a shoestring budget and in your closet.
Let’s get down to the interview.
Topic du jour: The tortoise wins the get rich race every time. Who is the man behind the tortoise shell?
Subject: Men who talk money. How to Get Rich Slow?
GRS JD Roth: YES, I would be happy to do your interview.
Ladies and Gentlemen, please put your hands together for Mister JD Roth!!! The founder of Get Rich Slowly.
ALLOW ME TO INTRODUCE MYSELF
GBM Miriam: It was great meeting JD Roth of Get Rich Slowly at FinCon 18 in Orlando. I had seen his picture on the blog-sphere so many times that I knew who he was on sight. I tried to keep a calm and cool composure, but on the inside I was screaming, “IT’S JD ROTH!!!!!” Over and over in my head.
Imagine my surprise when I got to ride shotgun with him on our way to a restaurant for a fellow bloggers birthday.
You can check out more of this story on my post about my very first FinCon called FinCon The Recap from your Friendly Neighborhood Greenbacks MagnetPart I and Part II.
We are in the car with Liz of Chief Mom Officer, Military Dollar, and Erin of Reaching for FI. In a car full of women, he was totally cool driving while listening to Taylor Swift. Yes, I found out that JD is a T. Swift fan. I am too. It’s like john jacob jingleheimer schmidt up in here!!!
Here is proof here!! I just so happen to think Taylor Swift is pretty awesome too! 😉 Great minds think alike. I literally just posted tweets on Taylor Swift and Lizzo last week. 😂👍
Just sent @BitchesGetRich a 2000-word email (yes, for real) on why I love both @Lizzo and @taylorswift13. Not much personal finance in it, I'm afraid, but a lot of personal conviction. Because these two women are awesome!
My dream concert is a Lizzo/Taylor Swift collaboration.
I figured out how to control my spending. If I carry the world's tiniest purse, like #LizzoAtAMAs, I could save a fortune. There's no way I could carry a wallet or credit cards in that 🤣 #TuesdayThoughtspic.twitter.com/ReXIL7u9kA
This is how I felt getting to interview JD. Over the moon and on top of the world. After three years of blogging, I made it. I’m still here. Anything is possible if you work hard enough for it. 😉So Grateful.
JD STARTS A BLOG ABOUT GETTING RICH
1. What prompted you to start a blog about money? How much makes you feel rich?Would you say $500k, $1M, $2M, or more?
I started Get Rich Slowly for three reasons. First, I wanted to document my own journey out of debt. Second, I thought maybe I could help other people learn to manage money as I improved my own financial skills. Finally, I hoped maybe I could make a few hundred bucks per month to supplement my income.
I had NO idea that starting Get Rich Slowly would change the trajectory of my life, financial and otherwise. It wasn’t even something I could have conceived at the time. Yet it changed everything.
How much makes me feel rich? That’s a great question. It doesn’t take much. I grew up poor. My family lived in a run-down trailer house in rural Oregon. My father was often out of work. Sometimes we had to take assistance from our church in order to get by. Today, I have far more money than my parents ever did. I feel very rich. But I don’t know what dollar amount leads to that…
GBM Miriam: Well ok. Thank you for your honesty. It is always appreciated. I fell into learning about money by accident. I was at my boyfriend’s place when I saw a Kiplinger magazine lying around. I just so happened to pick it up…
2. Any favorite finance books? How come?
I’ve read and enjoyed many finance books, but my favorite books about money usually aren’t actually books about money. What I mean is that often the books that I believe will most help people with their finances aren’t financial books. They’re only tangentially related to finances.
For instance, I think The Seven Habits of Highly Successful People is probably one of the most helpful book anyone can read if they’re struggling to improve their finances. The ideas and philosophy it conveys are so valuable in developing a successful financial mindset.
GBM Miriam: One of my top favorites is The Millionaire Next Door. That and the one you named are some good reading. 👍
3. What are you reading right now? What’s on your night stand?
Haha. I always have several books going at once. Right now, I’m reading:
* Wake Up and Live! by Dorothea Brande
* House of Suns by Alistair Reynolds
* Y: The Last Man by Brian K. Vaughan
* Deep Work by Cal Newport
This “many books at once” habit kind of goes against the whole Deep Work philosophy…
4. One thing people may not know about you?
When I left for college in 1987, I thought I was going to be a religion major. My aim was to get a religion degree, then become a Christian missionary. I thought I’d ultimately end up as a church pastor.
GBM Miriam: I did see you mention something about that on your blog. I put a link to that story in your response for readers to be transported there faster than Marty hitting 88 mph by clicking on college in 1987.
5. What’s in your wallet? How did you start building wealth?
It contains my debit card, my business credit card, my personal credit card, my Apple card, maybe $40 cash, and my insurance info (health and vehicle). That’s it.
I started building wealth through a two-pronged attack. First, I reduced how much I was spending. Second, I worked to build my income. Basically, I did my best to work both sides of the wealth equation (income and spending) in an attempt to grow my saving rate as high as possible.
Well said. So that’s what I did. Unlike that episode of King Meets Queens, when Carrie buys thousands of dollars worth of expensive clothes, keeps the tags on them to return them for a refund (get this because she could afford them *ahem* $2,000 Chanel suits) and said this to her husband…
If this sounds like you, please stop reading THIS and go read the Get Rich Slowly archives right now! If you want to get rich, cut the excuses and get fiscally educated!!!
If you are truly fiscally clumsy, then try the lazy method of investing. I would use Swensen’s model that he crafted for Yale University. With over $27 billion dollars under management, the Yale endowment is the second largest college endowment in the world (Harvard is #1). Just watch the video. Now you and Rory Gilmore will have something in common.
And if this is too much, just park your investments into a total stock market fund like the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) or Vanguard Total Stock Market ETF (VTI).
BONUS ROUND
Bonus Questions (pick any of the questions from the top or below that you want to answer)
6. Any life or money lessons from a favorite movie or TV show you would like to share?
I’m partial to Mr. Roger’s philosophy of loving others and encouraging others to love. He believed in accepting people for who they were, regardless of who they were. I subscribe to that ideal too.
GBM Miriam: Good stuff. I ❤ Mr. Rogers I wanted to take a ride on that train soooo bad! It looked like so much fun.
7. If you found a lottery ticket that ends up winning $1.5 million. What would you do?
I would buy new cars for me and my girlfriend. I’d get her a Tesla Model 3. I’d buy myself a Mini Cooper — the electric model, if it ever gets released. I’d stick the rest of the money in the bank.
GBM Miriam: A mini Cooper eh? I can dig it.
But that Tesla looks sexy.
And love those falcon wing doors.
Car Magazine UK Tesla photo
8. Who is your favorite X-men, Justice League, Avengers or comic book character? Why?
I’ve always been partial to nerds from the Marvel universe, characters like Cyclops from the X-Men or Mr. Fantastic from the Fantastic Four.
GBM Miriam: You are probably wondering why I asked this question. Beside being a huge cartoon and Mavel fan, I actually named this blog after a Marvel comic book character; Magneto. 😉
Just FYI: We skipped a few numbers and moved on to question 11.
11. If both a taxi and a limo were priced the exact same, which one would you choose?
Neither. I would probably walk, if I could.
GBM Miriam: Yeah, that’s me. I love to walk. I’m like Elizabeth Bennett in Jane Austen’s Pride and Prejudice.
12. What song or songs best describes your work ethic?
“Don’t Worry, Be Happy” 🙂
13. What would you do if you just inherited a pizzeria from your uncle?
I would sell it, if it were profitable. Hell, I’d sell it even if it weren’t profitable. That sounds like too much work!
GBM Miriam: You may be right. I know it’s just a cartoon but they worked the crap out of Doyle in that pizza place in Galaxy High!! 🤣
14. What was your best MacGyver moment?
This question is so NOT me. I’m not a MacGyver type. That said, my best MacGyver moment was probably installing a new tape deck in the 1993 Toyota pickup I bought last January. Admittedly, I had instructions for this project, but it was still pretty MacGyver-y for me. Now I can listen to cassette tapes as my dog and I cruise around Portland. 😉
15. If I gave you $40,000 to start a business, what would you start?
I know the answer to this! I’d start a blog. In fact, I’ve spent a similar amount to launch blogs in the past — and they’ve become businesses.
GBM Miriam: Why am I not surprised. 😆 I love blogging too.
How I feel about blogging: “Tonight, darling, we are going to right a lot of wrongs. And we are going to wrong some rights. The first shall be last; the last shall be first; the meek shall do some earth-inheriting.” -Margo Roth Spiegelman, Paper Towns by John Green
Cara Delevingne as Margo Roth Spiegelman in Paper Towns
New at the GRS blog: A look at how who we are (and who we want to be) shapes our financial lives: https://t.co/1efsBn9clQ — This is my first longer piece since deciding to NOT publish so often. It was fun to write.
16. If you had $2,000, how would you double it in 24 hours?
Hm. I’m not sure. There’s no reliable way to do this, of course. My inclination would be to pick a game of pure chance, such as roulette, then to make a single bet that would either double the money or lose it in one go. Using that roulette example, if I bet all $2000 on, say, even numbers or odd numbers, I’d have about a 48% chance of doubling my money and a 52% chance of losing it all.
Really, though, there’s no sure way to do this.
GBM Miriam: That’s JD. He always gives it t you straight and keeps it 💯just how we like it.
For example, he just put this out there for our fiscal viewing. Check out his post on Our first annual family meeting. Bringing people and finances together. As a financial blogger, that just melts my heart ❤right there.
THE END
GBM Miriam: Thank you JD!!! It was an absolute dream come true and a pleasure to have you stop by Greenbacks Magnet.
It was my honor to be your host this evening. See you at FinCon 2020. The year of perfect vision!!! Until we meet again!!! I bid you farewell.
Want more fiscal nuggets of wisdom, from the JD Roth?
Like Aesop’s The Ants and the Grasshopper, we must prepare our bank accounts as winter is coming.
When I woke up this morning, it was 44 degrees. Sweater weather indeed my friends. You know what also needs shelter from being left out in the cold, your money! Affluence is your duty.
Affluence Defined
I will define an affluent person as any adult that is saving and investing more than 25% of their income; with more money coming in than going out.
When you have enough income to pay your bills, save, and invest the difference, then you are rich compared to the rest of the world as most are living check to check.
Once you are able to save and invest more than 50% of your income, have more than $2 million in assets and receiving dividend income of $100,000 or more you are fairly wealthy.
When you make more in capital gains than you would from W-2 wage work, then you can kiss the working world goodbye after hitting a goal of $50,000 or more in income.
A salaried adult makes on average $40,000-$50,000 annually. Getting your investment income to this level means, you have created a passive income source large enough to replace a paycheck.
Good for you.
The bigger the gap between income and expenses is the difference between being rich and poor
Recently, I read two books; Evicted and $2.00 a Day: Living on Almost Nothing in America.
The premise is that welfare is dead and families no longer have access to cash assistance.
Those that do eke out a meager existence on modicum amounts of cash, SSI benefits and food stamps.
Within the book it also discusses how landlords were making a mint off the dregs of society, “the poor,” with one making $447,000 a year after expenses meaning he is part of the 1%.
Another landlord had an estimated net worth of $2 million.
The differences in their lifestyles versus their tenants were stark.
The difference between eating everyday or going hungry was just one of many. If this doesn’t scare and motivate you to save more money, then like Poncho’s owner in 101 Dalmations said, “no evil thing will.”
Evictions are on the rise all across America. Why? The reason is that there is no rent cap.
Rents are going up about as fast as a four-year college degree.
Having more than 50% of your income going out in rent leads to one word: Despair.
You must have cash in the bank.
I know that the price of everything feels like it has shot up overnight.
You are in the red and bleeding out money faster than a corpse does on The Walking Dead. However, you must save. The possibilities of something requiring your immediate cash assistance are endless!
All of the sudden Aunt Edna needs a new roof, the dog needs his shots, the basement flooded (for the third time this year) or junior needs braces.
I once had a Harvard educated orthodontist quote me almost $8,000 for treatment. And that was just for my teeth!
The human body has 206 bones and not any of them are receiving service from this guy. After, watching or hearing more stories of outrageous prices from car loans to purses (a Louis Vuitton handbag could set you back $400 or more), I knew that having liquid savings was the answer.
I’m as serious about saving money as Sarah Connor is about eliminating Terminators!
Cash. There is no substitute.
I refuse to lock up all my money in investments, but I know better than to just have all my cash sitting around earning no compound interest or dividends.
Pac-Man shows us how to get the job done
If you have ever played Pac-Man, then you know how the game is played. The player navigates Pac-Man through a maze with no dead ends.
Pac-Man’s favorite snack pellets — the tiny dots he munches as he moves around the video game board — were originally cookies. The “power cookies” are now the larger pellets he uses to eat the ghosts. The maze is filled with Pac-Dots, and includes four roving multi-colored ghosts: Blinky, Pinky, Inky, and Clyde.
The game was not designed with an ending.
You know what that tells me, that your money too should be looked upon as having no ending. You should save as if you are going to live forever.
I hope that last statements lights the fire you need to start saving this paper.
Using Pac-Man as an example, I want you to imagine the four ghosts are the following: debt, despair, denial and broke.
Your job is to eat as many power pellets “dividends” as you possibly can. The only way to do this is by investing your money.
You may be unsure where to start. I want you to start by opening up a brokerage account with a discount broker such as Vanguard, Fidelity, E-Trade or Charles Schwab.
Just FYI: Interactive Brokers (NASDAQ:IBKR) and Schwab (NYSE:SCHW) got rid of stock trading commissions, creating a major shake-up in the brokerage industry, and competitors TD Ameritrade (NASDAQ:AMTD) and E*Trade (NASDAQ:ETFC) quickly followed suit. Robinhood had already been offering this service, but now the big boys are getting in on the action.
Once you open up your account, you can purchase any 500 index or index fund that owns all shares in Mr. Market. If using Vanguard, that would be the VTSAX.
You put in enough money in Mr. Market and he starts to pay you for showing up in class everyday 365 days a year.
You earn money just for raising your hand and saying present.
How compound interest works
Compound interest is the difference between the cash you contribute to an investment and the actual future value of the investment.
In this case, by contributing just $8,000 per year with the annual contribution being increased by 1% per year (cumulative contributions of $278,779) you are able to accumulate $1,080,688 over 30 years. Compound interest makes up $801,908 of your future balance.
If you start saving $8,000 a year and earn 8% on those earnings, look what happens. You will notice in the beginning you earn only $680 bucks, but by year 30 you are earning $80k a year!
You must chomp away at collecting money to invest it and start collecting dividends.
Year
Beginning Balance
Savings @ 1%
Interest @ 8%
Ending Balance
1
$500
$8,000
$680
$9,180
2
9,180
8,080
1,381
18,641
3
18,641
8,161
2,144
28,946
4
28,946
8,242
2,975
40,163
5
40,163
8,325
3,879
52,367
6
52,367
8,408
4,862
65,637
7
65,637
8,492
5,930
80,060
8
80,060
8,577
7,091
95,728
9
95,728
8,663
8,351
112,742
10
112,742
8,749
9,719
131,211
11
131,211
8,837
11,204
151,251
12
151,251
8,925
12,814
172,991
13
172,991
9,015
14,560
196,566
14
196,566
9,105
16,454
222,124
15
222,124
9,196
18,506
249,826
16
249,826
9,288
20,729
279,842
17
279,842
9,381
23,138
312,361
18
312,361
9,474
25,747
347,582
19
347,582
9,569
28,572
385,724
20
385,724
9,665
31,631
427,019
21
427,019
9,762
34,942
471,723
23
520,109
9,958
42,405
572,472
24
572,472
10,057
46,602
629,132
25
629,132
10,158
51,143
690,433
26
690,433
10,259
56,055
756,748
27
756,748
10,362
61,369
828,479
28
828,479
10,466
67,116
906,060
29
906,060
10,570
73,330
989,961
30
989,961
10,676
80,051
1,080,688
Playing for keeps and dividends
Let’s say you start a Roth IRA at 20 and save $6000 annually, thereby maxing it out.
And please if you are going to max out anything, let it be a IRA and not a credit card.
Earning 10% interest, you would have $105,187.
Then you decide to stop investing and let it ride.
After about 23.5 years, you would have over $1M.
After 24 additional years of parking your money on the financial equivalent of Park Place with a hotel, you are sitting pretty on $1,036,063.83.
Investing your money for only 10 years would allow you to stop and not have to worry about your golden years.
Just some food, I mean power pellets, for thought.
Never spend your money before you’ve earned it. – Thomas Jefferson
If I could rub on Aladdin’s lamp, I would wish for world financial literacy. Oh…And world peace.
However, what I really want is for more people to get involved with the family finances and build generational wealth for their future.
Within the last 72 hours, I have read that college students are unable to afford housing in Sacramento, Forever 21 went bankrupt, WeWork will be letting go of 2,000 employees, Sports Illustrated (SI) sacked half the staff.
In addition, that there is also an aging population and a doctor shortage due to issues with stress, debt loads in the $200,000-$500,000 range, not to mention under funding of residency programs; and that most of the growth in the job market is concentrated in only two areas: health services and education.
What your job is, should you choose to accept it, is to keep as many dollars in your bank account as possible. Unlike Tom Cruise’s message in Mission Impossible, this message will not self-destruct in five seconds.
If this were a financial hospital, I would want you to form a triage and determine which parts of your finances need most immediate care. Your bank account is the heart of your finances so let us perform a little CPR. Greenbacks Magnet style of course. This post is all about letting you know what you cannot do with your finances in order to grow your nest egg to a fortune. This reminds me of a sketch comedy show called You Can’t Do That on Television. Let me explain.
You Can’t Do That on Television is a Canadian sketch comedy television series that first aired locally in 1979 before airing in the United States in 1981. It featured preteen and teenage actors in a sketch comedy format similar to that of American sketch comedies Rowan & Martin’s Laugh-In and Saturday Night Live.
What I loved most about this show was that they would always say what you could not do followed by some hilarious punishments such as being covered in green slime. And nobody wants that! Who wants to have to wash all that slime out of your hair?
Let’s pretend that everywhere you go there is a bucket of green slime waiting to be poured on your head for any financial missteps that you make. You may think twice about maxing out that credit card or renting that posh pad in the SoHo district for $4,000 a month. I’m just saying.
Here is a list of things that you cannot do with your finances:
Overloading on Student Loan Debt such as paying $100,000 for a Sociology degree
Buying a car that costs more than your annual income
Paying for a family member’s vacation to Disneyland on your credit card because theirs is maxed out
Taking out Personal Loans for more than you can afford to repay
Buying a home for more than four times your salary
Spending on fancy jewelry
Going on shopping sprees at the mall just because its Tuesday
Now that we have gotten that out of the way, let’s talk about what you can do with your finances. The list is short and quite simple:
Save until it hurts aiming for 50% of your after-tax income
Invest in index funds such as the VTSAX at Vanguard
Open up a Roth IRA
Max out your Roth IRA
And that’s about it.
I know what you’re thinking. That’s it?! The list for what not to do was more than twice as long.
That is because there are endless ways to spend money, but the road to wealth is quite simple. Spend less than you make and invest the difference. Therefore, if your take-home pay is $75,000 a year and you spend $50,000 on living expenses, then you should invest $25,000 a year. No matter what the numbers are, the goal is the same. The way to get to your destination may change, as life happens, but keep the goal.
I must now bid you farewell. Do not worry. I will not be far away. I am only a tweet away.
This is not goodbye. As they said in the 1987 He-Man film, Masters of the Universe, we Don’t Say Goodbye, we say Good Journey.
If you remember this fun, quirky, and often brutally honest show on ABC called Don’t Trust The B- in Apt 23, then you know exactly where this post gets its title.
The show aired from April 11, 2012 to May 11, 2013. It only lasted for a short two seasons, but it packed a lot into that one year.
For those unfamiliar with the show let me bring you up to speed.
June’s (Dreama Walker) plans of moving to Manhattan for her dream job and perfect apartment are ruined when the company that hired her goes bust. Broke and homeless, her luck turns around when she finds a job at a coffee shop and a roommate, Chloe (Krysten Ritter). The show also starred James Van Der Beek (from Dawson’s Creek fame) as himself.
In one of the funniest pilot episodes I have ever seen of a television show, it really gives you a sense of how quickly one life can change within less than 24 hours.
https://www.dailymotion.com/video/x6kqr75
June loses her job and apartment within a few hours once the company she was hired to work for goes down in an FBI raid due to the head of the company embezzling billions from clients in an Enron type take down, which reminds you of the glory days of yesteryear of Wall Street darlings such as the likes of Bear Stearns and Lehman Brothers; the latter of which was in business for 150 years having started operations in 1850.
Some media outlets such as CNBC did an article on what happened to former Lehman Brothers employees after the collapse and some still had not recovered from the company shutting down in 2008 some 10 years later including those not being able to find full-time employment.
This show and the acquisitions or closures of places like Merrill Lynch, Bearn Stearns, which opened in 1923, and Lehman Brothers are reasons why you should be your own financial advisor.
Unlike how JP Morgan bailed out Bear Stearns in March 2008 or Bank of America did Merrill Lynch, you are on your own like Lehman’s when they filed for bankruptcy as no one came to save them because if you fail to manage your money, then no one is coming to bail you out.
Let’s go back to 2008. Banks were failing. Many were found to be a part of the subprime mortgage crisis, but like the scandal at Wells Fargo nobody went to jail. You think your money is locked up tight like Fort Knox until you realize it isn’t. That is why Roosevelt created the FDIC insurance for banks as without the $250,000 deposit insurance after the 1929 crash many no longer believed in the banking institution.
Just because someone is wearing a suit does not mean they know what they are doing. Many of the analysts and associates that start work for their prestigious firms such as Goldman Sachs are straight out of college and still wet behind the ears. Even though I once read that the average salary of a Goldman employee was around $622,000, that does not equate to financial smarts or riches. Many of these employees still blow money like you wouldn’t believe. Instead of saving stacks they are blowing them.
Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway. – Warren Buffett
I have read enough accounts of high paying professionals and tons of the employees would blow off steam in a place called Scores in New York or buying million dollar homes, private school educations for the kiddies and exotic vacations costing $5,000 a pop.
Look, to each their own. Just understand that you are your best line of defense when it comes to your money. Read every book you can on the subject. Save as much as you can.
I even overheard a 2nd year law associate say that you can make a lot of money in New York, but it costs too much for too little. You have to be a millionaire to afford an apartment or buy a home.
Part of the reason so many people are bad with money is because they do not learn about how money works. Please do not be one of those people. You must learn how money works. Learn the rules of the money game. Here are a few things you can do to save yourself the commission fee and invest those dollars instead.
Use a three-part investing strategy.
Part I. Automate your savings and investments. Decide on a number you can live with, set it, and forget it.
Part II. Determine where to invest. Go with anyplace that offer fees that are less than one percent such as Trowe Price, Vanguard, Schwab or Fidelity.
Part III. Invest your money. I prefer to go with several index funds so I can be diversified in case one sector goes crashing down then others are usually going up. You could do a mix of 20 percent real estate or REIT’s, 15 percent in International Funds, 10 percent cash liquid savings in a high yield savings account, 10 percent in a bond fund and the remaining 45 percent in a stock equity fund like the VTSAX at Vanguard. This is similar to the Yale’s investment manager David Swensen’s model. He has been able to get a return on investment of billions into Yale’s coffers making them one of the larhgest college endowments on earth with $29.4 billion USD. Only Harvard has a bigger endowment war chest with $38 billion USD.
Who is David Swensen?
According to the Yale Daily News, “David Swensen of the Yale University endowment is the doyen of endowment investing. Imitation, of course, is the sincerest form of flattery. Today, the Stanford, MIT and the Princeton endowments all boast former Swensen deputies at their helm. Each also has adopted the “Yale model” of investing pioneered by Swensen in the 1980s.”
So what is Yale’s “secret sauce”?
“Until 1985, Yale had invested in mainstream U.S. stocks and bonds with a smidgen of foreign stocks and real estate.”
“Swensen was the first to apply modern portfolio theory to sizeable multi-billion-dollar endowments. He understood that “asset allocation” explains over 90% of a portfolio’s investment returns.”
“The decision whether to invest in specific asset classes matters much more than picking the right stocks. Over the past 30 years, Yale has shifted the bulk of its investments into “alternative assets” like natural resources, venture capital, real estate and foreign stocks.”
When the market goes down, buy more. That is where the bargains are. That is how Sir Templeton made his millions. Sir John Marks Templeton was an American-born British investor, banker, fund manager, and philanthropist. In 1954, he entered the mutual fund market and created the Templeton Growth Fund. In 1999, Money magazine named him “arguably the greatest global stock picker of the century.” He purchased tons of stocks during the stock market crash when everyone else was getting out.
So do not let fear take over how you manage and invest your money.
Why the difference? Because women earn on average $0.80 for every dollar a man earns.
Therefore, men have to save less and women have to save more in order to reach the same goal of fill in the blank $ dollar amount here.
WHY IS SAVING SO CRUCIAL?
No one can arrive from being talented alone, work transforms
talent into genius. – Anna Pavlov
All wealth building starts with saving.
Don’t let anyone tell you any different.
Sure you may have to invest and diversify your money such as investing in stocks, real estate, and bonds, but you have to save money FIRST before you can buy or invest in anything.
If you have ever read a Jane Austen or Charles Dickens novel, then you know the theme always comes around to money.
Considering that Jane Austen never married and Charles Dickens grew up in a poor house, it is not surprising that the authors chose to hone in on this topic.
The sorted topic of coin. Both authors are British and in that society they have a class system.
You are either born into wealth and inherit it or you must
work for many years and earn your fortune.
Many of the landed gentry lived off of their land. Profits that were made from owning land was how they made a living.
That monthly sum could be the difference between prosperity
and being locked away in poor houses, which were a form of jail for the poor.
Here in America, we do not have a class system of royalty, nobility, tradesmen, shop keepers and owners, or farmers.
However, we do have a social ranking and social class. Those are the haves and the have nots.
If you want to find yourself in the realm of having, then
you best start saving money for your future today.
Many years ago, I was laughed at for my paltry savings
amount of 9% per year.
Now I am saving over 40% of my income.
No one laughs at me now.
HOW SAVING MONEY CAN MAKE YOU HEALTHIER
They say wealth equals health. And that is an understatement
if I ever heard one.
Having money allows you to pay for all of your needs.
This includes doctor visits, healthy food, and medicine.
Eating well not only affects your waistline, but also your
brain functions.
It is said that children that do not get the proper rest,
nutrition or eat breakfast before school perform lower on tests and have harder
times concentrating.
Success depends in a very large measure upon individual
initiative and exertion, and cannot be achieved except by a dint of hard work. –
Anna Pavlov, Prima Ballerina
When you have the means to pay your bills, eat, and work in
good health; then you are fortunate indeed to be able to pay your own way.
Being able to afford your monthly nut just makes you happier
overall.
You are protected from the pitfalls of many of life’s
hiccups.
You can get just as much pleasure saving as you can from spending.
I seem just as happy being able to have the ability to
afford items than am to actually purchase them.
It is a great feeling to payoff debt. Every check you write frees you from obligation to lenders. Then your money can stop serving THEM and start serving YOU.
Make a goal to write down evet single bill you have and
person you owe.
I started doing this and tackling every debt I had one by
one.
Once I paid of my car, I owed $30,000 and my personal loan,
I owed $20,000, then things started really taking off from there.
I was able to take these monthly payments, $450 and $333
respectively, and start investing that money. Now that money works for me in
the stock market.
Here is one stock I recommend: VFINX or VFIAX. (You can also invest in the VTSAX or any equivalent)
Portfolio composition of VFIAX
Month-end 10 largest holdings (22.40% of total net assets) as of 03/31/2019
1
Microsoft Corp.
2
Apple Inc.
3
Amazon.com Inc.
4
Alphabet Inc.
5
Facebook Inc.
6
Berkshire Hathaway Inc.
7
Johnson & Johnson
8
Exxon Mobil Corp.
9
JPMorgan Chase & Co.
10
Visa Inc.
Whatever you do just make sure you not just SPEND money but SAVE money.
