How to Become Independently Wealthy

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How to Become Independently Wealthy

Becoming wealthy is a goal many of us hope to achieve in our lifetime.  Whether you want to be wealthy so you can have unbelievable lifelong experiences or to validate your success, the goal is often dreamed of but rarely achieved.  Ken Fisher, the author of The Ten Roads to Riches, discusses the many ways people can achieve wealth throughout their lifetime, ten to be exact.  All of these roads have proven to make someone independently wealthy throughout their lives.  Some are more common than others.  So if the question of how to become independently wealthy has crossed your mind, I will discuss two of the ten Ken illustrates in his book.

How to Become Independently Wealthy: Save and Invest Wisely

I usually sign off my posts with a simple phrase: Budget Smart, Invest Wise.  Budgeting allows you to allocate your funds to various categories, and hopefully one of those categories is savings.  Whether your savings vehicle is an IRA, Roth IRA or other type of investment, saving money is critical to building wealth.  However, saving is only half of the battle to building wealth this way.  The other key ingredient is investing wisely.  Investing wisely means creating a smart investment plan, be it with a financial advisor or through acquired knowledge, that creates a return on one’s investment.  For example, I have found that investing on a monthly basis in a mutual fund that covers the broad range of the U.S. Stock Market to be of most benefit to me.  I recognize that this investment, although it has risk involved, prevents me from being susceptible to the failure of one company or one sector of the market.  Saving and investing wisely is the road most traveled, but it also provides the greatest chance of reward.

How to Become Independently Wealthy: Invent Income

Inventing income can cover a wide spectrum of earning additional money.  For example, if you are a song writer or musician, you can create an ongoing stream of royalties from your lyrics or music.  If you purchase a property that you decide to rent out, you could turn it into a cash flow positive stream of income.  The possibilities are endless.  Maybe you have a specific skill that people are willing to pay for you to teach them.  Perhaps your area of expertise at work can lead to consulting other companies on the side.  Do you have something you’re passionate about that you can create into a blog or website and charge for ad revenue?  Many of us have the tools, knowledge and capabilities to put our talents towards creating additional income.

Becoming independently wealthy or successful all boils down to one’s level of commitment.  If you are committed to becoming independently wealthy, then most likely you can find a way.  Some individuals, like Bill Gates or Mark Zuckerberg, created an enormous amount of wealth.  Maybe you want billions like these company creators, or maybe you will be satisfied with millions or even a million.  Only you can determine what being wealthy is to you.

How To Trim Your Budget

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With the new year in full swing, people are doing their best to stick to the freshly made New Year’s Resolution’s they mapped out for themselves.  The most common resolution always seems to be losing weight.  Instead of going with the status quo resolution this year, why not try to trim something else?  Your budget perhaps?

How to cut my expenses? Is a question often asked by many in order to free up funds in their daily lives.  Maybe they are living paycheck to paycheck, maybe they are trying to save up money for a special purchase, either way trimming your budget is the best way to go about doing this.

For starters, you need to have a budget.  You can download a free budget template and simply put in your income and expenses.  The best part about budgeting is you get to see where your hard-earned money is going every month.  Perhaps you are spending a large portion on eating out, can you bring your lunch instead of going out to eat?  If so, you might be able to not only cut some expenses but trim your waistline also.

The free downloadable budget allows you to choose the expense categories you have for a given month.  Say for example you spend $100 a month on your cellphone bill, can you change service providers and possibly get the monthly expense down to $80 per month?  If so, you have freed up $20 per month or $240 for the entire year.  Can you trim $10 a month off your grocery bill by purchasing generic products versus name brand?  This can be an additional $120 in savings for the year.  Attempting to save as little as $10 to $20 per category for a few of your monthly expenses can add up to some awesome end of the year savings.

Below is a quick easy way to trim your budget:

  • Create a budget: If you don’t already have one, now is the best time to start budgeting. This will determine where you are spending your money every month.
  • Track all of your expenses: See just how much you are spending in the various categories every month. Some may surprise you.
  • Pick 2-4 categories: By selecting a few categories where you think you can cut some expenses you will maximize your yearly savings.
  • See how much you can cut: It can be $5, $10, $20 or maybe even more per category per month. Living on a little less each month won’t change your quality of life for the worse.  Instead, you can use the money saved to enhance it by saving up for a vacation or a future purchase.
  • Don’t incur new expenses: While trimming your budget to save up money is the ultimate goal, don’t incur new expenses during the process. A car payment or a gym membership will quickly eat away at the money you are trying to save.

Stick to it: Trimming your budget will only be beneficial to your wallet if you stick to it.  Developing discipline for sticking to a budget can be tough but also very rewarding.

Budgeting With Credit Card Debt

I recently spoke with an individual who was excited to begin his budget.  He downloaded the spreadsheet available on my site and asked me to look over it.  Everything looked good except for one thing I noted.  This individual had a category as follows:

Credit Card Payment (minimum)

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This shocked me for a number of reasons.  First and foremost, the minimum part that was included.  Secondly, paying off your credit cards is not an expense.  For example, if you go to the grocery store and spend $50.00 on groceries but apply the charge to your credit card, then your budget should reflect a $50.00 purchase on groceries.  The credit card is simply a means to pay for it.  Finally, I recognized that this individual had credit card debt, and he assumed paying off in minimum installments would eliminate it.  Yes, theoretically, as long as no further debt was incurred, but it would take a while.

This ultimately led me to the following conclusion.  This individual had a significant amount of money remaining in their budget every month.  I advised him that if I was in his situation I would do the following:

  1. Make sure I am able to cover all of my necessary expenses in the budget.  This would include rent, gas, food, student loans, etc.
  2. See where some expenses can be cut.  Bringing his lunch to work versus going out to eat might be the smartest financial decision until he gets his credit card debt under control.
  3. Use any extra money at the end of the month to pay off the remaining balance on the credit card.  Credit cards are notorious for having extremely high interest rates.  The quicker you tackle this type of debt, the more you save.
  4. Set a goal for paying off the credit card debt.  We agreed by the end of the calendar year.  Once the debt is paid off we could redo the budget and include categories for savings, retirement, and other financial goals.

Credit card debt can be a nasty thing, but a budgeting approach to handling it can make your financial life much better.  Use a budget to pay off your debt if you have any, then you will be able to create additional space to begin planning for your financial future more aggressively.

 

Budget Smart, Invest Wise

Buffett’s 7 Investment Tips

Most of us are familiar with famed investor Warren Buffett.  He has amassed a fortune of over $60 billion in his lifetime.  He is known for picking great investments and sticking with them for the long run.  In a world where it is easier than ever to buy and sell stocks in the blink of an eye, day-trading has become more and more popular.  However, Buffett has always been outspoken about the negative effects of buying and selling equities over the short period.

So what does Warren think people should do to create wealth for themselves?  The link below tells you just that.  While creating a net worth equal to that of Buffett’s is highly unlikely, it is very easy to take just a few steps in the right direction to follow Buffett’s advice.

http://finance.yahoo.com/news/warren-buffett-best-investing-advice-201019702.html

The Benefits of a Budget

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Budgeting is an essential part to taking control of one’s financial life.  You would be surprised to know that nearly two out of every three Americans do not budget their income.

With today’s technology, it is now easier than ever to track your income and spending.  Personally, I use Google Sheets to budget.  I have the ability to access my budget on any computer with internet access along with my smartphone.  Another great way to budget is through Mint.com.  Signing up is free, and they have an app so you can update your budget on the go.

Now that you can see just how easy it is to start your budget, I will quickly lay out why you want to budget and the benefits.

  1. You know how much you make:  Ask someone how much take home income they have in a given month, you would be surprised the number of people who can’t give you a specific dollar amount.  Knowing how much you make is vital to determining how much you can save and spend.
  2. Plan Purchases:  Saving up for a vacation?  By budgeting you will be able to determine how much you need to set aside each month so you and your family can enjoy a getaway.
  3. Eliminating Debt:  This can have a two fold benefit.  Firstly, if you know how much you make, then you know how much you are able to spend, thus you can avoid spending more than you make.  Secondly, budgeting can help you set aside income every month to tackle debt, be it student loans, a car note, etc.
  4. Enjoying your money:  Budgeting allows you to feel confident about your spending habits.  It allows you to plan for purchases and should limit financial stress on your life by worry about how you are going to pay for something.

This is not a comprehensive list of the benefits, but a few of the major ones.  If you are curious of the benefits you can receive from budgeting then give it a shot if you haven’t already.

 

Budget Smart, Invest Wise

Take 5 (Minutes)

I’m going to need you to Take 5.

And no, not the candy bar.  We all have 5 minutes a day that we can spare.  This 5 minutes revolves around budgeting and monitoring your spending habits.

Budgeting is a simple process when you have the right tools.  That is why I give you my free Excel spreadsheet so you can create your own budget.

I am now beginning my third year of budgeting, and I have found great enjoyment in knowing where all of my income goes on a monthly basis.  It could be because I like number a lot, but mainly because I know I’m setting myself up for financial success.

Kathleen discusses in her article how a simple 5 minute action every day keep hers on her budgeting towards her goals.  Honestly, I don’t even think it takes the full five minutes, but they don’t make a candy bar called Take 2.  Check out her article and see just how simple it is to get your money habits off to a great start in the new year.

http://finance.yahoo.com/news/habit-takes-less-5-minutes-160000540.html

 

Budget Smart, Invest Wise

 

 

Don’t Get Emotional

The other day I was sitting in a conference room with some coworkers.  Our company was restructuring it’s retirement plan for employees.  After the changes were announced, general conversation started taking place.  The financial recession of 2007 through 2009 came up.  One employee joked how he lost over $3,000 in the market downturn.  While it isn’t a large sum of money, it was enough of a loss for him to take his money out of stocks and place it in bonds.  He has had it in bonds ever since.

It is often said that losing money is more painful than gaining or winning money.  It is human nature for us to make rash decisions when our livelihood is being threatened.  And yes losing retirement money does effect one’s future quality of life and thus his or her livelihood.

My fellow coworker got too emotional during a time when he shouldn’t have.  When the market goes down, we hear “SELL, SELL, SELL”.  And when it goes up, “BUY, BUY, BUY”.  Don’t watch the news, don’t watch CNBC and their stock reports, and please don’t get emotional.  Investing consistently over time is the best way to ensure that you invest during dips and spikes in the stock market.  Right now the market is currently down about 6% from it’s all time high.  I consider that 6% a sort of holiday discount that we should all be benefiting from.

Budget Smart, Invest Wise

25 Ways to Improve Your 2016 Finances

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A new year is fast approaching.  While many are finishing up their holiday shopping and setting their New Year’s Resolutions, now is also the best time to lay out your financial framework for 2016.

As is always the case with every new year, it is time to prepare a new budget.  Getting your budget off to the right start is the best way to help your financial situation in the new year.  Go to the Monthly Budget page on my website and download an Excel version for yourself.

Create your monthly budget for the new year, using your best guess estimates for various income and expense categories.  Remember that it doesn’t have to be perfect, and you can always change it as the year goes on.

After you have set up your monthly budget, I highly suggest you check out Kimberly Palmer’s article that was shared on Yahoo Finance.  I have provided the link below:

http://finance.yahoo.com/news/25-ways-improve-finances-2016-154142827.html#

Look at some of the suggestions outlined and see where you can tailor your budget to focus on paying down high interest debt, or finding spare money to invest for your future.  You might not be able to relate to or benefit from all 25, but find at least three that you can implement into your 2016 budget.

 

Budget Smart, Invest Wise

 

What Is Retirement?

The other night I was pondering what actually classified as retirement.  We all think of retirement as falling towards the end of one’s life.  You work for a while, save up enough money, then use those savings to enjoy the latter part of your life.

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But what if you don’t want to wait until you are 65 or older to retire?  Say you want to save up money for 15 years, take 5 years off and then re-enter the workforce.  Is this retirement?

I didn’t know the answer, so I did what everyone does now-a-days to find such an answer.  I Googled it.  Webster’s Dictionary defines retirement as the following:

The act of ending your working or professional career; the period after you have permanently stopped your job or profession.

So if you did decide to take 5 years off during the middle of your working career I guess it would be classified as a hiatus.  Regardless of when you decide to retire, there are a few things I believe retirement truly is.

  • When one’s passive income is greater than one’s expenses.

Your investments, rental properties, royalties or whatever revenue generating sources you have other than trading your time for money are greater than your expenses.

  • Finding ways to spend your time with people you love and doing things you love.

You can have all the money in the world, but if you don’t have ways to enjoy it or enjoy your time then it has no purpose.

  • Creating your very own legacy.

Volunteering, raising money for a worthy cause, instilling wisdom in the minds of younger generations.  Creating a legacy to be remembered by is the ultimate goal of success.

 

Budget Smart, Invest Wise

 

 

Happy 1 Year

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Budget and Invest turns 1 today.  I know it is Thanksgiving and I want you all to enjoy your time with family so I’ll make this short and sweet.

I was inspired to start this blog a year ago by the passing of my father, a man for who I had much respect.  Although my father taught me many things, finances was something we rarely discussed.  The subject wasn’t taboo or anything, just not something that was ever brought up in conversation.  After he passed away, I started to see why.  My family’s finances weren’t as well of as I personally would have liked to have seen for my mother.  She didn’t have much say when it came to the family finances.  Dad would always tell her that he has everything handled.

The older I get, the more I realize just how open people need to be with their finances with loved ones.  I have also come to realize that the more one educates himself or herself on personal finances, the better off they’ll be.  Books like Rich Dad Poor Dad, The Millionaire Next Door, and Simple Wealth, Inevitable Wealth have taught me more about personal finance than a lifetime of schooling ever has.  That is why I share you with the knowledge I have gained and my personal stories.  In hopes that all of my readers can achieve the same financial success that I hope to and will attain in the future.

Happy Thanksgiving.

Budget Smart, Invest Wise