How to Become Independently Wealthy

Become Independently Wealthy

Becoming wealthy is a goal many of us hope to achieve in our lifetime.  Some want to be wealthy to have unbelievable lifelong experiences or to validate success. However, 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 in their lifetime.  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 roads Ken illustrates in his book.

What Does It Mean to Be Independently Wealthy?

To determine whether you are independently wealthy, you must ask yourself a few basic questions. First, do you rely on financial support from anyone? If not, then consider yourself financially independent. Second, do you depend on your employment income? If you answer no to the second question, you would be considered independently wealthy. When you have become independently wealthy, you have either saved enough or earn sufficient passive income to give up your day job.

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. 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. This may be with a financial advisor or through acquired knowledge that creates a return on your investment.  For example, I have found that investing on a monthly basis in a mutual fund is of most benefit to me because it covers the broad range of the U.S. Stock Market.  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 songwriter or musician, you can create an ongoing stream of royalties from your lyrics or music.  If you purchase a rental property, 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 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 talent to create additional income. However, do you have the drive to reach your goal?

Becoming independently wealthy or successful all boils down to the level of commitment.  If you are committed to becoming independently wealthy, then  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. On the other hand, maybe you will be satisfied with millions or even a million.  Only you can determine what being wealthy is to you.

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The Biggest Lies About Growing Wealth

The Biggest Lies About Growing Wealth

From an early age, there are several myths and lies about growing wealth that are drilled into our memory. However, some of these misconceptions are based on outdated ideas and limited perspectives. Here is a look at some of the most common lies still being circulated.

5 Common Lies About Growing Wealth

1. Businesses Break Even in the First Year.

There is a common misconception among new business owners that you will be an instant success. However, in reality plans get delayed, unexpected expenses arise, and it takes time to create a market presence.  According to Forbes, the timeline to achieve profitability is closer to 18-24 months. Furthermore, 25% of new business ventures fail in their first year.

The truth is that instant success is very rare. While entrepreneurs are waiting for their breakthrough moment, you must be willing to wait it out, lose money or even walk away from a failed venture. Many successful businessman will tell you that had several failures before they finally prospered.

2. All You Need Is a Good Idea.

This mantra lies at the heart of the American Dream that anyone can get rich with the right idea. This is one of those lies about growing wealth that perpetuates itself because there is some truth in it. Unfortunately, not every great idea meets a market need or consumer demand. Not only must the idea be feasible and practical, but it most importantly it must be profitable.

The execution and timing of your business’s launch are also crucial. When you are first finding your legs, expect to invest a ton of man hours to get it off the ground. You should also make sure you have enough savings to cover your bills and give yourself a cushion. This will allow you to breathe a little as you wait to gain a foothold and break even.

3. You Need High Returns and Savings to Grow Money.

Another myth about growing wealth is that you need high returns and savings to grow your wealth. However, most financial planners will tell you that making steady contributions is a more efficient strategy. Consistent savings is more important than stumbling upon a good investment opportunity. But, don’t ignore a good opportunity when it comes around.

This is also a great lesson to pass on to the next generation. Remember, it is never too early to begin saving and investing. Time is a valuable asset; the sooner you begin the more money you earn from compounding interest. Even if you start small, you can let your money begin working for you.

4. You Need a Loan to Start a Business.

One of the greatest pitfalls for potential business ideas is this idea that you need a loan to start a business. While some entrepreneurs have a significant amount of startup capital, most just start where they are at and build from there. Instead of quitting your job and focusing solely on the new business, perhaps it is wiser to keep your day job. This will provide a safety net while you establish yourself. Once your business can sustain itself, then it may be time to consider making it your sole source of income.

5. You Can’t Get Rich Off Your Salary.

Another lie about growing wealth is that you will never get rich just off your salary. Although it may be difficult to build enough savings for retirement on your salary alone, you can begin using it for steady investments from an early age. If you invest small portions of salary, over time it will grow exponentially. The key is to make consistent contributions at regular intervals to ensure steady, continued growth. Diversification will also protect your nest egg and mitigate long-term risks.

Final Thought About Growing Wealth

When you are making important decisions about your finances, consider your sources. Advice is freely offered with the best of intentions. However, you should take time to do your research and learn to decipher fact from fiction. And remember, when in doubt you can always seek out professional advice to find the best ways to grow your personal wealth.

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Hiring a Financial Advisor vs Managing Your Own Money

Hiring a Financial Advisor vs Managing Your Own Money

Many people ask themselves if they need someone to help them manage their finances. This is a very personal decision with no universally correct answer. However, there are some advantages to hiring a financial advisor vs managing your own money. Conversely, there are also benefits for those handling their own portfolios. If you are uncertain which route is best for you, consider seeking some professional expertise.

What Do Financial Advisors Do?

Financial advisors play a key role in helping you plan and attain your future financial goals. They will help you determine how much to save for retirement and choose the best accounts for you. Furthermore, a good financial advisor will ensure you have appropriate insurance coverage and coach you through estate and tax planning.

The reason for hiring a financial advisor is to provide a wealth of information no matter what financial quandary you find yourself in. Part of their job is to educate you in areas where you are unfamiliar. Your financial advisor can help you understand complex issues and lead you to the best solution.

Before they take you on as a client, financial advisors first assess your risk tolerance and goals. Next, you will create a financial plan and a timeline to enact it. Once your portfolio is established they will also make and manage your investments. The greatest benefit of hiring a financial advisor is regular monitoring and updates. This means you will not need to be actively involved unless you want to be.

What are the Benefits of Managing Your Own Money vs Hiring a Financial Advisor?

However, if you prefer to take a more hands approach, there are several benefits to managing your own money. It’s true that not everyone needs an advisor. According to Vanguard about 25% of private investors are considered ‘self-directed.’

Managing your own money helps you take a long-term view of your finances. Since there are no advisors needing to justify your portfolio’s short-term performance, you can ignore the short-term fluctuations. Second, it allows you greater control. Self-directed investors can create specialized plans and make quicker decisions. You will also save a significant amount of money in fees if you don’t have to pay a middleman. When you don’t see the returns you expect, it may be difficult to justify the expense.

Should You Hire a Financial Advisor or Manage Your Own Money?

As mentioned above, hiring a financial advisor vs managing your own money is a very personal decision. Although, it never hurts to do some research or reach out to a professional when you are confused, overwhelmed or afraid of making a serious financial mistake. It’s also not a bad idea to approach advisors when you are stable to make sure you are on course. Perhaps they could suggest new strategies or ways to fine tune your plan.

However, if you are a competent investor and feel you could produce better results, managing your own money may be the better option. You can always reach out with specific questions as well when you need expertise or advice. This is a decision only you can make. Weigh your options carefully and do your research with all your important financial decisions.

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Why Are More Young Americans Living with Their Parents?

More Young Americans Are Living with Their Parents

A recent study conducted by the Pew Research Institute reported that more young Americans are living with their parents than ever before. While there are a myriad of reason why children move home, the Covid-19 pandemic and rising unemployment rates have been important contributing factors. With no clear end in sight and our financially stability in question, many young adults are looking to save money any way possible.

The Lost Generation

Let me begin by stating that I am a Millennial, born between 1981 and 1996. Let me then preface this first statement by debunking the stereotypes associated with my generation. Many call us lazy and self-righteous, soft and coddled children. We are not ungrateful or demanding. On the contrary, many of us are just trying to survive.

Some have dubbed us “the lost generation.” We grew up in the age before cell phones, witnessed the birth of the internet, and lived through a terrorist attack on home soil all before we graduated high school. Then, we were forced to take expensive loans in order to get a college education only to graduate in the midst of the mortgage crisis. We are now facing a second economic downturn just as we are reaching our prime earning years.

The promises we had been fed about working hard and getting a good education have fallen short. However, living through such adversity has taught us to adapt and be resilient. The majority of us are simply getting by. Like most Americans, we live paycheck to paycheck, and pray not to get sick or lose our jobs right now.

How Covid-19 Has Affected Employment

Although we are better educated than previous generations, we are the first generation to be worse off than our parents. Most young adults have little savings and fewer investments. Few of us can afford our own homes because we have outstanding debts to pay off first. The only thing that keeps this precarious boat afloat is a steady income. Unfortunately, recent closures and quarantine measures have left thousands of people out of work.

During the Covid-19 pandemic, American unemployment rates have skyrocketed. Millennials have been hit especially hard since many hold jobs in the service industry. The reported job losses in the wake of the economic downturn are the highest ever since the Great Depression. These conditions have forced many young adults to move back in with their parents. According to the Pew Research Center, 52% of Americans ages 18-30 live with one or both of their parents. While unemployment is not the only reason for children moving home, it is a significant factor. Furthermore, no one is certain how long conditions will continue or an economic recovery will take.

Financial Stability of Young Americans

Another intangible mark this has left on our generation is an attitude of pessimism and lack of trust in financial institutions. Paying monthly bills has become a challenge with reduced hours and widespread layoffs. The first stimulus check issued by the government offered some temporary relief, but when rent comes due many tenants will be unable to pay. It’s no wonder why many young Americans are living with their parents. Cutting out a monthly rent payment offers a huge financial relief.

The uncertainty of just how long conditions will persist only exacerbates these negative feelings. Conservative predictions estimate that it will take the better part of a decade for the economy to fully recover. This further complicates any plans to pay off debt, purchase homes, invest and retire. I can only speak for myself, but I think it’s safe to say that most young adults do not want to live with their parents. Unfortunately, with little savings and job opportunities it is becoming more of a necessity until we can better understand the full and lasting economic impacts of the coronavirus.

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3 Reasons Why Weddings Are So Expensive

Beach Wedding Ceremony during Daytime
Why are Weddings so Expensive?

Summer is in full swing. While weddings occur all throughout the year, summer seems to be a popular time for two people to tie the knot. Many of us attend a wedding with the assumption that we are celebrating friends or family. But do we really know the costs behind it all? Weddings have been getting more and more expensive each year. Today, the average American wedding costs approximately $33,900. You may be asking yourself “How is this possible?” I can tell you 3 reasons why weddings are so expensive.

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How to use Payday Loans Responsibly

Payday loans can be an absolute lifesaver when used correctly. A well-timed loan can get you out of a bad spot financially and give you a little boost while you’re waiting for the next payday. 

However, using payday loans irresponsibly can cause you a world of trouble and result in both your bank account and your credit score dropping exponentially. It is not a little loan that you take out on a whim; it needs to be tactical, and ultimately, should be a last resort option. So, when exactly is it appropriate to take out a payday loan? Continue reading

Finance Lessons from Professional Athletes

professional athletes finance

Many athletes have come and gone. Many have made unthinkable amounts of money and many have lost unspeakable amounts of money. A lot of professional athletes, lacking time and the right advisors end up losing the fortunes they make. Oftentimes, they lose their fortunes and end up in significant debt. Their experiences serve as great lessons for the rest of us who would like to make and keep a sizeable nest egg. Professional athletes finance lessons provide a treasure trove of information. Continue reading

What Age Should You Start Thinking About A Real Estate Investment?

Real estate is one of those topics that can scare off a lot of people for several reasons. First off, it’s expensive. Second, it can be risky. You’re essentially putting thousands of dollars towards something that can be very valuable, but that’s not always guaranteed. If you’re wondering what is the best age to start considering investing in real estate, we can’t give you an exact number. However, if investing is something you want to do in the foreseeable future, we can help you decide when the right time is. 

 

You aren’t in a lot of debt

First comes first. Before investing in something as expensive and as risky as real estate, you’ll want to assess how much debt you’re in. Whether you have student loans, an expensive car payment, credit card debt, or even a mortgage,  you’ll want to pay those off as much as possible before investing in real estate. Many real estate investment strategies will involve taking out mortgages, which will put you in more debt. 

Naturally, younger adults in the country, mostly those who went to college, will have more debt than older, more established people. However, if you’re younger and in debt, you can make smart financial choices now so that down the road, you can also invest in real estate. 

 

You are financially stable and have good credit

Before you go ahead and take financial risks like investing in real estate, take a step back and evaluate where you are financially. Do you have a good credit score? Are you financially sound? When you invest, you’re putting money on the line. Before you make any big financial moves such as this, make sure you have savings, a low debt-to-income ratio, and a steady enough income where that if something were to fall through, you would be okay. 

If you’re at an age right now where you’re not as well-off financially as you’d like to be, start making choices that will benefit your financial wellness down the road. Create budgets, save up, and pay off debt. In just a few years, you’ll feel more comfortable investing in real estate. 

 

You have the time to put in the work

Real estate investing isn’t a “buy a house and you’re done” sort of deal. You’re going to have to put time and energy into the investment after you purchase the home or property. If you decide to fix the house up and resell it, you’re obviously going to need to either hire a crew to fix the house up for you or do it on your own. Not planning on going the “fixer-upper” route? Renting the house out, which is another alternative, also takes work. As a landlord, you’ll have a list of responsibilities. 

The time and energy that you spend in investing doesn’t go to waste, though. Taking the time to take care of the property you purchased is only going to work out better for you in the long run. Don’t have the extra time right now? Reassess down the road when you do.

Like we mentioned before, we don’t have an exact number when it comes to the best age to invest in real estate. However, we do know that it’s based on your financial wellness, how much debt you have, and how much time you have to put towards your investment. We hope you found this post helpful and will continue to stop back to Budget and Invest for similar posts.