Before you retire, there are a few things that you want to make sure of and you should be prepared for. Unless you want to be a FIRE-preneur like Mike Rosehart, where you have enough in investable assets to cover your absolute basic expenses (i.e. enough money invested for at least a few years so you don't starve to death or go homeless) and then become an entrepreneur, there are a few things that you want to be sure of before you make the jump to retirement.
#1 You Are Debt Free
Being debt free going into retirement kills 3 birds with 1 stone. On 1 hand, it makes it so you have less expenses that you have to worry about which, in turn (bird number 2) gives you down side protection if you lose a source of your retirement savings such as a rental property or pension or there is a recession and you have less retirement money to draw from. It also gives you the ability to not have to save as much money for retirement as you won't need as much retirement income because you have lower expenses.
#2 You Have At Least 25 Times Your Expenses in Investable Assets
Having 25 times your expenses in investable assets is a key to retirement. This is based off of the Trinity Study which states that if you withdraw 4% (1 divided by 25 is 4%, thus you need 25 of your expenses in retirement) of your 50% stock, 50% bond portfolio in the first year of your retirement and adjust it for inflation each year after that, the chances of you running out of money is 5% over 30 year periods. For people that are taking the standard retirement of retiring in their 60's and expecting to die in their 80's or 90's, this plan works pretty well.
However, that does not go to say that there is not some degree of criticism in the study. The 3 biggest points of criticism are as follows: 1) When the study was conducted, bond yields were far higher as they were now as the study in the mid-90's. The study used high grade corporate bonds which, for a large portion of history, have had higher yields than they do now as seen here. 2) It does not include any additional sources of income in retirement such as rental property income, social security, annuities, and/or CD's. 3) It is really only good if you are looking to take a traditional retirement route and not retire early as most people looking to retire earlier will likely have to either diversify their retirement income or have a lower withdrawal rate.
#3 You Have 1-3 Years Of Expenses in Cash
This is also an additional hedge to the 4% rule mentioned above. Having 1-3 years worth of expenses means 2 things: 1) when you are in retirement and there is a recession, you do not have to draw money from your investments as the value of them is likely to be lower and 2) you have the potential ability to take slightly more risk with your investments, which means potentially higher, long-term returns, as you have as slight cushion to do it.
#4 You Do Not Have Any More Dependents
Not having anyone depend on you in retirement is a luxury. Not having kids or parents depend on you can help you save a lot of cash in the long-term as they are off the payroll. This may be hard for a lot of people but is a necessary evil in order to have a successful retirement, financially.
#5 You Have A Plan In Retirement
When you actually retire, I hope at least, that you do not want to just sit on a couch all day and watch TV. So have a plan to maybe start that side business that you have always wanted to start or travel places that you have never been. Essentially, you are creating a fun and/or adventurous lifestyle off of your passions and things that you have fun doing. Otherwise, I feel most people would get bored just sitting around doing nothing.
So down in the comments, tell me what you want to do in retirement!
When it comes to funding your retirement accounts, there are many options to choose from. You have the 401(k), IRA, HSA, 529 plans, and many more. Sometimes it can get confusing to know which account to fund first and it does partly depend on your situation. Thus, this a good general starting point and if one of the points/accounts do not apply to your situation, you can skip it.
Please note that this is not investing or retirement advice for your situation. If you wanted a more in depth analysis for your situation, please do your own research or speak with a financial professional.
#1 Invest in Your 401(k) Up Until The Employer Match
There is no other, legal or legitimate, way I have personally seen to get an immediate 100% return on your money other than investing in your 401(k) up until the employer match, if offered. Before you even start investing, you already received a return on your money. Many employers offer some version of a match on the first 3-6% of your salary, thus this is a good start to investing in your retirement. However, if you do not have an employer match or 401(k) available to you, you can skip this step.
#2 Max Out a Roth IRA
The power of a Roth IRA is that you get to have tax free growth and tax free withdrawals on your investments once you hit 59.5 but your contributions are taxed. This is a great option as once you get into retirement, you do not have to pay taxes to Uncle Sam on your investment gains. Thus, in order to have good asset location, having a roth is good thing to have. In 2019, the contributions limits are $6,000 for people under 50 and $7,000 for people 50 and over. However, there are some income limits in order to contribute to a roth so please speak with an accountant about that.
#3 Max Out HSA
An HSA is one of those rare accounts that give you a triple tax advantage. Meaning, you can get a tax deduction on your income with contributions you make, tax free growth on your investment gains, and tax free withdraws on any health/medical expenses you have. In order to have a HSA, you need to have a high deductible health insurance plan. The contribution limits for single coverage is $3,500, $7,000 for families, and you can can contribute an additional $1,000 if you are 55 or older for 2019. What is even better about the HSA is, if you do not use the money for medical expenses, you can use it like a traditional IRA in retirement, once you hit 65.
#4 Max Out Remainder of 401(k)
Once you have made the contributions above, then you can contribute the remaining portion of the 401(k) limits that you have yet to contribute to. In 2019, the contribution limits on 401(k)'s are $19,000 and $24,000 if you are 50 or over.
If you have completed steps 1-4 and you are, say, a single 30 year old, you have the ability to contribute up to $28,500! Now let's say you max out all of the accounts for 5 years (ages 30-34) but after those 5 years, you never contribute to it again and we assume an average annual rate of return of 8%, you will have $1.817 million by the time you are 65!
#5 Brokerage Account and/or Physical Real Estate
Once you have maxed out the above accounts, you can look into investing into a standard brokerage account or physical real estate. These are great options for the high savers or the people that have super high incomes and would like to invest as much as possible. However, there may be some additional tax related things to look into for these types of investments, so please speak with a CPA!
In previous series, we have written about investment goals for your 20's and for your 30's. Sure, many of these goals are good baseline goals but you always want to go for that stretch goal in order to maximize your wealth. But what if you are between the ages of 40 and 49? what financial goals should you have in order to get to your financial goals?
Please note that none of this is financial advise for your situation. Please speak with a financial professional or do your own research for your specific situation.
#1 Max Out Your 401(k)
I know This goal may seem nuts but in the Goals For Your 30's post, the stretch goal was to max out both your IRA and 401(k). If that was something you were not able to do, at least max out our 401(k), if available to you, in your 40's. Doing this will propel you towards retirement because if you are in your 40's, you still have around 20 years until retirement but if you have little retirement savings, maxing out your 401(k) for consecutive years in your 40's will help you get back on track due to the cap being $19,000 for 2019.
#2 Optimize Your Taxes
In your 40's, you generally see a more money in your paychecks which means, more money to Uncle Sam. Thus, speak with an account to optimize your taxes. Some ideas can include, but are not limited to, putting money into a 401(k) or an IRA, utilizing the SALT deduction, or using your mortgage interest to reduce your taxes.
#3 Have an Estate Plan or a Will
Having an Estate Plan or Will will determine where you money goes after die. Speak with an attorney or lawyer for your situation but having a document that describes where your money goes once you die because you do not want the government to do this once you pass away. Especially if you have a lot of money.
Stretch Goal: Have at least $1,000,000 in Net Worth Before You Hit 50
Having a net worth of $1 Million before your 50th birthday is a lofty goal but there are a few ways you can reach this. Make sure you are maxing out your IRA and 401(k), pay off your house as quick as possible so you can reduce your debt burden and build equity faster, and looking into real estate properties for rental purposes. Again, this is a stretch goal that many may not reach but if you do some of the things listed, you can start to get pretty close to your goal!
When it comes to investing, many believe that you have to fork over a lot of money in order to invest. Whether it is hiring a financial advisor, paying $7 per trade through a brokerage such as TD Ameritrade, or paying a management fee for an index fund or mutual fund, all of these methods involve some sort of fee in order invest and this cuts into your investment gains. But there are a few ways to actually not pay any fees whatsoever. And I am going to go over 2 that could be appealing to some individuals.
Please note that this is not financial advice for your situation. Please do your own research or speak with a financial professional for a more in depth analysis for your situation.
Fidelity Index Mutual Funds
As many people have chosen to leave active mutual fund managers, many are fleeing towards index funds, index mutual funds, robo-advisors. Overall, this is a wise choice as many of these types of investments charge substantially lower fees and/or commissions. However, Fidelity, within the last year or so, has come out with a few index funds where there are 0 trading fees and 0 management fees. An example of one of these funds is the Fidelity ZERO Total Market Index Fund (FZROX). Competitors, such as Vanguard's version: VTSAX, have a management fee of 0.04% which is not a lot but over 40 or more years can save you some money. These types of funds are generally good for the lazy investor. If you do not want to do a whole lot of work but still want to invest, funds such as these may be good options for you. Or if you wanted to open an IRA an invest in index funds, this may be an option for you!
Trading With Robinhood
If you are the type of person that likes to trade individual stocks, Robinhood may be a good option for you. Robinhood does not charge the trading fees that companies such as TD Ameritrade or ETrade charge in order to trade individual stocks. Thus, if you are a day trader, swing trader, or a long term investor in individual companies, this app is a good option. The only down fall to this app is that it only offers brokerage accounts as of this moment. Thus, if you wanted to open up an IRA, this is not the app for you.
These are 2 option in order to not pay any fees, do you use them?
Since October, we have seen many articles about talks on concerns of a recession. And don't get me wrong, recessions are terrible as many people lose money and jobs in them and they will come eventually but what if I told you, they could help you propel your wealth? Most people would say I am nuts for saying that. Here are a few steps you can take to increase your net worth during a recession.
Step #1: Pay off Debt In Good Times To Profit In Bad Times
If you are a person that has a large amount of debt, specifically, student loan debt, credit card debt, or auto debt, try to pay this off as fast as possible in good times so you have more disposable income to invest in bad time. This is sort of self explanatory but you are killing 2 birds with 1 stone by doing this. 1) You are actually hedging your downside risk if there is a recession because if you loss your job in a recession and you still have debt, you have more expenses to cover. But if you pay them off beforehand and you loss your job, your expenses are less, and in turn, you do not have to drain your emergency fund or investments as much. 2) You free up more cash to invest in a downturn. Simply by freeing up more money, you can invest more money in down turns to take advantage of lower stock prices and/or lower real estate values.
Step #2: Contract Your Spending In Good Times To Deploy In Bad Times
I, personally do not recommend market timing as in many cases it does not work. However, if you do not expect to have a job or have a lower income during a recession or maybe do not want to put as much money in at/near the top of the market, put a small percentage of your cash in a high interest savings account to be deployed during a recession. In this scenario, you aren't 100% market timing but more so deposit timing due to having more cash at hand to invest.
Step #3: Refinance Mortgage
Generally during recessions, the Federal Reserve lowers interest rates which effects loans such as mortgages. Thus, if you have a high rate on your mortgage, look into refinancing it during a recession in order to take advantage of lower rates. This, obviously, won't make you money but could save you thousands of dollars over the course of your mortgage, which means you can plow more money into investing.
Step #4: Do NOT Sell Any of Your Investments
The biggest mistake many people take during a recession is selling their investments. This is the worst thing to do during a recession. The 2 biggest reasons being: 1) you realize your losses. Sure, if you hold your investments, you may notices losses but those losses are not realized until you actually sell them. Meaning, they can recover in the long-run. 2) If you utilize a Dividend Reinvestment Plan (DRIPS), you can buy even more lower prices of securities as the dividends that you are given from the securities you own can be reinvested.
Step #5: Invest Extra Cash You Have Sitting Around
Somewhat similarly to step #2, if you have some extra cash in your checking or savings account that you were not looking to spend or that is not apart of your emergency fund, use it to invest. Even if it is $100, that can help you in the long-run when you are looking to retire.
Step #6: Update/Clean Up Your Resume
Not necessarily investing related but if you are in a situation where you laid off, make sure you have a ready to go resume so that you can fire off on job applications sooner in order to get a job. This will save you some time and help you make some money sooner as you do not have to wait as long to get a job.
Step #7: Have A Properly Diversified Portfolio In The First Place
In order to hedge yourself against some downside risk, make sure you have your investment portfolio properly allocated. This can help stop the bleeding and not give you as much downside risk. Also, make sure you are diversified whether it's between all types of stocks (think VTSAX), different asset classes, and have exposure to international assets.
Step #8: Increase Your Savings Rate
By increasing the amount of money you put in your investment accounts or buying real estate, you can start shopping for investments that are on sale at a higher rate. This can benefit you by lowering your average cost basis which can give you a higher potential upside during the good times in the economy.
In today's age of investing, there is a large array of choice of individual investments. Thus, it is important to look at your options to see what types of investments could be the best options for your specific situation. There are many things that you should look at such as, transaction costs, management fees, liquidity, risk versus reward benefits, your personal risk tolerance, your personal financial goals, and many more. Though what type of investments does The Financial Library like in particular?
Also, please note that NONE of this is financial advice for your particular situation. None of these investments are signals for you to make any purchases/investments within any of these types of investments classes. Please consult with a financial professional or do your own research for your own personal situation.
#1 Total Stock Market Index Funds
If you are part of the FIRE movement, funds such as VTSAX should ring a bell. But what a total stock market index market fund is, is a type of investment fund that focuses on investing into the whole stock market as opposed to one individual sector or section of the market. The good part about a fund like this is that it usually contains a few thousand stocks or positions within them which makes the fund extremely diversified for a fairly low price. For instance, VTSAX, which is Vanguards version of a total market fund, contains 3,637 different stocks and cost just over $75 per share as of July 28, 2019 (please note that the price of this fund is likely to change). Due to the diversification, much of the volatility is smoothed to a degree. There 100% will be some volatility but it will definitely be less than that of only holding a few stocks or 1 sector of stocks.
#2 Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts, or more commonly known as REITs, is a company that owns, and in some cases operates, various types of real estate, such as hospitals or houses. With a REIT, you can invest in a single stock, such as Digital Realty, or an index fund, such as USRT. The benefit to REITs over physical real estate is that you do not have to put a hefty up front cost like a down payment. Thus, you don't have a lot of money to blow but you want to get your feet wet in real estate, invest into a REIT and listen to the conference call of the companies.
#3 Target Date Retirement Funds
Target Date Retirement Funds are a type of fund where you select the year that you would like to retire in and you invest in that fund. The fund automatically will invest into a broad selection of domestic and international stock and bond index funds based off of a gliding scale. As the scale gets closer to your retirement year, it will get more conservative. The great part about this is you get professional management, for a cost far less than that of a financial advisor or a robo-advisor.
Overall, these are my top picks, what are yours?
Also, visit our new Money Tools page!
Unless you are an avid Dave Ramsey follower, you can earn some cash back in order to help lower your bills or to maybe to use to invest into your IRA. Either way, assuming that you are a responsible credit card user, you can benefit from this and also benefit from things such as purchase protection, extended warranties, and also the ability to improve your credit score. It is great to know all of this information but how can you optimize your cash back cards in order to get the most cash back possible?
Below we have gathered how to obtain the most cash back possible off of various credit cards. But there are a few things to note BEFORE jumping down below. 1) I am assuming that it is still the 3rd quarter of 2019 as some of the cards below have rotating categories for cash back. 2) NONE of these cards are affiliated with The Financial Library and none of the links below will benefit The Financial Library in anyway. 3) This will NOT assume any sign up bonuses where you may get more cash back in the sign up period.
5% Cash Back Categories
As mentioned above, there are 3 credit cards on this list that have rotating categories. Those 3 cards are the Discover it Cash Back, the US Bank Cash Plus, and the Chase Freedom. What rotating categories means is that the 5% cash back will apply to a select number of categories each quarter. In the 3rd quarter of 2019, the Discover it Cash Back card will give you 5% cash back in Restaurants and Paypal. Thus, if you eat out a lot or eat out for business purposes, use this card.
But remember, you may need to fill up your gas tank when you drive to the restaurant. This is when you use your Chase Freedom card for Gas purchases that you make. Generally, many credit cards to give more cash back for gas than other purchases, thus, definitely take a look at your credit card cash back for gas.
Lastly, with the US Bank Cash Plus card, you can select 2 categories each quarter to get 5% cash back on up to $2,000 worth of purchases. You can choose the following categories to make purchases on: TV, Internet, & Streaming Services, Fast Food, Cell Phone Providers, Department Stores, Home Utilities, Select Clothing Stores, Electronic Stores, Sporting Goods Stores, Movie Theaters, Gyms/Fitness Centers, Furniture Stores, and Ground Transportation. Obviously, that is a lot of categories and they may be subject to change, per US Bank, and you can only select 2 of them but I am going to guess that many people utilizes at least 2 of those categories on a fairly regular basis.
3% Cash Back
In the 3% Cash Back category, this is where the Bank of American Cash Rewards card comes into play. This card has a tiered system of 3%, 2%, and 1% cash back on various categories and you can receive even more cash back if you bank with Bank of America and qualified for their Preferred Rewards.
Though, assuming you get the base line rewards with Bank of America, you get 3% cash in the following categories: If NOT the 3rd Quarter of 2019: Gas & Dinning. If not selected in the US Bank Cash Plus: Online Shopping and Home Improvement and Furnishing. In a card not mentioned above: Drug Stores (such as CVS or Walgreens).
2% Cash Back
For the 2% Cash Back Category, there are 2 different cards that you can optimize: The Citi Double Cash Back card and the Fidelity Rewards Visa Signature card. Both cards do get 2% cash back on all purchases. This is the best I have personally seen for a no fee credit card if you wanted a flat cash back rate on a card. But how do you know which is better for you? If you are NOT a Fidelity customer already, the Citi card is probably better for you because you can redeem the cash back via a statement credit, gift card, direct deposit, or check. But if you are a Fidelity customer, you can redeem your cash back directly into your investment account(s) which is very convenient.
Overall, this is how you can get the most cash back with your credit cards! Tell us which credit card you like the most!
This article was also featured on Allie's Fashion Alley
We all know the college stereotypes. You have the math and science nerds, the jocks, the frat bros, and many more. But there is only common bond that many of college kids share. And that bond is frugality. Between the late night ramen noodles or the inexpensive adult beverages, we all had at least 1 frugal habit throughout college.
Some of these frugal habits can actually have long lasting impacts on your spending habits post-graduation. Some of them being not very healthy or maybe not the best for us. The problem, for most, is the lifestyle inflation as the average person has a salary of just over $50,000 right out of college. They get that first paycheck that is probably more money than what they are used to and they want to blow that money. You want the new car, the new cloths, or the latest iPhone. But what what happens if you stayed on a budget that was somewhat similar to your college lifestyle with minimal lifestyle creep? What impacts does it have on your long term wealth?
Let's take the example of John. In college John worked part time throughout the school year and had some sort of full-time employment during the summers. Overall, he made $20,000 each year throughout college but because he has living and college related expenses, he spends that $20,000 in full.
But the four years of college go by for John and he graduates with a degree in business. He gets a job and makes what is equivalent to what the average salary of a college graduate makes: $50,556. But as we all know, Uncle Sam takes his cut of around 20%. So now John has $40,000 left over to spend whatever he wants on. But let's say that he sticks to the same or a very similar budget to what he a had in college and still spends $20,000 per year on living expenses. The remaining $20,000 goes towards investing. We will also be assuming that John's expenses and salary will rise by 2% per year in this example and the following examples. We will also assume that the average yearly return on his investments is 8% per year. We are also assuming that he makes a lump sum deposit into his investment at the end of the year.
So, assuming his expenses start at $20,000 and rise 2% per year and his post-tax salary starts at $40,000 and rises at 2% per year, John will have a net worth of $313,310.19 at the end of 10 years. What makes this just as crazy as it sounds is that this is nearly $115,000 more than what the average person has in his/her 401(k) ($198,600), according to Nerd Wallet... in their 60's, when most are considering retiring!
But let's compare this to a situation where John spends $30,000 on various living expenses and he saves the rest. We will also assume the same other assumptions above, the only 2 differences being, he spends $30,000 and invests the difference ($10,000 in this case). Because John's savings is half of what it is in the prior example, after 10 years, his net worth is half of what it is above, $156,655.10 but is still not bad.
But let's take this a step further an assume a savings rate that is closer to what most people actually do, invest right around 10% of his/her pre-tax income. In this case, that works out to be $5,000 for John. In this scenario, this is 25% less than the first example as you can see below.
Now what if we stretch this out to 30 years? What are the consequences over that period of time as most individuals invest for usually 20-40 years before they retire? For the John that started by investing $20,000 of his income, he ends up with about $2.75 million. In the second example, where he started investing half of that, he ends up about $1.375 million. And in the last example, where he saves about 10% of his gross income, he ends up with about $687,000. In all three scenarios, he makes out pretty well but the difference between the first and the third example is a staggering $2.062 million!
Now I understand that in all of these examples, I made many assumptions. Some of those can include, but are not limited to, John not having any debt (or at least not mentioning it) in any of the examples, not including any other sort of savings goals most should have such as an emergency fund and/or saving for a home, investing for 30 years as opposed to 40 if he started at 22 years old and retired at 62, not having any money whatsoever after college, and assuming that nothing crazy happens to his financial picture such as getting injured and not having the ability to work again.
But overall, regardless of what your budget was in college, in most instances, it was probably less than what it was post college and I can guess that it will have an impact on most people's net worth. As cliche as it may sound, budgeting your money can have some serious consequences.
Hope you enjoyed this article and if you want more content such as this, visit The Financial Library for more!
When it comes to investing for your retirement, there are multiple types of accounts you can utilize in order put that money in. The 2 most common types of accounts are the 401(K) and the IRA. The 401(K) is an employer sponsored plan where you can contribute up to $19,000 if you are under 50 or $24,000 if you are over 50. Generally this is a good type of account to utilize if you either a) receive an employer match or b) you are a high achiever when it comes to savings as the cap for this account is far higher than the IRA. But not every employer offers a 401(K). So what do you do?
That's where the IRA comes into play. An IRA is an account where you can deposit up to $6,000 if you are under 50 or $7,000 if you are 50 or older. There are 2 different types of accounts that you can utilize, the Traditional and Roth IRA. I won't bore you too much with the differentiation of the 2 but I would highly recommend you speaking with an accountant or financial advisor to see which is better for your situation as the tax treatment for the accounts is different.
But back to the main topic. You probably see that million dollar mark and notice that you can only deposit $6,000 or $7,000 (depending on your age) and be asking yourself, how would it even be possible to become a millionaire with this account? I'll show you the math behind it but it really boils down to 2 things a) starting to invest in it early on and b) maxing it out.
Before I show the math, there are a few assumptions that we have to take. We will say John is going to start investing into his IRA starting at age 22 and he will max it out (deposit $6,000) every year until he is 50, then he will put in the additional $1,000, to achieve the higher, adjusted cap for that age group. We will also assume that he will get an average annual return of 8% per year.
From age 22 to 48, he is able to have over $500,000 in his IRA. Not bad if you compare it to the average retirement savings of $95,766 but we are only half way there and John is already 48.
But don't worry as it gets a lot better for John. It took hit about 26 years to get to a half a million dollars but only takes him around 8 years to get that other half. By the time he reaches 56 years old, he has amassed over $1,000,000! From when he started, it took him a total of 34 years to get to $1,000,000.
If he has a Roth, he could start to withdraw any of his contributions or deposits if he chose to retire (which would equal $217,000 in this case) or he could wait until he is 59.5 years old to withdrawal any amount he has available. But wait, there's actually a third option. Remember how above I mentioned that it took him 34 years to accumulate $1,000,000? Guess how long it takes him to get to $2,000,000, assuming all the same assumptions from before? 8 years! When he hits the age of 64, he will reach that $2 million mark!
Now I understand that there are other variables that were not considered that may include, but not limited to, the ability for someone to invest this much based off of his/her income, that the IRA contribution cap usually rises every few years, what you actually invest in, whether or not your employer offers a 401(K) match, and whole host of other things that were not mentioned. But if you follow this and invest in an S&P 500 index fund, which has averaged a 9.8% return over the past 90 years, you may be able to make it work!
When it comes to money, people try to do whatever they can to chase it. They play the lottery, gamble, or work themselves to death just to get that extra raise and/or commission. Even people such as Suze Orman recommend that you have between $5 and $10 million in retirement. And yes, you read that number correctly. But, when it comes to retirement, stop trying to chase the money but rather chase the lifestyle.
As previously mentioned, there are so many people out there that work their jobs to death just to get that 2% raise every year and eventually burn themselves out. Then by the time they get to 65 and retire, they die within 3 years. May sound harsh but it is a reality amongst many people that get caught up within the rat race and try to stock away as much money as possible.
Or you run into a similar situation where people do the same thing but do it just to get that bigger house or that nicer car. These people are trying to, like it or not, acquire as much stuff as possible as they can just because they make that $50,000 salary. But in reality, are either of these situations something that you should be striving for?
Rather, chase the life style you desire. For instance, if you enjoy traveling, create a lifestyle around that. Maybe you can work on a cruise ship and essentially get paid to travel the world. Or work for 5-10 years, save up money and credit card points and then take the next 5 years to strictly travel.
The goal of this is to take something that you enjoy on an everyday basis and use that as the tool to create a life around it. And the options are endless on how you can do it. Whether it is taking a job that may pay a little less but will make you substantially happier in the long run. Or pursuing the FIRE (Financial Independence, Retire Early) crowd and grind for 10-15 years and then "retire early" to pursue those jobs or passions that you have where you may not get some sort of monetary gain but you will enjoy doing.
All of this will have some sort of sacrifice. You may not have to live some sort of lavished lifestyle in for this. But that may be alright as this is something that may make you happier in the long run. The point is to live for purpose and simplicity. Don't buy the extra stuff you do not enjoy or need. Buy the things or experiences that make you happy. Create or do that career that is purposeful and not one where you live by the demands of your family/friends, society, and/or your boss.
Having that freedom is what you want to pursue.
Many of us strive to be a millionaire in retirement and it is a good goal that many financial advisors and pundits recommend to have in retirement. We even wrote about a similar topic on the blog Build Your Budgets on how to achieve that millionaire status. In there, we pointed out that if you start saving at 22, you will be a millionaire by the time you hit age 56. But not everyone starts investing at age 22. There are many factors at play here. You may not go to college and get a job right out of high school or you may have student debt that may be making it difficult for you to save for retirement. But regardless of the age you start, how much do you need to invest in order to become a millionaire?
Now before we start, we are just going to lay some ground rules here. We are going to take the example of a person that invest at the following ages: 20, 25, 30, 35, 40, 45, 50, & 55. The hypothetical person will get an average annual rate of return of 8% which is slightly less than the average annual rate of return of the S&P 500 over the past 90 and less than the average rate of return of various real estate investments (please note that this is NOT financial advise. We highly encourage you to speak with a financial advisor or do your own research before investing in any asset class and before what retirement account you put your investments in). We also assume that you make lump sum investments at the end of the year. Now, this technically increases the amount needed to put in each month, assuming the other parameters are the same, thus, you may be able to get away with depositing ever so slightly less into your retirement accounts. Also, those deposits stay the same every year (as in you never increase or decrease them). Lastly, we assume that each person retires at the age of 62.
With those set parameters below is what came from each age for how much you have to invest on a YEARLY basis (obviously, divide what the amount by 12 for a per month basis).
As most can assume, the younger you are, the less you have to invest. This shows the power of compound interest first hand. For people that are under 25 can choose to deposit that money into an IRA as the amounts needed on a per year basis are less than the cap. Those from ages 25 to 40 would have to use either a 401(k) entirely or some combination of a 401(k) and IRA. Though all individuals aged 45+ would have to seek out non-retirement accounts, such as a brokerage account on top of your retirement accounts. Though if you are self employed, you may be able to use a solo-401(k) or SEP IRA for up to $56,000 in retirement contributions.
Some other things to consider with this numbers may be the following as they will likely change the amount of money you, personally would have to contribute to any of your retirement accounts. 1) If you increase you deposits by inflation. Increasing you deposits by 2-3% is a good way to hedge inflation and because you are increasing your deposits yearly, you won't have to deposit as much early on. 2) When you choose to retire. The age you choose to retire has a huge impact on how much you have to deposit. The earlier you retire, the more you have to deposit and visa versa. 3) If you have an employer match for your 401(K) or other employer sponsored plan. With this, you employer can foot some of the retirement bill for you, thus you do not have to deposit as much into your retirement accounts. 4) Losing your job. Losing your job may effect any of the previous factors and, obviously, your ability to contribute at all to your retirement, in most cases. Though, you can slightly hedge against this by investing more when you do have a job so you can offset when you are fun-employed... I mean unemployed.
There are 2 more things you should also consider before investing. Though as previously mentioned, please do your own research or speak with a financial advisor, accountant, and or lawyer before following my advise on this as I am just some random dude on the internet. But first, you want to consider what you are invested in. I used 8% above as you may (not guaranteed) get around that return in an S&P 500 Index fund, a stock index or mutual fund, real estate investment trust (REIT), and/or physical real estate. Though, your returns may be different if you invest into bonds, cd's, annuities, life insurance, and/or cryptocurrency or at least if you add them into your portfolio. Secondly is the type of account you use as the account type will likely give you different tax benefits. Some tax benefits may give you more money to keep now to invest or leave you with more money later to reinvest.
Overall, these are considerations to take in and I would HIGHLY SUGGEST that you do more research before you invest into any 1 thing.
If you would like to play with the numbers yourself, you can download an excel sheet yourself here!
5/25/2019 0 Comments
This post is featured on Budget Girl Kylie
When it comes to chasing money, most of you may think of Ebenezer Scrooge with his stacking of daily change on his desk. I understand that may be an extreme example but he sure did like his money. We all know we need money to get by for our basic needs and some additional cash to save for retirement, pay off debt, and have a drink or two but is it wise to chase money in the short run in order to have the lifestyle you want in the long-run?
This is usually the argument that most Financial Independent, Retire Early (FIRE) make as they try to make as much money as possible in a 10-15 year time span, invest as much as possible and then live life on their own terms. And by their own terms, this doesn't have to mean sitting on the beach all day, it could be choosing that lower paying job that you have in order to bring more happiness to your life or it could mean paying off your debt so you have more freedom to spend your money on things you enjoy or actually investing for your retirement. There really is no one right answer.
And I do think that there is a lot of truth in the above paragraph. Strategically trying to maximize your income, in the short-run, can have some substantial consequences long-term. Now I will put a huge astrick on this as you should NOT make it a ling term habit of trying to make and invest as much money as possible as you will never be happy regardless of what is going on in the rest of your life.
The point is to create a situation to free yourself from a certain thing. Maybe you pay off your debt or maybe you have enough saved and invested to move to a different job or go on an extra vacation per year. You are literally buying your freedom back from society in some way, shape, or form.
Let's show an example of how this actually can be played out. Let's say we have John. John graduated from college and got a job that pays $75,000 before taxes. He was able to get a great paying job out of college because he majored in Mechanical Engineering and Computer Science. 20% of his pay goes to our favorite person, Uncle Sam, thus, he is left with $60,000. We are also going to assume that he is ambitious and gets a 20% raise per year between year 2 and 5 of his career but he cools off and only gets a 5% raise from then on out. We will also assume that he saves and invests 50% of his paycheck and gets an average annual return on his investments of 8%. After the first 5 year period, he will be worth over a quarter of a million dollars! That is far more than many even have in retirement! And 20 years, he will be worth just under $3.2 million!
But what happens if we change the scenario a little bit? What if he starts with the same expenses and same starting salary but only gets a 2% raise? John ends up with around half of his net worth in the previous example with it now being about $1.587 million after 20 years.
But you know what, let's take it a bit more extreme! What if John only invests 10% of his income (which is usually what you hear to do)? John ends up with only a little over $315,000 after 20 year which just under 10% of the first example!
In the first scenario, you can essentially create the life you want to live once you hit the golden 4% safe withdrawal rate that most people strive for. Basically, once your investments are at the point where withdrawing 4% of your investments equals your expenses, after taxes, you can theoretically have enough money forever. And this ability will give YOU the freedom to live life on your terms!
This is a guest post by Retired By 35
Are you stuck in your daily 9-to-5 grind?
Would you like to escape the rat race, and regain control over your life?
Yep, I know exactly how it feels because I have been in the exact same situation as you 10 years ago when I graduated from university and started to work for a big consulting company. I worked and worked and worked, and the more I worked the more I was lost and the more I was feeling hopeless. The truth, however, was even more profound: I hated my job and I hated my life. Something had to change.
Looking back, I am happy I lost my job during the financial crisis because if I didn’t lose my job, I’d probably still be working and suffering silently in a job I couldn’t care less about. Since I, fortunately, dropped out of the rat race 10 years ago and never felt compelled to get back in, I feel uniquely qualified to tell you what the upside of choosing yourself is.
If you want to break out of your current cycle and look for alternatives to your 9-to-5 job, I encourage you to have a look at my article “10 Side Hustles For 2019: 10 Income Ideas You May Want To Explore” which discusses promising ideas that you can start executing on TODAY.
In addition, I would recommend you to head over to another article of mine titled “How To Retire From The Corporate Rat Race In 6 Months Or Less” which contains a step-by-step guide about what you need to do in order to drop out of the rat race in the next 6 months.
Dropping out of the rat race isn’t that hard at all, it is likely the uncertainty and radicalism of such a move that causes you second thoughts. However, choosing myself is the best decision I have ever made. The upside is enormous.
Here at 5 reasons why you should choose yourself.
The Ultimate Form Of Choosing Yourself: Start Your Own Business
I never understood how working for somebody else is the height of ambition.
The truth is, most people “choose to” work for somebody else because they like the (perceived) security that a job provides, they like a regular paycheck and a routine. If you are comfortable with uncertainty, however, I would recommend you to look into starting your own business.
You don’t have to give up your main gig right away, though: You can start a side hustle today and see how that works out. Being able to run your business remotely should be the end goal for you.
Go Wherever You Want To Go
If you have your own business, preferably online, you can travel wherever you want whenever you want. You don’t have to ask anyone for permission. You can’t put a price on this kind of freedom. Real freedom is being in charge of your life and in control of your time, not necessarily having a big bank account.
No Bosses And No Politics
I don’t know about you, but I hated having bosses. I didn’t necessarily hated my bosses, I hated having bosses. Bosses are always right (even though they are often not!), but you have to go along with their bullshit, swallow your pride and shut your mouth just to keep your job. If you are like me and can’t stop running your mouth, not having a boss and not being forced to play along with office politics is a major perk of being self-employed and/or running your own online business.
It’ll Help You Grow
Not a single day in my life did I regret dropping out of the rat race. Not. A. Single. One. When you drop out of the rat race you may face a lot of criticism from people around you, but believe me they are just trying to make you as miserable as they are. Choosing yourself is liberating and it stimulates your creative energy. You will grow both personally as well as professionally.
Tap Your Talents
People are way too often stuck in mindless 9-to-5 jobs that kill their creativity and spirituality. Nothing will make your more creative than not having to conform to somebody else’s time table. Work in a self-designed space of tranquility that gets your creative energy flowing. Like to work on the beach? In nature? In a cafe? When you choose yourself and start your own business, you are in charge of making those decisions.
While leaving the rat race 10 years ago was a bit scary at first, the benefits widely exceed the (perceived) downsides. I can choose where I work, when I work and how I work. There are no bosses anymore in my life that are bitching at me when I arrive in the office late in the morning because I was standing in traffic. No office politics. No bullshit. Just freedom and the deeply satisfying opportunity to shape my own destiny and build my business. I am in total control of my life and that is what makes dropping out of the rat race so awesome.
This is a guest post from Build Your Budgets.
Since I have implemented our family budget and have been diligent in paying off a few items from our overall plan, I have recently gotten creative on how to save even more money to help our bottom line.
It's kind of like a savings disease (but in a good way, LOL) once you start on this journey you just can't stop. It's a hard, but freeing, roller-coaster part of life.
After over six months of living by our strict budget and following our individual money plan, I noticed every week we would have some left over cash in our envelopes. Because I have a space designated for each and every dollar that comes through our accounts, it always comes from two (2) areas of our variable expenses (expenses that change/vary). For us, this is our GROCERY budget and our RESTAURANT budget.
Some may think that my budget for these two areas is already set pretty high. But, for our family, this works. I have a husband, a 21-year old daughter still living at home and a 15-year old son and two cats. Our GROCERY envelope is set for $175 a week. However, I do include a couple of extra items here including:
Some weeks, I only have a little bit left over. Other weeks I have saved up to $100 just from this envelope alone. NOTE: I do have a sinking fund for pets as well. This would be used to cover vet visits and things like flea treatments, etc.
Our RESTAURANT budget is middle of the road. I have allotted $100 a week for eating out. This amount may seem little to some people but seem like a whole lot more for others. Each person and family is different. I, personally, love to cook so this amount works well for us. (You can view my recipes and other Everything Meals by clicking HERE) I can admit, often by the time Thursday nights roll around I usually want to order pizza for the family and take the night off of cooking. My husband and I will also spend out of this envelope for date night once a weekend. On some weeks when I really need some extra cash, I spend a lot of time meal planning and stick to it - it SAVES. I have kept my entire envelope of cash from this category more than once or twice and it has helped our cash flow every single time.
After you have created and stuck to your budget for a while, you may see where you tend to spend and where you can save. Budgets are always changing! Life changes and every person who budgets needs to adjust the numbers from time to time to accommodate.
TRUTH: Some weeks I have not saved anything from these envelopes because we are human and we mess up! Some weeks I have saved over $100 and been able to add them to sinking funds for other purposes - like birthdays. A little bit of discipline goes a long way. I encourage you to set weekly goalsand stick to them. They can surely increase your bottom line and add dollars to your wallet!
Have you tried my cash envelopes? I can also help you prepare your Grocery List for FREE by clicking HERE.
Have you saved cash from your envelopes? What do you spend it on? Debt or Savings? Leave me a comment! Thanks for following.
This is a featured post by Budget Girl Kylie. Follow Instagram @budget_girl_kylie
Are you living paycheck to paycheck? Do you have little to no money in a savings account? Do you wonder how you will afford to retire? Are you overwhelmed with debt wondering how the heck you will get rid of it? You may need to start focusing on paying off your debt once and for all!
According to MarketWatch half of American families are living paycheck to paycheck. This means that 50% of the population is unprepared for an emergency. Nearly 1 in 5 Americans have no savings for an emergency, while 1 in 3 don’t even have at least $500 in savings.
There are many reasons to pay off your debt including:
If you are motivated to finally get out of debt but don’t know how to start, then read on! This article will explain various debt pay off methods so that you can decide what approach is right for you on your debt free journey.
What is the Debt Snowball Method
The debt snowball is one personal finance method used to help a person pay off all of their debt. The method has an individual write down all of the debts that they owe in order from the smallest amount owed to the largest amount owed.
Examples of debt a person may have are:
Keep in mind that each debt also has an interest rate attached to it.
The debt snowball method encourages a person to list their debts and pay them down according to the total owed and not take into consideration the interest rate.
With this method a person would make the minimum payments on each debt except for the first debt.
On the first debt, the person would make the minimum payment plus put any extra money that they had each month on top of the minimum payment.
In order to see if they have any extra money each month, the person would do a monthly budget and subtract their monthly expenses from their monthly income.
If you need more information on how to do a budget, please read this post on Budgeting for the Beginner. It explains in detail how to do a budget and also provides two free totally customizable budget worksheets.
Once they paid off the first debt, they would then take the minimum payment on the first payment and add it to the minimum payment of the next debt and also add any extra money they had as well.
Let’s say the person discovered they have an extra $150/month, they would then add that onto the $30 credit card payment for credit card 1. It would take them roughly 2.5 months to pay off credit card 1. Once they pay it off, they put $180 (the extra $150 plus the $30 minimum from card 1) onto the now $45 minimum payment and they would pay $225/month on card 2. It would then take them 3.5 months to pay off card 2. With this method it would take them about 6 months to pay off 2 credit cards (pretty cool!).
The great thing about the debt snowball method is that the individual can wipe away small debts quickly, free up extra money in their monthly budget, and potentially increase their credit score quickly as well.
The research shows:
Kellogg School of Management researchers found that consumers who pay off their small balances first are more likely to to pay off their overall debt. The researchers were able to analyze real life data from a debt settlement company. They had 6,000 participants overall. Their analysis showed that the individuals who paid off the smallest debts first were statistically more likely to completely pay off all of their debt.
If you are ready to start your debt free journey, take about 30 minutes to an hour to write out all of your debts so that you can come up with a focused plan. I have included a FREE Debt Snowball worksheet- click here.
Looking at it this way, a debt snowball sounds like a perfect way to get out of debt. The downside is that because the individual is ignoring the interest rate on each debt they could take longer to get out of debt and also pay more in the long-term. If you do the math, the debt snowball method is pretty consistent in costing more over the long-term.
What is the Debt Avalanche Method
The debt avalanche is a different method to achieve the same results of getting out of debt. This method has a person list out all of their debts, and just like the debt snowball, pay the minimum on all debt except for the debt on the top of the list. The difference with the debt avalanche method is that the debt avalanche method instructs a person to pay off the debt with the highest interest rate first and then list accordingly. You could also list the debt in order from the highest monthly paid interest.
Traditional Debt Avalanche Method
Secondary Debt Avalanche Method
If you look at the amount of interest you are paying a month, the student loan costs you more each month than all of the other loans combined just in interest.
The debt avalanche method is a great way to save money over a long period of time. A person really focuses in on their highest interest rate debt and knocks it down quickly so that their income goes further over the long-term.
This method can get discouraging if the first debt is thousands of dollars and will take years to pay down. A person can get complacent and not put 110% of their effort to pay down their debt quickly and aggressively.
What do the Experts Say
As you can see, there are a few ways to go about paying off your debt. Some people have a personal preference while others are devoted to their debt payoff method and believe it is the best and only way to pay off debt.
Dave Ramsey is well known for his belief that the debt snowball method is the only way to go. He believes simple is better, and small goals and wins are more motivating over the long run. His motto is personal finance is 80% behavior and 20% knowledge/education.
In his point of view, if a person pays off their debts quickly they are more likely to stay motivated, focused, and aggressively pay off all of their debt in a shorter amount of time. He wants an individual to focus on their behavior modification and not worry about saving money in interest.
He also believes that you don’t tackle the mortgage in the debt snowball method, that comes later in his 7 step plan. According to his 7 step plan you have to also save up $1,000before you can even start your debt payoff journey.
Well Suze Orman has complicated the debt payoff a little! Instead of debt snowball versus avalanche she recommends the debt payoff by type of debt. She recommends paying off in order: IRS debt, student loan debt, personal debt, mortgage debt, car loan debt, and then credit card debt. There is an article with detailed information on why she recommends the list in this order and you can access it by clicking here.
When it comes to credit cards it is clear that she recommends the debt avalanche approach and encourages people to pay the credit card with the highest interest rate first. She has a credit card calculator that you can use as a resource to see exactly how much you can save in interest.
What do I say
Okay now it is my turn to give my opinion! When it comes to paying off debt, I don’t believe one method is superior over the other. I think both have pros and cons and the best method to paying off debt is to use a combination approach. Each person’s financial situation is very unique and different. You have to look at all options and then tailor your approach to what will work best for you given your short-term and long-term goals.
Let’s say I’m the person in the example and I have a 600 credit score. Well I would probably focus on paying off the debts that will get my credit score up so that I can refinance my car and get a lower interest rate which would save me a lot of money in the long run. I would also negotiate with the credit card companies to get a lower interest rate. I would pay off the credit cards with the highest debt to credit ratio first because that would help my credit score increase quicker.
In the example we used above this is how I would pay down my debt so that I can increase my credit score and renegotiate my interest rates with my lenders. I would still tackle the smallest debt first to get it out of the way.
Now let's say renegotiating my rates isn’t an option because my credit score is already high or I have so many debts it would take a long time to increase my credit score. I would then probably lean towards the traditional debt snowball in this example because there are 3 debts that could be knocked out in a year.
If my combination method would be too complicated or overwhelming then I would recommend to do the debt snowball approach because you would be psychologically motivated to pay off your debt over a long period of time. You would have a lot of small wins over time which would make it easier to tackle those large debts as they come up, both financially and mentally.
Like I mentioned each person’s situation is completely unique so you might have to evaluate all of the options to see which would you feel the most comfortable with. You can always try out one method and then switch things up over time.
Here are 3 different Debt snowball calculators that you can use to get an idea of you personal debt snowball. Just plug in the numbers!
Debt snowball calculator 1
Debt snowball calculator 2
Debt snowball calculator 3
Conclusion- What Can Getting out of Debt Solve
Let’s face it, getting out of debt is hard work! We can accumulate a lot of debt easily in our society. Once we begin to realize how our debt is holding us back in life, we understand how important it is to pay off debt quickly.
Getting out of debt saves money (think interest payments over the years), it allows a person to save money in case of emergencies (job loss, death of partner, divorce), and it enables a person to build wealth (401k, investments, stocks, real estate).
If you are ready to start your debt free journey, take about 30 minutes to an hour to write out all of your debts so that you can come up with a focused plan. I have included a FREE Debt Snowball printable. This printable will help you organize and focus on your debt payoff journey so that you always stay on track and get that debt paid off quickly!
Guest post by Allie Barke from Allie’s Fashion Alley
I love wearing new clothes but I also love saving money. Balancing both is difficult but certainly not impossible. Admittedly, I used to put my love for fashion before my financial best interests. I used to spend hundreds of dollars every month on new outfits that I would only wear once so I understand the temptation. Especially as a fashion blogger, there’s pressure to always wear a new outfit. Here are my top tips for saving money without sacrificing style:
Don’t shop. Rent!
A few years ago, I became a Rent the Runway Unlimited member and I’ve never looked back. I pay a monthly fee to be able to rent as many new clothes as I want. I can wear something new almost everyday without the hassle of shopping. The price is still a bit of a splurge (now $159 a month, although I’m grandfathered in at $140) but it actually helps me save money. I like to think of it as more of a yearly cost. It eliminates my desire to shop so I rarely spend any extra money per month on impulse buys. I wrote a blog post all about my Rent the Runway experience that you can read here.
There are lots of other clothing rental services popping up that are lower cost. Express has one. I haven’t tried it but it could be worth looking into.
Sell stuff you don’t wear.
Since I started renting my clothes, I’ve slowly gotten rid of most of my wardrobe. I list higher value items on Poshmark. It can seem overwhelming to try to sell your clothes but start small by just listing a couple of items per week and you’ll see how easy it is.
I also send items to ThredUp. You make less money than selling yourself, but it’s super easy - they send you a bag, you mail it back (free shipping) then they give you money for what they can sell and donate the rest.
Only invest in classic pieces that will last a long time.
The only item I will really spend money on is jeans. I wear them weekly, they last virtually forever, and it’s important that they fit well. I have one nice winter coat - a must in Chicago. I rent the rest but if I need anything else, I buy it for cheap. I find that my shoes wear out quickly - especially in the summer. I’m hard on my sandals, flats, and heels so my favorite place to buy those is Target.
Take care of what you have.
Wash your clothes in cold water and hang dry everything. Heat and drying shortens the life of your clothing. Wash jeans inside out.
If you just have to have that Chanel bag or another luxury item, search a site like Poshmark first. You might be able to save significantly compared to the retail price. There’s no shame in buying pre-owned - it’s cheaper and better for the environment.
Don’t buy something just because there’s a sale.
If you buy a $200 dress on sale for $100, you didn’t save $100. You spent $100. Spending money is not saving money.
On that note, unsubscribe from all shopping/marketing emails. Just do it. Don’t go shopping if you don’t want to buy anything, even if you’re just tagging along with a friend. Just say no. If you don’t see it, you can’t buy it.
It’s hard to completely avoid spending money on fashion. You know I don’t. But I hope these tips will help you save more and spend more thoughtfully when you do.
For any of you followers who follow this blog, we do a series called the Grow Your Dough Challenge. The point isn't to show off flashy return or anything along those lines. The point is to show how you can start investing today with as little as $500 using Robinhood.
With the Robinhood portfolio, our goal is to select a variety of dividend paying stocks with $500. These stocks do not have to be Dividend Aristocrats but as long as they have some sort of dividend, that is all that matters! Also, please be advised as this is NOT financial advise and I recommend that you DO NOT buy any of the stocks below. Please do your own research or speak with an investment professional before investing your hard earned money.
The portfolio still consists of of the same 8 stocks within the portfolio. Switch has also been the stock that has grown the most as it has grown the most since January as it has grown nearly 50%. The stock that has grown the least since its purchase has been Target, which has actually gone negative ~2.5%. The fall of Target's stock has been due to the announcement of Amazon doing 1 day shipping for its current Prime member customers. The overall portfolio has risen by 14.28% since we have started which has beaten the S&P 500 within the same time period (up 13.18%). You can also find more information of the portfolio at the bottom of this post.
In the month of April, we had 2 of our 8 companies/ETFs distribute dividends. Oracle distributed a $0.24 per share dividend ($0.48 total) as well as State Street which distributed a $0.47 dividend.
The total amount of dividends that were received were $0.95. Of this money, it is all staying as cash as I, personally, do not want to dabble with penny stocks (only $7.15 in cash). This is one of the down falls of not having enough money to invest but you have to start somewhere. But you can help contribute a stock by utilizing our Robinhood referral.
There were 2 companies that announced earnings in the month of April: Switch and Waste Management.
Switch did see revenues increase when compared to the first quarter of 2018 as they had revenues of $107.03 million in the first quarter of this year versus $97.72 million in revenue from the first quarter of 2018. Though they did miss EPS expectations of $0.04 by 2 cents. In terms of pure profitability, they showed a profit of $700,000. One of the biggest business highlights is that they signed a 10 year agreement to be FedEx's data center in the western portion of the United States. The contract is to be worth $72 million. Not only did they sign a deal with FedEx, but they were also able to renew their deal with Box Inc. which is said to be worth $20 million.
Waste Management did beat analysts exceptions on revenue by $0.03 but did see revenues miss expectations by $4 million. This was most likely due to the fact that the recycling segment did see revenues decline by 6.7% though on the flip side, the transfer segment of the business did see revenues increase but nearly 10%.
The only notable news that came out of any of the companies that are owned is the acquisition of Advanced Disposal by Waste Management. The acquisition will cost Waste Management nearly $5 Billion and will likely go through towards the beginning of the year in 2020. This acquisition will be the largest acquisition in 9 years for Waste Management.
Financial freedom. Everyone from Uncle Dave Ramsey to the Financial Independence Retire, Early (FIRE) crowd have a slightly different definition. When it comes to talking about money in particular, a lot of people would generally define financial freedom by having to do whatever you want, whenever you want because you have the financial ability to do so.
By this definition, you can achieve financial freedom in 2 ways. A) make substantial money early on within your career so you can have the ability to take that lavished vacation or buy that lavished house or b) continuously save and invest in order to have the ability retire in your 60's. And don't get me wrong, there is nothing wrong with doing either one of these models as I encourage most to choose their own road to financial freedom. But I encourage most to look at it from a different perspective.
Early on within people's lives, most individuals are encouraged to go through college to get that good paying job that their parents, family, and/or pears expect them to. In the process, they acquire some student loans, which the average student walks way with just under $30,000 worth of. Once they graduate, they need to buy that car in order to get to their job. Even though, individuals tend to make right around $50,000 right out of college, they still manage to have a car payment of $530 per month for that new car or, if the individual is a little bit more financially savvy, he or she might get a used car with a payment of $381 per month. Then that college graduate might spend a few years trying to pay off that debt in order to acquire some more debt in terms of a mortgage in a house that is bigger than they can afford. Also, in what most of us call life, we have a kid or 2, which cost us about $233,000.. before they turn 18. Then, they go off to college and we reach our pre-retirement years (55-64), where we only have an average retirement savings of just over $100,000.
To most people, this may seem like a perfectly average life. But even by the definition above, you don't seem very financially free. And I can totally understand that life gets in the way of your financial goals sometimes but there are many things to consider doing that you do have control of when it comes to you money. Sure, you don't have 100% control of all of your health circumstances or when/where you were born. But you can control the size of the house you buy, the car you buy, or the college that you go to with the major that you choose or even more broadly the profession you choose (for the most part).
My point is, when it comes to money, with the things you can control, try to manage them as best you can so you can live the life you want. Straddling yourself with a lot of bad debt can put you back many years of achieving the things you want to achieve. Even if you have a net worth of $0, you are far ahead of the person that has $30,000 of student loans or $10,000 of credit card debt. By not acquiring this debt, you can then choose to be in a lower paying profession that you are happy in and are still able to pay the bills every day. Or if you want to choose a high paying career and aggressively save and invest early on to pursue that lower paying job or something else that you would live to pursue, not having that debt can propel you there substantially faster.
Financial freedom is about creating a life where you are in control of your money and it is not in control of you. You are living life in a job or profession that you want to do not because you have to. There is nothing wrong with chasing money in the short run in order to achieve financial independence but do not become addicted to the Benjamin's over the long-run.
When it comes to money, everyone wants to find little tips and tricks to build their wealth ever so slightly faster. And that is 100% a good problem to have as Americans are fairly notorious for being terrible savers. Thus, one way to hedge against that is to find ways to help grow your money ever so slightly faster. Essentially meaning you increase the velocity that it grows at.
And all you need to do is put it into Bitcoin and boom, you'll be rich!
Damn it! Why does Bitcoin or Bitconnect always come up in my articles!
But regardless of what you think of cryptocurrency, here at The Financial Library, we want you to have a higher net worth than the median American. As the median American, you only have $4,830 in you savings account and this is far lower than the average of $16,420. And we see a similar trend when it comes to individuals net worth as the median net worth is $97,300 and the average is $692,100. A few reason to why the discrepancy between the average and the median is so large could be for a variety of reasons that can include, but not limited to, a lot of people on the wealthier side of the spectrum having a large net worth, people investing into assets classes that could produce a higher rate of return and not putting that money into a savings account, and on a similar note, a smaller amount of people utilizing asset classes that have generated them a higher average rate of return, thus giving them a higher net worth.
But regardless of this mumbo jumbo, what can you do to help boost your net worth? Also, please note that is not financial advice! Please speak with a financial professional or do your own research before doing any of these things!
#1 See if Your Employer Has A Match for A 401(K)
If I told you that you could get a 100% return on your money, you would think that I am straight up lying to you but I am not. How an employer 401(k) match works is you put a certain percent of your income into your 401(k) and your employer will put a certain percent of that money into your 401(k) with you. So let's say you make $50,000 and your employer matches 100% up to the first 5% of your income that you put into your 401(k). If you put in 5% of your income, $2,500, into your 401(k), your employer will also put in $2,500. This is the easiest way to boost your savings rate with out putting in any more of your own money into the account. So if you are in a situation where you have kids or an expensive medical issue, this could be a great option to still save money for retirement but not put more than you would like to into the account.
#2 Utilize a High Interest Savings Account
The average savings account in the US is 0.09% which is practically 0%. But luckily, there are accounts called high interest savings accounts that do pay far more than that. For instance Marcus by Goldman pays 2.25% on your savings and what is even better about this is that there are no account minimums so you can start with even $100. Now, personally, I would only recommend putting your emergency fund into this account or money that you need for any short term savings goals. The reasoning behind this is because you may get a higher long-term return by putting your money into other options that are available to you such as stocks, real estate, bonds, your business, and even a certificate of deposit.
This is probably the most cliche option of them all but tracking you money is the easiest way to see if there is any waste within your budget. By tracking where your money goes every month, you can see any waste in your budget and cut that spending out. This "new found money" can be used to create an emergency fund or start a retirement account or a fund for saving for a house. The options are almost limitless to what you can do but as long as you do something that is going to increase your net worth, long-term, that is all that matters.
#4 Utilize the Resources at Your Local Library
Your local library has so much information available to you that YOU ARE ALREADY PAYING FOR! Whether it is a workshop or a seminar or reading a book, there are so many informational things that you can learn from. Once you take in this knowledge, use it at your job or at your business and it can help get you a raise or a larger commission. Then you can utilize this money to save and invest for any financial goals you may have.
Whether it is Dave Ramsey, Suze Orman, or your financial advisor, there are many financial experts out there that give great advise and a lot that give terrible advise. Usually many of them have to give them very general advise because they are in a position of authority and have a wide audience. Thus, it is usually hard to give specific advice to a specific situation and because of this, there can be cause for bad advice. It is not 100% their fault but there definitely is advice that can be changed or not taken. So what do I think is the worst financial advice from these so called "Experts"?
Please note that this is not financial advise for your specific situation. I would highly encourage you to do more research as this is somewhat skewed from the statements made in the previous paragraph.
#1 Save 10-15% of Your Income
You hear from many financial experts that you should save between 10-15%. And by saving, most people mean putting this money into some sort of investment or retirement account. I will say, if you want to be an average person, this actually is perfectly good advice. But I want you to be extraordinary and I want you to do more. If you want to retire early or travel more in retirement, you will have to bump up that savings rate. Try taking that up to 20% or 30% or try maxing out your 401(k) and/or your IRA. But if you want to be an overachiever, try joining the tribe of FIRE (Financial Independence, Retire Early) people who save and invest over 50% of their income.
#2 Renting Is Always Throwing Away Money
In some situations, renting may actually be more beneficial for your situation than buying a house. For instance, if you have a job where you need to travel or be more mobile, renting may be an option. Also, if you are simply not in the financial position to afford the maintenance, tax, down payment, and other costs associated with a house, renting is by far a superior option so you can better your financial position in the short to medium term to buy a house.
#3 You Need a Financial Advisor or Financial Planner
For 90%+ of people out there, having a financial advisor or a financial planner is not the best choice. Even if you have a financial planner that has your best interests in mind, they still have substantial fees that can cut into your long-term gains. These fees can range from asset under management fees (AUM fees) to the fees for selling any sort of mutual fund as these generally have what is called a load attached to them. And even if you are not financially savvy enough to pick your own investments, try looking into a robo-advisor or a target retirement fund where you can still get some degree of professional management on your investments but pay far less in fees.
Now for the 10% of less of the population that I do think should get a financial advisor, these people are generally people that come into a lot of money from a position where they did not have much money. Think of people that hit the jackpot and won $50 million or got an inheritance of $5 million. These are large sums of money that you did not previously have and most of these people would blow the money, so please speak with a financial professional if you are in a similar situation.
#4 Using a Traditional IRA or 401(k) When You Have a Low Income or Are In a Low Tax Bracket
We previously talked about the difference between a traditional and a roth IRA and the traditional and Roth 401(k), for the most part, work about the same as their IRA counterparts (there are a few differences but for a more in depth analysis for your situation, speak with a CPA). Generally speaking, when you make less, you pay less in taxes, thus by nature, it makes more sense to invest into a roth option as you get tax free growth. For most lower to middle income people, this is a great way to save for retirement long term because if if have, let's say $500,000 in a roth IRA and/or 401(k), you can pull that out without paying taxes where as you would have to pay some degree of taxes with the traditional counterpart.
#5 You Should NOT Use/Have Credit Cards
Traditionally something that is said by Uncle Dave Ramsey but I largely disagree with. If you are a responsible person, credit cards can be a great thing to utilize. With various credit cards that offer cash back or travel rewards, you can travel for a very low cost or get some extra cash every single month to help lower your monthly bills. There are also various sign up bonuses that you can take advantage of to further maximize these rewards. Now the key to this is not over spend, obviously. As previously stated, do not be irrisponsible by maxing out all of your credit cards and going into debt.
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The Financial Library Disclaimer: The Financial Library is not a provider of investment, tax, financial, or legal advice. The Financial Library does not force or recommend anyone the purchase of any particular securities listed on the exchanges, nor promise or guarantee any particular financial or investment results. Individuals must understand and acknowledge the risk involved in investing in securities. We encourage you to seek out licensed accountants, lawyers, and financial advisors to understand all the risks involved in investing as well as any tax or legal consequences. The Financial Library takes no responsibility and does not have any liability in your individual investment decisions or any results you may see due to those decisions.
The Financial Library Disclaimer: The Financial Library is not a provider of investment, tax, financial, or legal advice. The Financial Library does not force or recommend anyone the purchase of any particular securities listed on the exchanges, nor promise or guarantee any particular financial or investment results. Individuals must understand and acknowledge the risk involved in investing in securities. We encourage you to seek out licensed accountants, lawyers, and financial advisors to understand all the risks involved in investing as well as any tax or legal consequences. The Financial Library takes no responsibility and does not have any liability in your individual investment decisions or any results you may see due to those decisions.