investing

Forget “Get Rich Quick.” Grow Your Wealth PATIENTLY.

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Promises of getting rich quick are more rampant than ever these days and especially during rising markets. Any of us with a Facebook account probably see at least a dozen invitations a week to some sort of multi-level marketing company that will get you wealthy in no time (“from the comfort of your own cell phone!”). The implication with any sort of “get rich quick” promise or advertisement is that, with little effort or investment, you can become wealthy overnight.

 

Not so fast. That’s just not how it works!

 

In life, patience is a virtue. In building wealth, it’s an absolute necessity! It means starting early so time is on your side, investing as much as you can so you have more money working for you, and adopting a globally diversified, long-term strategy so you avoid the pitfalls of market timing. Most studies show that the average investor loses about 2 percent per year to lousy timing decisions, by buying high and selling low! That’s a wealth destroyer you’ll want to avoid.

 

Bear in mind that a key component in the investment process is TIME, and that’s why I tell people you can never be too young to start! Inexperienced investors often succumb to “get rich quick” schemes and hot stock tips. They buy at the top, after the big gains have already occurred and just before the stock plunges. However, just because a stock or a mutual fund had a great run last year doesn’t mean it will have a repeat performance again this year. In fact, often last year’s biggest winners become this year’s biggest losers because they became overpriced.

 

Here are some smart tips for investing wisely and growing your wealth patiently. If you’re entirely new to the concept of investing, the stock market, and growing your wealth, I’ll give you some straight forward facts so you can understand the basics:

 

  • Regularly invest in a diversified, long-term strategy rather than chase yesterday’s winners or engage in market timing. Begin by establishing an automatic monthly investment program as soon as you receive your first paycheck (even if you’re still in college if you can!). Many large mutual fund companies offer global balanced funds at relatively low fees and minimums. They can arrange for monthly investments from your bank account so it’s a user friendly process.
  • Resist taking more risk after strong market gains and taking less risk (panic selling) after major market losses. Remember, it’s “buy low, sell high” not the reverse! Understand that markets peak when the economy is great and they trough when the news is bleak. Don’t let your emotions get in the way of your wealth. Think and act long term.
  • Avoid overly concentrating your investments in a few stocks or market segments (e.g., technology). The market has a ruthless way of humbling the overconfident investor!
  • As a rule of thumb, no stock should represent more than 10-15 percent of your assets. That way, if things don’t pan out, you’ll still have the other 85-90 percent working for you. (Tip: Although it may seem tempting to go for what seems popular or successful at the time, that’s not always wisest.)
  • Remember to diversify across different asset classes (the three main asset classes are stocks, bonds, and cash equivalents, and others include real estate and commodities) to reduce your risk and beat inflation. Too many people put all (or none) of their assets in stocks and live to regret it during market downturns they can’t handle.

 

After taking the above tips into consideration, remember, above all, that patience is key. Very few “get rich quick” schemes—even if they work—are sustainable for the long term. Save and invest with your END GOALS in mind.

 

Do you see the value in building your wealth patiently? Have you had some experiences with this (investing or otherwise) you’d like to share?

 

How YOU Can Change the World

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Note: This post was writting by Noel Meador, Executive Director for Stronger Families in the greater Seattle area (www.strongerfamilies.org). 

“Before you criticize the younger generation,
remember who raised them.”
-Unknown Author

We live in a culture that sees more screen time than family dinner times, that talks more through text and Facebook than eye to eye, and that praises performance and “beauty” over the heart and soul of a person. We have some big problems on our hands.

But take heart: tonight you will have the opportunity to change the world.

You can invest in the stock market, have the best house and car, and know great success, but when you die, it will all die with you. All that hard work and dedication, good stewardship, understanding of investment will be gone.

Sure, you can pass on your monetary inheritance but, if it is to a generation that hasn’t been taught responsibility, it will be squandered.

If it is to a generation that hasn’t been taught the value of family and investment in others–a heritage will fade.

If it is to a generation that is self-focused and distracted–your generosity and kindness will end.

So, how can we ensure our heritage will live on?

If we want to invest in something that will live beyond our time and have the ability to change the world, let’s sit down at our table tonight and look at the faces of our children. Take time to talk, listen and teach.

They are it! They are the change we hope to see in the world! The future of this country and our families. I hope and pray I’m investing wisely.


Noel Meador is the Executive Director for Stronger Families in Bothell, Washington and the author and creator of the Oxygen for Your Relationships seminar. Noel has a passion to see families and relationships revitalized and strengthened. He resides in Woodinville, Washington with his wife Karissa and their two sons.

5 Tips for Getting SMART about Retirement

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When you envision retirement, you probably don’t see yourself depending entirely on Social Security as your main source of income. Unfortunately, many people do, and are alarmed at how little money they have to live on in their golden years. Consequently, many seniors are heading back to work for some “financial supplements,” which is also affecting job opportunities for younger people.

 

It’s time to get SMART about retirement—and here’s a catchy acronym to get you started. The five tips in this acronym will help you develop an investment program now that will give you the financial freedom for later on in life: Start early and Make room in your budget, knowing the growth of your wealth is a function of the Amount you invest, the Rate of return you earn, and the Time period over which you invest.

 

S—Start early

It is never too early to begin strategically planning for your financial future! If you only take away one thing from this blog, may it be this: beginning your investment program as soon as you start your career should be a top priority. By investing early in a long-term program, you’ll have the best chances of building substantial wealth for your retirement. You might be thinking, “Why now…I’m not retiring for 30 years!” The answer is simple—the power of compounding your returns over many years is enormous. Here’s an example:

           

If Brad invests $2,000 per year at a 7% return from age 18 to 27 and lets it grow at that rate until he’s 65, he’ll have a much larger nest egg than Madison, who waits until age 31 to start investing $2,000 each year until age 65. That’s right! Brad’s $20,000 produced greater wealth than Madison’s $70,000! So, start investing ASAP!

 

M—Make room

With money, come choices and tradeoffs. Each time we buy now, we lose the opportunity to buy something of even greater value in the future. It takes self discipline to resist the now for the sake of the future. There’s no getting around that making room in your monthly budget to invest is the only way to build assets for your future.

 

A-the AMOUNT you invest (more is merrier)

The more you invest, the greater (and sooner) your wealth will grow. Strive to invest at least 15% of your income for your retirement, and take this amount into account for your monthly budgets (while considering your employer’s plan). By doing so, you’ll significantly supplement your Social Security income. If you want a retirement lifestyle similar to your career years, you simply have no choice.

 

R-the RATE of your return (higher is happier)

It’s not as intimidating as it sounds. The higher the percentage rate of return after expenses, the greater the wealth you’ll build. Develop a well-diversified portfolio of stocks and bonds that fits your risk profile and beats inflation. The earlier you start, the greater risk you can afford to take and the more wealth you’ll accumulate.

 

T-the TIME period over which you invest (longer is better)

Remember, it’s a snowball effect. The longer the time period that you invest, the more wealth you will accrue. A $10,000 investment with a 7% return grows to over $76,000 in 30 years. That same investment is worth only about $20,000 in 10 years. Make sure time is on your side!

 

           

Being SMART about your retirement takes discipline, but the impact is astounding!

 

In what ways have you begun planning for your retirement? Have you followed these SMART steps? What challenges or obstacles have your run into? We welcome all of your questions, comments, and suggestions!

 

New! Financial Literacy Posters

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We have some exciting news to share! LifeSmart Publishing has partnered with the creative genius at Learning ZoneXpress to develop an innovative poster series: Secrets to Money Management.

 

This cleverly designed four-poster set shares financial wisdom from What I Wish I Knew at 18, equipping your students with these “real world” success principles:

·       Be a Skillful Earner (career choice and becoming a workplace MVP)

·       Be a Smart Spender and Disciplined Saver (allocating your money wisely)

·       Be a Trusted Borrower (living within your means and building positive net worth)

·       Be a Careful Planner (setting goals and investing early)

 

We think learning about money should be fun! So, adorn your business/personal finance/CTE/FCS/life skills classrooms with these witty and wise posters, and watch your students take these lessons to heart.  

 

Attractively priced at $49.95, the Secrets to Money Management poster set is just a click away!

  

 

Grow Your Wealth Patiently

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You’ve all seen the ads, “Get rich quick!” The implication is that, with little effort or investment, you can become wealthy overnight.
 
Not so fast.
 
In life, patience is a virtue. In building wealth, it’s an absolute necessity! It means starting early (so time is on your side), investing as much as you can (so you have more money working for you), and adopting a globally diversified, long-term strategy (so you avoid the pitfalls of market timing). Most studies show that the average investor loses about two percent (2%) per year to lousy timing decisions! That’s a wealth destroyer you’ll want to avoid.           
 
Bear in mind that a key component in this process is TIME. Inexperienced investors often succumb to get rich quick schemes and hot stock tips. They buy at the top, after the big gains have already occurred and just before the stock plunges. However, just because a stock or a mutual fund had a great run last year doesn’t mean it will have a repeat performance again this year. In fact, often last year’s biggest winners become this year’s biggest losers because they became overpriced.    
 
Here are some smart tips for investing wisely and growing your wealth patiently:
 

  • Regularly invest in a diversified, long-term strategy rather than chase yesterday’s winners or engage in market timing. Begin by establishing an automatic monthly investment program as soon as you receive your first paycheck.
  • Resist taking more risk after strong market gains and taking less risk (panic selling) after major market losses. Remember, it’s “buy low, sell high” not the reverse! Understand that markets peak when the economy is great and they trough when the news is bleak.
  • Avoid overly concentrating your investments in a few stocks or market segments (e.g., technology). The market has a ruthless way of humbling the overconfident investor!  
  • As a rule of thumb, no stock should represent more than 10-15% of your assets. That way, if things don’t pan out, you’ll still have the other 85-90% working for you.
  • Remember to diversify across different asset classes to reduce your risk and beat inflation. Too many people put all (or none) of their assets in stocks and live to regret it.

 
Do you see the value in building your wealth patiently rather than turning to get rich quick schemes or trading and chasing investments? Have you had some experiences with this you can share with our online community?  Questions you’d like to ask? We’d love to hear from you!
 

Develop (and Stick to) Your Financial Goals Part 2

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Last week we talked about the importance of setting (and sticking to) financial goals. One of the most common reasons many people DON’T is that they fail to take into account their need to save and invest each month. Why not? Poor planning. Lack of foresight and/or self-discipline. Ignorance. Overspending. To name just a few!
 
Goal-setting—and the discipline needed to accomplish those goals—is critically important in the area of finances. You’ll find that many of your goals involve substantial sums of money, and it takes planning to reach them. Among the most common financially-related goals are your: 1) education, 2) car, 3) down payment on your home, 4) children’s education, and 5) retirement. Some of these goals will come soon (short-term), some will be in the next five to10 years (intermediate-term), and some are much further down the road (long-term).
 
For each of these goals, you need to develop a financial plan that gets you there, and determine how much you’ll need to save and invest for each goal. This process  shouldn’t be intimidating. In fact, it’s actually pretty easy.      
 

  • Consider items requiring (your) major spending over the next one to five, five to 10, 20-30, and over 30 years.
  • Then, come up with an estimate of how much money you’ll need for each item.
  • Take the total for each item and divide it by the number of years you’ll need to save for it.
  • Finally, calculate the amount of savings you’ll need per year for each goal.

 
It adds up, doesn’t it? By doing this exercise beforehand, it will reinforce the importance of not spending all of your earnings on items you want now. Good planning requires the discipline of putting off spending now for the sake of important items you’ll need later.
 
When you look ahead over the next twenty years of your life, which things do you think you’ll need to save up for? How will you plan for them when there are so many things you may want to buy NOW? Share your experiences and questions with us by commenting below; we’d love to hear from you!

Live Within Your Means (& Generate POSITIVE Cash Flow!) – Pt. 2

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In last week’s blog we discussed how to live within your means and generate positive cash flow by conservatively estimating your INCOME. But that’s only half of the equation. You must also carefully manage and control what you spend.

 
When it comes to the EXPENSE side of the equation, your goal is to spend less than you earn on a regular basis. This is how you generate positive cash flow and have money available to invest. However, for many people, this is the most difficult part of managing their finances, for several reasons:

 

  1. They don’t keep track of it and develop a budget. Those small items can add up!
  2. They fail to consider seasonal expenditures (e.g., gifts, vacations, and property taxes).
  3. They have no idea how expensive children and pets are!
  4. They don’t appreciate how much more expensive it is to own a home than rent an apartment.
  5. They forget about finance charges on credit card balances.
  6. They live a more lavish lifestyle than they can afford:
    1. They’re lured into spending on impulse items.
    2. They purchase big-ticket items such as homes and cars that are far too expensive for their budget.
    3. They assume that if they purchase it on credit, they’ll figure out a way to pay for it later.
    4. They place too much value on possessions and expensive brands in order to impress others.
    5. They’re too impatient—wanting it now rather than saving up for it.

 
It’s essential to discipline yourself to spend less than you make (thereby generating positive cash flow) and regularly measure your progress. Remember that if your cash flow is negative, your options are to: 1) increase your income (not always possible!) and/or 2) reduce or postpone your expenses.
 
One of the best ways to generate positive cash flow is to set up an automatic savings plan where a set percentage of your income is placed in an investment program each month. It will force you to save and help you resist the temptation to overspend.
                                                                     
Do you monitor your spending versus your income to ensure you’re living within your means? This is true whether you’re a college student on a modest income or an executive earning seven figures. Share your comments and questions: we’d love to hear your experiences and ideas!

Live Within Your Means (& Generate POSITIVE Cash Flow!) – Pt. 1

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Money will never make you completely happy—but mismanaging it can be a life wrecker!
 
Money problems are among the top reasons for divorce, alcoholism, and suicide in our country. For these, and many other reasons, it’s critical to become a wise manager of your financial resources. You should consider this one of your greatest priorities and our nation’s educators should too.
 
Having a positive (and growing net worth) is essential for all of us, and the good news is it’s not rocket science. Simply put, it requires two things: 1) living within your means by spending less than you make and 2) building long-term wealth through a regular savings and investment program. This will set you up for success in both the short- and long-term.
 
In order to generate positive cash flow, you must spend less than you make. That means conservatively estimating your income and ensuring you have a “cushion” left over after all of your spending. Trouble sets in when you either overestimate your income or underestimate your spending.
 
Here’s where many run into trouble on the INCOME side:

  1. They forget that their take-home pay is roughly 60% of their gross salary (after taking into account deductions like federal and state income taxes and Social Security)
  2. They assume that a spike in their income is the new “normal” level of earnings and ratchet up their spending accordingly.
  3. They assume their strong investment returns in the recent past will persist.

 
It’s important to recognize whether your career provides a steady or volatile income. Generally speaking, the more your income is tied to sales (e.g., real estate agents) or project work (e.g., writers, architects, actors) the more it will fluctuate over time. This income pattern presents unique challenges in your financial planning because you can’t forecast the next few years based on the recent past.
 
Consequently, people often overestimate their future income when they just had a great year. Then, they increase their spending just when their income falls back to normal. Not good!
 
Don’t fall into this trap. Plan your income conservatively—it’s far better to be positively surprised than disappointed!
 
What are some ways you’ve learned to live within your means and generate a positive cash flow? Have you developed creative and effective ways of showing these principles to your own children or students? Share ideas and questions by commenting below; we’d love to hear from you!