Wealth Well Done: Podcast.

Interest rates are rising.  The financial landscape is changing.  It’s becoming easier to make money from our cash.  These changes in interest-rates have inspired me to update my emergency-fund strategy.  Here is my mission statement:   My goal is to transform my emergency-fund from a liability of $20,000 cash that is losing value to inflation every month, into an asset that makes me money each month.   After all, one of the greatest insights I’ve ever heard on how to build wealth was this quote by Robert Kiyosaki:    “It’s the compounding of assets, not just money, which creates true wealth.”   To summarize that point: To create true wealth, I need to collect as many assets as I can get my hands on.  My new goal is to invest part of my emergency fund so that it becomes a new cash-creating asset in my portfolio.  Below are the steps I am taking to invest my emergency fund to make more money in our post-recession, higher-interest rate world.   My Past Emergency Fund Strategy:   In order for me to explain how I’m going to improve my emergency-fund strategy, I need to tell you how I’ve managed my emergency fund in the past.  For the last four years, my local bank only offered a .01% APR (Annual Percentage Rate) on the cash I held in my savings account.  There wasn’t a lot of money to be made with that .01% interest rate, so I decided to hold 6-12 months of expenses in my local banks low-interest savings and checking accounts.   I decided my emergency fund should be $20,000 because that’s the number I felt safe and secure with.  Being self-employed means that I have more financial risk in my life than a normal W-2 employee.  I could lose a huge client, or my business could fail overnight due to forces outside of my control like a plummeting economy.  A year’s worth of expenses saved in the bank helped me feel confident that I could find new clients, or find a new job, if my sales dried up.   $20,000 was just a magic number that made me feel comfortable in my day-to-day financial life.  So for the last 5 years, keeping $20,000 in my savings account has been the norm for me.   This strategy worked well for me when interest rates were ultra-low.  If you do the math, .01% on $20,000 is only $2, so it’s not like I was missing out by keeping this money easily available in my local bank.  But now that interest rates are rising, banks are offering higher-interest payments if you store your money in their savings accounts.  I recently realized I can start making money off my emergency fund if I hold it in the right bank.  So I have decided it is time to update my emergency-fund strategy so that I can start making money on my cash, and turn my emergency fund into another asset in my portfolio.   How I’m Going to Invest my Emergency Fund:  The Research.   I started my research by searching for alternative banks that offered savings accounts that paid a better interest rate than the horrible .01% annual rate my local bank offered.  I was looking for a safe, stable, and convenient place I could put this money, which would still allow me to access it quickly in an emergency.  These were my top three favorite accounts I found:   Ally offered a savings account with a 2.0% APR. American Express offered a savings account with a 2.1% APR. Vanguard offered a money market account (VMMXX) with a 2.45% APR   As you can see, they all offered a great alternative to my .01% savings account.  So let’s look at the pros and cons of each one, and which one would be the best investment for me to store my emergency fund in.   Ally Savings Account:  Currently offering a 2.0% interest rates.   I first became familiar with Ally Savings Accounts, when I attended the financial-blogging conference, Fincon last year.  Ally threw an incredible outdoor party at a local bar with a BBQ buffet and a band.  It was an extremely fun and memorable event.  While there, I talked to a few big-time money bloggers there who used Ally for their high-interest checking and savings accounts and they were very happy with their product and service.  That memorable experience, and customer reviews, put Ally’s offerings in my top 3 finalist.  Their savings account was also FDIC insured.   Their only drawback for me was that they weren’t offering the best interest rate (see American Express and Vanguard below), and since I’m not already a customer of Ally’s, I’d have to open a new account with them, and I don’t want to spread my money all over the place if I don’t have to.   American Express Savings Account:  Currently offering a 2.1% interest rate.   I didn’t know American Express even offered savings accounts until I started searching for high-interest savings accounts.  I was surprised to see that American Express offered a FDIC insured savings account with an interest-rate that topped Ally’s by .10%.  The American Express savings account was attractive to me because I already have an American Express card, so it would be easy for me to expand my working relationship with them.   Finally, I dug into the account that paid the highest-interest rate:   Vanguard’s Money Market Account (VMMXX): Currently offering a 2.45% interest rate.    Vanguard’s Money Market Account (VMMXX) isn’t a savings account like the above two options.  It’s actually an extremely conservative mutual-fund that is traded under the symbol, VMMXX on the New York Stock Exchange.   But it’s different from “normal” mutual funds, because it maintains its value like money in a savings account does.  Unlike most mutual funds, Vanguard’s money market account (VMMXX) doesn’t decrease in value when the stock market decreases in value.  And it pays a 2.45% interest rate on the money that is held in there.   The down sides of Vanguard’s VMMXX is that you don’t have immediate access to the money you invest in this fund.  In order to retrieve your money in this fund, you’d have to sell your shares of VMMXX (which hold at a constant $1 per share no matter what the stock market does) and wait for a few days for that money to then be deposited into your bank account.   This investment fund was an attractive option in my new emergency-fund strategy, because it paid the highest interest rate among it’s competitors (2.45% monthly), and I already have an account with Vanguard.  However, another down-side to this fund was in the little disclaimer I found at the bottom of the fund’s description that read:   “You could lose money by investing in the fund (VMMXX). Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.”   Realizing that this money-market fund isn’t FDIC insured was a scary detail at first because my primary goal with my emergency-fund is to NEVER lose any money during a time of an emergency.   But after doing some research on it, I realized there are firm guidelines Vanguard has to honor to their clients who invest their cash into this fund.   (You can see the terms of this fund by clicking here.)   After reading this document in full, I saw that at worst, an investor in this fund can be charged a 2% fee, and up to 10 days to get their money out of this fund.  In an absolute worst case scenario, losing $200 and waiting 10 days to get my $10,000 in an emergency wasn’t that frightening to me, because I would almost NEVER need my cash within 10 days.  I have credit cards I can get by on, and even if I needed to get $10,000 out of this fund, I still plan to carry 2 months of emergency cash in my checking account to pay my monthly bills.   In the end, I realized this account would best solve my needs.  It would allow me to invest a large chunk of my emergency fund ($10,000) and it would pay me $294 annually (2.45%) to hold my money there.  This scenario fulfilled my desire to transform my emergency-fund from a liability that was losing money to inflation, into an asset that would start paying me a couple hundred bucks a year.  For these reasons, this fund became my #1 choice to invest a big chunk of my emergency fund into.   My Final Plan to Update my Emergency Fund Strategy:   Finally, after all that research, I had to stop being a student in a controlled classroom.  I had to become an active investor, take a leap of faith, make a decision, and invest some money in my emergency fund and learn what works the best by trial and error.  I finally decided that my updated emergency fund strategy will be a collection of these three accounts below.   The First Emergency Fund Vault:   The first vault that I will store my emergency-fund savings in will be my checking account at my local bank.  I will use this account to pay my monthly bills.  I plan on keeping 1-1.5 months worth of cash in there.   My checking account won’t have the benefit of making me any money, but it won’t lose me any money either.  It will allow me to easily access my cash easily as the bank is only a half mile from my house.   On average, I need about $4000 per month to pay my monthly bills which includes two mortgages.  Just to be safe, I’ll probably keep an extra half- month of cash in there to avoid overdraft fees or an expensive month.  So my emergency-fund going forward will have between $4,000 and $6,000 worth of cash in my checking account at my local bank.  We’ll try this, and adjust as necessary.   The Second Emergency Fund Vault:   The second vault that will hold my emergency-fund savings will be $10,000 worth of Vanguards VMMXX Money Market shares that will start paying me 2.45% interest on the cash I store there.  This portion of my Emergency Fund will now become an asset and start paying me $294 per year, or around $25 of passive income per month.   This backup $10,000 will help me sleep deeply at night because I know I have around $15,000 in cash laying around that won’t go down in value if the stock market drops or an emergency comes up.   The Third Emergency Fund Vault:   The third vault that will hold my emergency-fund savings will be my Vanguard brokerage account, which currently holds 100% of vanguard’s total stock market index fund, or VTSAX.   I currently have $11,000 stocked in there in case an emergency or an awesome can’t-miss investment opportunity pops up.  One of my investing goals in the next 2 years is to build this account up to have a value of $30,000-$50,000 worth of shares, which will act like a backup to emergency fund strategy.  Since I should never need this money immediately, I can afford to invest it into higher-performing stocks.  This investment will be higher-risk, but it will also provide me a potential higher return.  This is what investors call their F-U money.  Once I have $50,000+ stored away in these three emergency-funds, I’ll have a couple years worth of expenses stored up before I have to tap into my other vaults of cash which are my retirement accounts and real-estate equity.   Considering this blog is starting to profit me around $1 a day in April 2018, I am confident that I can build it up to making me at least $100 a day in 2 years.   So for me, I’ve started to see my emergency fund as having two purposes in my life.  One purpose is to act as a financial buffer between me and the harsh realities of life.  It’s second purpose is to act as a financial bridge to my next goal in life which is to turn this blog into a full-time lifestyle business, which I hope to do in the next 5 years.    In conclusion, in the next year, I hope my updated emergency-fund will look something like this pie-chart below:     Considering our monthly spending (without any major emergencies or entertainment splurges) is around $2,000 per month, my new updated emergency-fund strategy should provide me around 2+ years of financial cushion to figure out what to do next if a financial emergency does happen in my life.   I also like that the risk associated with each account will be structured in three tiers:  low, medium, high. The lowest-risk account (Checking) will be the money I keep closest to my daily needs.  The slightly-higher return account (Money Market) shouldn’t be needed until I run out of money in my checking account.  And the highest-risk/highest-return account (Total Stock Market Index) shouldn’t be needed until I run out of 6 months worth of money in my first two accounts.   Will this be enough money?  Am I right, or am I wrong?  I’m a DIY investor who learns by trial and error, so I am always looking for advice.  In the end, this is how I am going to update my emergency-fund strategy for 2018, and I’ll let you know how it goes.   What’s your strategy with your emergency fund? Please share your thoughts in the comment section below so that you can inspire someone reading this after you! (Anonymous comments are fine.)   STUFF WE LOVE: Personal Capital is a net-worth calculating tool that turns your finances into a puzzle that’s fun to solve.  It’s free and makes monitoring your money easy. Bluehost is how we started this blog.  Launch yourself onto the internet.  Your friends are out there.  It’s an easy to start your blog today.   Get posts to your inbox: Subscribe to our weekly newsletter and get VIP access to our hidden media page: Email * Comment Submit    

You must take risks to live an extraordinary, deeply-meaningful life.  I am a huge believer that taking the right smart risks can act like a turbo-booster to help you get what you want out of life.  But the risks have to be extremely smart risks.  Dumb risks turn into pain, frustration, and regret.  Smart risks turn into the awesome results that you fantasize living in your dreams.   So what are smart risks, and how can you tell the difference between a smart risk and a dumb risk?  I developed a system that helps me evaluate which risks that are smart to take.  Every time I am encountered with a new idea or opportunity, I go through this mental checklist to help me evaluate the associated risk. If the risk passes the checklist, I jump into the opportunity head first and try to turn it into gold.  If the opportunity fails my checklist, I avoid it like it’s a massive skull-eating monster that is trying to bite my head off and chew it a little bit.   HERE IS THE RISK CHECKLIST I USE TO EVALUATE STUPID, AND SMART, RISK: Question #1:  Is it Legal? Question #2:  Is it Ethical? Question #3:  Can I Afford it? Question #4: Will I get Hurt? Question #5:  Do I Want to Do it? Question #6:  Can I Achieve my Purpose in Life if I don’t do it?   Taking smart risks has been my biggest secret weapon to create everything good (wealth) that has happened to me in the last 5 years.  Smart risks are what led me to meet my wife; start my first business; manage my money on my own; buy an investment property; and start this blog.   To build a life you dream of living, first create a lifestyle that allows you to feel safe taking risks.  Second, improve your ability to determine which risks are smart for you to take, and then take them.  Now that I’ve explained why smart risks are an important ingredient to create wealth, let’s dive deeper into my risk checklist so I can show you how I target the right smart risks, and how I avoid stupid risks.   My Risk Checklist: Question #1:  Is the Risk Legal?   The first question I analyze when I am thinking about taking a new risk is: “Is this risk legal?”  I ask this question first, because I have learned that no matter how rich, powerful, or successful a risk can make me, going to jail because the risk is illegal is NEVER worth it for me!  If I realize right away that the risk I am pondering puts me in a dangerous situation on the wrong side of the law, I immediately turn it down.  Even if the risk seems like a golden opportunity where there’s virtually no chance I could get caught, I remind myself of the shame and embarrassment I would feel if I  was put in handcuffs because of it.  Ruining a reputation that takes a lifetime to establish is NEVER worth any payout, no matter how tempting or lucrative the risk may seem.   In conclusion:  If the risk is legal, it’s a potentially smart risk, and I go onto the next question.  If it’s illegal, it’s a stupid risk and I run like hell.   Question #2:  Is the Risk Ethicial?   The second question I ask when evaluating a new opportunity, is: “Does the risk fit within my ethical standards?”  I am 37-years-old, and I have learned that even though my time alive seems long, it goes fast.  I want to spend as little time as possible worrying about the choices I am making.  So each time I encounter a risky decision I’m intrigued to take, I compare it to my values and ethics, and I ask myself, “Do I feel comfortable with the ethical ramifications of my actions and decision?”   If I feel comfortable with the ethical decisions I’ll be forced to make regarding the risk, then I move onto the next step in my risk checklist.  If I don’t feel comfortable with the ethical decisions, I swiftly move on and search for the next opportunity.   In conclusion:  If I feel comfortable with the ethical decisions I’ll be forced to make, I deem it a potentially smart risk and go onto the next question.  If I feel uncomfortable with the ethical questions I encounter, I deem that life is too short to feel like a sub-standard human being, and I move on.   Question #3:  Can I Afford to Take the Risk?   Once I’ve determined that the risk is legal, and ethical, I start evaluating the financial impacts it may bring upon my life.  (If it is a risk that doesn’t have anything to do with my finances, such as:  Asking a girl out on a date when I was single (a romantic risk), or committing to run a marathon (a physical risk), I bypass this step altogether.)   But since I am a guy who loves personal finance, financial investments, and building wealth, a lot of the risks I evaluate have something to do with money.  When evaluating a financial risk, I always ask myself this question:  “Can I afford if the risk turns sour, and I lose all the money I put into it?”   Ultimately, I ask myself this very important question because even if I lose everything, I don’t want to hate the life I have to live.  Life is too short to hate any part of it.  So if I deem that the risk may destroy everything I’ve built up over the last decade, than I may deem it too expensive to take.  If I can’t afford losing, than I deem the risk is not worth taking.   However, if decide that I will only be uncomfortable, frustrated, and discouraged for a short time if the risk goes sour, than I could deem the risk worth taking because I am young enough to be able to learn and bounce back from it.  But I have made the decision that no risk is worth losing everything and making me feel like I hate the life I am living.   In conclusion:  If I can afford losing, than I deem the risk worth taking.  If I can’t afford losing, then I deem it a stupid risk and look for a smarter risk to take.     Question #4:  Will I Get Hurt?   If a risk involves physical pain, I often evaluate, how much pain am I risking?  I can handle a little pain, but I can’t afford a serious injury.  For example, before I do a roofing project on a house I own, I evaluate is saving a few hundred bucks worth it if I fall and have to pay a $6,000 insurance deductible?   Or if I am skiing in Colorado, and I see an awesome cliff line I would have loved to take in my younger years (and when my parents were paying for my health insurance), I evaluate if it’s a smart decision to make.   At my age, I am willing to sacrifice some comfort, for some pain, if it brings me the results I crave.  But I am no longer willing to risk a serious injury that could cost me tens-of-thousands-of-dollars in unnecessary medical expenses and weeks of loss of work.   In conclusion:  If it’s just pain and comfort I am sacrificing, I determine it could be a smart risk to take.  But if I am risking a potentially serious injury, or death, I deem it a stupid risk and look for a smarter risk to take.    Question #5:  Do I Want to Take the Risk?   When evaluating an alluring risk, I always ask myself: “Am I contemplating taking this risk because I really want to take it?  Or am I doing it because I feel peer pressure from others, such as my parents, my bosses, my family or my friends?”  To build real wealth, it is vitally important that you only take the risks you want to take, to get the results you want to live, and then repeat those risks hundreds and thousands of times until you master the risks that will create your dreams.  Taking smart risks can be extremely motivating because you will build self-confidence and independence as you learn about yourself, and learn how to master these risks to create your dream life.   However, on the flip side, there aren’t many more miserable feelings in life than feeling forced to take risks that other people want you to take.  Taking risks for other people can lead you into a nightmarish existence, because if they go sour, then you’re the one who has to pay the consequences, even though you weren’t the one who wanted to take the risk.  Before I take any risk, I ask myself:  “Do I want to do it?  Are the results important to me?  Am I willing to become an expert by learning through the uncomfortable process of trial and error?”  If I realize the risks are important to me, and I am willing to learn and grow by trying to turn a risk into a goldmine, then I take these risks.   In conclusion: a risk that you want to take, may be the beginning of a new life you want to live.  However, a risk that you don’t want to take, may lead you into a life you hate, and living a life you hate to appease other people is one of the biggest mistakes a human being can make.    Question #6:  Can I Reach my Purpose and Destiny if I Don’t Take the Risk?   Finally, I evaluate the risk, and the reward I hope to get out of it.  I compare the risk and reward to my own mental position regarding the risk.  I ask myself:  “Why do I feel like it is a risk?  Why am I hesitant to take it?  Am I hesitant because of fear?”  If I am only afraid of the risk because of fear, and it passes all of the above checklist, I ask myself this question to challenge myself:  “What goals in life can I achieve if I can will myself to the other side of this risk?”   If I feel my purpose or destiny is on the other side of the risk, then I know it’s just fear holding me back, and unsubstantiated fear is often the enemy of living an extraordinary life.  If all the other steps above make the risk look like a smart risk, then I can realize it’s only fear that is holding me back.  If it’s only fear that is separating me from my dream life, than I realize part of my purpose in life is to overcome my fear and take the risk.   I personally believe that achieving our purpose is the most valuable thing any of us can do in our life, and often our purpose is sitting on the other side of our fear.  Purpose is more valuable than money, because purpose can make you feel like you lived for something.  Money can only make you feel like you worked for something.  Enjoy taking risks.  Because once you find your trail of smart risks leading you toward your purpose in life, there isn’t a life that will make you feel wealthier than walking down that trail.   Years ago, I was told some great advice from a very smart and successful man that has stuck with me.  He said:  “The doors of opportunity are always opening and closing in life.  You don’t need to walk through every door of opportunity.  You just need to walk through the doors of opportunity (the right risks) that are right for you.  Find your doors, take your risks, and then find yourself along the way.”   Use this website to find your doors of opportunities.  Then have fun taking the smart risks that are right for you, so you can become who you’re supposed to be.   In conclusion:  Embrace the fact that risks are the opportunities that will lead you to who you’re supposed to become.  Seek risks. Find risks. And then once you encounter risks, learn to logically evaluate each risk.  Maximize the smart risks you choose to take, and avoid the stupid risks.  Save your money along the way, and you will quickly find yourself on your path to wealth.    STUFF WE LOVE: Personal Capital is a net-worth calculating tool that turns your finances into a puzzle that’s fun to solve.  It’s free and makes monitoring your money easy. Bluehost is how we started this blog.  Launch yourself onto the internet.  Your friends are out there.  It’s an easy to start your blog today.   Get posts to your inbox: Subscribe to our weekly newsletter and get VIP access to our hidden media page: Email * Comment Submit

Don’t be me this weekend.  Why?  Because my frugal, wealth-building ways almost became a victim of my own pride, ego, and arrogance. For a moment, I almost let irresponsible feelings of vanity get the best of me, and I wanted to, as Dave Ramsey so eloquently puts it: “Buy things I don’t need, with money I don’t have, to impress people I don’t like.”  This how it happened:   My parents were unable to attend Memorial Day weekend at our family cabin, so the responsibility of getting their boat to the lake fell on me.   To do this, my dad handed me his keys to his brand new truck on Friday, and his luxurious new truck became my car for the next few days.  I’d never driven a brand-new, expensive vehicle for an extended period of time before, so I didn’t know what I was getting into.  As I drove his truck around town, it’s shiny exterior, and computerized interior started to seep into my psyche.  I started to feel richer and more powerful than I really am because I was driving a car a few steps above my budget.  I felt people noticing me at gas stations and stop lights.  My prideful, egotistical awareness-of-self became even stronger when I got to the cabin and hooked his awesome boat to the back of the brand new truck and began to tow it down the road.  Now not only was I driving a brand new truck, but I was also towing a trailer with a boat on it that anyone would be envious to own on a hot and sunny summer weekend in Minnesota. The feeling intensified as I drove the boat to the boat launch early on Saturday morning.  I could almost feel other people at the launch watching me as I stepped out of the truck, and got it ready to launch it.  I knew I was embodying the image of money and power as people noticed me at the boat launch.  I was under 40 years old, relatively handsome (I’m not ugly ???? ), and I was at least presenting the image that I was rich enough to be driving a brand new truck with an awesome boat attached to it.   I felt the arrogance and vanity of someone who enjoys flaunting their wealth and money as I launched the boat.  I sized up all the other trucks and boats that were there, and beamed with pride that the rig I was driving was one of the newest, shiniest, and most expensive in the parking lot.  Since I’ve always driven cheap cars around, and lived more like a Millionaire Next Door pursuing stealth wealth, than a Debt Leverager always trying to finance tomorrow’s money to live a top-shelf life today, I had never really experienced the intoxicating feeling of looking so rich before.   Before falling victim to my own vanity this past weekend, I had never really understood why people go into debt to purchase things they can’t afford.  But this weekend, I experienced how powerful a human being can feel when they try to appear to be rich, even if they don’t own any the luxuries they’re showing off.  I suddenly understood how even a very smart person could find them in a dangerously, over-leveraged situation.  Sometimes, I realized, extreme debt-acquisition is more about fueling the prideful, egocentric feeling that you create by making yourself appear smarter, richer, and more powerful than you really are because of the expensive things you own.   I mean look at what happened to me this weekend:  I’m one of the most frugal, humble guys you could ever meet.  I’ve been able to build a $300K financial portfolio in five years even though my wife and I have lived on a relatively average income.   But suddenly, after only a couple of days of driving around a brand new truck and boat, I even caught myself getting sucked into the prideful feelings associated with being rich and powerful, and thinking, “Maybe I should get a truck like this for myself.“  And to be totally honest with you, I wasn’t thinking about getting one because I needed one.  I was wanting one, because I liked the way it made me feel.  I wanted to own a massively expensive liability because it made it easier for me to flaunt my wealth, and therefor made it easier for me to feel smarter, richer, and more successful than the other people I was around.   I am embarrassed to admit this, but it’s true.  That’s why the title of this post is:  “Don’t Be Me This Weekend.”  Thinking like this is not the way to build real wealth.  This mindset will lead to bankruptcy eventually.  Because at some point, anyone over-leveraged with debt, will encounter a financial market with a floor that will unexpectedly drop out from underneath them.  Once there is no longer enough money coming in to pay for all of these financed things, the over-leveraged person will lose everything.   I recently read a quote from the book, Sapiens, by Yuval Noah Harari.  In the book, the author wrote:  “One of history’s few iron laws is that luxuries tend to become necessities and to spawn new obligations (to acquire them.)  Once people get used to a certain luxury, they take it for granted.  Then they begin to count on it.  Finally they reach a point where they can’t live without it.”   After a weekend of driving around in a brand-new truck, I started slipping into the “luxury trap” perfectly described above.  I started to believe that I couldn’t live without a new truck of my own, and maybe, it was worth sacrificing some of my future wealth to acquire more of the prideful, egotistical feelings that made me feel good today.   But I am enough of a philosopher to use My #1 Skill of Successful Investors to look into the future and imagine if a brand new truck would really make me feel that much better in the long term.  I realized that even if I bought my own luxury vehicle, where would the addiction to the prideful feelings end?  Would I then crave a new McMansion to store my new car and boat in?  Would I then want designer sunglasses, and clothes, and brand new mountain bikes, and golf clubs to go with my house, car, and boat?  So that everywhere I went, I could feel the envy of people looking at me, and wanting to be me?  Even if they knew nothing about me, or how confused, empty, and lost I really felt about why I was buying all these things that I really didn’t need?   Once I was able to play these scenarios out in my head, I realized I didn’t need these luxury items in my life.  I suddenly had a lot of empathy for people who get caught in this luxury trap and create a prison of debt for themselves that seems impossible to escape.  I understood it, because I was that person this last weekend.  I had got a taste of the powerful drug that is vanity, and I just wanted a little bit more, and a little bit more, and who knows how deep that rabbit hole would have gone if I had chosen to follow it.   Luckily at the end of this weekend, I didn’t have the guilt, shame, or sickness of realizing I had taken out a big loan to buy things I don’t need, to impress people I don’t like.  I simply had to return the keys to my dad, and climb back into my inexpensive 2004 Toyota Camry with 210,000 miles on it.  I had to remind myself that I may not have a brand new truck, or boat, but I am planting the investment seeds that will one day lead me to wealth beyond my wildest dreams.   So in conclusion, if you want a life of financial freedom, and the ability to create the life in your dreams, NEVER, EVER, EVER think like I did this last weekend.  Buying expensive things won’t make you bigger, smarter, or more powerful than you already are.   Have you ever made purchases, or possessed luxury items that made you feel like this?  How did you break out of the cycle of feeling like you need them to be happy?   STUFF WE LOVE: Personal Capital is a net-worth calculating tool that turns your finances into a puzzle that’s fun to solve.  It’s free and makes monitoring your money easy. 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A friend shared some unique life and money advice as we talked this week.  Our conversation struck my mind as life-altering advice long after it was over.  He said, “A human being’s most important financial asset is the quality of their supply line.” I felt inspired to write a fiction story based on the wisdom he shared to illustrate this point. Here’s the story I wrote:   “The Most Important Thing I Learned in the Vietnam War.”   Jay watched as his father’s eyes drifted away from him. All morning he seemed to be bouncing between reality and the memories in his mind as they drove.  He whispered cryptic things to himself like: “Life is like war in a lot of ways. You’re either going to accomplish your mission, or you’re not. There’s not a lot of valuable middle ground in life.”   It was strange seeing his father act like this. He knew his father had served in the Vietnam war, but he never talked about it growing up.  Today was different.   When they got to the gun range where they were sighting in their rifles for the upcoming deer hunting season, Jay took his gun out of the truck and leaned it against the picnic table. It was his 20th birthday today. He wondered if this is why his father was acting strange.  He was now the same age as his father when he went to war.   His father walked up beside him with his own gun and sat down. “There are two things I learned in the Vietnam war that totally changed my life. I want you to learn them today, so you can live a successful life without living through a war to learn these things.”   His father exhaled.  “Do you smell that?” His asked.   Jay smelled the air. He smelled the faint scent of dead leaves in the dry autumn air.   “It’s fall.” His father said. “Summer is leaving. Change is the only thing you can count to happen to you in life.  There will be so much change you will encounter.  Smart people are always ready for change to come. Be ready for change.  Embrace it.  Prepare for it the best you can. Trust me, there will be events that will surprise you, and spook you. Things will change shape on you, even if you’re certain of them. The most successful people in the world are those who know how to adapt to change. Those are the people that did the best dealing with life in, and after, the war.”   The afternoon sun was getting hot. Jay pulled his rifle out of the case. He took his sweatshirt off. A warm breeze blew through the valley. The leaves were changing into the red, brown, and yellow colors of fall.   His father looked off at the target in the distance.  “Now I want to tell you the second most important lesson I learned in the Vietnam war.”   His father opened his gun case, and pulled out his rifle.  He set it against his chin, and hugged it into his shoulder.  He pointed the gun barrel at the target 100 yards away. “Have you ever heard of the Ho Chi Mihn Trail?”   Jay shook his head. “No. Never heard of it.”   “The Ho Chi Mihn Trail was the supply line that the North Vietnamese used to sneak supplies through the jungle into South Vietnam to fight the war.  The Ho Chi Mihn trail taught me that every human being needs a supply line to stay alive.  If you cut off a human being from their supply line, they’ll naturally die because they’ll run out of food, water, and medicine. But if you allow humans to have an endless line of incoming supplies, human beings can fight to infinity.”   “The only reason the tiny, poor country of Vietnam was able to win a war against a giant, rich nation like America was because we were never able to completely shut their supply line. I’ve always remembered that lesson.  I want to pass that bit of wisdom onto you.”   His father sighted his rifle and shot. The explosion from the gun echoed through the hills and trees around them.   His father continued: “The secret to being able to support yourself, even when life changes, is to always keep your supply lines of incoming resources open. All the great leaders, who fought all the wars in history, knew the same thing: An armies most important asset is their supply line of fresh resources.  Always think in creative ways to improve it. Grow it.  Never cut yourself off from it. The quality of your supply line will dictate how your life will go, and if you’ll win your own personal wars or not. That is the most important thing I learned in the Vietnam war.”   He set his gun down, and looked at his son. “Think about it. Did you ever not have food, water, and shelter growing up?”   Jay shook his head. “No.  I always had everything I needed.”   His father continued:  “That’s because I always had a job.  I made sure that I had a salary that acted as our supply line to bring fresh resources into our family.  I then started side-businesses to make secondary supply lines in case I lost my primary job. I didn’t retire until I trusted my retirement income streams. When your supply lines are dependable, you can do anything you want in life. But if you lose your supply lines, you will lose whatever mission you are fighting for.”   Jay looked at his father as he was deep in thought, and kept talking:  “I learned all of this during my time fighting in the Vietnam war. The Vietnamese never separated themselves from the Ho Chi Minh Trail that brought them fresh food, ammunition, and soldiers.  America would bomb it, and they’d rebuild it. We’d find it, and they’d move the trail.  The scariest thing for a leader in a war, is losing their supply line.  The same rules are true as you figure out life.”   His father continued:  “Once I returned home from war, and I re-adjusted to American life, I realized this philosophy of always keeping your supply lines open, works in a financial sense too. To succeed with money, focus on establishing quality supply lines.  First get a job to create your first supply line. Then work on creating new businesses for secondary supply lines.  But never, ever cut yourself off from an established supply line until you have a new one in place.  The supply lines you build are the energy sources that will keep you fighting toward your dreams no matter what challenges you face.  That is my advice to you.”   READ ON: MY BEST MONEY ADVICE   STUFF WE LOVE: Personal Capital is a net-worth calculating tool that turns your finances into a puzzle that’s fun to solve.  It’s free and makes monitoring your money easy. Bluehost is how we started this blog.  Launch yourself onto the internet.  Your friends are out there.  It’s an easy to start your blog today.   Get posts to your inbox: Subscribe to our weekly newsletter and get VIP access to our hidden media page: Email * Comment Submit    

My investment philosophy exploded like a string of firecrackers in my brain-cells recently as I was exploring the knowledge in my mind.  I realized my investment philosophy was full of thoughts I wanted to think about more.  As I dug deeper into these thoughts, I asked myself:  “What does my mental portfolio look like?”     As I explored the idea of what’s inside my “mental portfolio” I discovered that I prioritize philosophical ideas over financial ideas. 90% of my mental portfolio is based in philosophy, and only 10% in strategic financial concepts.  I found it fascinating that only 10% of my brain thinks about numbers, and yet, I have been able to succeed with money and build a powerful amount of wealth in a short period of time even though money is mostly a numbers game.   Personally, I don’t worship money.  It’s probably why I don’t think about numbers.  But I do worship philosophy. Learning and improving myself are the ideas I think about all the time.  The financial concepts I do understand are pretty basic, but I am learning that you only need to know the basics of mathematics to succeed with money.  This discovery led me to ask myself: “So if I’m not naturally great with numbers, how did I accomplish all my money goals because financial transactions are based on knowing your numbers?”   What I learned is that having the right philosophy in your brain (for me at least) is more important that being brilliant with financial calculations to build wealth.  I am writing this post to give hope to those people who love philosophy, but don’t believe they have the natural number skills to be good with money.  Just because you’re not a mathematical wizard, doesn’t mean you can’t use the skills you do have, such as philosophy, to become great with your finances.   Let’s do a deep dive into my mental portfolio, which I have illustrated into a creative pie-chart below.  This pie-chat shows how I categorize and structure the wisdom I retain in my brain: This chart shows you that you don’t need a ton of super-deep economic, mathematical, and financial knowledge to succeed with money.  If you’re using a lack of talent with numbers as an excuse as to why you can’t get ahead, I am here to tell you to stop telling these lies to yourself.  Believe that you can do it.  If becoming a math nerd that analyzes financial spreadsheets all day sounds fascinating to you, then more power to you and become that person.  Building wealth is the adventure to become whoever you want to be.   But if you’re like me, and don’t really care about mathematics or the numerical side of finance, I want this chart showing my mental portfolio to inspire you.  You don’t have to be a math-pro to succeed with your money.  You just need to know a few basic economic and mathematical concepts to guide you in the right direction.  This revelation is kind of freeing to me, because it shows me that you don’t have to become someone you’re not to master money.  You can be a philosophical person, and build just as much wealth, as someone who studied finance in college and crunches numbers all day.   Don’t believe me?  Look at the chart again.  As you can see, 90% of the thoughts in my brain are philosophically based.  They’re basic concepts on how to be a good human being, and how to live a fulfilling life, that anyone can learn.  Only 10% of the thoughts in my brain have roots into hard financial numbers.  If I can build a net-worth of $250,000 in only five years, with only 10% of my brain devoted to mastering financial numbers, then you can too, if you adapt the right philosophies into your life.   I believe self-awareness is one of my strengths, so I’ve learned how to use that strength to help me with my finances.  Personally, I am just naturally better at comprehending philosophical ideas, over mathematical ideas, so I focus my attention on finding the best philosophical ideas the world has to offer.  Then, I use these ideas to transform my life into the life I WANT to live.  Since I feel the most confident engaging in philosophical ideas (90% of my brain), I learned I really only needed 10% of my brain devoted to financial knowledge to become great at saving money, investing money, and ultimately building wealth.   Let’s dive into the different categories that make up my mental portfolio, so I can share examples of the philosophies that I consider my greatest assets:   The First 50% of My Mental Portfolio:  Philosophy on Being a Good Person. A surprising fact about me (considering that I run a financial blog) is that 50% of my brain is based around the philosophies that will help me become a good, productive, likable, and unique human being.  For example, here are a few examples to show you what my “good human being” philosophies look like:   Don’t do everything yourself.  You can’t.  Think about others.  Help others and they will help you.  Helping is the action that will lead you and others to wealth.   Don’t waste time.  One day your time alive will be over, and you’ll regret every memory you have of wasting time.   Failure is a necessary part of growing.  If you succeeded at everything you did, you’d never learn anything, and learning is the key to unlock the doors of wealth.  Failure is the greatest education.  Become educated through trying and failing, and then use that education to succeed and create wealth.   Real friends don’t expect you to be perfect.  Real friends are imperfect people who want to strive toward perfection with you.   Money doesn’t create your self-worth. The quality of a human’s ideas, and how they execute them, will create your sense of self-worth.   Don’t live the life other people want you to live.  The only voice that can tell you what to do is God’s.  Live the life your soul craves to live.   Look at the above ideas and philosophies: 50% of my mental portfolio has nothing to do with money!  But if you look into each of those philosophical examples, you’ll see that if executed correctly, these philosophies will naturally lead a person to opportunities to create wealth.   For example, when you help others, you are creating value that someone may pay you for eventually.  When you focus on maximizing time, rather than wasting it, you will naturally find yourself creating things and experiences with your time that have value to others.  You can then sell those things for money to build wealth.  When you’re not afraid of failing, you can take risks that may allow you to succeed on a massive scale.  When you make real friends, you will find yourself joining an army of motivated human beings who want to help each other succeed.  Wealth is often the result of friends helping each other succeed.   I truly believe it’s the art of philosophy, not mathematics, that leads human beings to wealth and fulfillment.  Philosophy is an energy source in the mind that can guide, motivate, and lead any human being to the life they dream about.  The right philosophies in your mind can help you overcome any obstacle in your way.  Financial and numerical knowledge are just tools that can help you create financial margin and execute the philosophies in your brain.   The second 40% of my brain is just more philosophy that I use to help make financial decisions.  For example, here is how a few basic philosophical concepts help me improve my finances: Whoever saves more money than they spend, will have more money than they need.   Be prepared for rainy days and long winters.  The sun won’t shine every day.   Investing is the act of building a money printing machine.   Some of the best things to experience in life don’t cost any money.   You’ll sleep better at night with an emergency fund.  You’ll sleep even better when you have so much money you no longer have to think about money.   Buy on credit and take out loans if you want to make other people rich with your money.  Avoid credit if you want to make yourself rich with your money.    A penny saved is a penny earned, and a million dollars is just a bunch of pennies that someone earned and saved over a long period of time.   It’s kind of a cool exercise to evaluate your own mental portfolio.  What are the thoughts inside your brain?  How are they structured?  What does your mental portfolio look like?  Your mental portfolio is extremely important to understand because everything you are, and everything that happens to you, begins with the thoughts in your mind.   The Third, and Final 10% of my mental portfolio is based in mathematical concepts that help me analyze economic and financial opportunities.  Below are some of the mathematical concepts that have helped me build wealth.  If you’re not naturally good with numbers like me, don’t worry.  You don’t have to be a numbers wizard to build wealth.  After all, numbers only make up 10% of my mental portfolio, and I’ve done just fine.  You can do the same. Compound interest, as Einstein once said, is the 7th wonder of the world.  Make sure to understand and incorporate this “wonder of the world” into your own financial life to win with money.  Here’s a riddle to show you how powerful compound interest can be:  Lilly pads on a pond double every day, and after 100 days, they will completely cover a pond.  How many days will it take to completely cover the pond with lily pads if it takes 99 days to cover the first half of the pond?  Answer:  It will only take one day to accomplish the same outcome that took the previous 99 days !  Always be thinking about ways to utilize compound interest with your finances.  This is how you double your money into massive sums over long periods of time without having to do any work yourself!   Money invested in the stock market has historically doubled every 9 years.  Realize $10,000 today has the potential to be MUCH more if it’s invested in a safe and diversified way. (Index funds!) $10,000, if invested, is really closer to $100,000 after it doubles for a few decades.  If you invest a $10,000-$20,0000 sums every year, and those sums just keep doubling every year, that’s probably a couple million dollars after a few decades!!!  A couple of million dollars in my bank account sounds way more exciting to me than a new car every few years.   Real-estate is great for portfolio diversification, and awesome cash-flow opportunities.  If you’re thinking about buying real-estate, make sure you’re getting those two things.  If you’re not getting those things, you could just be buying a huge headache for yourself.   If you’re able to save $1 for every $5 you make, then you can save $6 for every $10 you make.  To become wealthy, find ways to increase your income, NOT your spending.   Don’t make the mistake of raising your spending habits just because your income rises.  The only good reason to spend more money is if it’s going to make you happier, healthier, or teach you something.  Don’t just spend more because you have more.   7% returns on Investment are better than 0% returns.  But 20% returns are better than 7% returns.  Gleefully seek the biggest percentage of returns that you can find.   Let’s say two opportunities to have fun present themselves to you:  One costs $20, and the other costs $100.  Do the things that cost you $20 most of the time, and only do the $100 things on special occasions.  Save and invest the rest into your wealth-building fund to become financially free.   Debt interest is bad no matter what it is.  However, if you’re going to take on debt, then at least try to make money on the debt you’re taking on.  Here’s an example on how to make money on debt:  I have an investment property mortgage that makes me a 20% return per year, and I only paid 4.75% per year to borrow that money.  I get to keep that 15.25% profit using other people’s money.   $5 + $5 = $10 is a good and healthy equation.  Addition signs are awesome to see in personal finance!  It’s the subtracting numbers you have to be afraid of.  When you see subtraction signs (-) stealing money from your net-worth, find ways to get those subtraction signs out of your life so you can keep that money!  The more addition (+) signs the better!   In conclusion, as you can see above, it’s pretty simple to become wealthy.  It’s not rocket science.  You just have to have the right philosophies in your mental portfolio.  Load your mind up with the best philosophies, and then use a few basic numerical concepts to help you make the right financial decisions.  Finally, below is the mental portfolio that works for me:  90% philosophy, and only 10% numbers.   So what does your mental portfolio look like?   STUFF WE LOVE: Personal Capital is a net-worth calculating tool that turns your finances into a puzzle that’s fun to solve.  It’s free and makes monitoring your money easy. Bluehost is how we started this blog.  Launch yourself onto the internet.  Your friends are out there.  It’s an easy to start your blog today.   Get posts to your inbox: Subscribe to our weekly newsletter and get VIP access to our hidden media page: Email * Phone Submit

I went for a walk last night as the sun set.  It’s March in Minnesota.  The snow banks were melting, causing cold, icy, and slippery side-walks as I walked.  This is the season in Minnesota where spring and winter mix together.  Warm afternoon air mixes with the sub-zero nights, and an icy mess appears everywhere outside.   I dodged frozen puddles and snow banks that looked like frozen lizard sculptures around my feet.  Tonight I was thinking about my two favorite subjects:  money and life.  I was asking myself if I am using my time alive to become the human being I want to be.   I talk to God when I walk.  I simultaneously speak to myself.  I use outdoor walks to try to understand who I am.  Am I living the mission I am supposed to be living?  Or am I just working a job so I can mindlessly afford a nice middle-class lifestyle as I slowly inch toward my eventual death?  I ask myself these question as I walk:  Am I living my life the right way?  What is the right way to live?  I honestly don’t know what I am supposed to do with my life most of the time.  That’s why I go for so many walks.  I desperately try to listen to the voice in my soul, and then do that over and over again.  Here’s a good visual showing why I walk so much: As I walked last night, I thought about the financial decisions I make on a daily basis, and how they impact my overall life.  My thoughts floated around like butterflies in my mind.  I could almost see them land on bright, beautiful ideas that looked like blooming flowers inside my skull.   I decided to call the idea that blossomed inside my mind as I walked:  The Three Horsemen That Will Make You Rich or Poor.   I’ll list the three Horsemen below (Because they all start with the letter “H.”) These financial horsemen that you will encounter in life will either make you rich or poor, depending on how you interact with them.  The three horsemen are:  Houses, Hovercrafts, and Hobbies.   The First Horseman:  Hobbies.   Ask yourself right now; are your favorite hobbies making you rich or poor?  Are your hobbies expensive or cheap?  If your hobbies are expensive, it’s going to be extra-hard to save the cash you will need to buy investments and become wealthy.  However, if your hobbies are inexpensive, it will be a lot easier for you to become wealthy.  I believe cheap hobbies are one of the best gateways to building wealth.   For example, with just some gas money, I can spend an entire weekend exploring beautiful places outside.  We have another favorite hobby of inviting our best friends over to our house for dinner and a game night.  We buy food at the grocery store for around $10 or $15, and we have a great time hosting our best friends at our house.  Since our favorite hobbies cost so little, we’re able to save a spectacular percentage of our income without feeling like we’re missing anything.   Let’s compare this lifestyle one of my old favorite expensive hobbies:  Partying.  I remember back in the day, it was nothing for me to buy a $50 concert ticket, and spend my weekends blowing through cash on $20 parking fees, $20 dinners out, and $30+ drinks at the bar.  My money was flowing out of my pockets living this lifestyle.  My hobbies were eating up all my cash before it could even make it into investment accounts.   Looking back at the cost difference between my hobbies now and then, it’s no surprise why I felt broke in my 2o’s, and why I feel wealthy in my 30’s.  My current lifestyle allows me to take $20 and have a GREAT time!  My old lifestyle took $20 just to get out of my driveway!  It cost me a few hundred bucks before I could even feel like I was having a good time.   I am convinced that how much money you spend on your hobbies will be one of the biggest factors that determine if you will be rich or poor.  If your favorite hobbies are Shopping, Cable TV, Drinking in Bars, Eating out, Going to Concerts, being broke will be the reality you live because those hobbies will eat your money like little cash-eating monsters .  But if you can find hobbies that cost little, but lead you to the same amount of happiness, then you will create a great opportunity to become wealthy.   The Second Horsemen:  Hovercrafts.   While I was out on my walk in the winter snow, “vehicles” actually came to mind as the second Horseman.  But because I wanted to stick with the “H” symbolism in this story, I decided to call all vehicles: “Hovercrafts” because that’s really what they are.  You sit in vehicles, and they “hover” you to wherever you want to go.  These “Hovercrafts” come in all different shapes and sizes:  Airplanes, Motorcycles, Cars, and Boats, etc.  They’re all big, expensive, and require a lot of maintenance, and cash, to keep them running.   To increase your chances of becoming wealthy, learn this financial truth:  The amount and type of vehicles you own will be a significant factor to how much money you can save, and the amount of wealth you will be able to create.   Vehicles are notorious for breaking, needing updates, and sucking money out of your bank account for interest payments, upgrades, and general maintenance.  The vast majority of vehicles depreciate in value the minute you buy them, and drop in value until they’re eventually as worthless as a hunk of metal in a junk yard.  The government even gets in on the action, as the newer your cars are, the more the government can charge you for licenses and tabs just to drive them on the road.  It’s just a fact that the more expensive your car is, the more your cash will be diverted from your savings account, into your expenses account, and the less “dry powder” cash you will have to buy the right investments.   All vehicles suck money out of your wallet, rather than put money into your pocket.  Protect yourself from this financial Horseman, by making vehicle choices that are based on economics, durability, and that will do their job for the least amount of money.  If you can avoid buying a car altogether, good for you.  But I live in Minnesota, and the winters are just too harsh to be outside December-February, and our city landscape is too spread out to avoid owning a car.  So I personally buy Toyota Prius’s, Camry’s, or Rav 4’s, (depending on my needs) that will last 200,000+ miles.  Below is my current 2004 Toyota Camry with 206,000 miles on it.  Honestly, this car has been a huge reason why I’ve been able to build so much wealth so quickly.  I don’t have a car payment on it.  It just never breaks down or needs expensive repairs. The tabs are only $49 a year.  The money I save by driving an inexpensive car then gets funneled into the investments that help me build wealth.  You can read about My Five Favorite Investments to Become a Millionaire  by clicking here. The mathematics to beat this financial Horseman is pretty simple:  Own as few vehicles as possible.  Buy economically-smart ones for the vehicles you do need.   The Third Horsemen:  Homes.   Once your financial decisions surrounding your hobbies and hovercrafts become more efficient, where does the remaining portion of your monthly paychecks go?  Probably to housing costs.  Rent and mortgages are often the biggest monthly costs we have.   I’ve learned that the home you choose, will  either help you get rich, or help you become poor.  To build wealth, focus on buying, or renting, a home that isn’t too big, or too luxurious compared to your income.  If you choose a home that’s too big, or too luxurious, your savings rate will get slaughtered by your mortgage or rent payment.  If you pay too much in housing cost, you’ll never attain a savings margin big enough to help you build wealth.   The way to beat housing costs is to use this mind trick when you choose a house:  Avoid choosing a house based on what you can afford.  Instead, choose a house that fulfills your needs.  Buying a home that feels amazing and luxurious will lead you to feeling good at first, but ultimately lead you to being poor as a result.  Choosing a home based on your needs, will lead you to feel fulfilled.  The benefit of being frugal with your housing costs will allow you to funnel extra cash toward buying the investments that will help you build wealth.   Here is how I choose the right home:  I decide what I can afford, and then I buy, or rent, 1,2,or 3 steps below that.  The lower I can go below what I can afford, means the more margin I can create between my income and my housing costs.  The bigger my margin, the more I can save.  The more I can save and invest, means the more wealth I can build.  The more wealth I can build, means the more options I will create for my future.  The margin you create between your income and housing costs should become your “wealth-building” fund.  The size of this fund will determine how wealthy you will ultimately be.   And remember that this “Housing Horseman” comes in many different forms.  “Housing” also comes in the form of “House Repairs” and “Property Taxes.”   Remember, if you’re house is 4,000 square feet, it’s probably going to cost twice the maintenance, energy, and taxes as a 2,000 square foot house, minus the appliances. Be aware of that when you’re comparing square footage decisions and layouts.   In conclusion: being rich isn’t about buying expensive stuff.  It’s about having the freedom to do the things your soul craves without having to face financial consequences for doing it.  Save and Invest over and over again until you’re rich.  And then once you’re rich, have some fun with it.  Chase a dream you’ve always wanted to live.  Or support an honorable mission you’ve always be a part of.  Be smart with these three financial horsemen:  Hobbies, Homes, and Hovercrafts; Invest the rest of the cash you save, and you will naturally find your path to wealth. Addendum #1:  After publishing this article, I got this awesome email from an email subscriber who I think really nailed the point I was trying to make in the article:   I think the post really resonated with me because, as you pointed out, it just takes a little bit of intentional focus in these areas to either set you up for a trajectory or success (making smart decisions) or a slow bleed of all your incoming resources (by making poor decisions). It’s like these minor decision points – how do I want to spend my weekend, which house should I buy, what method of transportation do I want to utilize – have such a profound effect that just compounds over the course of our lives. If you can simply put some focus and make intentional decisions in these 3 areas – or even 1 of the 3 areas – that decision moves the needle every single day. It’s interesting stuff ????   Addendum #2:  And if you liked this article, our friend, Freedom is Groovy, expounded on the thought in his article:  “Tito, The Three Horseman, and Talking Trash.”  Here is an excerpt on how he improved my idea:   Bottom line: Billy has discovered a very intriguing calculation. If you can keep your three horsemen costs under 10% of your gross household income, you can save a crapload of money. In 2016, Mrs. Groovy and I saved 51% of our gross household income. For the longest time, the foremost mantra of the FI community has been to “mind the gap.” And that’s great. The larger the gap between income and spending, the more you have to save and invest. But perhaps a more effective mantra is this: mind the three horsemen. For if you become adept at minding the three horsemen, minding the gap will be darn near effortless. Haha! Thanks to Billy, the simple path to wealth got even simpler.   STUFF WE LOVE: Personal Capital is a net-worth calculating tool that turns your finances into a puzzle that’s fun to solve.  It’s free and makes monitoring your money easy. Bluehost is how we started this blog.  Launch yourself onto the internet.  Your friends are out there.  It’s an easy to start your blog today.   Get posts to your inbox: Subscribe to our weekly newsletter and get VIP access to our hidden media page: Email * Message Submit

Our best investment strategy was inspired by this below Paul Samuelson quote (a 1970 Nobel Prize winner in economics): “Investing should be dull. It shouldn’t be exciting. Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” I’ve been reflecting on the investment strategies that have worked for the best for us recently. I believe that if you can understand your past, you can best prepare for your future. Study what has worked, and not worked. The way to success is to simply repeat the actions that have worked for you, and dump the actions that haven’t worked.   I want to reflect on the steps that led me to being a successful investor in this post. When I get anxious in the present moment, I just remind myself to keep doing what has worked in the past. And what has worked in my past, honestly, has been as boring as watching paint dry or grass grow.   I first became an active investor 5 years ago. We first met with a financial adviser to get help, and through him, we made our first investment ($22,000) into four funds that he recommended. We maxed out our retirement accounts that year ($5,500 each) for the first time, and we had $11,000 leftover that we used to buy our first shares of taxable mutual funds. I spent the next year learning how to follow the performance of those shares, and I learned the general workings of the stock market. While learning, I became fascinated with the revelation that investing is actually the art of building your own money-printing machine.     I enjoyed learning how to be an active investor in that first year. I discovered there was a relationship between how much money we had in the bank, compared to how well I slept. I just slept better knowing I had money in the bank. So we did the logical thing, and saved and invested every chance we got. As I reflect on this period, I can now see that there weren’t any exciting or miraculous things that happened during this time. There were just thousands of small logical financial decisions that were made consistently over a 5-year period.   Just like the quote says in the beginning of this article, the investing strategy that worked for us wasn’t a thrilling experience like the feeling of winning a massive bet on a sports game. It was actually boring. Our best investing strategy was just making logical financial decisions over and over and over again. In this micro-view, our investing strategy was about as exciting as watching paint dry. But when you look at the results that were created in the macro-view, many exciting, life-changing financial events were taking place.   Here are three steps we took to get our lives and finances together.  This is the investment strategy that led us to our adventure to create wealth:   Our Best Investment Strategy, Step #1:   Our first step was when we chose to live frugal lifestyle, over a luxurious lifestyle, no matter how much money we made. My wife and I chose to see luxuries as an expense that we just didn’t need to be happy. We realized that our happiness didn’t change all that much if we were in a $3,000 car, compared to a $60,0000 car. We learned that we were  actually happier engaging in outdoor activities like biking and hiking that were free to enjoy, rather than paying hundreds of dollars to feel fat and lazy eating and drinking at bars and restaurants.  This decision to live cheaply, over expensive, was the first key we embraced to unlock our journey to wealth.   We stopped eating out. We stopped buying clothes. We shopped on Craigslist, Ebay, and sought diamonds in the rough at Goodwill.  We chose hobbies such as exercising in nature, which were free and open 24 hours a day, rather than paying for concerts and sporting events to be entertained at.  We filled up water bottles from fountains, and we brewed our own coffee, rather than paying a 1000% mark up for them at a store. We thought long and hard about the vacations we took, and searched for ways to tighten our budget every way we could.   I remember a conversation that my wife and I had that summed this period of our lives up: One morning we were hungry, and we stopped at McDonald’s for breakfast. The sausage Mcmuffin’s (without the egg) were .99 cents. The Egg Mcmuffins were $3+. I remember both of us looking at each other, and saying, “Today let’s go with the .99 cents option. And because we were smart with our resources today, one day we’ll be able to buy a real egg-mcmuffin (WITH THE EGG!!!!) guilt-free. But today is not that day.” Making the decision to save, rather than spend, over and over again, was the first step that unlocked the next steps, which led our money to start accumulating into snow drifts, from snow flakes, in our bank account.   Our Best Investment Strategy, Step #2:   The second step in our investment strategy was saving the down-payment for our first house so we could get married and move out of both of our parent’s house. But rather than buy an expensive house that was at the max-limit of what the mortgage lenders were offering us, we let our frugal mindset guide us to buy the right financially-smart house.   The mortgage company was willing to loan us $300,000 based on both of our incomes. But we made the decision to base our home purchase on ONLY my wife’s $30,000 annual income. Her income got us approved for a $165,000 loan with a 20% down payment, so we ONLY looked at houses that were listed for $165,000 or less.   This “smaller” loan, combined with the 20% down-payment,  helped us avoid a PMI payment, and allowed us to have a house payment of $900 a month (And since we received $1200 back at the end of each year due to a property tax refund), our house payment really was only $800 per month. $800 per month is pretty dang reasonable, considering a 2-bedroom, 1000 sq ft apartment in our area easily goes for $1,200 per month. And we got a 2,000 square foot house with 3 bedrooms and 2 bathrooms for $400 less than that. Even better, every month when I paid the mortgage, the loan balance dropped $200. And even better, we knew our first house could become a perfect rental property a few years down the road if we ever wanted to move. So we were helping ourselves in 2 ways buying our first home: We were collecting a future asset, while at the same time, solving our need for a nice place to live.   (Disclaimer: Just be aware when you own real-estate, not everything is going to go as rosey as the numbers make it seem when you first buy a home. Things are going to break. Appliances are going to fail. Storms are going to hit and damage stuff. These acts of God can become frustrating and very expensive, so be prepared for that. If these things cause you to cringe, then it’s Ok to bypass the entire real-estate owning experience. I know a lot of millionaire friends (Millennial Revolution, and Budgets are Sexy to name 2) who are happy and rich renting, or avoiding real-estate altogether, and live full time in an RV like Steve and Courtney at Think, Save, Retire do.)   I credit my DIY attitude for helping me overcome the frustrating sides of real-estate ownership. Which is: stuff is going to break, and not everything is going to go as planned.  But rather than calling an expensive professional every time something broke, I learned how to enjoy working on home projects, and did most of the home maintenance on my own. This DIY attitude has saved me tens-of-thousands of dollars on real-estate projects over the last few years. When something breaks, I don’t feel helpless or stress out. I just buy some tools, watch some youtube videos, put on old clothes, and get to work. This is the attitude you should definitely embrace if you’re going to win with real-estate.   Our Best Investment Strategy, Step #3   Finally, the third step of our investment strategy began once the two above steps (Frugality, and Low Living costs due to home ownership), (combined with 2-paid off cars, and no consumer debt), put us in the sweet position to save ALOT of money in a short period of time. With low expenses, we didn’t need to make massive incomes to become wealthy. (For example, my wife and I combined have never made more than $100,000 in a year.)   With low monthly payments to live our lifestyle, we were able to save around 50% of our income, which was around $20,000-$30,000 per year. We then used this “dry-powder cash” to buy more stocks and more cash-flowing real-estate when the right opportunities presented themselves.  (Cash, or other liquid assets, is often referred to as “dry power” in the investing world.  Having cash available is important in case an unexpected investment that you don’t want to miss suddenly appears for a limited time, or you find yourself in a financial emergency that cash can help you escape.)   These assets helped establish our first passive income streams, which is basically money we were making even when we weren’t working. But rather than spend this money, we chose to re-invest it to buy more assets. Having this money is invaluable to me. Because having this money, takes my money-stress away, which is ultimately my goal of saving all this money. Because even if I lose my job, I don’t have to be afraid of losing my life. And when you don’t have to stress about money, you can focus your stress on the things that really matter, like achieving the life God wants you to live.   This third step has really just been repeating the first two steps (frugality, and saving to buy investments) over and over over again the last five years. We sneak in the occasional ski trip, or mountain biking adventure on a budget as we go, just to make sure we’re living fun, fulfilling lives as we focus on saving and investing.   Here’s a list of my 5 Favorite Investments That Can Make You a Millionaire.    It’s still amazing to me that we’ve accomplished all of this in the last five years. In the micro-view, it didn’t look like anything was happening.  But in the macro-view, amazing things were taking place.  Over a period of years, one investment account turned into five, and the number of houses I own has grown to two.  I have to remember that investing done right is alot like “Watching paint dry,” when I start getting impatient and anxious.  Investing done right takes time.  I just need to continue the same logical, methodical approach I’ve taken the last five years, and I should be fine.   I’m not trying to become wealthy to buy expensive crap I don’t need. I also don’t want to quit my job, retire early, and do nothing with my life. I am self-employed and like the job I created for myself. My goal for financial independence is just to reduce the stress I have when I think about money. Once I have a million bucks in the bank, I will never have to stress about money again. My passive income streams will be large enough to keep me living a sweet life no matter what happens to me. Once my money stress is gone, I can focus on living the life I really want to live: I want to accomplish every goal that God — Not my boss — puts in my heart.   Ultimately, what I’ve learned over the last 5 years is: Great investing is the result of living a very boring, logical, methodical way of living life. It’s simple to be a great investor: Just live below your means; invest what you save; and re-invest what you make.  But being patient enough to pull this off is extremely difficult.  The funny, paradoxical thing about great investing is that even thought it’s one of the most boring ways to live life, it leads to one of the most exciting ways to live life.  Because once you can afford to do anything you want, you can begin to become whoever you want to become.   This is the best investing strategy I have found.  So what has worked for you?   STUFF WE LOVE: Personal Capital is a net-worth calculating tool that turns your finances into a puzzle that’s fun to solve.  It’s free and makes monitoring your money easy. Bluehost is how we started this blog.  Launch yourself onto the internet.  Your friends are out there.  It’s an easy to start your blog today.   Get posts to your inbox: Subscribe to our weekly newsletter and get VIP access to our hidden media page: Email * Comment Submit

A strange thing happened in our home this week. My wife stopped obsessively watching the Olympics. When I asked her why she stopped, a profound truth bubbled up from her heart. This is the story of what she said. It is an extremely important truth if you want to build wealth:   Over the weekend, I went downstairs and I immediately noticed the TV was off. Amanda, my wife, was sitting quietly on the couch. The fireplace was flickering in the background. This is strange, I thought. The 2018 winter Olympics are on, and my wife is a competitive junkie. She looks forward to the Olympics every year. That’s why it was strange seeing the TV turned off as I walked into our living room. It was prime time. The Olympics have been on in our house since they began last week.   “What’s wrong?” I asked my wife. “Why aren’t you watching the Olympics?”   She looked unhappy and frustrated, like she was trying to grab for control after briefly losing it. She looked up from her phone.   “I’ve decided to stop watching them. They’re not good for me.”   “What do you mean?” I asked.   She set her phone down. “I’m tired of watching other people achieve their dreams in life, and wishing I was them. That era of my life has to end, and it’s going to end tonight. It’s time I start prioritizing achieving my dreams as the most important game in my life.”   Amanda glanced back at her phone. I looked at what she was intently focusing on. Her phone was in her hands, the colorful screen glowed on her face. The light rays made her face look like she was a blue creature from the movie Avatar. She was drawing on her phone with an art app open. She was practicing her art. These were some of the images I watched her create as the colors from her phone flashed off the screen onto her face. I, (Billy B.) am the main writer on this blog, Wealth Well Done. But my wife, Amanda, is the main artist. She is the one who creates most of the artistic images you’ll see on this blog. She understands colors, designs, and artistic interpretation, like I understand words and stories. Writing comes natural to me. Art comes natural to her. She’s always dreamed of being an artist but she never thought she was good enough.   Her own self-doubt has always held her back from the things she wanted to do. It’s been a bad habit she’s been trying to overcome the last few years.  Recently, as she was watching the Olympics, she’s realized she’s spent too much of her life watching other people practice, train, and compete for their dreams, and not enough time mastering her own talents, gifts, and life. So when I heard that she was taking a break from obsessively watching the Olympics to focus on figuring her own life out, I felt excited. I selfishly want my wife to be the best she can be, so we can be at our best together. I wanted to know what inspired her to think like this? What made her have the revelation that her life was more important than the lives of people she was watching on TV?   I sat down next to her. I looked her in her eyes. “Tell me more. I’m excited to hear what you’re learning, because learning is the key to unlocking everything amazing and magical in life. ”   Amanda looked back at me, sadness in her eyes. But the sadness was motivating her, and not crippling her. “I’ve just hit my breaking point recently.” She said, “I’ve spent my whole life on the sidelines watching other people achieve their dreams. I’m starting to realize that being a spectator in life isn’t enough to fulfill me. I want to play in the game too. I want to win. I’m tired of sitting on the couch, and watching life pass me by, while I watch other people work to live amazing adventures. Watching champions compete is no longer good enough. I want to feel like a champion in my own life.”   She turned on the TV. We both watched the Olympic skiers compete on the screen, and she looked back at me. “Do you know what the difference is between them and me?”   I shrugged my shoulders as I watched. “What?”   “I used to think that they were simply more gifted and talented than me. But now I know that is a lie I chose to believe. The only difference between us and them is that they’ve spent their lives practicing their skills, and working at their dreams, while I’ve spent my life watching them. While they were training, practicing, failing, succeeding, and growing, I was sitting idle and wishing I was them. I’m realizing that those athletes may be more talented than me in some areas, but I am more talented than them in other areas. The only difference between us is that they have been doing something with their gifts, and I have not. I’ve spent too much of my life wishing I was someone else. It’s time I start embracing who I am and figuring out what I am supposed to do. That’s what champions do. That’s how you win a gold medal in your own life.”   I leaned back on the couch. The cushions felt like I was sitting with my thoughts. Amanda continued drawing on her phone. More images flowed out of her mind, and more bright colors appeared on the screen:   I listened to her and visualized the process of how human beings turn ideas into realities, and revelations into adventures that can change the course of their lives. In my mind, I saw the “journey to find your own personal gold medal.” It looked something like this:   First there is revelation. In this scenario, Amanda had a revelation that she wanted a bigger role in life than just being a spectator. She wanted to be a competitor in her own game of life. She realized she was going to have to create her adventure before she could live it.   Second, a plan formed in her mind. She stopped being a spectator by turning off the TV, so she could focus on finding the vision of who she wanted to become in her life.   Third, action had to be applied. Ideas will stay ideas until action is applied.  She applied action by practicing an art-form she cares deeply about.  Our talents and art-forms are often the vehicles that will take us to the places we need to go.  But we have to practice them, to be the best at them.   Fourth, she began to achieve.  Completing projects leads to a boost in self-esteem and confidence.  Confidence leads to bigger opportunities.   Fifth, reward is achieved.  Wealth (happiness, accomplishment, and monetary gain) is often the reward for doing your best.   “What caused you to think like this?” I asked.   “I’ve just been asking myself this question recently: Do I want to spend the rest of my life watching other people live their dream lives? Or do I want to live my dreams? Watching is no longer enough. Practicing, learning, and achieving is the next step I have to take.”   Her comment reminded me that there are two type of personalities in the world. We all get to decide which type our personality will be. There are those who spend their lives watching the adventures of others.  And there are those who create adventures so they can become champions in their own games.  Champions are the individuals who most often become wealthy.   I am convinced that building wealth is not just about saving, investing, and counting your money. It’s also about making a mindset shift and choosing to believe you can be a champion in your own life. Wealth is the outcome of seeing life as the greatest game, and becoming a champion of mind, body, and spirit within it. Your own personal gold medal is out there for you to find if you want it.   This is how one builds wealth:  Stop being a spectator.  Get in the game.  Become a champion in your life and in your adventure.   STUFF WE LOVE: Personal Capital is a net-worth calculating tool that turns your finances into a puzzle that’s fun to solve.  It’s free and makes monitoring your money easy. Bluehost is how we started this blog.  Launch yourself onto the internet.  Your friends are out there.  It’s an easy to start your blog today.   Get posts to your inbox: Subscribe to our weekly newsletter and get VIP access to our hidden media page: Email * Message Submit