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Wealth Hacks

The Guide Through Every Stage Of Life Using Investment Vehicles

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The moment you enter the workforce and start making money, you should already start thinking about where and how to maximize your investment vehicles. Whether you’re a freelancer, a full-time employee, or a business owner, making your first investment can bring you closer to your financial goals.

There are many investment vehicles to choose from, such as stock and bonds, real estate, VUL insurance, mutual funds, and many others. For a lot of people, creating an effective investment strategy can be overwhelming. Some want quick returns and forget that there’s a lifetime ahead of them to make their investments and other resources work for them, while others are content with having bank accounts that earn little to no profit.

But when it comes to investments, it’s not about which one you should put your money in – it’s about which investment vehicles are right for your individual financial situation and goals.

Before Investing: Factors to Consider

The key to becoming a smart investor is to match your resources, requirements, and priorities in relation to a particular period or stage in your life. This means your investment decisions will have to be based on several factors, including your monthly income, assets, expenses, financial goals, and risk appetite for investment, among others.

Since investing can take a considerable chunk of your finances, you need to check your cash flow. Do you have a regular office job or a flourishing business that gives you a stable source of income? With the income you’re getting, are you still left with surplus cash that you can use toward investing? It’s important to ask these questions as these allow you to set proper expectations about your financial responsibility as an investor.

It’s also advisable for you to take stock of your financial position for the short term. Ideally, you should have saved six months’ worth of salary to help you minimize the impact for when your ability to earn – and consequently, invest – is affected by economic factors or personal emergencies. It simply isn’t wise to go into investments when you’re struggling with your finances, especially when there’s no real guarantee that your return on investment (ROI) is going to be quick. The idea in investing is to part with money, which you can afford not to use or spend for months or years.

Your readiness to invest may also depend on how much you’re paying your billers to cover for your monthly expenses, such as housing, education, transportation, food or groceries, and the like. Aside from these, you have to factor in your lifestyle and personal expenses, too. If you’re spending more than what you’re earning, it’s a red flag indicating that you don’t have a healthy financial status and may not be ready to invest.

Here’s a sample of the recommended expense-to-income ratio for various types of expenses:

Housing: 20% to 25% of your income

Transportation: 15% to 25% of your income

Living Allowance: 20% to 25 of your income

Debt Payments: 5% to 10% of your income

Savings: 10% to 15% of your income

When it comes to your financial goals, you can tap on your investments to help you reach those objectives. If you’re a new parent, some of your high-priority goals may be to buy a house, establish your child’s educational fund, and make sure you have readily-available cash in your bank account.

In this case, you’d do well to put your assets in different investment vehicles. Doing so helps you manage the risks that come with investing, and as a result, gives you more chances of achieving your goals as the money you invested starts growing.

Speaking of risks, it’s another factor you need to consider when you decide to invest. Since almost all forms of investment come with a risk, you need to determine if you’re open to the prospect of having your investments depreciate at some point in time. This is known as your risk appetite. If you’re not too comfortable with the thought of incurring possible losses, then you’ll have to be conservative in investing. Consider investments with lesser risk.

Your timeframe for investment vehicles may also influence how much risk you’re willing to take. Generally speaking, your risk appetite decreases as you age. If you start building your investment portfolio while you’re in your 20s, you can have more time to recover any money you might lose than if you choose to invest when you’re already nearing retirement.

Which investment vehicles Should You Invest In?

Once you’ve assessed the various factors described above, the next step is choosing the right investment vehicle. This is one of the biggest dilemmas that investors tackle, especially if you’re barely getting started. You might find the decision process easier if you first line up your goals, and from there, make a comparison of what investment vehicles might be suitable for your timeline.

It’s likely that you’ll be coming up with short-, medium-, and long-term goals. Naturally, each of these will require investments that are aligned with yet a different set of factors, such as interest rates, liquidity period, and overall value for your hard-earned money.

For short-term goals, the most common types of investment may include fixed deposit, liquid funds, or short-term debt funds. Meanwhile, you may opt for balanced funds and equity-linked savings schemes for your medium-term goals. Obviously, your long-term goals will give you the widest range of options, from stocks and bonds to real estate.

Indeed, investing your hard-earned dollars is a major venture that requires a lot of homework, careful planning, making projections, weighing your options, and so on, to grow your money over time. In our featured infographic, we discuss more of the things you need to consider, so you can have a clearer perspective about investing at whatever life stage you may be.

Investment Guide Through Every Stage of Life

Investment Guide Through Every Stage of Life

Investment Guide Through Every Stage of Life

Investment Guide Through Every Stage of Life

Investment Guide Through Every Stage of Life

Investment Guide Through Every Stage of Life

Investment Guide Through Every Stage of Life

Personal Finance

The Main Benefits of Being Financially Independent

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Being financially independent means different things to different people.

To some, it means retiring and traveling the world, relaxing at home, or doing whatever you love.

For others, it means having the financial stability to have at your back, while you continue your career or business.

In general, financial independence is defined as when your passive income is higher than your living expenses. Here’s the issue though…

It can be a moving target.

You need different levels of income at different points in your life. Let me explain

How Much Money Do I Need?

If you are 18 years old and have no debts, are healthy, and can get by with little, the amount of income you actually need to get by is very low.

Eventually, you might get married, have a family, a dog, etc. So, the income you need to sustain this is a lot higher.

Then, the kids move out and you downsize. You need a lot less again.

Then you start to get older and you find your health failing you. Your costs will go up once again.

So, at a minimum, I’ve already outlined 4 different points in your life where your “financial independence number” will go up or down.

Regardless of the difficulty in calculating exactly how much you’ll need, there still are a lot of benefits to strive for financial independence. Let’s take a look at those.

Freedom of Choice

I already alluded to it a bit, but the biggest benefit to financial independence is freedom.

As soon as your passive income is higher than your wages, you’ll find that you don’t need that job. You can continue to work, but you don’t have to. So, all the stress is gone.

Same goes if you’re a business owner. You can continue to grow your business if you want, but you don’t need to.

You could opt to walk away from it and do something else entirely. It allows you could leave the high paying job and find a job that is more rewarding.

Whatever you choose to do, it’s because you’ve achieved Financial Independence.

You’ll Be Able to Make More Money

You can never unlock your true potential as long as you are a slave to your job or business. It’s hard to pursue other opportunities when you can’t afford to leave your job.

As an employee, you can earn money by working more, getting a raise, or getting better positions. But, you are actually very limited because most of your time is dedicated to the job.

And that brings us to the heart of financial independence – time. The most valuable commodity is time, and if your time is spent working for someone else, it isn’t spent finding new opportunities for growth.

By growing your passive income to the point where you don’t have to work anymore, you can unlock that time and harness all of your intelligence and creative power to pursue more valuable endeavors.

You’ll Actually Get to Retire

If you haven’t realized it yet, Social Security is going to go broke, pensions can disappear overnight, and even state or municipal government benefits can be slashed to pennies on the dollar.

While some people will be able to retire with these, we should not depend on them entirely. Doing so will make it far less likely that you’ll have the security you need or want in retirement.

But, retirement isn’t something many of us worry about until it’s far too late. We don’t save or prepare, then find ourselves unable to retire.

So many people work until they are no longer able to work and they are forced to retire. By then, they have no way to actually enjoy any of their ‘retirement.’

If you are financially independent at a young age, you are kind of already retired. Additionally, you can continue to work and just save everything to get to a point where you are truly prepared for retirement.

You might even be able to afford to retire early and enjoy your later years to their full potential.

Passive Income is Like Unemployment Insurance

Unemployment insurance covers only a portion of your lost wages. But, if your passive income is already at or above your wages, then it’s like a really good insurance policy.

The fact is that many industries are changing and advancing, which is leaving its older workers behind. Having financial independence means that you’ve got something to fall back on and can take your time to find new work without worrying.

You Can Plan

A lot of people never plan ahead. While they might plan their next vacation, wedding, or Black Friday shopping spree, most people aren’t planning for their finances next month let alone 20 years from now.

A lot of that comes from the belief that it’s impossible to get ahead, be successful, wealthy, and secure. Planning ahead would just be depressing.

But, if you work to attain financial independence, planning for the future becomes fun. Who doesn’t want to think about the future when the world is your oyster?

You’ll Be Less Stressed

Money is one of the leading causes of worry and stress in our society and in most households.

Having more passive income can help with your finances, allowing you to enjoy the company of your spouse and children. It can allow your family to actually enjoy each other rather than always being stressed over paying bills.

Why Aren’t You Chasing F.I.?

What is holding you back from pursuing financial independence? Comment below.

This article originally appeared on IdealREI.  Follow them on Facebook, Instagram and Twitter.

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Wealth Hacks

If You Don’t Do This, Your New Years Resolution Won’t Work

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We are entering a new decade. Say hello to the year 2020. Although we aren’t getting around by flying cars, we’ve made great advances in society.

Ten years ago who would’ve known our cellphones would be used as a TV, personal assistant, professional camera, and finding the love of your life? A lot of incredible things can happen in a short period of time and it doesn’t happen by accident.

You’ll probably be setting goals for yourself this year. Ask yourself this question and no, it’s not rhetorical. “How can I maximize my time this year?” Here’s a way you can answer this question. You can start by setting three to five major goals you hope to achieve.

In the video featured below, I’ll be helping you identify your goals for the year 2020. Usually, the new year is viewed as an opportunity to “start over” or start for the first time. Whether it be fitness goals, financial goals, or career goals. The principals and methods are the same.

What goals should you start with? Among all the goals you can list, you likely won’t be able to achieve them if you’re health is deteriorating. I believe the greatest focus should be on your health and wellness.

Once your health is being taken care of, you’ll have the energy and focus necessary to achieve every goal you set for yourself.

It’s been 20 years since the Y2K frenzy. People were taking things very serious when they thought the world was going to end. Work with that same urgency when you have unfinished business. Let’s go after these goals and resolutions with everything we’ve got for the year 2020.

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Wealth Hacks

Liquid Woes: Here’s Why You Should Never Sit On Too Much Cash

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According to a recent NerdWallet survey, Americans sit on an average $32,286 in cash. Yet, a whopping 39% say they aren’t investing.

And yes, while nest egg is great, being too liquid also comes with a lot of downside. According to NerdWallet’s calculations, every $10,000 kept in cash over 30 years (vs. investing) comes out to $44,000 in lost returns.

“They’re potentially losing tens of thousands of dollars in compound interest,” financial expert Chris Hogan told FOX Business’ “Morning’s with Maria.”

Here’s why you should never sit on too much cash.

Interest rates (and inflation)

Interest rates are at an all-time low. Back in the day, 5% was common. These days, the average savings account offers a pathetic 0.6% return

Needless to say, those kind of rates won’t beat inflation over time. In other words, your money literally loses value just by sitting in your savings account. 

Despite this, the average saver—somehow—thinks it’s better to sit on the cash.

Of the participants in the study, 32% responded that they prefer to be able to access their money easily, so they choose to not invest. Another 28% said they didn’t know how to invest.

How much you should save

So what’s the alternative? Instead of having a nest egg, keep three to six months of expenses “parked in a money market account, not a savings account,” he said.

A money market account is basically a savings account, but you need at least $10,000 minimum deposit.

You can also consider moving it to a mutual funds or ETFs trading on the stock exchange, since most of them allow you to withdraw your funds anytime—and they offer much better returns than a savings account.

All in all, any cash over this 2% inflation threshold can be invested across various asset classes, most of which offer great returns on your investment.

How to choose an investment

The trick here is to research and invest in the funds that fit your bill and investment horizon.

The takeaway from this move is the massive compounding growth your investments will gain over time.

One of the best examples of this is Grace Groner’s, a regular American who bought three shares of Abbott for $180 back in 1935.

Due to compounded interest, the value grew to a $7M fortune less than seven decades later. Now that’s what you call a #WealthHack.

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