Saving

Rags to riches

Write Your Rags to Riches Story Now!

Money Maroon

We have all heard a rags to riches story. It is now time to have your own story. While we all day dream of winning the lottery, or inheriting riches, most rags to riches stories are not a result of a quick transfer of wealth. The fact is, most rags to riches stories are a result of making difficult, wise and consistent financial decisions over time. 

The Money Game

No matter how much or how little money you may have today, to build sustained wealth, you must spend less than you earn. This is the only way that you will save. Saving is important because it allows you to build up an emergency fund, it allows you to become prepared for the unpredictable. An emergency fund makes financial emergencies routine life events.

Further, by saving, you are able to have money/funds/assets available such that you are able to take advantage of financial opportunities. 

For example, if the stock market falls, do you have enough money in reservers to ride out the downturn? Are you able to buy stocks at the bottom of the market? In such a situation (financial down turn), many do not have enough in reserves to ride out a market downturn and therefore sell at the bottom of the market and realize financial losses.

If home prices fall, are you able to take advantage by purchasing real estate? When interest rates are low, are you well positioned to borrow at the lower interest rates?

Saving, and having money/funds/assets to take advantage of financial opportunities is necessary to write your own rags to riches story.

Invest In Yourself And Journey From Rags To Riches

With your savings, not only are you prepared to take advantage of financial opportunities, you are also able to invest. You may invest in any vehicle that brings value, for example real estate, the stock market, and yourself. Saving alone will not allow you to complete your rags to riches story, you will need to invest such that your money/assets make money on their own. You will need to invest such that your money works for you instead of you working for money.

On a basic level, any investment that you make after doing your due diligence is an investment in yourself. However, making an active and purposeful decision to invest in your education is a must. Your investment may be in education to increase your knowledge in your field of study/profession or in financial literacy. 

As your money/assets grow, so must your financial knowledge.  If not, you risk regressing and losing what you have worked for. Do not forget, there are equally many riches to rags stories as there are rags to riches stories. You must purposefully manage your money/assets and understand how money works to maintain and grow your wealth. Your financial literacy is important.

The Element Of Luck In Your Rags To Riches Story

Luck is essential but hardly recognized
Luck is essential, but hardly recognized

Luck is essential, but one of the least recognized component of a rags to riches story. Let’s face it, many hate to admit that luck played a role in getting from rags to riches. Most want to attribute all their riches to their own hard work and dedication. This is false. Many toil their entire lives and remain in poverty. While hard work plays a role, luck and the people around you also contribute to your success.

Luck is a matter of being in the right place at the right time. Luck is the convergence of resources and opportunity. What you will notice as a constant theme throughout life is that the harder and smarter you work, the luckier you will be. The harder and smarter you work, the more opportunities will be open to you; the luckier you will be; the more you will find that you are in the right place at the most opportune time. 

Luck requires preparation. You must be ready when the opportunity presents itself, otherwise, your luck will turn into a life changing missed opportunity.

Write your own rags to riches story by playing the money game, investing in yourself and being ready to act when an opportunity presents itself.

Conclusion

We have all heard a rags to riches story. It is now time to have your own story. While we all day dream about winning the lottery, or inheriting riches, most rags to riches stories are not a result of a quick transfer of wealth. The fact is, most rags to riches stories are a result of making difficult, wise and consistent financial decisions over time. Journey to financial independence and write your own rags to riches story.

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Video Summary

Write your rags to riches story!
Money Beyond

Saving The Next $50,000, You Can Do It Now

Money Maroon

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating funds over time. Once you have accumulated your first $50,000, it is time to think about saving the next $50,000 and beyond.  The biggest step on your journey to financial independence is the step you take today. Take the next step.

The Plan – Saving The Next $50,000

Just like enacting any plan that requires a change in habits or direct action, implementation of your plan to financial independence can be difficult. If you choose to save by cutting back on eating out, this will no doubt affect your social life. If you decide to work a side hustle, this will take time from other activities. To journey to financial independence, you will make sacrifices. 

However, by the time you begin saving the next $50,000, you have already made changes and can now use the momentum that you have build up saving your first $50,000 and further optimize your strategy. Because of the habits formed saving your first $50,000, saving the next $50,000 will be easier to achieve.

Your Emergency Fund

By the time you are on the path to saving the next $50,000, based on your lifestyle, your emergency fund may now be fully funded or very close to being fully funded. This is a huge step and should provide comfort for you and your family. Saving 3 months, 6 months, or one year of expenses in your emergency fund is a huge step and you should feel very proud of yourself for achieving this milestone. Further, you should be motivated by the fact that you can do it. You can do this. The steps taken to financial independence is paying off.

You got this
You Got This!

Once you have achieved a fully funded emergency fund, do not stop saving. Continue the same habits. Do your homework, research and optimize your plan. Achieving financial independence takes time and consistency.

Once you have fund your emergency fund, instead of putting money into an emergency fund, you are now able to contribute that money to another area of your plan. Will you be contributing more to retirement, paying down debt if you still have debt, or invest?

Contributing To Retirement

Once you begin to save, you should attend to your retirement fund, especially if your employer is providing a match. No matter how little you may contribute, contribute to your retirement. 

Now that you are saving the next $50,000, begin to increase your retirement contributions, especially if you have already paid down debt. In the year 2020, your contribution limits for a 401k is $19,500 (catch-up contribution limit for employees aged 50 and over is $6,500). The contribution limits for an IRA is $6,000 ($7,000 if you’re age 50 or older). As such, you are able to put away $25,500 ($33,000 if you are aged 50 or older).

On the path to financial independence, by consistently contributing to tax advantaged retirement accounts, it is possible to join the 401k millionaire club.

Paying Down Debt

Once you begin to save, you will  also need to attend to debts. You will definitely want to keep your accounts current by paying at least the minimum. Once your emergency fund is fully funded, it will be time to pay more than your minimum. 

Remember, the best way to obtain a 16-18% return (the average interest charge on a credit card), is to pay off your credit card debt.

It is advisable to pay down debts having the highest interest rate. This will lower your interest payments as you pay down the debt. Another approach is to pay down the smallest debt first, such that you have a snow ball effect of paying the least balance to highest balance. The method used here is up to you. Which method will motivate you to pay down your debts faster?

Paying down debt in the early stages of your journey to financial independence typically provides the greatest early return. Paying down debt yields exponential benefits as it frees up funds for contributing to retirement and investment accounts such that you are able to take advantage of the power of compounding.

Ride The Wave – Saving The Next $50,000

As you are able to fund your emergency fund, pay off your debts, and contribute to your retirement, you will begin to have more funds available to further your race to financial independence. The funds that went to your emergency fund can be used to pay down debt, contribute to retirement fund, and/or invest.

Do not feel the need to “reward your self.” You do not want to fall into the trap of lifestyle creep/lifestyle inflation. You do not want to raise your standard to living as you earn more/have more disposable income. There are lots of folks who save the same amount when making $100,000 as they did when they were making $50,00. If you follow this path, this will be a detriment to your ultimate goal of financial independence. 

As your income/disposable income increases, the amount you save/invest should be increase as well. Live below your means, and journey to financial independence.

Conclusion

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating funds over time. Once you have accumulated your first $50,000, it is time to think about saving the next $50,000 and beyond.  The biggest step on your journey to financial independence is the step you take today. Take the next step.

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The first $50,000

Saving The First $50,000 Now

Money Maroon

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating your first dollar milestone over time. For many, saving the first $50,000 is at the top of the list. Of all the incremental $50,000 gains that  you will achieve, saving the first $50,000 is the most difficult. Saving the first $50,000 is the most difficult because it  includes taking the biggest step on your journey to financial independence — taking the first step.

Begin Now – Saving The First $50,000

If you are like most, once you decide to begin the journey to financial independence, you likely do not yet have an emergency fund or an active retirement account. If you do have such accounts, it is likely that they are underfunded. As such, the path to accumulating your first $50,000 will be the most difficult because it represents the beginning of a new journey. 

Accumulating your first $50,000 will require a change in mindset and the implementation of new and at times, foreign concepts. To take your net worth from zero or negative to $50,000 will take time and effort. Time and effort makes any task difficult.

Below is a basic review of the difficulties that will be faced.

Your Financial Situation

Begin saving the first $50,000 by taking stock of your financial situation. What is your revenue and expenses over a period of time, for example a month? Are you saving? Can you increase revenue and decrease expenses? What is your debt load and how will you reduce it?  

Based on the answer to these questions, devise a plan to journey to financial independence. Devising an appropriate plan that gives you a high likelihood of success will take time. The more time that goes into your planning, the higher the likelihood that you will succeed on your journey. 

After designing your plan, you will need to implement the plan over the long term to achieve your goals.

The Plan – Saving The First $50,000

Just like enacting any plan that requires a change in habits or direct action, implementation of your plan to financial independence can be difficult. If you choose to save by cutting back on eating out, this will no doubt affect your social life. If you decide to work a side hustle, this will take time from other activities. To journey to financial independence, you will make sacrifices.

Think of a diet and how difficult it is to stick to such a plan over time. At times, it may take multiple attempts before breaking through and having success. To achieve success, you must start.

Your Emergency Fund

Now that you have a plan, how will you begin to bulk up your emergency fund. To obtain additional funds to support your journey to financial independence, will you be increasing your revenue, reducing your expenses or both? 

Saving more is always more difficult than it sounds. This task is never straight forward. When contributing to your emergency fund, you will also need to consider your retirement fund and also paying down debt. 

First, how will you increase income (Revenue minus expenses)? Will you increase revenues, decrease expenses or both? Will you first build your emergency fund or will you do all three (fund your emergency fund, pay down debt and contribute to retirement) together? This decision is situationally dependent, but very important to consider. For example, if you are receiving a 401k match from your employer, there is no reason to loose this free money. As such, you should contribute to your retirement account at least to the amount matched. Further, to ensure that your credit is not destroyed, it is best to keep your debts current by paying at least the minimum.

With regard to your emergency fund, how many months of expenses will you keep in your emergency fund. Will you contribute 3 months, 6 months or a year or more? This is dependent on your situation. Do you have a family or are you single? For your emergency fund, it is important to place your money where it is easily accessible, however, you must also consider where you will be able to obtain a reasonable interest rate. In effect, stay away from brick and mortar banks if possible, as online banks provide high yield saving accounts that will provide, while low, a significantly higher interest rate as compared to brick and mortar banks.

Contributing To Retirement

As noted above, once you begin to save, you should attend to your retirement fund, especially if your employer is providing a match. No matter how little you may contribute, contribute to your retirement. 

Paying Down Debt

Once you begin to save, you will  also need to attend to debts. You will definitely want to keep your accounts current by paying at least the minimum. Once your emergency fund is fully funded, it will be time to pay more than your minimum. 

It is advisable to pay down debts having the highest interest rate. This will infact lower your interest payments as you pay down the debt. Another approach is to pay down the smallest debt first, such that you have a snow ball effect of, least balance to highest balance. 

Essentially, by beginning this journey, you are increasing your net worth by incrementally reducing your debts while increasing your assets.

As you can see, because you are not only accumulating funds, but you are also paying off debt, accumulating your first $50,000 will take some time. Even if we simplify and include all savings and investments (including retirement) apart of your first $50,000, saving the first $50,000 will take some time and be the most difficult. Nonetheless, by consistency implementing your financial plan over time, you will achieve your goal.

Congratulations – Saving The First $50,000

While the journey will be long, you will achieve your goal of $50,000. But keep in mind that this is only the begining of the journey. Because of the plans, strategy and patterns that you now have in place, of the series of $50,000 that you will save, this will be the most difficult. As you move to save $100,000, you will arrive at that point a lot faster.

Consider that less of your funds will go toward debt payments and debt interest payments, you will potentially have a higher revenue (raises as you become more experience), your investments will grow over time and you will be comfortable and more knowledgeable about money generally. This all adds up to a snow ball effect with regard to your financial growth and accumulation over time.

Conclusion

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating your first dollar milestone over time. For many, saving the first $50,000 is at the top of the list. Of all the incremental $50,000 gains that  you will achieve, the first is the most difficult. Saving the first $50,000 is the most difficult because it includes taking the biggest step on your journey to financial independence — taking the first step. Take your first step today.

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Accounting

You Do Not Need To Make A Budget

Money Maroon

When we hear the word “budget,” most immediately think of a rigid system of not only an itemized estimate of income and expenses, but also writing down and tracking each transaction as they are made. As you can imagine, implementation of these ideas could be very burdensome for many. The thought of itemization and keeping track of every expenditure contributes to why so many individuals do not take the first step to know their financial position. I am here to tell you that while having a detailed budget is recommended, it is not needed. Yes, you do not need to make a budget. Your first step to financial independence is getting a general understanding of your revenue and expenses.

What Is A Budget?

A budget is a financial plan for a defined period of time. Typically, a budget will include an itemized estimate of revenue and expenses over a period of time. For example a week, month, a year or a period of time in between in the future. The aim of any budget is to give a financial projection for a period of time in the future. It is a financial roadmap.

Following A Budget

The hard work of a budget is not only the act of sitting down and tediously making a detailed budget. The hard work of a budget comes following drafting and finalizing the budget. Hard work is the act of sticking with the budget. The hard work is tracking your spending, and ensuring that you are staying within the confines of your budget. Essentially, a budget is your guardrails and your aim is to stay within these guardrails.

The Problem

The issue that is commonly seen with budgets is the fact that many do not get started. If you are not getting started on making a budget, there is no hope of sticking to a budget. With regard to a rigid budget, many find itemizing over a period of time very cumbersome. Further, tracking spending becomes burdensome for many. Because most do not sit down and draft a budget, they do not get a true picture of their financial situation. They  remain clueless about their total revenue and expenditure. They are unable to reap the benefits of knowing what they are spending on and how to stop if necessary.

The Solution – You Do Not Need To Make A Budget

You do not need a formal rigid budget. Yes, you do not need to make a budget. Generally, what is needed is a general understanding of what you are taking in and what you are spending over a period of time. This is the first step. A deep itemized dive can come later.

Many who do not have a set salary have no idea how much money they are making per month. I am talking to those who are hourly workers, get tips, or commissions. Further, those with salaries may know what they make each year in total, but how much do you take home each pay period? Surprisingly, most do not know this total. If you do not know what you are taking home, how can you consistently save, invest and build wealth?

The Solution – Get A General Overview

Sit down and take 5 minutes to consider how much you are taking in each month. Look at one or two pay stubs and use a calculator if needed. Think of your average commission or tip per pay period. Only 5 minutes required. 

Once you have an idea of how much you are taking in on average, consider what you are spending.This will require another 5 minutes. Note your recurring expenses (mortgage/rent, car payment/maintenance, cable/internet, electricity) + what you spend each workday multiply by 20 (coffee, transportation, lunch) + weekend expenses multiply by 4. This will give you an average of your expenditure per month. That is it folks. This 10 minute calculation will give you a general understanding of what you are taking in and what you are spending monthly. Is your spending greater than your income? Do you have money left to save or invest? Can you pay yourself first?

Now, with these numbers, you are ahead of the game. It is clear on average what you spend and what you are bringing in each month. You now have the power to take control. You can decide to cut back on spending, earn more, decide if you need to sit down and make a formal detailed budget, or if you want to track spending to further optimize.  

By performing this exercise, you are able to obtain a high level view of your financial situation. From this vantage point, your next step may be to make a budget, to track your spending, and/or implement a financial plan. This exercise can serve as the basis for your next step.

The Benefit

At times, when we give general advice we introduce rigid concepts, for example, budgeting. It is important to know what to do, but it is more important to start doing. One of the first step on the journey to financial independence is getting a general overview of your financial health. A simple review of your income and spending will provide this general overview. From this jump-off point, you can take the next steps on your journey.

While You Do not Need To Make A Budget, Having One Can Be Beneficial

Budgets are great because they serve as a guide. Even if you go over, a budget gives you an idea of what you are over spending on. Budgets give you that answers to the question, why are you in debt? Further, a good budget also have the potentially to provide a roadmap out of debt. However, when you are beginning your journey to financial independence, you do not need a budget.

Conclusion

When we hear the word “budget,” most immediately think of a rigid system of not only an itemized estimate of income and expenses, but also writing down and tracking each transaction as they are made. As you can imagine, implementation of these ideas could be very burdensome for many. The thought of itemization and keeping track of every expenditure contributes to why so many individuals do not take the first steps of knowing their financial position. I am here to tell you that while having a detailed budget is recommended, it is not needed. Yes, you do not need to make a budget. Your first step to financial independence is getting a general understanding of your revenue and expenses.

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Video Summary

Growth

The Journey To Financial Independence Is A Marathon, Not A Sprint

Money Maroon

It is best to begin saving and investing as early as possible. The earlier you begin to save and invest, the more time you have to take advantage of compounding. It only makes sense, so while we can all appreciate this simple concept, why do we ignore our financial future until retirement? The journey to financial independence is a marathon, not a sprint. Begin the race today.

The reason we do not begin saving early is often because (1) we think we cannot begin saving because of lack of funds, (2) instant gratification or a combination of (1) and (2).

The Belief That You Do Not Have Enough To Save

Let us dispose of point 1. The thought that we cannot all begin to save “now” is often a fallacy. If you are without an income stream point (1) may be valid, however, this is usually not the case. No matter how little you earn, I can guarantee that if you look back over the past month, you have wasted more than $5. Whether it be on an event, food, dinks, or a random purchase that was not necessary. Saving can start small. Start small. Pay yourself first.

Instant Gratification

The issue we all tend to have with regard delaying saving, is one of instant gratification. Saving is boring, it is slow. If you are beginning at $0, growth will be incremental and slow. For example, if you are beginning the process of fully funding your emergency fund, then process can be a slow and painful process. Painful because to contribute to your emergency fund if you have not been doing so previously, you will now need to change your habits, make a sacrifice and deliberately save. If your aim is to save a year of income, let’s say $65,000, beginning to save will be painfully slow. 

For example, If you begin by saving $500 per month, in 3 months, it is only $1500 without interest. In your mind, you are so far away from your total that it is inevitable that you will become discouraged. In 5 months you will have only saved $2500 without interest, still over $60,000 to go. At this point you may begin to think, what is the point? You may begin to believe that the sacrifices that you are making is too great. This is the point where many quit saving and revert to their old ways.

If you quit your savings plan, what you and many others fail to realize is that the math is simple and true. If you are saving $500 a month, that is $6,000 a year, that is $60,000 in 10 years, that is $120,000 in 20 years. None of the above includes the added compounding interest or the prospect of you getting a raise as you progress in your career, or investing a portion of your savings.

Because the math is so simple, if we are able to find easy ways to take our minds off the slow process, we will be able to make progress.

Set It And Forget It

To keep our minds off the slow process of accumulating wealth at the initial stages, it may be best to set it and forget it. For example, automatically deposit a portion of your income into a savings account. As this is an automatic process, this means that you will at times forget the process. When you remember this process, you will be surprised by the amount that have accumulated. The gratification of seeing this progress working will  no doubt encourage you to continue the process. A feed forward cycle will emerge. 

Dream big
Keep your eyes on the future and your goals

Further, money begets more money. This may be in the form of investing a portion of your savings or the general power of compounding. Your greatest asset in wealth building is time. Keep your eyes on the future and your goals. Think long term.

Take the first step today and begin saving for your future. Set up an automatic deposit of $5. If you are able to contribute more, do so and increase your contribution over time. 

Conclusion

It is best to begin saving and investing as early as possible. The earlier you begin to save and invest, the more time you have to take advantage of compounding. It only makes sense, so while we can all appreciate this simple concept, why do we ignore our financial future until retirement? The journey to financial independence is a marathon, not a sprint. Begin the race today.

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Video Summary

Probability

Dramatically Increase Your Financial Success Now

Money Maroon

Probability and financial success intertwines. In a mathematical sense, life is a probability function. The probability of an outcome increases or decreases base on your actions. As such, when you see someone achieving success, it is important to understand that luck had little to nothing to do with it. It is all a probability function and that individual may have taken requisite action to increase their probability of achieving  that success. There is also a very low chance, but a chance nonetheless, that such an individual did absolutely nothing and achieved this success. 

This reality does not take away from the fact that others may have helped this individual to achieve his goals. Those who aided the individual played a role in increasing the individual’s probability of achieving their goals. In the same vain, the individual achieving the success may have taken action to be around those individuals who aided him in achieving the success achieved. Again, this could be summed up as taking action to increase the chances of success – putting yourself in position to take advantage of opportunities.

The Lottery

Let us look at the example of winning the lottery. We all have a chance of winning the lottery. There is a probability of winning even if we do not actively go out and purchase a lottery ticket. The probability is very low of course. But, you can theoretically win the lottery without buying a lottery ticket. Consider the fact that you may find a lottery ticket on the side of the street that happens to be the lucky numbers. You may also be gifted a winning ticket.

Note, the probability of any of the above two scenarios happening is very low. We must accept the fact that the odds that you will win the lottery without purchasing a lottery ticket is infinitesimally small, however, you still have a chance.

Now, suppose you buy 1 lottery ticket, the probability of you winning the lottery will now increase substantially. Your odds of winning will be 1 in 292,201,338. If you would like to increase these odds further, you can purchase a second ticket to now have an odds of 2 in 292,201,338.

The Financial Game

The financial game is the same. We are all born with a probability of having financial independence. If you born into a wealthy family, you may have a higher probability of this result than someone born in poverty.  However, there is a probability that those born wealthy may end in poverty and those born in poverty may end in wealth. Every action you take increases or decreases your probability of getting a result.

What Can You Do To Increase Your Probability?

To increase your probability of financial independence, I have a secret. Ready, it is the same boring list that you have heard before, live below your means, save, invest, and repeat. 

Your probability of living below your means is increased by having a higher salary, maximizing your time and spending less. How do you increase your probability of having a higher salary? You gain an education, you start a business, you invest. How do you spend less? You cut unnecessary expensive and limit debt.

The same two factors (living below your means and spending less) will also increase your probability of saving and investing. The more you save, the more you will have to invest. It is a feedforward cycle. This is also the reason the rich gets richer.

The second you begin to take action in this regard, your probability of financial independence increases. On the other hand, the opposite is true. Earning less and spending more will undoubtably decrease your odds of living below your means, saving and investing. These actions will undoubtably decrease your odds of financial independence and stability.

Action Plan

If you want to have a financially secured life, there are steps you can take to increase your probability of achieving that result. Live below your means, save, invest, and repeat. Take steps to increase your chance of financial independence. 

Conclusion

Probability and financial success intertwines. In a mathematical sense, life is a probability function. The probability of an outcome increases or decreases base on your actions. As such, when you see someone achieving success, it is important to understand that luck had little to nothing to do with it. It is all a probability function and that individual may have taken requisite action to increase their probability of achieving  that success. Journey to financial independence by taking simple steps that increases your probability of financial success.

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Opportunities

Take Advantage Of Financial Opportunities During Pandemics

Money Maroon

As someone much smarter than I once said, it is wise to be “Fearful when others are greedy and greedy when others are fearful.” Although the coronavirus has shutdown businesses and have caused mass unemployment, it is important to see and seek opportunities in this time of fear. Let us be clear, we are not down playing the coronavirus or future pandemics. However, it is important to remain level headed and keep your eyes on your goals. In this vain, I implore you to seek, find and take advantage of financial opportunities during pandemics.

Unthinkable And Unplanned

Opportunities may present themselves in the form of a new business opportunity, returning to school or investing in property. Whatever the opportunity is, the opportunity will most likely not appear at the most opportune time or planned. As the coronavirus spreads, different opportunities will present themselves, none of which were thinkable just three months ago. As these opportunities come into view, it will be up to you to take advantage of the opportunities.

Is It Time To Enter The Stock Market

In this coronavirus environment, the most obvious opportunity may be that of taking advantage of the stock market. As a reminder, to build wealth, it is important to live below your means, save and invest. Living below your means allow you to save. While saving is important, saving alone will likely not bring wealth. The power of your saved dollar will be eaten away by inflation.

In view of inflation, investing may be necessary to build wealth. Investing can take the form of investing in a property, yourself, a business or the stock market. 

With regard to investing in the stock market, this act is typically one of the last step taken by most. Due to the risk associated, investing happens to be the step that most are most hesitant to take. However, once most individuals begin to invest, the number one regret tends to be not starting earlier.

What We Can All Agree On

I could go into details about the market providing about a 10% return (not taking into account inflation). However, let us look at the numbers. The stock market hit a high of 29,551.42 on February 12, 2020, and have later dipped below 20,000. This is a drop of more than about 33%.

Will the market go lower? I don’t know, no one does. However, what we can all agree on is that it is highly likely that over time the market will rise from its current levels. This is the opportunity. Buy low, sell high.

Taking Advantage Of Opportunities Involves Risks

If you do decide to jump into the stock market, ensure that you understand the risks associated. All investments carry some degree of risk because nothing is 100% certain. 

Investing in stocks, bonds, exchange traded funds, mutual funds, and money market funds involve risk of loss.  Most importantly, loss of principal is possible. 

While nothing is certain, taking calculated risk can provide substantially return on investment. Further, by doing your due diligence, taking calculated risk can aid on your journey to financial independence. As such, seek, find and take advantage of financial opportunities during pandemics.

Conclusion

In this pandemic like all pandemics, fear is plentiful. As someone much smarter than I once said, it is wise to be “Fearful when others are greedy and greedy when others are fearful.” In this vain, I implore you to seek, find and take advantage of financial opportunities during pandemics. In 2020, the opportunity may just be the obvious, the stock market.

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Covid-19

Financially Survive A Pandemic

Money Maroon

As the Covid-19 pandemic expands, starting in the East and now devastating the West, governments are taking actions to limit and contain both the health and financial fallout. The effects of the Covid-19 pandemic are unimaginable. However, a pandemic should not change how you approach your financial future. These same principles apply during the coronavirus pandemic: live below your means, save and fund your emergency fund. By following these principles, you should be able to financially survive a pandemic.

Social Distancing

As countries and states practice social distancing, they are economically shutting down. As residences are forced to shelter in place, multiple parts of the economy shuts down. For example, the transportation industry (including airlines and taxies), the restaurant industry, and the hotel industry to name a few. As these industries shuts down, revenues are down while employees must be paid. In such a situation, unless there is some intervention, layoffs will follow. 

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Layoff Concerns

In the current environment, the prospects of layoffs should be on every employee’s mind. For these employees, next are the thoughts of providing for their families, servicing mortgages, student loans and other debts. These thoughts breed anxiety and stress. More concerning, anxiety and stress lowers the ability of the immune system to fight diseases. This in turn leaves individuals more susceptible to diseases.

But not everyone is having financial anxiety.

Financial Independence

Over the past ten years, many have tried and have achieved financial independence. Many have exited the daily grind of working for others and have become their own bosses. For many, even with the current fall of the stock market, their financial future is stable no matter the out come of the pandemic and the related financial effects. These individuals are truly financially independent. 

How did these individuals achieve this peace of mind? They followed these basic money principles: live below your means, save and fund your emergency fund.   If you have followed and are following these principles, congratulations, during this economic crisis you will be ok at least in the short term. Simply put, by following these principles, you should be able to financially survive a pandemic.

You Can Achieve Peace Of Mind

Whether you own your own business or you are a salaried employee, there is a possibility of financial hardship in the future. As such, it is prudent that we all plan ahead for a rainy day. Living below your means, saving and funding your emergency fund takes planning. But also, taking these steps means sacrificing and delaying gratification.

By living below your means, you are able to limit debts, for example, lower mortgage payments and lower car payments. By not keeping up with the Jones, you are better able to weather the financial storm when it comes. Living below your means further frees up money for you to save and fund your emergency fund. 

By saving and funding your emergency fund, you are able to have a greater runway to act during a financial crisis. In times of crisis, cash is king. By having a fully funded emergency fund of six to twelve months, any gaps in income can be made up at least temporarily. As such, you are able to maintain your standard of living while having time to search and potentially find a new job.

By planning ahead and putting away money, you are effectively buying time to maintain your family during retirement or a financial crisis. If you are not practicing these basic principles discussed, begin today. Saving $100 a month is $1,200 in a year, and $12,000 in ten years without added interest. If this amount is invested, your total following 10 years will likely be higher.

The Future

As the number of those infected by the coronavirus increases, pay particular attention to the programs available to financially help individuals and businesses. Federal student loan payments are being delayed for 60 days, while foreclosures, evictions and mortgage are being temporarily suspended. As these programs are outlined and implemented, plan ahead and take the steps necessary to keep your family secure and financially healthy.

Conclusion

As the Covid-19 pandemic expands, starting in the East and now devastating the West, governments are taking actions to limit and contain both the health and financial fallout. The effects of the Covid-19 pandemic are unimaginable. However, a pandemic should not change how you approach your financial future. These same principle apply during the coronavirus pandemic: live below your means, save and fund your emergency fund. By following these principles, you should be able to financially survive a pandemic.

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Money Mindset

Money Mindset

Money Maroon

Money & Human Nature

When we have painful decisions, it is only normal to delay. It is human nature. For you to journey to financial independence, you must change your money mindset. You must be aware of your default reaction and consciously make a change. Change how money decisions are made.

Think of your last painful or difficult decision. Whether it was a decision that would have resulted in conflict or one that would have caused you to make a sacrifice, it is only natural for you to delay. Our first reflexive action is to avoid making difficult decisions. This reflexive action typically results in employing a delay tactic where other decisions are made but not the ultimate decision. We make difficult decisions only when we must make the decision.

With money decisions, the same occurs. The science behind it all is undeniable. Let us use the example of shopping vs saving. 

Shopping

The neurotransmitter dopamine surges when you are considering buying something new. This dopamine surge is a result of purchasing the new item and the anticipation of getting that new item immediately. With online shopping, the dopamine surge is on another level. For online shoppers, there is the joy of making the purchase, the anticipation of getting the new item, the built up anticipation of receiving that item and receiving that item in the mail. Shoppers are therefore more excited when their online purchases arrive in the mail than when they buy things in store. As such, online shopping can be as exciting or more exciting as in store shopping.

As you can guess, the retail industry is acutely aware of this effect and take the necessary steps to exploit our biology.

Saving

When saving for a long term goal or financial independence, we do have some dopamine release related to attaining that financial target. However, saving falls into the category of delayed gratification. For delayed gratification,  dopamine signaling declines as the delay to the large reward increases. As such, the thought and planing related to having financial independence is gratifying. However, because of the long time period  between the thought of financial independence and having actual finical independence, we typically do not carry through on our plans. 

This is why we spend so easily but find it so difficult to save. We all know that we should save and invest for the future, but very few do.

Saving for the long term is counter to our biology.

Remedy

Change Your Money Mindset

In view of our natural reaction to delayed gratification, to achieve financial independence, we must consciously realize our default actions and change our mindset.

Based on the science of our reward system, we are more likely to succeed on our journey to financial independence if we have a long term goal (financial independence), intermediate goals, but also short term goals. The short term, intermediate and long term goals allow for short term, intermediate and long term dopamine fueled rewards.

Conclusion

When we have painful decisions, it is only normal to delay. It is human nature.

For you to journey to financial independence, you must change your money mindset. For a more successful financial journey, create and achieve your short term and intermediate goals on your journey to financial independence.

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Stacking Money JoToFi.com

High Earners And High Debt

Money Maroon

When we see someone driving a nice car or living in a big house in the nicest of neighborhoods, we often assume that these individuals are for better or worst higher earners living the dream, living the easy life. But are they?

Stressed

Many high earners spent years in school to get where they are. Most high earners work in high pressured professions and live in broken homes as a result of the long hours required to advance their careers. No wonder high earners tend to have high rates of suicides and elicit drug use.

Pay Check To Pay Check

This may be surprising to many, it is not atypical for high earners to live pay check to pay check. Simply put, those nice cars carry a nice car payment and a nice cost for insurance coverage. Those nice homes comes with a nice mortgage and nice costs of up keep (insurance, heating, cooling, landscaping, house keeping).

What about the family? Private schools for the little ones, those lavish family vacations and those social expenditures. You must keep your social status if you want to be in certain social circles.

 But with those high salaries, they can afford it, right? As we tend to do at JoToFI.com, let us use examples. 

Doctor And Lawyer

University

Let us look at the financials of a doctor and a lawyer. At about the age of 22, both our future lawyer and doctor will graduate college. 

For all costs, let us use 2019 numbers for a rough estimate. Again for simplicity, we will use the average costs of public and private education. We will also assume only public or only private education from university to professional school for our estimates.

  • Average public university cost per year: $10,116 
    • Average public university cost to graduation: 4 x $10,116 = $40,464
  • Average private university cost per year: $36,801
    • Average private university cost to graduation: 4 x $36,801 = $147, 204

Interest

Let us assume that our doctor and lawyer took out loans for school, for simplicity we will use the cost to graduation as their debt. For simplicity, we will not include interest charges. However, keep in mind that typically, interest accrues from the day the loan  is disbursed. Interest continues to accrue until the loan is paid off. Further, this interest is capitalized. Currently, the interest rate is about 5% annually.

Professional School

After obtaining top grades and racking up debt at university, our future doctor and lawyer must now attend professional school. 

For our lawyer, that is three additional years of law school education:

  • Average private law school cost: $49,095
    • Average private law school cost to graduation: 3 x $49,095 = $147,285
  • Average public law school out-of-State cost: $40,725
    • Average public law school out-of-State cost to graduation: 3 x $40,725 = $122,175
  • Average public law school in-State cost: $27,591
    • Average public law school in-State cost to graduation: 3 x $27,591 = $82,773

Our doctor on the other hand has four additional years of medical school:

  • Average private medical school cost: $52,515
    • Average private medical school cost to graduation: 4 x $52,515 = $210,060
  • Average public medical school cost: $32,495
    • Average public medical school cost to graduation: 4 x $32,495 = $129,980

Now, keep in mind that this debt accrues interest at about 5%-8%

Employment – Lawyer

For most lawyers this is it, at the age of about 25, they must now find a job. If you are aware of this profession, you will understand that the legal profession is bimodal. Meaning, at the top, a select number of law school graduates from top schools can earn a starting salary of $190,000 per year. Whereas at the bottom, the vast majority of lawyers earn a starting salary of less than $50,000 per year. In fact, the average salary for law school graduates is $72,500.

We will assume that our lawyer had amazing test scores, attended one of the top law schools in the country and was able to obtain a position with a starting salary of $72,500.

Employment – Doctor

For our doctor, residency follows medical school. Residency is a minimum of 3 years (based on your speciality) and an average salary of about $57,000 is paid.  During residency, our future doctor will toil day and night. For many residents, the salary provided during residency is simply not enough. As such, our doctor’s loans will continue to accrue interest during this period

Following residency, let us imagine that our doctor foregoes a fellowship, it is time to find a job at about 30 years of age. With an average salary in the range of $160,000 – $200,000, absent the present debt load, our doctor has a bright financial future.

The Math

For our lawyer, with a starting salary of $72,500, without counting the accrued interest, if he attended: 

  • Private schools, he owes about: $147, 204 (University) + $147,285 (Law School) = 294,489
  • Public schools, he owes about: $40,464 (University) + $122,175 (Law School – in State) = $162,639
  • Public schools, he owes about: $40,464 (University) + $82,773 (Law School – out of State) = $123,237

For our doctor, with a starting salary of between $160,000 and $200,000, without counting the accrued interest, if he attended:

  • Private schools, he owes about: $147, 204 (University) + $210,060 (Medical School) = $357,264
  • Public schools, he owes about: $40,464 (University) + $129,980 (Medical School) = $170,444

With the accrued interest added, these numbers would be significantly inflated. This is especially true for our doctor due to the added year of medical school and added years of residency.

Now, is our doctor and lawyer living the dream, living the easy life? If anything, they have loan payments added to the lifestyle that they are expected to lead. Professional Stress + Financial Stress.

High Earners, High Debt

For high earners starting their careers, the debt loads are high. As high earners navigate their way through their careers, in addition to student loans, add the added cost of purchasing a home, getting married, having a family, life style inflation, and our consumerism culture. It should now be clear why so many high earners live pay check to pay check.

We are not telling you to feel sorry for high earners, especially those who live above their means to maintain social status. Our aim with this article is to give you an insight into the life of those who we typically view as “rich.”

Conclusion

Whether you are a high earner or not, your journey to financial independence includes living below your means, saving and investing. Journey on.

In this article, the use of “he” is intended to be gender neutral.

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