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Positive Wealth Building Thoughts

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“Wealth is the product of a man’s capacity to think.” – Ayn Rand

“We become what we think about.” — Earl Nightingale

Wealth building begins and ends with your mindset, thoughts and behaviors. Thus, it’s imperative to keep your thoughts focused on the positive, on success, on making an impact, on changing the world and on changing people’s lives for the better.

There is an old adage that goes:

  • Watch your thoughts, they become words.
  • Watch your words, they become actions.
  • Watch your actions, they become habits.
  • Watch your habits, they become your character.
  • Watch your character, it becomes your destiny.

You must not fix your eyes on current world conditions or even your own personal situation. Instead, you must focus on what you can control, on how you respond, and on how well you maintain a positive and winning mindset and attitude. Focus on the solution not the problem.

So, your keys to success tips include:

  1. Use only positive words while thinking and while talking. Use words such as, ‘I can’, ‘I am able’, ‘it is possible’, ‘it can be done’, etc.
  2. Allow only feelings of happiness, strength and success into your awareness.
  3. Every time a negative thought finds its way into your mind, immediately replace it with a positive thought or an affirmation.
  4. In your conversation, use words that bring forth feelings and mental images of strength, happiness and success.
  5. Before starting with any plan or action, visualize clearly in your mind its successful outcome.
  6. Read at least one page of an inspiring book or an inspiring article every day.
  7. Associate yourself with people who think positively.
  8. Act courageous. Always sit and walk with your back straight. This will strengthen your confidence and inner strength.

In order to build wealth and to achieve financial freedom, you must develop a wealth building mindset and follow a deliberate plan. As you will discover, your wealth grows to the extent that you do.

“We become what we think about most of the time, and that’s the strangest secret.” – Earl Nightingale

Bottomline…for success, keep your focus and thoughts on wealth building!!! Because, what you focus on expands and establishing habits is the key to expansion.

Don’t focus on the problems your dealing with today or the conditions of the world; fix your eyes on your systems, habits and the destination.

Napoleon Hill describes success as the product of having a definite objective. In achieving that objective, you need a clear definite aim and a definite plan to get there.

A definite chief aim means in simple terms that you must have a clear objective that you are aiming to achieve. Success — building wealth and achieving financial freedom — will not come to you and you will not be able to manifest what you want, unless you know what you want.

Success is ultimately achieved by focusing on a clear objective, and pursuing that objective deliberately and with all the means at your disposal. In simple terms, success is simple, but not easy.

“Whatever the mind of man can conceive and believe it can achieve.” Napoleon Hill

Actually, you just have to be exceptionally clear about what you are trying to achieve, passionate about achieving it, comfortable and happy that what you’re doing matches your values: and finally, and perhaps more important than anything else, you must believe that you can achieve it, you must expect to do so, and you must have a plan to achieve it.

So it’s imperative that you use the power of your thoughts and mind to focus on the positive aspects of your life. This works similarly to building strength in the muscles of your body. As you focus on what’s going right in your life, it will grow and expand like a muscle.

What you focus on grows and expands!

References:

  1. https://www.therealsecretofsuccess.com/napoleon-hill/
  2. https://activerain.com/blogsview/5155111/what-you-focus-on-expands

Biden Administration’s Fossil Fuel Policies Raised Gas Prices

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Benchmark crude oil prices have surged to $115 per barrel.

The ‘pre-Russian invasion of Ukraine’ rise in gas prices has been the tax Americans pay at the pump for Biden’s administration pro-climate and anti-fossil fuel policies.

Upon taking office in January 2021, the Biden administration implemented policies and regulations that have been extremely detrimental to the exploration, production and investment in domestic fossil fuel energy:

  • They rejoined the Paris climate agreement,
  • They terminated the Keystone XL pipeline,
  • They suspended all oil and gas leases in Alaska’s Arctic National Wildlife Refuge
  • They began working on his pledge to ban all “new oil and gas permitting on public lands and waters.”

The Biden administration entered office promising to “end fossil fuel” and signaled a hostility to the fossil fuel industry with a major push for clean energy, including a pledge to cut U.S. greenhouse gas emissions by at least 50 percent of 2005 levels by 2030. The result has been that investment, exploration and production has fallen across the oil and gas industry within the U.S.

When you announce your intention to tax and regulate the fossil fuel industry out of existence, investors, along with fossil fuel executives and corporate boards listened, writes Marc A. Thiessen, in a Washington Post opinion piece. The results are less production and capital investment — and higher prices.

Considering that the price of gasoline never rose above $3.04 in the year prior to Biden taking office. Once Biden entered office, gasoline prices broke that threshold in four months — long before Putin invaded Ukraine and economic sanctions were imposed on Russian energy.

Entrepreneur Elon Musk — the founder of the electric car company Tesla — says we need to drill for more oil and gas at in the United States to alleviate world wide pressure on crude oil supplies brought on by the ban of Russian oil exports.

Many billionaire investors, such as Berkshire Hathaway’s Warren Buffett, believe that oil prices will continue to remain elevated in the coming quarters and are putting their reserves of capital were their long term investment beliefs are.

References:

  1. https://www.washingtonpost.com/opinions/2022/03/10/biden-gas-prices-hides-behind-ukraine-suffering/
  2. https://www.fool.com/investing/2022/03/07/looks-like-warren-buffett-just-bet-big-on-an-oil-p/

4 Steps to Build, Manage and Preserve Wealth

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The requirements for building, managing and preserving wealth are simple, mundane and practical, if you choose to pursue it. The requirements are:

  • Commitment so that you prioritize the steps, habits and behaviors necessary to build wealth; otherwise, life will just get in the way.
  • Planning and creating systems based on proven principles and strategies that actually work.
  • Action because nothing happens without persistent, disciplined action over the long term to reach the your wealth goals.

What is “Wealth-Building?”

Wealth building is the process of generating long-term income through multiple sources. The sources includes savings, investments, and any income-generating assets. The wealth building definition requires proper financial behaviors, planning and goal,setting. Many individuals turn to wealth building as a way to achieve financial freedom and acquire cash flow to fund their lifestyle and retirement.

The 4 Steps to Building, Managing and Preserving Wealth

To build wealth, you must follow four simple steps: make money, save money, invest money and manage cash flow. Before investing, it is essential to have a reliable source of income. After securing a reliable source of income, it is recommended save regularly and paying yourself first. Finally, it is time to invest in assists and manage your cash flow.

1. Making Money

This step may seem obvious and is fundamental to wealth-building. A small amount of regular savings from your income can compound into a substantial amount. An important question to ask yourself is whether or not your current job can provide you with a regular amount of savings for 40 to 50 years. If not, it may be time to look for ways to increase your income.

The two basic types of income are earned and passive. Earned income comes from your employment, while passive income comes from investments. To increase your earned income, you may first have to make changes in your occupation. Consider investing in your education and other forms of training to help you become a stronger candidate for your desired job.

2. Saving Money

The second key to wealth-building is setting aside a portion of your earned income regularly. Once you have saved enough, you can start investing to grow passive income. Here are a few ways to to start saving money:

  • Keep track of your spending each month, and then eliminate the spending that you don’t need or does not align with your values
  • Adjust your budget to the point in which you’re saving every month.
  • Always have about 6 months’ worth of expenses saved in case of emergencies. Having a cushion will help prevent you from derailing your finances every time something unexpected happens.
  • Contribute to your retirement plan. If your employer offers a matching plan, definitely take advantage of it. Don’t leave free money on the table.

3. Investing Money

Once you have saved, you can start investing your money. However, to build a diverse investment portfolio, you will have to take a few risks. It is important to research how much asset allocation is appropriate for you. While you can do this research yourself, using a financial advisor is also recommended for new investors. They can help you gain clarity on your investment goals, time horizon, and how much risk you can stomach. Based on these insights, they can help you build a diversified portfolio that is risk-averse, moderate, or aggressive, based on your preferences.

4. Managing Cash Flow

Cash flow is king!

Your net worth, which is how wealth is measured, is an extremely important factor in wealth building. However, to live the lifestyle of your dreams, you must be able to generate positive cash flow from your wealth.

Cash flow is defined as income (cash in) minus expenses (cash out). And, the simpler your lifestyle and the better you manage your spending and expenses, the less income is required from your investments to live the life of your dreams and to achieve financial freedom.

To create a wealth building system, you can establish long term investing strategy and portfolio, and achieve financial freedom. Choosing the right wealth building assets comes down to which opportunities best suit your financial goals. With the right planning, investors can be well on their way to building, managing and preserving wealth.

In short, successful building, managing and preserving wealth are necessary requirements to achieve financial freedom. And, financial freedom buys you time and with time you can discover and experience what you really want out of life.

References:

  1. https://financialmentor.com/category/wealth-building/wealth-program-system
  2. https://www.fortunebuilders.com/wealth-building-assets/

Systems are Best for Long Term Success

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“Goals are good for setting a direction, but systems are best for making progress.” James Clear

James Clear, author of Atomic Habits, spoke at a conference I attended about ‘goals and system’. During his insightful talk, he explained that “Goals are good for setting a direction, but systems are best for making progress. ”

Furthermore, he said that, “I began to realize that my results had very little to do with the goals I set and nearly everything to do with the systems I followed.” To explain, he writes that “If you’re an entrepreneur, your goal might be to build a million-dollar business. Your system is how you test product ideas, hire employees, and run marketing campaigns.”

Moreover, goals are good for setting a direction, but systems are best for making progress and reaching your destination.

Goals can become too limiting, says Scott Adams, the nationally syndicated cartoonist of Dilbert. Systems, in contrast, habits are things that people regularly do and that increase the odds that an event ends up creating an experience that leads to an eventual success, even though that success might not be immediately apparent.

A system, says Adams, contributes to a positive attitude that widens a person’s field of perception, which he contends is what makes some people luckier than others in that they can see more opportunities.

Build a system for getting 1% better every day.

In Clear’s opinion, “a handful of problems arise when you spend too much time thinking about your goals and not enough time designing your systems.”

https://twitter.com/atomichabitss/status/1498825041835823105

According to Clear, several problems arise when you focus on goals and ignore the system, such as:

Problem #1: Winners and losers have the same goals.

Successful and unsuccessful people often share the same goals, thus the goal cannot be what differentiates the winners from the losers. It wasn’t the goal of winning the Tour de France that propelled the British Cyclists to the top of the sport, states Clear. Presumably, they had wanted to win the race every year before—just like every other professional team. The goal had always been there. It was only when they implemented a system of continuous small improvements that they achieved a different outcome.

Problem #2: Achieving a goal is only a momentary change.

To truly have meaningful and long-lasting change, you must change your habits that led to the problem or challenge in the first place. Achieving a goal only changes your life for the moment. That’s the counterintuitive thing about improvement. You think you need to change your results, but the results are not the problem. What you really need to change are the systems that cause those results. When you solve problems at the results level, you only solve them temporarily. In order to improve for good, you need to solve problems at the systems level. Fix the inputs and the outputs will fix themselves.

Problem #3: Goals restrict your happiness.

The problem with a goals-first mentality is that you’re continually putting happiness off until the next milestone. Happiness should not be just something for your future self to enjoy.

Furthermore, goals create an “either-or” conflict: either you achieve your goal and are successful or you fail and you are a disappointment. You mentally box yourself into a narrow version of happiness. It makes no sense to restrict your satisfaction to one scenario when there are many paths to success.

A systems-first mentality provides the antidote. When you fall in love with the process rather than the product, you don’t have to wait to give yourself permission to be happy. You can be satisfied anytime your system is running. And a system can be successful in many different forms, not just the one you first envision.

Problem #4: Goals are at odds with long-term progress.

Finally, a goal-oriented mind-set can create a “yo-yo” effect. When all of your hard work is focused on a particular goal, what is left to push you forward after you achieve it? This is why many people find themselves reverting to their old habits after accomplishing a goal.

The purpose of setting goals is to win the game. The purpose of building systems is to continue playing the game. True long-term thinking is goal-less thinking. It’s not about any single accomplishment. It is about the cycle of endless refinement and continuous improvement. Ultimately, it is your commitment to the process that will determine your progress.

Fall in love with systems

James Clear surmises that “goals are good for planning your progress and systems are good for actually making progress. Goals can provide direction and even push you forward in the short-term, but eventually a well-designed system will always win. Having a system is what matters. Committing to the process is what makes the difference.”

The next time you think about a goal, something you deeply desire to achieve, think of the system that you will follow — and how often — in order to reach it.

References:

  1. https://jamesclear.com/goals-systems
  2. https://www.cioinsight.com/careers/dilbert-creator-focus-on-systems-not-goals/
  3. https://jamesclear.com/good-habits
  4. https://medium.com/swlh/thinking-in-systems-not-goals-2b9a4105d0d3

James Clear is the author of the #1 New York Times bestseller, Atomic Habits.

“The most useful form of patience is persistence. Patience implies waiting for things to improve on their own. Persistence implies keeping your head down and continuing to work when things take longer than you expect.” ~James Clear

Credit Report Information 101

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Your credit history is one of the factors that lenders use to assess your creditworthiness so it is important to understand what information has been reported to your credit file. 

Ancient Greek playwright Sophocles wrote, “Wisdom outweighs any wealth.” While this statement certainly rings true, it’s also true that wisdom can play a major role in building wealth—particularly when it comes to effectively managing your finances and credit.

Consumers with excellent credit scores  tend to pay less for major purchases. In short, your credit is your financial calling card, it can both open and close doors. Credit reports have also become essential tools beyond the financial world. Nowadays, your housing or employment status could be decided by your credit history; and maybe even your love life.

Thus, it is important to be prepared for anything on your horizon by understanding how your credit and credit score can impact financial progress and wealth building. The three major credit reporting bureaus — TransUnion, Equifax and Experian — maintain credit reports. The reporting companies issue credit reports to creditors, insurers and others as permitted under law for the purposes of evaluating your financial responsibility.

Tablet - 3 Bureau Reports & Scores

Here is an example of how the system works:

Apply for a Credit Card – When you apply for a new credit card, the creditor requests a copy of your financial history, or credit report, from one or more of the credit reporting companies.

The Creditor’s Assessment – The creditor may use your credit report, a score, and other information you provide (such as income or debt information) to determine whether to approve your application and what rates to offer.

The Creditor’s Decision – If you are issued a card, the creditor reports that account to the credit reporting companies, and then updates it, including your balance and payment activity, about every 30 days.

Your Credit Profile Updated – The credit reporting companies update your credit report as they receive new information from creditors and lenders. Your credit profile changes based on your financial activity. The next time you apply for a credit card or loan, the process repeats.

Managing Your Credit Report

Your report is divided into six main sections. When you open a new account, miss a payment or move, these sections are updated with new information. These sections are:

  • Identifying Information (name, address, birth date and Social Security number)
  • Employment
  • Consumer Statement
  • Account Information
  • Public Records
  • Inquiries

Negative records – Late payments create a negative record. Generally, negative records will stay on your report for up to 7 years (up to 10 years for certain bankruptcy information). Positive records can remain on your credit report longer.

Your Credit Report is updated in most cases every 30 days – Your credit report is updated with new information reported by your creditors. Most creditors report new information approximately every 30 days, to reflect your account balances and payments you make.

Check every 6-12 months – Not all creditors report to all three companies; the companies obtain their data independently, so your credit reports from TransUnion, Equifax and Experian could substantially differ. That’s why it’s important to check your three credit reports every 6-12 months to ensure that the information is accurate and up-to-date.

Check Your Credit Report regualarly…checking your own credit will NOT harm it.

Correcting inaccuracies – Under the Fair Credit Reporting Act, consumers are protected if there is inaccurate information on their credit reports. If you find inaccurate information on your credit reports, you can contact the associated creditor or lender directly. You can also dispute the inaccuracy with the credit reporting companies.

Know the system – Managing your credit and maintaining a good credit history can lead to better rates on major purchases. It’s recommend that you check your credit reports every 6-12 months, or at least 3 months before a major purchase, in order to identify potential inaccuracies and any signs of identity theft.

Routine check-ups, along with paying your bills on time, keeping your credit card balances below 35% of their limits, and correcting any inaccuracies will help ensure your credit reports are viewed in the most favorable light.

Finally, if you believe you’re a victim of fraud, you can activate automatic fraud alerts and the credit bureaus will place an initial alert on your credit report. This alert encourages lenders to take extra steps to verify your identity before extending credit.

References:

  1. https://www.creditonebank.com/articles/10-famous-quotes-about-finances-credit

Benjamin Graham

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Every investment is the present value of all future cash flow.

Benjamin Graham, colleague and mentor to billionaire investor Warren Buffett,  is widely acknowledged as the father of value investing. His timeless book, The Intelligent Investor, is considered the value investor’s bible for both individual investors and Wall Street professionals.

Many of Benjamin Graham’s concepts are deemed fundamental for value investors, and his concepts should be studied and followed for anyone who plans to invest long term in the stock market.

For example, “Margin of Safety” is the famous term coined by Ben Graham. In simple terms, an asset worth $100 and bought at $80 has a better Margin of Safety than the same asset purchased at $95. In other words, “A great company is not a great investment if you pay too much for the stock”,  according to Benjamin Graham.

The 10 Benjamin Graham quotes, all of which are valuable in today’s market, tell us that::

  1. “A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.”
  2. “People who invest make money for themselves; people who speculate make money for their brokers.”
  3. “While enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street, it almost invariably leads to disaster.”
  4. “Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal.”
  5. “Obvious prospects for physical growth in a business do not translate into obvious profits for investors.”
  6. “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”
  7. “To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.”
  8. “The intelligent investor is a realist who sells to optimists and buys from pessimists.”
  9. “The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.”
  10. “Weighing the evidence objectively, the intelligent investor should conclude that IPO does not stand only for ‘initial public offering.’ More accurately, it is also shorthand for: It’s Probably Overpriced, Imaginary Profits Only, Insiders’ Private Opportunity, or Idiotic, Preposterous, and Outrageous.”

See the source image“I never ask if the market is going to go up or down because I don’t know, and besides, it doesn’t matter. I search nation after nation for stocks, asking: ‘Where is the one that is lowest-priced in relation to what I believe it is worth?’ Forty years of experience have taught me you can make money without ever knowing which way the market is going.”—Sir John Templeton

“Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.” – Benjamin Graham

“Successful investing is about managing risk, not avoiding it.” – Benjamin Graham

References:

  1. https://cabotwealth.com/daily/value-investing/benjamin-graham-quotes-to-improve-your-investing-results/

Habits and System Building

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“Your system is the collection of daily habits.” James Clear

Behaviors and Beliefs are a two way Street, says James Clear, author of “Atomic Habit”. Effectively, the way you act influences what you believe about yourself; what you believe about yourself influences the actions you take and the manner in which you behave. But, you should let the behavior lead the way, explains Clear.

Every action you take on a daily basis is a vote regarding the person you are currently and want to become in the future. Everyday you’re casting votes to become the person you see yourself. Habits matter because they reenforce the person you want to become.

Build a system.

You want to focus on developing a process / building a system or achieving a goal or outcome. You don’t rise to the level of your goals, you fail to the level of your system. Building the system — the way you prepare — that executes on achieving your goals is what is important. The system is what gets you closer to your destination. Ask yourself what you’re optimizing for?

Your goal is your desired outcome. Your system is the collection of daily habits you follow. Your system is your collection of daily habits you follow. Your current daily habits are perfectly designed to deliver your current results. Over a long period of time, your life bends towards your system, or collection of habits.

The purpose of habits:

Habits are the autopilot mode that your brain goes into when completing repetitive tasks, according to James Clear, author of “Atomic Habits”. For example, driving to work, the first time you do it, it may be confusing and stressful but after a few weeks your mind is just going through the motions, explains Clear.

Not having a grasp on your habits means not having control of your life and outcomes…consider:

  1. No financial habits = living pay check to paycheck.
  2. No healthy food and exercise habits = lacking energy and good health.

Without good habits, you will always be behind the curve. Success in your life and finances depends on the effectiveness of your habits and systems.

  • Your system for reading might be to read at least 1 page before bed every night.
  • Your system for exercising might be to do at least 5 minutes of bodyweight exercise every morning.
  • Your system for healthy eating might be to eat at least 1 apple every day for lunch.
  • Habits are the “compound interest”of self-improvement.

The bigger your systems, the bigger your results. Systems are the vehicles that are going to take you to your goals—your goals are simply the destination. Effectively, you don’t rise to the level of your goals; you fall to the level of your systems.

If you want to change the world and do big things, the actions you’re doing every day, your habits, are what are going to get you there. That’s where the things happens.

“You do not rise to the level of your goals.  You fall to the level of your systems.”James Clear

Showing up each day and making one small choice or trying to do something in a slightly better way, and then watching that compound and multiply over time. In life, changes may seem relatively small and insignificant on a daily basis, but over 10 or 20 or 30 years, small choices and changes can make meaningful difference.

What starts out small and seems relatively insignificant, grows and accumulates into something bigger.

Your mindsets and your systems can set us up for success. It is important to understand the importance of consistency when it comes to forming habits that last.

“Changes that seem small and unimportant at first will compound into remarkable results if you’re willing to stick with them for years”, says Clear. “We all deal with setbacks, but in the long run, the quality of our lives depends on the quality of our habits. With the same habits, you’ll end up with the same results. With better habits, anything is possible.”

Small incremental changes can end in massive results. Small improvements day by day will result in a huge compounding effect, says Clear.

References:

  1. https://movemequotes.com/beyond-the-quote-8/
  2. https://brenebrown.com/podcast/atomic-habits-part-1-of-2/
  3. https://theherstonproject.com/2020/11/atomic-habits-summary/

African Americans are less likely to participate in the stock market | Kiplinger Magazine

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There are many well-known historical racial based disparities in the American financial system that have contributed to the current wealth gap between Black Americans and their White peers.

Wealth (defined as the difference between a household’s assets and debt) provides a critical safety net to households during economic downturns. According to The Brookings Institute, wealth holds several significant advantages over wages as an economic resource: In particular, income from wealth is taxed at much lower rates than income from work, and wealth can serve as a source of savings to absorb temporary setbacks such as a loss of employment income.

The denial of access to wealth-building homeownership and education benefits in the GI Bill, redlining and loan rejections for businesses are several critical components of today’s widely discussed racial wealth gap.

Throw in historically lower wages and education gaps and you find there is a staggering difference in wealth by race. White families have roughly eight times the wealth of Black families, according to The Brookings Institution. In 2019 the median white household held $188,200 in wealth—7.8 times that of the typical Black household wealth of $24,100.

This historical context is critical in understanding that individual achievement must be matched with policies that address the framework that has yielded this result.

While there is much to do to address the broader systemic issues, every day that goes by is an opportunity to shore up individual situations. There are steps to building and creating wealth such as stock ownership.

Stock ownership

While more than half of White Americans own some equities, that number falls to about a third for Black families, according to data from the Federal Reserve.

Investing in stocks is an important means of building wealth over time and generating the returns necessary for retirement.

Take action: For many people, the easiest way to start investing in the stock market is through their workplace retirement plan. If your employer offers a retirement savings plan, make sure you contribute enough to earn any matching contribution your employer offers. Also be sure to evaluate the investment options and get the assistance and information you need from your employer to select an investment approach that is right for you.

If you start with a low percentage contribution, you can typically increase the amount you save over time (some companies even let you do this automatically), with the goal of saving at least 10% to 15% of your income for retirement. The compounding effect of investing money over time can often help you accumulate more than you think.

If you don’t have access to a 401(k), consider contributing to an IRA for retirement savings. You can open an IRA with a brokerage and follow similar principles as you would with a 401(k) account.

Source: https://www.kiplinger.com/personal-finance/604231/the-biggest-financial-barriers-facing-black-americans-and-strategies-to

Getting Started on the Road to Building Wealth

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“The most difficult thing is the decision to act, the rest is merely tenacity.” ~Amelia Earhart~

Amelia Earhart addresses one of the hardest parts about achieving financial freedom and building wealth—just getting started. After getting started, she suggests correctly, it’s merely a matter of sticking with a system and your financial or wealth building plan.

Ms. Earhart’s advice mirrors another adage about the importance of just getting started by China’s Lao Tzu, the father of Taoism: “The journey of a thousand miles begins with a single step.”

Saving money is important, whether you’re creating an emergency fund or working toward a long-term goal like a vacation or retirement. But there is a difference between saving money and building wealth.

If you establish an habit to save 10% to 20% of your income each year, the money will add up over time, and you will end up with savings that you can dip into when you need it. If you invest the money that you save, your money will start working for you and create more money through stock price appreciate, dividends and the power of compounding.

This is when and where you will begin to build substantial wealth.

The purpose of earning (active and passive income) and saving money are to pay for your investments, which will build wealth and pay for your future. Investing involves buying assets, which are things that will likely go up in value. It’s important to “see every dollar as a “seed” that can be planted to earn a hundred more dollars, which can then be replanted to earn a thousand more dollars”, says T Harv Eker, author of The Millionaire Mind.

“Focus on all four of your net worth factors: increasing your income, increasing your savings, increasing your investment returns, and decreasing your cost of living by simplifying your lifestyle.”– T. Harv Eker

Focus on all four net worth factors:

The true measure of wealth is net worth, not working income.The four net worth factors, according to Eker, are:

  1. Income (working income and passive income)
  2. Savings
  3. Investments
  4. Simplification – decreasing your cost of living by simplifying your lifestyle (you consciously create a lifestyle in which you need less cash flow).

By tracking your worth, you are focusing on it, and because what you focus on expands, your net worth will expand. By the way, these laws go for every other part of your life: what you focus on expands and, like, what you measure, you manage.

The goal is to get educated. Learn about the world of investing. Become familiar with a variety of different investment asset classes and financial instruments, such as stocks, bonds, mutual funds, exchange traded funds (ETF), real estate, mortgages, stocks, and currency exchange. Then choose one primary asset class in which to become an expert. Begin investing in that asset and then diversify into other assets later.

It comes down to this: you must work hard, save, and invest your money so you can have options, live the lifestyle of your dreams and achieve financial freedom later in life.

References:

  1. https://www.creditonebank.com/articles/10-famous-quotes-about-finances-credit
  2. https://www.thebalance.com/how-do-i-begin-to-build-wealth-2386145
  3. https://www.edwardjones.com/us-en/market-news-insights/personal-finance/investing-strategies/investing-rules-road
  4. https://www.harveker.com/top-10-tips-for-wealth-success/
  5. https://www.wealthofhappiness.com/secrets-of-the-millionaire-mindset/
  6. https://www.sitrakaratsimba.com/secrets-of-the-millionaire-mind/

Inflation…the Enemy of Savers

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Inflation is the enemy of those who save.

For most of the 21st century, savers and investors have experienced a favorable period of relative low inflation stock market growth. In fact, the average annual inflation rate from 2000 through 2021 was 2.31%. Even with that “low” inflation rate, the proverbial uninvested dollar hidden under one’s mattress in the year 2000 would be worth a mere $0.62 today.

With inflation approaching 7% in late 2021, we’re on the precipice of witnessing the rapid erosion in the value of the dollar which will create substantial risk for ordinary savers and ultra conservative investors. Keeping your money in a savings account, money market or CDs is failing to protect it from inflation.

Instead, the best place to invest is in the economy. While large sums of money are generally required to purchase real estate or a small business, the stock market allows those with limited capital a means to invest regularly in a wide variety of businesses and benefit from the strength of the economy.

The equity markets have a history of robust returns over the long run. Over the last one hundred years, the average annual stock market return is 10%. That means investors who stay invested are nearly doubling their investments every seven years.

Some individuals view the stock market as too risky and they literally view investing in the market as “gambling”. But, when you choose to use less “risky” investments like bonds rather than investing in stocks, the results vary great.

A study by NYU’s Stern School of Business gives insights into historical returns provided by an investment in U.S. Treasury bonds as opposed to corporate bonds and the S&P 500.

Assume an investor received a $300 inheritance on the day he was born. On that date, his parents invested $100 (the inflation-adjusted equivalent of $1,630 today) in several asset classes in 1928.

As of September of 2021, the above investor would have $8,920.90 in U.S. Treasury bonds, $53,736.50 from corporate bonds, and $592,868 in returns from an index fund that tracked the S&P 500.

Obviously, the stock market beats “safe” investments. While bonds might play an important role in a balanced portfolio, a 100% bond portfolio will fail to achieve the investment goals for most.

Investing a little now is better than a lot later

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein

A strong argument can be made that the amount of time one is in the market is of more importance than the sum invested in stocks.

Consistently timing the market is impossible. There literally is no human being who can claim that he or she has been successful at that task with any degree of honesty. However, timing the market is not only unachievable, attempting to time the market can lead to poor investment returns.

Over time, this would result in an ever-falling income stream. You spent your life buying stocks because they are a great source of return, that doesn’t stop just because you retire! The market is still the best source of future returns, you should be continuing to buy more, not sell!

If one largely invests in stocks with yields of 5% or more, you can receive a substantial annual income without cannibalizing your portfolio. Furthermore, if the average annual market return is 10%, a stock that yields in the high single digits does not need to appreciate markedly to provide market-beating returns.

Higher yield stocks outperform more often. They distribute cash on a recurring basis, whether share prices are up or down. Prices are volatile, and at the whims of emotional investors, dividends are the profit generated by the business and distributed to shareholders.

Any investor with an employer with matching contributions should take full advantage of that opportunity. Any investor with an employer with matching contributions should take full advantage of that opportunity.

By investing in dividend-bearing stocks and resisting the temptation to time the markets, you can be well on your way to building wealth and achieving financial freedom.

References:

  1. https://seekingalpha.com/article/4484316-retirement-what-novice-investors-must-know