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40 Investing Terms You Need to Know

If you are a new investor, you are likely to encounter terms that you don’t understand. As you consider the various ways in which to invest your money, continue to use these terms and definitions as a resource. With a greater understanding of these terms, you can feel more confident researching potential investments.

You don’t have to know everything to start investing. In fact, if you wait until you know everything before you get started, you’ll probably never start investing at all! But there are some basic terms you might want to have in your investing arsenal.

  • Arbitrage: Arbitrage is basically buying a security in one market and simultaneously selling it in another market at a higher price, thereby profiting from the temporary difference in prices.
  • Ask: This is the lowest price an owner is willing to accept for an asset.
  • Asset: Something that has the potential to earn money for you. It is something you own that can reasonably be expected to produce something for you. Assets include stocks, bonds, commodities, real estate, and other investments.
  • Asset allocation: One of the ways to divide up the holdings in your portfolio is to do so by asset class. The idea is that different assets perform opposite to each other, and you can limit some of your risks by allocating your portfolio according to the type of asset you have.
  • Balance sheet: A statement showing what a company owns, as well as the liabilities the company has and stating the outstanding shareholder equity.
  • Bear market: A bear market is when a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment. Bear markets also may accompany general economic downturns such as a recession.
brown bear walking between trees
  • Bid: This is the highest price a buyer is willing to pay when buying an investment. Today, electronic trading makes it possible to ask and bid to be matched up automatically and almost instantly.
  • Blue chip: You might hear reporters and others refer to “blue-chip stocks.” Blue chips are industry leading companies that have a long history of good earnings, good balance sheets, and even regularly increasing dividends. These are solid companies that may not be exciting, but they are likely to provide reasonable returns over time.
  • Bond: This is an investment that represents what an entity owes you. Essentially, you lend money to a government or a company, and you are promised that the principal will be returned plus interest.
  • Book value: If you take all the liabilities a company has and subtract them from the assets and common stock equity of the company, what you would have left over is the book value. Most of the time, the book value is used as part of an evaluative measure, rather than being truly related to a company’s market value.
  • Broker: This is the entity that buys and sells investments on your behalf. Usually, you pay a fee for this service. In the case of an online discount broker, you often pay a flat commission per trade. Other brokers, especially if they also manage your assets as a whole, just charge a percentage of your assets each year. I use Robinhood but M1 and Webull and many others are excellent choices as well.
  • Bull market: This is a market that is trending higher, likely to gain. If you think that the market is going to go up, you are considered a “bull.” Additionally, the term, like bear, can be applied to how you feel about an individual investment. If you are “bullish” on a specific company, it means you think the stock price will rise.
Statue, Bull, Animal, Wealth, Ancient
  • Capital gain (or loss): This is the difference between what you bought an investment for and what you sell if for. If you buy 100 shares of a stock at $10 a share (spending $1,000) and sell your shares later for $25 a share ($2,500), you have a capital gain of $1,500. A loss occurs when you sell for less than you paid. So, if you sell this stock for $5 instead ($500), you have a capital loss of $500).
  • Diversification Diversification of a portfolio is a risk management technique. You spread your investments over different asset classes (stocks, bonds, commodities, real estate) such as to reduce the exposure you have to any one type of security, area and domain. Diversification may help to prevent a higher loss if the market experiences an upheaval.
  • Dividend: A portion of a company’s earnings that is paid to shareholders, or people that own that company’s stock, on a quarterly or annual basis. Not all companies pay dividends. For a getting started in long term dividend investing consider my book: Beginners Guide to Dividend Investing.
  • Dollar Cost Averaging The Dollar Cost Averaging strategies call for investing a fixed amount of money at regular intervals over a period of time regardless of the share price. This is considered a smart investment strategy because the investor does not need to try to pick tops and bottoms.
  • Dow Jones Industrial Average: This average includes a price-weighted list of 30 blue-chip stocks. While there are only 30 companies included on the list, many people think of the Dow when they hear that “the stock market” gained or lost. The Dow is often used as a gauge of the health of the stock market as a whole, even though it is only a very small portion.
  • Exchange: This is a place where investments, including stocks, bonds, commodities, and other assets are bought and sold. It’s a place where brokers (buyers and sellers) and others can connect. While many exchanges of “trading floors” most orders these days are executed electronically.
  • ETF: Exchange-traded funds, a type of investment fund that trades like a stock. Investors buy and sell ETFs on the same exchanges as shares of stock. They are very similar to mutual funds, except that they trade throughout the day on stock
  • Index: A benchmark that is used as a reference marker for traders and portfolio managers. A 10 percent return may sound good, but if the market index returned 12 percent, then you didn’t do very well since you could have just invested in an index fund and saved time by not trading frequently. Examples are the Dow Jones Industrial Average and Standard & Poor’s 500.

10 Lies We Tell Ourselves About Debt.

Debt is one of those things that is almost unavoidable. If you want to buy a car, you’re likely taking out a loan to pay for that car. If you are looking to buy a house, unless you are very wealthy, you are going to be getting a mortgage on the home.

Some debts are less bad to carry and have some tax advatages over the others, like mortgages. Others are really just bad—think revolving credit card debt that never gets paid off. But if you’re trying to get out of debt, you may come across a lot of misinformation.

While we know how we should live financially, many of us just don’t listen. Thing is, I believed the lies and fell for the hype as well.  I didn’t listen to what the experts had to say.  I just did what I thought was right based on what I was reading and had been told by others in my situation.  But all along I was just lying to myself.

The thing is, debt is bad.  There is no other way to say it.  You don’t want it.  You don’t need it.  So why then, do we all continue to believe the myths and lies?  Perhaps it is because we just don’t even know that is what they are. I along with many many others are guilty of believing and living these untruths. Here are 10 lies people believe about getting out of debt.

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1. Everyone’s got debt

This one isn’t entirely false. Most Americans—75 percent—do carry debt. Most can be attributed to student loans, mortgages, and car loans.

The really unfortunate form of debt is the dreaded credit card that you can’t pay down.

For the purposes of this article, we will focus on non-mortgage debt. Focusing on credit cards, student loans, and automobile loans. While auto loans have finite terms, credit card and student loan debts could literally stay with you a lifetime if you don’t hunker down and come up with a plan to take care of them.

There are many Americans who have no debt at all.  Some do not even have a mortgage payment. “If everyone was jumping off a bridge, would you jump too?”  Of course not.  You have more common sense than to do that, don’t you? Why then, do you think that just because everyone has debt that it is OK for you to have it too.

This lie is often trotted out when we want to excuse a new purchase. Herd mentality is nothing new. I used this very defense more than once when I wanted my parents to buy the next “new thing” for me in high school. “But mom… but dad, everyone has one!” However, there are plenty of people who have no debt at all, not even a car payment or a mortgage. Debt does not have to be a constant reality from birth to death. Everyone does not have debt.

2. I don’t need to sacrifice

To be frank, I hate the term “sacrifice.” What you really need to do in order to free yourself from burdensome debt is to make an active choice to do so. Choosing not to buy the latest iPhone or smart watch is not a sacrifice. Jumping on a grenade in a war zone is a sacrifice.

If you think that you are going to get out of debt without making the hard choices about the purchases that you make going forward, then you should stop reading now.. not really. But thinking of this reminds me of Dave Ramseys saying “If you will live like no one else now, later you can live like no one else

See also: Dave Ramsey vs Robery Kiyosaki

You are most likely going to have to say no to a lot of things. That dinner date with your friends at the fancy sushi restaurant, the new iPhone, that gym membership that you only use once a month, or the fastest internet plan your provider offers.

3. I can only afford unhealthy foods

While going to McDonald’s and buying food off of the dollar menu may be cheaper than going to the grocery store and getting some healthy alternatives, it is not a good life choice.

You can create extremely budget friendly meals at home that will not only be better for your body, but will taste better, too.

If you doubt me, here is a link to 15 recipes that you can cook at home for under five bucks! There are so many more that you can find on your own by just searching for key terms like “cheap, healthy recipes.”

What’s the point of getting out of debt if you can’t live long enough to enjoy the benefits?

No more excuses for eating that unhealthy fast food—well, at least not monetarily.

5 Dividend Stocks to Consider During 2020 Market Crash

Since late March, the S&P 500 index has partially climbed back from the coronavirus-driven market sell-off that began in February. However, as of Monday, April 13, the index is still down more than 18% from its all-time high, set on Feb. 19.

During times like these, many investors are looking for rock-solid dividend stocks to help them weather the turbulence, and myself and many others take advantage of lower stock prices to lock in a high long term yield on cost.

When you invest during a bear market in a solid company with a history of increasing its dividend payments, you obtain a degree of comfort that you’ll receive cash flow while you own that stock. Even if the shares lose value during a bear market, you’ll receive income from your dividends.

During uncertain economic times like today, it’s wise to invest thoughtfully. Dividend stock investing during a bear market may reward patient shareholders with long-term profits. Below are stocks I have focused in on for my long term investments, primarily for dividends for the very long term (forever being ideal).

Some links are affiliate links and I will receive a commission at no additional cost to you, thank you for the support!

Coca-Cola (KO) 

When it comes to a tried-and-true dividend stock, it’s hard to beat Coca-Cola (NYSE:KO). And investors can use the argument, if it’s a good enough for Warren Buffett, it’s good enough for you. The potential anchor to the stock has been that soft drinks, particularly of the sugary kind that Coca-Cola is known for, have sort of fallen out of favor. Part of it is due to concerns over childhood obesity and some is because of the changing tastes of consumers who are demanding various options in every aspect of their life. But Coca-Cola is navigating this pivot well. First, they’ve invested in other brands. This strategy is providing an effective hedge against potential revenue losses to the flagship brands.

And the company just released its own energy drink, Coke Energy, in January and the company is looking to get into the caffeinated seltzer and flavored water arena. Analysts are becoming bullish on the company in advance of its earnings which the company reports on January 30.

Sector: Consumer Staples   Industry:Soft Drinks
Recession Return: S&P 500 lost 55% from 2007 – 2009; KO shares lost 31%

Dividend Growth Streak: 55 years

Coca-Cola is the world’s largest beverage seller, marketing over 3,900 products under 500 brands in more than 200 countries and territories via 24 million retail markets. The company owns 21 brands that generate over $1 billion in sales including: Coke, Powerade, Dasani water, Simply and Minute Maid juices. 

Coke’s wide moat is courtesy of the world’s largest distribution network which has taken over 130 years to build up at a cost of tens of billions of dollars in marketing spending. Smaller rivals simply can’t replicate the company’s reach or brand awareness. As a result, Coke enjoys premium shelf space in almost every retail outlet in the world.
Coca-Cola’s plans for the future include continuing to diversify into healthier options where it has less share today, such as teas, juices, and water. These markets continue to grow strongly in both developed and emerging economies. 

Recently this focus on healthier beverages has helped drive mid-single-digit organic sales growth, which is among the best in the industry. Meanwhile, the beverage maker plans to re-franchise its capital-intensive bottling operations (over 900 plants worldwide) which will drastically reduce its annual costs. 

The company has had annual dividend increases for 55 consecutive years (since 1963). Management targets a reasonable 75% payout ratio over time and expects to continue to grow the dividend as a function of free cash flow. 

While the firm does need to invest somewhat aggressively in beverage categories of the future, Coca-Cola should have flexibility to keep its dividend moving higher along the way. From the company’s excellent credit rating to its recession-resistant portfolio (sales declined just under 5% during the financial crisis), support for the payout is solid. 

Meanwhile, investors enjoying Coke’s dividend can also expect below average volatility. During periods of maximum market fear, Coke shares tend to do even better. For example, during the financial crisis shares lost just 31%, outperforming the S&P 500’s slump by about 24%. The bottom line is that Coca-Cola remains one of the safest consumer staple stocks you can own if the economy hits a downturn and brings on a bear market.

10 Profitable Real Estate Side Hustles

Every day, you’re hustling. Maybe your hustle just isn’t enough to pay off those student loans fast enough. Or could use a few extra bucks to worry less about credit card bills. Or maybe you’re ready to buy an investment property but just need to scrape together a down payment and have cash reserves. 

It’s time for you to get a real estate side hustle. 

Many Americans have some kind of side hustle. A lot of these side hustlers have full-time jobs. Or they are looking to leave that full-time job and start earning passive income while they live the life they want on their own terms. If you’re looking to invest in real estate, side hustles can help you get there without making a drastic change to your lifestyle as well as get your feet wet in the industry.

Some of these side hustles require a little bit of cash to start, while others don’t. Some require a license and some training. Others require that you have great selling skills or killer connections in the industry.

But no matter where you are in your real estate journey, you can start making some extra money with at least one of these side hustle ideas.

Links to products are affiliate links and I will receive a commission at no additional cost to you. Thank you for your support!

Real Estate Side Hustles : License Or No License

Real estate is a massive industry. After all, everyone needs a place to live. There are dozens of professions that focus on the real estate industry and there are all sorts of opportunities for real estate side hustles as well. 

Some of the activities in the real estate industry require you to have a real estate license. The licensing process changes from state to state in the US, although most of the laws and rules are similar wherever you go. 

The licensing laws in your state are important to understand because you DO NOT want to be performing activities that require a license if you don’t have one. The penalties are big fines and possible jail time. 

Additionally, you want to be sure you aren’t putting your real estate license at risk by breaking state laws. The laws have all been crafted with consumer protection in mind and there are all sorts of ways where sloppy or unethical behavior can land you in hot water.

With that in mind, here are some real estate side hustles that may be worth exploring. It’s not a comprehensive list, but it’s a solid start. 

Related: How to passively invest in real estate

My Top 5 Personal Finance/Investing Books

I’m new to investing, what should I do? Where do I even begin?

Nobody starts out an expert, and even the best investors in the world had to begin somehow.

So how did the experts become, well experts.

Many got finance degrees, studied abroad and read a lot. Luckily for you, they have now all written books compiling their experiences, some being the best on investing and personal finance. They discuss what works and what doesn’t, so you don’t make the same mistakes they did.

There are so many great resources available to learn about the world of investing, business, and finance to include blogs, podcasts, and online courses. I feel the most long proven method is still by reading good ol’ books. I’ve spent a few hundred dollars per year on books, but I can tell you that they’ve resulted in countless dollars in savings and in current and future earnings. There really is no better return on investment.

Below is a list of my favorite books with a small description of each. I also have some of these in my Books section that have been that influential in my life to be recognized twice. Feel free to add some suggestions down in the comments as well.

(All of these links are affiliate links to Amazon meaning if you click through the site, I get a small percentage of it with no additional cost to you.)

The Total Money Makeover by Dave Ramsey

If there’s one thing I’ve never been accused of, it’s frivolous spending. Okay, that’s not completely true. I’ve got a gym membership only to use it a few times and I’m even guilty of have a gym memebership I didn’t activley use while having multiple free options on the military base gyms. However, I have worked very hard over time to be smarter about my spending, what some may people call financial prioritization. Still, I’ll be the first to admit that there’s still so much to learn about managing my finances especially budgeting. Dave Ramsey’s book, The Total Money Makeover, is packed full of helpful information on this subject.

This is a book about money, but what you won’t find in these pages is any kind of get-rich-quick scheme—Ramsey emphasizes that there is no secret way to building wealth. Instead, it takes both dedication and time. You must work for it—hard.

Unfortunately, we are not born with an innate skill on how to manage money. But that is not an excuse for poor money habits and avoiding the necessary steps to educate ourselves properly.

For those who have bad money habits, are swamped in credit card debt, or would just like to improve their budgeting skills, The Total Money Makeover is an extremely rich resource (pun intended). It provides a transparent plan on getting out of debt and lays out exactly how to revolutionize your finances. Ramsey points out many dangerous money myths and how to avoid falling victim to them. Throughout the book, he provides a step-by-step guide to achieving financial well-being.

No matter how much you know about handling your money, there’s always more to learn. If you think your budgeting skills could be even a little stronger, you owe it to yourself to check out Dave Ramsey’s book. You won’t regret it.

Cash out Refinance to Buy Stocks?

A cash-out mortgage refinance allows you to borrow more than you owe, against your homes equity, and keep the difference as cash. Taking out a Home Equity Line Of Credit (HELOC) is another way. 

Normally the most you can borrow from your house is 80% loan-to-value (LTV). So if your home is worth $1,000,000, and you have a $500,000 mortgage, the most you can refinance would be $800,000 and receive $300,000 in cash, and this money is tax free because it’s a loan that you will have to repay but can be very powerful in building a higher net worth or passive income. 

Cash-out Refinance To Buy Stocks

With the coronavirus and other factors, the 10-year bond yield and 30-year bond yield have both fallen to new all-time lows. The 10-year bond yield is now below 1% after the Fed announced a surprise 50 bps Fed Funds cut. More Fed rate cuts in the future are very possible as well.

With many investors cash heavy and unsure how the stock market will perform in the short term, many are turning to other vehicles to hold their wealth. This should help slow any major swings in real estate prices, as investors buy into investment properties. And rental prices even through 08-09 were much less affected than housing prices and the stock market. Some may take this time to do just the opposite and free up money to buy into a depressed market and get stocks while they are on sale. 

If you are thinking of doing a cash-out refinance to buy stocks, here are some of my pros and cons.

Pros Of A Cash-out Refi To Buy Stocks

1) Lock in massive outperformance. Let’s assume the S&P 500 is down 10% for the year when you purchase stocks. You would be able to lock in 10% outperformance on your cash-out capital. No matter whether the S&P 500 continues to go down or up, you will always be outperforming.

Although it’s great to make money when it comes to investing, the next best thing is outperforming the index or your peers. If an active fund manager were to outperform his benchmark by 10%, that would plave him in the top 1% of active fund managers. Given this performance, he’d probably get a huge bonus and attract a massive amount of assets and new investors.

To gain true wealth, you must outperform the average, otherwise, you’ll always be just average. 

Related: How to Passively Invest in Real Estate

2) Take advantage of all-time low interest rates. The Fed cuts interest rates to make money easier to get and increase economic activity. The lower interest rates go, the more people and businesses tend to borrow to buy equipment, property, goods, and services. Doing a cash-out refinance to spend is in line with the Fed’s desires. 

If inflation is running around 2% and you can get a mortgage rate at 2.425%, your real interest rate is only 0.425%. The lower the real interest rate hurdle, the higher the chance of earning a greater return. From a nominal return basis, the 2.425% mortgage interest rate drag on returns is comparable to paying a traditional wealth manager to manage your wealth or investing in a hedge fund which charges 2% of assets and takes 20% of profits. 

Everybody should consider refinancing their mortgage today. But not everybody should be doing a cash-out refinance. 

3) Diversify net worth. If you have a large percentage of your net worth in real estate, you may want to do a cash-out refinance to diversify your net worth. Note that your real estate exposure will only decrease based on your increased exposure in stocks. Your absolute real estate exposure won’t decrease since you haven’t sold any properties. You just have more debt.

4) You could get a tax deduction. The mortgage interest deduction may be available on a cash-out refinance if the money is used to buy, build or substantially improve your home. In general, homeowners who bought houses after Dec. 15, 2017, can deduct interest on the first $750,000 of the mortgage. Claiming the mortgage interest deduction requires itemizing on your tax return. As always, verify your situation with your accountant. 

How To Get The Lowest Mortgage Interest Rate Possible

Refinancing a mortgage today is a smart move with interest rates having fallen to 6-year lows in 2020. With trade war tensions with China, Oil Price Battles, and COVID-19 wrecking many people’s ability to earn normal wages, the 10+year bull market in stocks has ended.

Lending standards are also strict with ~740 being the average credit score for denied mortgage applicants in 2020. With these higher lending standards, I feel confident that the next housing market correction won’t be nearly as bad as the last one.

Mortgage rates are still historically low and you may have plenty of loan options, but take some time to figure out whether refinancing is your best move right now. How long you plan to stay in your home, your financial goals and your credit profile all play a role in your decision about whether — and when — to refinance.

I’ve refinanced one mortgage which was a 5/1 ARM loan and currently refinancing my VA loan through the VA IRRRL (Interest Rate Reduction Loan). Here are my strategies for how you can get the lowest mortgage rate possible.

How To Get The Best Rate Possible

1) Question your existing mortgage lender: The easiest course of action is to ask your existing mortgage lender if they can lower your mortgage rate. After all, they don’t want to lose your business to a competitor.

2) Shop around online: A great option is Credible, a leading mortgage comparison marketplace to see what their lenders could come up with. I like Credible because they provide real mortgage quotes from pre-vetted, qualified lenders who are competing for your business. Within minutes of filling out the application, I was contacted with mortgage rates between 2.75% – 3%.

3) Track down your old mortgage officer: The mortgage officer who first helped you refinance your loan might have moved elsewhere. If so, track him or her down and tell him or her you’d like to do business.

Mortgage officers at new banks would love to win over business from their old bank. As a result, they may often given you a better rate. It’s worth starting a new application with a new bank so you have something in writing to negotiate with your existing mortgage lender.

4) Ask about multiple accounts: Banks are all about cross-selling you products. Not only do they want to refinance your mortgage, they’d also love for you to open a savings account, a business account, an investment account, a Home Equity Line of Credit, and more.

You want to dangle the carrot by telling the lender that if they match or beat a certain rate, you plan to open up several new accounts. As good faith, you can open up a simple account such as a savings account, especially if they have a promotion.

Banks want sticky clients with multiple accounts for cross selling and revenue generation purposes. There is no legal quid pro quo that banks can use to get you better terms. But every big bank has a tiered client system in place where clients with more assets get better access, rates, and benefits.

What to do During a Stock Market Crash.

Are there Benefits of a Bear Market?

Cheap Stocks = Massive Gains Over Time

If you act effectively, by not selling and rather continuing to purchase stocks, the more bear markets you experience as an investor, the higher the probability that you’ll retire with a bigger nest egg. Years of underperformance tend to be followed by years of overperformance and those years of underperformance present a great opportunity to purchase shares inexpensively.

Other Investors Are Scared of the Stock Market

A simple reason why so many investors and even professional money managers are scared of the stock market–in the short term is stock prices can seem arbitrary. Up one day and down the next, watching the ticker every second the market is open can cause one to wonder just what the heck is going on. 

In the short term, stock prices reflect all kinds of noise. The Fed Chairman says this or that, unemployment numbers come out, or more recently a virus spreads across the world, any of these cause the stock market to react in many ways. The point is that in the short term (About one year or less), stock prices are often the result of factors that do not necessarily reflect the long-term value of the enterprise.

When viewed long term, however, the market truly does reflect the underlying value of public companies. By long term, I mean really long term (10+ years). Stocks can be undervalued or overvalued for a decade. But given enough time, stocks will reflect the underlying value of the corporation that issued the security.

Boost your savings rate

A stock market crash can have a ripple effect on other areas of your life. For example, you may get laid off from your job, have limited access to credit or have a tough time getting clients for your side hustle. For these reasons and more, it’s important to be prepared and have cash saved up.

Experts recommend saving three to six months of expenses in an emergency fund, others as high as 12 months. While this may take some time, there’s no harm in starting to save more as soon as you can.

With increased savings, this will help you weather a storm if the stock market should crash. See last weeks post on maximizing savings.

10 Ways to Maximize Savings in 2021

You’re probably familiar with the annoying saying that “it takes money to make money.” There’s definitely some truth in it. The more money you stash away in investments that generate passive income, the more income you earn. The more capital you have to launch a business, the greater its odds of success.

What they don’t normally tell you is where to find the initial money to invest. That’s because it’s an answer no one really wants to hear: You have to live well below your means and save it. You have to maximize your savings rate, the percentage of your net income that you put toward savings and investments.

The price of building wealth is a high savings rate, which takes discipline. It’s not fun to drive a 5 to 10-year-old Honda while your colleagues and friends drive brand-new BMWs. But if you want to build true wealth, it’s time to get serious about your savings and start piling money into income-oriented investments that will make you truly rich, instead of just rich-looking to your friends.

How to Maximize Your Savings Rate

Boosting your savings rate is partially about budgeting but spending less is more a behavioral problem than it is a math problem.

Being able to use some of the tips below will help you spend less while achieving a similar quality of life. Some are about reducing wasted money, others about automating savings. All require a high priority toward accumulating wealth.

Remember, as you set about raising your savings rate, that it’s more about adopting a mindset than it is about any one tactic or action. If keeping up with the Joneses is a priority for you, don’t expect to ever save much money, because there’s always someone with a fancier lifestyle you compare yourself to, and try to keep up with.

A great book that goes deeper into this concept of keeping up with the Joneses is The Millionaire Next Door. Which is an excellent read and will make you realize how much you and those around you are hurting their long-term wealth generation for things that don’t actually make them happier. 

Start internalizing a desire to build real wealth. It takes patience, time, and discipline, none of which is sexy. But there’s no more effective way to build long-term wealth than by investing every possible cent in high-ROI investments and letting the returns compound.

Saving more money doesn’t have to be about cutting your daily coffee(my favorite coffee death wish for you kcup users), feeling guilty about spontaneous buys, or trying harder. Before you start slashing expenses left and right, start with these three steps to set yourself up for successful saving.

  1. Recognize that saving is not about more willpower. You may have tried and failed to save money in the past. If trying didn’t work then, don’t expect it to work now. Trying harder to save, or summoning more willpower to save, is not going to work. If you’re serious about saving money, putting systems in place that help take the emotion and effort needed to make it easier for you to save is the way to go.
  2. Be realistic. When planning on how to save or how much money to save, set realistic goals. For instance, if you eat out most nights or buy a daily morning coffee, you don’t have to go cold turkey in order to save money because your not as likely to stick to it. Making gradual changes over time to your habits will make it more likely that you’ll stick with them.
  3. Automate your savings. Automating your finances is the best step you can take to save money with ease. You can have your employer funnel your money to two accounts instead of one, have your bank automatically move a small amount into your savings account every month, or set a Goal specifically for saving with your simple account. Whichever you choose to do, the idea is that you have money you want to save monthly automatically funneled into a place separate from the rest of your money. Automating your savings makes it effortless to grow your savings and more difficult to spend the money you’ve saved.

Dave Ramsey vs Robert Kiyosaki- Is either right or wrong?

Let’s compare two highly successful, well-respected financial entrepreneurs and their respective stances on debt: Robert Kiyosaki, author of Rich Dad Poor Dadsays that there is such a thing as good debt – or debt used to buy money-generating assets like rental properties and businesses. 

 Dave Ramsey,  radio personality and author of The Total Money Makeover, teaches followers to avoid debt altogether. Both agree that  debt carried on credit cards and cars is bad debt, because these things only make us poorer.

Kiyosaki is not completley against using credit cards, but says that balances should be paid in full every month.

While some see Ramsey’s stance on not using credit at all as extreme, the fact that the Federal Reserve estimates that almost half of U.S. households are unable to pay their credit card bills in full each month, and that these households owe more than $800 billion in card debt (about $15,000 per household), lends itself to the idea.

Ramsey proposes using mutual funds as a main investing vehicle for retirement, and is also a self-admitted lover of real estate as an investment, but only if one uses cash to purchase instead of mortgaging. Kiyosaki advocates leveraging and using real estate as a primary builder of passive income and wealth.

Both programs have worked for millions of faithful followers. We could easily leave it at that, but in finance, just as in many other things, we tend to project what we know to be true on others. This is where things can get distorted.