There are a lot of problems, questions, and false assumptions we have about managing our money.
We donât know where to start and if we are doing anything right because the internet has only made our lives more complicated.
Tech hasn’t necessarily simplified it and given us straightforward answers.
Although Iâm a teen, at 13 I already started investing and trading.
That might sound like a terrific head start.
But of course, as we are always our worst critic, I still feel behind.
I didn’t seize the opportunity.
The biggest advantage we have when we are young is time.
It is the only thing you cannot buy or have more of and is what everyone is chasing for yet we have no idea what to do with it anyway since we waste too much of it without realizing.
The problem with entrepreneurship, passive income, and the idea of generating wealth is that it really doesnât come easy.
We assume that making money is quick and ubiquitous.
Yes, it is found in quirky, ordinary places and there are opportunities on almost every site from Grubhub to RocketOutreach, but the problem with those outlets is that most people flock to them for quick cash, not sustainable assets they can grow.
It’s like winning the lottery.
It is proven that the poorest people who win blow it all becuase they are so excited.
Same thing with quick cash.
Might as well not earn it in the first place becuase you don’t appreciate or envision the impact of its growth.
The secret for building wealth has always been the same for hundreds of years and we have the power and patience, but most of us donât want to utilize it.
âSuccess is neither magical nor mysterious. Success is the natural consequence of consistently applying the basic fundamentals.â -Jim Rohn
There are several problems and reasons as to why we donât like to talk about personal finance.
It is seen as a taboo subject and that is the main problem.
It makes cents that we donât want judgment on how much we make and live our life, but if we are able to let go of those assumptions, we can learn and achieve so much more.
Since our self-worth is tied directly to our performance, any failure is proof we arenât good enough.
Outside
I tried rejection therapy a few years ago after realizing how much social media is controlling my life and had my ideas of wealth messed up.
Whenever I saw someone in a beautiful car or swimming in their backyard pool, I couldnât help feeling jealous.
No matter how many times my parents told me that those folks living their fake glamourous life could easily be in debt, taking out loans to impress others, show off and possibly in deep trouble inside, it was hard to convince myself this was true since no one talked about it and they were very good liars.
Whenever we think of someone in debt we usually associate with sad, students trying to pay off their student loans spending day and night crunching numbers in their 500 square ft apartment.
Never with the same image as a financially free individual.
That’s what’s so dangerous about money.
It can change what we look like and a great advertising gimmick and inhibit what’s really going on.
So with this therapy, I intentionally placed myself in situations where I would look foolish to overcome this fear of rejection and not feel jealous any longer.
Some activities included to ask people if I could sit at the same table as them or make sure I told them when they parked their Rolls Royce that I wish I was them.
After 2 years of consistently tiring to do this almost 5x a week, I became the most confident I had ever been but most importantly, appreciative of what I had.
Our versions of building wealth are all wrong.
Investing is not gambling.
It is the stock market and although based on emotion and the news cycle, it cannot be influenced by our excitement.
It isnât a game but rather your future.
If you want to accumulate your wealth, you cannot live in a high-status neighborhood.
You need to create login lasting habits not short-term lousy ones that don’t get you farther.
Trying to âlook richâ and âKeep up with the Jonesâ will keep you broke.
Stop distracting yourself with people so you can actually build that wealth.
When you are impressing others, the hard workers are at work.
They don’tâ spend a second looking at what others have because they know someone can always have it better.
Same thing when I’m on aosical media.
I only use it for 2 things.
To produce content and look for new customers or ideas.
I don’t bother being a consumer trapping myself with other people’s fantasies that they chose to post on purpose, not by mistake.
When was the last time you felt good about scrolling down that feed?
Never so don’t do it in real life either!
Stay in your lane.
Reality, Reality-TV
Thomas Stanley, the author of The Millionaire Next Door and his team surveyed hundreds of millionaires and discovered most of them led simple, frugal lives.
The principle is: building wealth usually looks simple, even boring.
Stanley found some fascinating trends:
1) A typical American millionaire never spent more than $399 on a suit for himself.
2) Over 95% of millionaires have 20% of their income entirely in stocks.
3) 85% were âself-madeâ and didnât work a typical 9â5 job.
How I Can Be Expensively Cheap
Determining the fine line between being frugal and what and what not to spend on is difficult.
We all wish we were better savers and spenders but when it comes down to hanging out with your friends and staying healthy, peer pressure comes into play and the media only perpetuates this bad behavior of throwing money away.
Since my family are immigrants, theyâve instilled in me that we really donât need much to enjoy our lives.
Being appreciative, patient, and realistically pessimistic will get you the farthest rather than always chasing for the next paycheck, scrambling to find the next tech unicorn, and being too positive about the future, leading you to live off of food stamps and be bankrupt in the future when a pandemic or an out of pocket expense hits.
By no means am I to tell you what you need in life but as someone who hasnât eaten out throughout this pandemic, hasnât contributed to the boom in e-commerce sales (except for toilet paper and necessities) and worn the same shirt all day for a week, of course, I have several pairs but technically I don’t bother on wasting money on something different waist down for Zoom, I couldnât be happier.
The pandemic has secretly been a blessing in disguise for me because Iâve first off, gotten over 30 hours of my time back from no commuting, cooked, and become healthier in my own kitchen, and gotten back to the basics of simplicity and routine, the way I like it.
I see countless of my friends have this excuse simply because they are teens: “We have parents that can take care of the expenses and bills. This is the time of our lives.”
I understand you want to take advantage of your age to still have fun while it lasts, but setting up poor habits today, will result in major losses, burnout, regret, and sabotage later in life.
For most readers on here, Iâm assuming you are older than me so Iâll make this most relatable for you.
Understand what you use the most, what brings joy, and spend the majority of your day doing.
Next, I would certainly invest more money into these things becuase they allow you to produce more value for people, work harder, and give yourself a break.
Of course, if you enjoy partying and drinking, I would transition to something healthier such as healthy snacks or reading, but with everything else enjoyable such as taking walks outside or spending time with your kids, make sure they are enjoying your presence too.
Make those memories.
Invest in better shoes so you donât have to be charged thousands for an injury later on in life and get a good board game and camera so you can take those prized photos of you and your kids to reflect on.
That is worth it but it is different for everyone.
Limit things in your life that make you unhealthy, sick, jealous, unhappy, and less grateful.
Our health and financial well-being are the most important things in life that we need to know so in order to keep them in check, it is easier to get rid of the things that we donât need that the things we do need.
Investing With Nothing
Many low incomes, suburban families, immigrants, and frankly anyone without exposure or education on financial literacy.
The US ranked 14th when it comes to the percentage of adults who are considered financially literate at 57 percent.
This isnât horrible but pretty bad since the richest 1% hold about 38% of all privately held wealth in the US, while the bottom 90% held 73.2% in debt.
The richest 1% own more wealth than the bottom percent according to ot the NY Times and the income disparity gap has only gotten worse during the pandemic.
The rich are getting richer and the poorer are getting poorer.
So how do you rise from the bottom and actually start making additional income with no time, resources, education, support, or risk tolerance if you are at the lowest?
First off, everyone takes risks and is part of the game if you want to make progress.
Riskâs return = progress.
You cannot achieve anything more or better than what you have now without embarrassment and making mistakes.
Sure, you can be risk-averse all your life and lose your money due to inflation sitting in your savings account, but will have less profit in the future.
But in that case, Iâm presuming you are keeping your wealth in a savings account not because you are lazy but rather for an emergency fund and that is perfectly fine.
Starting Poor and Small
But for those who donât know what in the world that is, hereâs where to start.
I completely understand if you are living below your means, need to support your family, as a blue color worker being paid by the hour, and just donât have the time or energy to invest.
You cannot afford an advisor or pay for an education.
That can be a very difficult and sad situation but it isn’t the end.
It never is unless you want it to be.
But first of all, complaining you have no time or resources is wrong.
If Bill Gates has time to read, I donât even know how many books he reads, Iâm assuming over 50 per year, you surely have time to learn financial literacy for a max or 10 minutes per day.
Over a span of a month, you will learn more than you wouldâve in a year at school.
Plus, at school, they donât teach this so youâre in better luck.
Plus, just with an internet connection, you have an advantage.
Where you live provides you an advantage.
Who you know, your age, what you can find and your grit is an advantage.
Having money isn’t an advantage from the start.
It’s an excuse.
If you have more money to start a business, it doesn’t mean your business will grow bigger than one that had to take out a loan.
Money is a path to an easier gateway to losing out on great opportunities becuase your ego is tougher.
So how do I actually utilize that power of my advantages that I cannot see?
Let’s say you live in the Bronx. Not the best neighborhood but I’m sure you have internet to read this. Okay, you might not be able to pay for college or get an internship on Wall Street or connect with like-minded students but there are other roundabouts to get to that same place.
Take a U-Turn.
Stop wasting your time on Instagram and Facebook filtering your photos.
Stop being a consumer and rather a producer!
On the internet, create a LinkedIn, watch Youtube and be strategic!
There are so many ways you can get farther in life these days than your grandparents and it is much easier too.
Complaining will get you nowhere.
There is nothing holding you back unless you think that way.
Okay now, what?
You did some research, know what a diversified portfolio is, your risk tolerance, saving 101, spending 101, how much cash you should put aside for an emergency, and how to plan for retirement.
The key main things I would say you should know first.
Great!
You are already one step ahead of about 60% of Americans.
Now accept that risk is part of the process.
You cannot be risk-averse in investing.
That is just impossible.
The upsides of investing are:
-Another income source
-Passive income
-More opportunities = wealth?
Itâs up to you what you do with your wealth but essentially it is a security blanket!
As a result, even if you are living paycheck by paycheck scrambling what you have, the biggest billionaire investor feels the same way.
In fact, the more money you have, sometimes the less strategic you will be because your big ego telling you you have a lot and never lose anything so as a result, you take bigger bets!
Yet, this is not always true because billionaires tend to have more experience and financial literacy since they must have known something to get to that position but who knows!
While trading they may be intoxicated or have an advisor making decisions on their behalf without consulting them first!
The point is, anyone can lose out.
The billionaire can lose more money since they have more money that’s given away.
That isnât to say that the poor wonât lose much because they certainly can if they invest a little bit out of their salary.
$1k is a bigger percentage of their overall net worth for the poor than a billionaire but donât think you need to be a part of this exclusive club with over 100k in assets to invest.
Software, applications, and just the prevalence of technology have allowed even 10 years olds (not recommended but it is a great place) to start learning how to invest.
When starting out, if you are definitely wary of not having enough money to invest, I wouldnât recommend getting a physical advisor, and by physical I mean human since there are Robo-advisors.
They charge immense fees upwards of 3k per month which my family pays for since time = money and weâve decided that at the moment, we want to test out if an advisor can manage our money better than we can and we’ve gotten to a stage in our life where we can afford that.
I would either start with a Robo-advisor or youself.
Plus, they are objective! Your parents aren’t!
Robo-advisory Fees can go up to 2% of the AUM(Assets Under Management) but overall it is a low-cost solution for investors who are getting started.
These Robo-advisors are found everywhere from Charles Swab, Fidelity to Vanguard.
It will take you less than 15 minutes to search for one and get started with a personalized quote.
Robo-advisors charge an annual fee equal to a small percentage of your balance.
The industry average is about 0.25%.
So, if you invest $10,000, youâll pay $25 a year.
Thatâs not a lot of money, but it begins to add up if you amass hundreds of thousands of dollars so be wary.
If you are really cautious, I would stick with managing it on your own but that doesn’t mean make investing a game.
Remember, it SHOULD NOT be fun! (Exclamation not for excitement but rather for emphasis!!)
It is your money that you are saving for.
Not Las Vegas.
Robinhood is a good place to start or Acorn but will only accept up to a certain amount since it isnât fully-fledged investing a lot of money.
I use Personal Capital (not sponsored or affiliated at all).
They do an excellent job (for free) to show you a snapshot of your treatment goals (yes I know Iâm a teen but I like to plan early. Earlier the better!), cash on hand, overall portfolio, and a great overview of everything!
Robo-advisory fees are low is that they typically invest in index funds or ETFs, not mutual funds that are actively owned by a physical human manager.
Reminders:
-If you are younger, remember you can go for more risk because of your time horizon.
-One misconception and this is very tempting is to sell when something is cheap.
You never want to do that because you are investing for the long term, not the short term!
Sure, Dow Jones, today was down by 900 points because everyone is selling based on fear of new COVID cases in Europe and in teh states nad election volatility and fear but if you keep your investment in the long run, as hard as this may sound, you will make a profit in the long run.
Think about it in 10 years.
You might even forget this virus, probably not, but your investment will, and they will grow unless it is Kodak or Blackberry in that case, run for your life!
Money Habits
There is this misconception you need to have thousands to make hundreds of thousands and more.
For many people, they donât want to take that risk.
You have to start somewhere, and starting small is a great place.
Go big or go home?
Not really in the market.
Building wealth is developing good habits.
Budgeting, putting away money for a rainy day fund, or saving up for a vacation.
It doesn’t happen overnight.
Same thing with investing, that’s why it is closed. Jk!
You can always find money to cut back on because the value of the amount of stuff in our home is spectacular and we donât even know it.
There is around $500 worth of stuff that if sold today, you could get that much on average.
Investing is having money work for you.
You donât need much to start.
By investing as little as $100 a month and if that is extreme, $10 a month you in a high yield savings account or ROTH IRA you can make a staggering amount of almost a million by retirement simply through the prized method of compounding, earning interest on your interest.
Save first, then invest.
You cannot do the opposite.
Now you can invest as little as $1 with no trade commissions.
In the past, stockbrokers charged commissions of several dollars every time you bought or sold a stock. If you want to invest in a high-priced stock like Apple, for instance, you can do so for a few dollars instead of shelling out the price for one full share, which, as I write this, is around $370.
Public (not sponsored or affiliated at all) does a great job of this through their investing app, offering thousands of stocks and ETFS with no commission fees.
You purchase stocks through slices so no need to put down thousands of dollars ot be a shareholder.
Other Unthinkable Options!
Another option besides the stock market is real estate!
If you are desperate and not able to afford a cheap place and do renovations on it, rent out part of your house.
The basement or a separate floor preferably since no one wants to live in the same common room with a stranger.
Real estate is one of the best ways to accumulate wealth and have another steady paycheck per month through a tenant.
But it isnât as easy as finding people who would pay.
You certainly need to do your due diligence with background checks and making sure they will not default on the payments or charge them a fee if trash the place, but especially for college students, they are willing to rent any palace if it’s affordable and somewhere close to work or school!
If youâre on a tight budget, even the simple step of enrolling in your 401(k) or other employer retirement plan may seem beyond your reach.
But you can begin investing in an employer-sponsored retirement plan with amounts so small you wonât even notice them.
The most common but also hidden one from your job:
This is one step that everybody should take!
For example, plan to invest just 1% of your salary into the employer plan as a 401K to save for retirement.
Last Option:
US Treasury securities are great when startign out.
Youâll never get rich with JUST these securities, but that’s what a diversified portoflio is for!
It is an extremely safe place to park your money and earn at least some interestâuntil you are ready to go into higher risk/higher return investments becuase they are savings bonds.
There you can buy fixed-income US government securities with maturities of anywhere from 30 days to 30 years in denominations as low as $100.
Passive Income Disputes
We can all agree that generating passive income is incredible.
You make dough when you are sleeping, playing tennis, and on Christmas Eve but most of us don’tâ get into it because of an internal factor.
OURSELVES.
It has nothing to do with the amount of money, resources, or place you live in.
It has to do with your grit and patience.
Emotion is built into the stock market.
This isnât great since it is impossible to time the market and no matter how much experience you have, you still won’t be able to plan for the unexpected.
But emotions are important and can come to your advantage when you can identify them when generating passive income.
For example, when creating a YouTube channel, you do a ton of work behind the scenes that isn’t even imaginable!
A 10-minute video usually takes 5x the amount of time.
First, you must come up with the idea, script, know what you will say, lighting, get ready-nice outfit, makeup, etc, film, edit for 1-2 hours and thumbnail!
All of this adds up!
Just because it’s a 10-minute video doesn’t make it easy and thatâs what we all think.
We are looking for easy escapes like Grubhub but they don’t last.
We want to get started with something because we assume it is only 10 minutes of our time.
Once we understand that it is roughly 5 hours for 1 video and no returns right away, we bailout.
Those are the worst qualities to have as an investor, money maker, and hard worker in general.
Entrepreneurs have that frame of mind that they know they might be wasting their time or not but are putting that investment to possibly see incredible returns in the future.
Even Amazon didn’t have profits for 10 years when they launched!
Would you have the patient to endure that?
If so, you should also be okay with failure because it has also been a learning process as well.
I would rather regret the thighs I didnât do than the things I did.
Everything requires patience and stamina.
Donât expect to be Labron or Cuban in a year.
It takes constant dedication, embarrassment, failure, mistakes, and stupidity to get farther than everyone else but most people arenât into that.
How Many Accounts to Have?
Now, you could be searching for days on how many accounts, brokerages, managers you can have for everything but you still have no clear answer.
The thing is, everything is personalized in finance.
Hence, personal finance.
A 16-year-old boy can eat 6 burgers and a shack and probably not bloat or gain a lb as easily as a 30-year-old man with the same diet because of his slow metabolism.
Your risk appetite, short and long term goals all depend on how much you want to save up.
If you know you want to go on a nice vacation in the next month (wouldnât recommend these days unless by car) or for a car(cheaper the better, they lose their value the moment you drive off the lost. Don’tâ impress others), then I would recommend having a decent amount of cash on hand.
But for larger purchases that can be long or short term such as buying a home (great low mortgages rates now, would recommend) and have extra cash on hand to take out a loan and there is nothing wrong with taking out a loan on a house because it is an appreciating asset.
Never take out a loan on depreciating assets such as luxury goods, tech, clothes, unless you can resell it for a HIGHER not LOWER price.
It is still considered depreciating even if you see that Gucci bad for $100 less you bought it 10 years ago.
The last savings account I would have is an emergency rainy day fund.
Currently, my family is pretty risk-averse.
Theyâve always been this way so we have roughly half a million in savings.
Before you bash at me let me explain.
My family is looking into buying an apartment for me near NYU which is practically the cost of our savings with a down payment and then mortgage so a little less but practically all.
But we also have and always need extra for an emergency.
It is better to be safe than sorry.
Better be earlier than late.
Even to those Zoom meetings.
It is best to plan for the worst during the best time instead of in the worst when it happens.
This way you wonât freak out and have to tap into your retirement accounts when the emergency comes.
Itâs already prepared and relax when people are stressing becuase of their poor decisions on the sunny days.
This might seem like a lot of cash my family has losing its value due to inflation yet realistically it is necessary because we would be in a worse situation and could not sleep at night if we didnât have it for the reasons mentioned above.
Additional Planning + Savings For Special Cases
If you are about to have a child you want to set up a 529C plan for college.
Since tuition only rises each year since there is no reason to lower it (even though that would be nice) I would expect to put in double the amount of what a traditional in state school would charge today depending on when your child will be born.
Lastly, your retirement.
Retirement is a big deal becuase you are back to where you started as a child.
You are living for free and not making money only living off of what you saved.
In order to plan, you must save throughout your life because you can.
The older you get, the less convenient it is to live with 3 roommates and eat Ramen.
But Iâm defiantly not saying you have to punish your whole life to live happily ever grandma when you are older.
Find a balance and put yourself on the right track early.
And that will be accomplished with savings.
Unless you have another dream of starting a business or moving to Paris, you have to allocate respectively for those events. But these are the most common reasons.
The Rich Debate
âNo one is ready for a thing, until he believes he can acquire it. The state of mind must be BELIEF, not mere hope or wish.â -Napoleon Hill
Think of the most common financial advice youâve heard over the years. It probably includes recommendations like:
-Save your money
-Pay off your credit card every month
-Your home is your biggest asset
-Get a good job with a good paycheck
-Diversify your portfolio
-Be frugal
-Donât take big financial risks
But according to the worldâs most influential financial books, this advice is wrong.
Although this traditional advice helps millions achieve financial freedom it is actually what differentiates the top from the mediocre.
The ideas are usually based on being too optimistic and risk avoidance, something that needs to be achieved as we alluded to earlier.
Instead they:
-Value education
-Evaluate their risk tolerance and see what they can bet on
-Look long term never short term becuase there will always be volatility
-Have patience and grit
-Donât have fun with your investments, have fun with them working for you strategically
-Stay in their own lane. Know what works for you
Woah!
This has definitely been a lot but I hope I have helped simplify, define and reconsider some of your questions about this one topic that is not taught enough but the only thing we ever need to know.
Financial advice doesn’t change a whole lot so don’t be flustered and annoyed to keep tabs on everything that may be changing.
Stick to the basics and don’t be afraid.
Investing is for everyone.
Don’t believe becuase you don’t have money or the grass is greener on the other side it will prevent you from achieving what you want.
Learn to make mistakes and work in your best interest.
Impress yourself no one else.