As creatures, we always strive to look our best. It shows respect, dedication, and effort. First impressions do matter and to an extent, othersâ opinions are crucial. Thereâs nothing wrong with it until it drags down the balance sheet and we find we are living for strangers or 99% of our unknown followers.
After two years stuck at home, itâs not as convenient anymore to get ready. We canât take the genie out of the bottle. Weâve discovered both sides of working and hybrid seems to work best for most. Work is just one component of life. It doesnât have to be who you are, it is what you do and hopefully, enjoy doing for 80% of your waking hours.
Convenience in terms of attire and style has shifted. Business on top, party on the bottom have seemed to be the norm. Just donât get up during the Zoom. Yet wherever we go, thereâs always pent-up demand somewhere. Thereâs something relentless about the human spirit and in particular our obsession to still please.
Itâs pretty upsetting to some degree. We are willing to go to extreme lengths such as owing 20.3% credit card debt on luxury goods simply to impress strangers on the street or stretch ourselves to extreme measures to buy a certain outfit that we must decide whether to put food on the table, where to sleep or pay for medicine.
One of the best financial hacks Iâve learned over the years is to fool ourselves. Not in the usual way that is sabotaging ourselves already but rather to hide our paycheck. The higher the number, the likelier you will and must upgrade your lifestyle. This soon causes an inflationary lifestyle bubble that is bound to burst at any moment. The more you earn, the more you are living on the edge and betting against how long you can last. The action of not revealing to yourself your entire take-home pay, especially the higher marginal tax bracket you are in, the healthier you will be.
If you tell yourself you are earning X in adjustable gross income, it will seem safe. Donât ever stay complacent in the markets or in your financial portfolio for this reason.
As they say, itâs not about how much you make, itâs how much you keep. Fooling yourself is advantageous here. It entails telling yourself you are earning less than you really are. After your employer-qualified earned income is invested to the max into your tax-advantaged retirement accounts and deposited for health and disability insurance, the rest is for you to keep.
You have 3 main choices:
1- Invest in your brokerage account
2- Save as much as you can and the rest will be placed into a current negative yield savings account due to inflation and rock bottom interest rates
3- (Most Dangerous yet Easiest) Spend it
Sadly, the national savings rate plummeted back to pre-pandemic levels of 2% percent in November 2021. At the height of the pandemic as turmoil and uncertainty were brewing, as expected Americans were too and saved as much as 50% of their paycheck, a level not recorded since the Great Depression.
Shop Till You Drop?
As interest rates are poised to rise with the first-rate hike in March, savings, cash, and liquid securities will become more appealing for a capital preservation strategy since yields will inch higher yet for now, investing in a diversified fund is certainly a better option than spending or saving for that matter.
But we cannot forget that spending is necessary. We cannot live without it and thatâs the point of our earnings yet if we cannot control ourselves as half of Americans are unable to due to a lack of financial literacy and 150 million report feeling anxious and refrain from tackling their finances altogether, spending should be at the bottom of the list especially the more you make. Although it tends to be the opposite.
All in all, saving as much as possible from your paycheck and reinvesting it into the market in a low-cost efficient diversified ETF is much more prudent than investing in individual stocks that are volatile and that can fluctuate your entire portfolio based on any news or proxy report. Too many unknowns can arise so prepare yourself best by knowing what you can control which starts with taming your ego and blocking out half your paycheck and letting it work behind the scenes instead of spending it in front of your eyes.
Legit Problems
Everyoneâs problems and concerns are valid. We all have our own reason for being down in the dumps but not about our financial problems. One of the greatest doors financial portfolios managers get to open is into peopleâs balance sheets and rarely if not at all do managers report theyâve had a client who is in tip-top shape.
Isnât that crazy?
Unexpected to say the least. With all the guides, webinars, podcasts, sources, articles, Jim Cramers, Reddit Forums, social media threads, financial jargon, that is all around us, and money is involved in everything we do and cannot be avoided yet when it comes to handling our own finances, Americans feel domestically stuck.
From the outside, this seems untrue until you visit any coastal city and the physical proximity between classes is appalling and at an extreme level. America is the wealthiest country in the world with the most billionaires and cheapest land, tech hubs, incredible talent, and innovation, yet we are behind when it comes to democracy and balance.
The gap between the bottom 90% and the top 0.1% has grown tenfold in the last 50 years. The Giving Pledge, an effort organized by Buffett and Gates to donate over half of oneâs wealth isnât enticing enough and the loopholes in the tax system are billionairesâ first resort. Priorities and mindset are off. We are fending for ourselves in this capitalist society. It produces great prosperity and opportunity but doesnât distribute it evenly.
We are what we become.
In order to feel in control of your balance sheet, you must produce healthy recurring positive cash flows. The fascinating thing about most millionaires in this world is that they DID NOT come from Silicon Valley or Wall Street. They may have produced intellectual property or created a product but the majority of them played the long game. After hitting a certain net worth of roughly $50m, you can credit almost half of your success to luck, timing, and connections.
They aggressively saved, invested, prioritized their time, the investment in themselves, became educated, built up equity in their first primary residence, got lucky, made an effort to meet people, stayed consistent and slowly grew their wealth and didnât touch it for at least 5+ years. Thereâs no secret sauce, itâs just a path that doesnât look appealing enough to TikTokers and Millennials due to the time commitment.
Reduce your liabilities, increase your alternatives, investment positions, and holdings, and own more assets that you can ideally depreciate as you appreciate, most evidently found within real estate. These are true luxuries that build up behind the scenes and return a pot of gold down the line that you may not even feel the urge to sell since the process became more enjoyable than splurging with it.
Those who are stuck financially arenât willing to think about their future selves. They are warped up in the meme frenzy and buy, no pay later quick schemes and accessibility are all around persuading them to get rich quick today instead of focusing on whatâs important later on.
What does luxury really mean to you? Itâs all driven by our ethos and principles. If you are waking up every day to prove someone else, itâll be impossible to focus on your path. Investing in your potential and portfolio starts with being a little selfish and foolish, the right way. Focus on yourself to drill down whatâs holding you back. Is it that loan on a car that you thought would look better in your garage or a higher paycheck that is blindsiding you?
Invest and hide that paycheck away to earn more for you later on. What you donât know canât hurt you. Know you are worth it with what you have at your disposal. Too much of a good thing is bad. Although having a higher paycheck may sound like a problem everyone wants, itâs the situation that gets too many in trouble and turns them into a HENRY (High Net-Worth, Not Rich Yet) facing downhill.
Less than 1% of people in the U.S. have more than $1m in their retirement accounts. This is a sad truth. If you follow the ~4% withdrawal rate, with less than a quarter of a million dollars investment, you must fix your spending habits now or else treatment will be even more expensive than it is looking already.
Retirement is the most expensive period of our lives for a reason. No matter how much you may be earning now, how does your lifestyle add up later on? Will you really appreciate or want it? The most common dangerous lifestyle is one that keeps up with rising income. It shouldnât rise since it wonât get better. You are then associating your happiness and fulfillment with your paycheck and how much more you can attain instead of what you can already be appreciative of.
Thinking two steps ahead is the name of the game. Not just in football, but for your finances, something that will always need a revised game plan for life.