The world will drown you with financial advice, thus I thought I’d take a moment to pare it down to the basics to provide a solid approach to improving your financial future.
Don’t work for money, let money work for you!
Step One:
Forget about how wealthy or poor you are compared to others. This isn’t about winning, it’s about improving your personal finances.
Step Two:
“Pay Yourself First” – this is a common phrase of financial advice so let me give my own definition of what this is. Paying yourself first is creating your own mini “comfort crisis”, you are giving up something now in order to have a better future. This means taking some money and investing it regularly. Perhaps every paycheck? Perhaps every month?
If at this point the only thing running through your mind are excuses of why you “can’t” then you have two choices. Either you start doing it (you can) or give up and accept your financial situation (and stop wasting your time reading this – go enjoy your life).
Step Three → Choosing your investments:
Where do you put your money? Keep in mind that almost every investment is a leap of faith.
Buy stock? That’s just a fantasy number until you actually sell the stock!
Put money in a savings account / CD? Guaranteed you are losing value because of inflation. But a high probability that you’ll actually be able to cash this in when you need to.
Buy real estate? Are you really buying it or are you just borrowing from another entity to place a claim on the real estate? Even once you have it paid for, you still have obligations such as property tax and maintenance. Also don’t believe the “common wisdom” that real estate always increases in value (it doesn’t). Again, this is a fantasy until you actually sell it (easier said than done!).
My suggestions:
First buy gold. This is your conservative bedrock. Nothing else has as long of a track record of being universally used and valued as money. When you need to you can sell it. Gold protects you from inflation. My advice is that at minimum 10% of your investments should be gold. Perhaps a maximum of 50% in gold. More if you are conservative, less if you are a risk taker. This is real gold, not some exchange traded fund that “tracks” gold. Consider that a large part of the reserves held by all Central Banks is a stockpile of gold!
I would advise a combination of physical gold that you have access to (stored safely somewhere) and physical gold held in a vault by a company such as Cybermetals or Glint. The big advantage of Cybermetals and Glint is that that they allow you to buy really, really tiny amounts at no penalty. Very flexible! Very easy to sell.
Stocks!
This is where you can make significant growth of your wealth… long term! Don’t “play” the market. Invest in solid businesses and enjoy good long term growth. The market will bounce up and it will bounce down, so avoid getting yourself into a position where you must sell when the market is down. Be patient!
Buy when the market is crashing (down) and if you wish to sell, then sell when the market is booming (up). But mostly don’t do anything, just let it sit!
What stocks should you buy? That depends on whether you are a risk taker or a conservative play it safe person. There are two kinds of stocks. Growth stocks gain in price, dividend stocks primarily pay out dividends but maintain a fairly stable price. You might want to buy some of each. If you don’t have good gut intuition and don’t want to pick stocks yourself, then hire a financial advisor, you won’t get great gains but you should do decently. My personal example is comparing my own investments vs my 401k that is managed by the financial company hired by my employer. Hint: my own decisions blow away theirs.
Think about what will be valuable in the future, what companies today are building that business? It’s also fun to “vote with your money”. Don’t like a company? Then don’t buy it’s stock. Want to support a company? Buy it’s stock!
Real Estate, the only real estate I prefer is to buy your own home. You’ve got to live somewhere, right? Typically this means borrowing a lot of money. Don’t buy for status, buy for comfortable living. Costs to maintain a home may turn out to be a lot more than you expected. An advantage of owning a home is that eventually you’ll get that loan paid down a good bit and potentially you can “downsize” to a cheaper home for retirement and obtain a good pile of cash (to invest to generate a retirement income).
But what about the coming apocalypse?
Remember that physical gold you have been hoarding? There you go, that’s your apocalypse wealth. Seriously, if a “Mad Max” scenario comes then you should have been prepping. You are prepping aren’t you? Building wealth is not the same as preparing for an apocalypse.
If you take anything from this article, take:
Start! Anything is better than nothing. Small efforts can yield large results (over time).
Invest in both gold and stocks.