You’re Doing It All Wrong (The Truth About Financial Freedom)

Budgeting your moneyYou don’t need to earn a lot of money to achieve financial freedom quickly. You just need to follow two simple rules:

  1. Live within your means (and)
  2. Invest the rest.

I’ve never paid myself more than $60,000 a year, I don’t live frugally, I spend $700 / month on food, entertainment and other stuff plus I donate $100 monthly. Yet I still manage to invest nearly $18,000 each and every year.

Isn’t it about time you make a spreadsheet, face your own truth and make some changes in your life? Take a look at mine and see how you compare, look for places you can improve and make decisions about what expenses truly bring you sustained happiness and which ones are holding you back from achieving your potential.

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Do Just One Thing Great in 2016

To all of my entrepreneurial friends, if you read just one book this year, I strongly recommend this be it.the-one-thing

After mentoring nearly a hundred entrepreneurs in 2015, and my going through my umpteenth own self-discovery phase, I’ve noticed one of the biggest mistakes made by almost everyone is a burning desire to do more. This is the not only the wrong approach to achieving success; as you gain momentum in different areas you continue to de-focus yourself and push yourself further away from achieving the potential that you are capable of in any singular focus.

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A Single Sacrifice Is All It Takes To Retire Early

necessity-vs-luxuryLast night I met with a colleague of mine who said she didn’t have any money to invest in her retirement. As it turns out, within five minutes I found several instances where she was believing her own lies. The biggest one? Her car costs as much as her mortgage… that’s nuts!

Mortgage ($810 mortgage + $140 property tax)
$950 / month

Car ($465 payment + $250 insurance + $240 gas)
$955 / month

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Preparing Your Net Worth Statement to Buy Investment Real Estate

checklist-628x363[1]In a previous blog (Get Organized Before Buying Investment Real Estate), I outlined a list of documents that anyone should have prepared before they seek financing for their real estate investment acquisitions.

One of the most important documents is your “Net Worth Statement”. In the last year I’ve had the pleasure of reviewing dozens of these and, as a result, it’s clear to me that many newbie investors have a challenging time filling it out properly. As a result they have reported having a challenging time obtaining financing approval within the time constraints of their deadlines.

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Pay Attention to the Small Things, Because They Add Up Quickly!

Light bulb vs. LEDShort term pain for long term gain. Many people will avoid spending $100-200 to replace their lights with a more efficient alternative.

Recently I replaced the last 16 bulbs in my house with LEDs, the investment of $128 will break-even in less than 18 months and save me approximately $2,000 over the next 20 years.

At this pace, assuming no increase in electricity cost for the next 20 years (which is unlikely), worst case scenario I will earn an annual ROI of 33.3%; which is far greater than the historical average ROI of the stock market historical average of 10.1% (8.7% adjusted for inflation). There are many cases when masterful saving can outperform systematic investing and it’s worth paying attention to.

Take a look:

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Should I Use My Home Equity for Investing? Discussing the Risks and Rewards

Home equityEvery penny counts towards your retirement and it’s vital to sock away as much as you can afford, especially while you are young. How much can you afford to invest? Let’s assume you can invest $300 each month ($3,600 each year).

Every time you look at your investments it appears to be growing; albeit slowly. Is there a way to kick-start your investment account? There is, but it’s going to require an entirely different mindset about what risk truly is and an understanding of how risk can be managed. Let’s discuss…

Most homeowners have equity in their house and each and every month as the mortgage is paid down this equity continues to grow. Unfortunately this equity earns $0. Of course the value of your home appreciates slowly over time, but this would happen regardless of what you owe on it.

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Why Should I Consider Investing in Real Estate Instead of Stocks?

Why Invest In Real EstateA common question that I’ve been asked numerous times over the last few years is why should anyone consider buying rental properties? Why not just invest in stocks, mutual funds, ETFs, etc.? It seems like it’s a lot less work and lower risk!

The reason is that rental properties can easily and consistently bring in 10-15% cash-on-cash return on investment, and an additional 20-30% after all vacancy, expenses, management & mortgage expenses have been accounted for. The caveat is that it requires some due diligence and work to ensure that you remain patient and buy the right properties (recommended reads: How to Perform a Cashflow AnalysisThe Difference Between a Successful and Failed Investment).

Retiring a Few Years Later Can Make All the Difference

compound interestOne of the most important lessons in investing is to learn about the power of compounding. In many cases, investing early and regularly can make all of the difference in the world.

Let’s take look at a chart that shows the impact of investing $100,000 by age 30 vs. investing $200,000 by age 45 (assuming 8% average return each year). As you can see, even though the second individual invested an additional $100,000, they will have nearly $600,000 less at the age of 65… that’s a breathtaking difference!

the power of compounding

Investing $100,000 at 30 years old vs. investing $200,000 at 45 years old

But what if you haven’t had the luxury of starting to invest early? What do you do then?

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Our Love for “Luxury” is Costing Us Our Freedom

luxury house with poolDoes that $30,000 kitchen renovation really make you that much happier? Did you need granite countertops, new stainless steel appliances, built-in double ovens and recessed ceiling lighting?

Alternately, would new modern cabinetry with a standard countertop at a tenth of the price have been sufficient?

What about that $30,000 pool install? Did it need to be installed in-ground? Did you also need to replace your patio and extend it with high-end interlocking stone?

Alternately would an above ground pool that was a tenth the price have been sufficient?

Do these “luxurious” upgrades really bring you increased sustainable happiness or are you a victim to consumerism, short-term lust for higher-end physical possessions and, of course, trying to keep up with the Joneses.

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