Are You a Saver or an Investor?

Last night, I read an article on US News and World Report (you can see the article here) about how the majority of "investment experts" are now recommending members of Generations X and Y (I'm at the tail end of X, my wife is at the beginning of Y) to set a retirement savings goal of at least $2 million.  I could write a post every day for at least a month about where I disagree with this article.  However, the one thing that I focused on is that the investment advisors's recommendations are to "save money in your retirement account and build a nest egg."  I did a word count and throughout the article, the word "save" shows up 11 times.  They talked about saving a lot.  I also did a word count on "invest".  Guess how many times the word "invest" showed up?  None.  The only time the term investment came up in the article was in reference to the people advising us to save.  On the surface, this makes sense.  Most people do believe that saving for retirement is investing.  I went to the dictionary to compare saving versus investing.



Save (v): Keep safe or rescue (someone or something) from harm or danger.
Invest (v): To commit (money or capital) in order to gain a financial return.


It looks to me like saving and investing are not the same thing at all.  Instead, I believe it's a decision (choice) between the two.  Some people save for retirement and hope their nest egg will last them when they retire at 65 (or later, as the article suggests).  Others invest their money, build passive cash flow, and have a much higher chance of success.  I've known both savers and investors and one thing I can say about them is investors seem to enjoy investing a lot more than savers do saving.  Even though investors do lose sometimes, it's just part of the game.


Now I'm not saying don't ever save money.  It's important to have an emergency fund set aside as a buffer (about 3 months of income is my buffer).  But for my overall retirement plan, I am choosing to be an investor and I plan on retiring way before the age of 65.  I believe the key reason I will achieve this is because I first chose at the age of 25 to become an investor instead of a saver.

First Steps

Tonight, I took my first real step towards escaping the Rat Race.  I did market research and technical analysis over the past couple of nights with the stock market and placed 2 orders tonight that should get filled Monday morning when the market opens.  Even with all the education, knowledge, and skill that I know I've put into my decisions (and I could easily have done more than 2, I'm just starting small for now), it's still pretty nerve racking taking that first step.  I was talking with someone yesterday who told me that the stock market is gambling.  If so, it's designed that the people with financial education basically flip the odds and are playing as the house rather than the gambler, and I hope to someday feel that confident in my own skills.  Only through winning, losing, and learning as I go will I continue to develop.  One of my coaches in my financial education explained to me that it's the learning from the successes (and even more importantly, from the failures) that separates the rich from the poor.

What Would You Give Up For A Little Extra Cash?

So there's been quite a bit of change going on in my life and my family's life.  My wife just got a job (temporary contract with a Federal Contractor, but can be extended) that will take her away almost every day of the week for the near future and leaves me alone with the kids from the time I get off work until I put them to bed.  I know it's going to be a struggle, but we have our financial goals as a couple and a family, and the extra income will definitely help us towards achieving them.  For us, it's worth the short-term sacrifice if it helps us get to the point where we don't have to worry about which bills to pay or how to make a little extra money here or there.


Which brings me to an article I read on Yahoo about what people were doing to make extra money and why they were doing it.  There were people doing mystery shopping for gas money and typing up foreclosure lists to avoid being put on it, but the one that stuck out in my mind the most was a guy named John from California, who has a full time job and then also teaches 3 night classes per week.  He enjoys teaching, but says it's hard on him and his family because sometimes he doesn't get home till 11pm.  His quote that stuck out in my mind is "Still, when you have a family to provide for, you have to make sacrifices and you damn well better do it." 


If I had the opportunity to meet this man in person, I would want to ask him what his plans were to increase his financial wealth so that in a couple of years, he doesn't have to teach at night anymore.  Or perhaps he can retire from his day job and only teach at night, and be able to see his family a lot more.


Everything I have in life I attribute to my family.  My parents raised me, my grandparents spoiled me, my sister kept me humble, my kids keep me going, my wife is my rock, and my parents continue to counsel and teach me to this day.  Within reason, there isn't anything I wouldn't sacrifice to spend more time with my family.  That's why I am taking risks and starting to build passive income streams.  That's why I currently have 6 financial books checked out of my local library and have a goal to read all of them by the end of September.  I'm building up my financial IQ and my passive income so that when the time is right, I can finally look to my family who has supported me all the while and we can celebrate the success of my early retirement together.


Good luck to everyone and god bless!

Recent News

I read 3 articles today on Yahoo that dealt with financial news.

The first was an article about Bank of America Merrill Lynch and Morgan Stanley and the likelihood of a global recession on the horizon. Essentially, it was a doom and gloom article for the economy and did list several indicators that can point to an eventual 2nd recession.  However, when asked for an odds ratio, both companies gave the odds at about 1/3 on whether or not we will have a recession.  Of course, let's not forget that it took Ben Barnanke, the Chairman of the Federal Reserve, a year AFTER the last recession started before they could clearly state that the US had been in a recession for a year.

The second article was about the recent downturns in the stock market and how different financial planners from across the country were advising their clients to sell off some of their funds and move the money into cash or Treasury funds.  I found it pretty entertaining that someone had mentioned that they could not afford to lose (as an investor) 4-5% in a $5,000,000 retirement account (That's $200,000 - $250,000).  Over a 2 week period, that could be considered a typical swing depending on how aggressive the investment strategy is.  However, the question is: if someone isn't willing to take that kind of short term loss, why were they invested in the stock market that heavily at the time?

The third article was about personal finance, and was part of the financially fit series on yahoo, which I would highly recommend to anyone that is looking to increase their financial knowledge or needs help staying in the black.  This particular article was about where the average consumer unit (a statistic created by the US Bureau of Labor Statistics) and it shows for the average consumer unit what percentage of their income goes into 7 major categories and gives you the opportunity to measure what you spend against the averages just to see how you stack up to the average.  My goal is to someday be spending well above those averages dollar-wise, but be well below those averages percentage-wise.

The best piece of advice I can give anyone is to increase your financial knowledge.  It's not something we're really given in school.  Most of us don't even get it in college.  It's something you have to go out and search for.  If you're looking for a place to start, let me know and I'd be glad to share where I got started.

Good luck to everyone!

Financial Advice From Millionaires?

I just finished reading this article where Paul Sullivan, a columnist for the NY Times, meets with an investment group of self-made millionaires called Tiger 21 and they go through all of his finances and then proceed to challenge, or grill, him on what he is doing and why.  There is some sound advice in the article, and I would recommend reading it.  I've linked the article here.

While the advice is good, I have to say I found myself wanting more.  In the article, at the very end, Mr. Sullivan states that the group mostly made their money from having high paying jobs and investing well, or from starting businesses and building them up.  While in the meeting, he makes no mention of whether or not Mr. Sullivan's portfolio is in line with his retirement goals or if he is taking advantage of the investment opportunities that come his way.  In this article, I kept reading about how they were in good financial shape because they save money, but nowhere in the article does it talk about investing wisely and making your money work well for you.  I suppose you can only ask for so much free advise from a group of millionaires.  If you want to join their ranks, you're going to have to learn to think like them and play by their rules.

Good Luck and God Bless!

Getting Paid More From Your Job - Good Luck

So I just read this article on yahoo! finance about how to approach your boss and ask for a raise.  They advise assessing what you are worth inside and outside of the company, using websites that list average salary information for your position, and formulating your request by possibly asking for other non-monetary perks, such as extra vacation time or having them pay for conferences, etc.  It seems that the days of being a top performer and being able to walk into your boss's office and ask for a raise and have an open conversation about it are long over.  I've gone through professional negotiation training in the past, so I'm pretty comfortable negotiating in just about any situation, but when it comes to your salary, as an employee, your power is pretty limited, especially here in Texas.  The only leverage you have is you can leave at anytime (for most employees, the at-will law in Texas holds legal precedence over anything).  However, your employer can also terminate you at any time with or without cause.  You have no additional leverage in your job (short of threatening to leave) unless your employer is nice and feels like you deserve more money.  Here is the link to the article.

Rather than having to go to a boss and asking for a raise, wouldn't it be much more empowering to first strengthen your financial education and then build your own passive cash flow outside of your employment?  That way, if you want a raise, you can find an opportunity out there and build it yourself.  There are many ways that people can strengthen their financial education.  If you would like some guidance on first or next steps, please feel free to send me an email and I will be happy to help.

Good Luck!
Jacob

Finding A Job Versus Finding Cashflow Opportunities

So I have been looking for a new job for almost 3 months now.  In that time, I have viewed hundreds of job postings, submitted a few hundred applications, received a few dozen responses, and had over a dozen interviews.  This has taken hundreds of hours of work to complete.  Once I have a job and know that my family and I can be taken care of for a while, I feel if I take this same hunger and approach and apply it to finding opportunities to increase my passive cashflow, then that will take me even closer to retiring quicker.  Something that has stuck out to me is how methodical finding a job really is.  Even when you utilize your network and reach out to them, it still takes time and effort.  If I am willing to put this much time and effort into finding a job that I do not plan on doing all my life, then how much time and effort should I be putting into finding good strong cashflow opportunities that could potentially set my entire family up for generations of wealth and success?