Payday Plan Post 9/11/2020…

“It’s not your salary that makes you rich. It’s your spending habits”

– Charles A. Jaffe –

As the paydays continue to come and go… it’s time to do an update since the last payday plan post.

– Designated funds from this payday –

  • 401K contribution $177.30 – current value $15.637.43
  • Fidelity brokerage account $55.00 – current value $210.81
  • Acorns Roth IRA $0 – current value $103.35
  • Acorns investment account $0 – current value $142.77

A part of what I earn is mine to keep

You can create your own acorns account by clicking here.

Once again I’m not putting a lot into my brokerage account as I continue to pay down my debts. But I will maintain paying myself first no matter how little it might be. I do contribute 6% of my pretax income to my 401k since my employer matches dollar for dollar up to 6%. Unfortunately the employer match has been suspended until further notice due to the covid crisis.

I wound up selling my share of BIGC because I had read some articles discussing the share price being over valued and predictions of a massive decline in the share price. I wound up selling at 110.09 which isn’t a bad profit since I purchased it at 72.81.

I took that and added it to some dry powder I had sitting in my brokerage account to pick up a share of apple for 132.91 after the apple stock split but the share price started tanking right after I opened my position. I didn’t want to see all of my BIGC profit vanish so I sold AAPL at 122.99… it’s currently at 113.60 at the time of this writing.

I decided to take that and what I had left sitting on the sidelines in my brokerage account and purchased shares of BRG which is a REIT stock that pays an annual dividend of $.65 per share. I opened a position and purchased 23 shares at $7.56 per share. It’s time to start building that passive income portfolio.

I just added 7 more shares of BRG at $7.33 per share after adding the $55.00 to my account to make an even 30 shares. I’ll probably start picking up 1-2 shares a payday from this point on to add to that position. I’m researching some other stocks I’d like to open positions on in the coming paydays.

I’m not adding to the acorns account on this payday.

Be sure to keep track with me and if you’d like, share your payday plan in the comments section below.

Until next time… be sure to comment below and let’s get some dialogue going.

5 strategies of the rich that you should know…

“Spend each day trying to be a little wiser than you were when you woke up”

– Charlie Munger –

How do people become wealthy? Well, I’m about to go over five methods that you can apply towards building wealth that are used by people already where you want to be. It’s not enough to just manage your money like the rich, you need to have methods in place to get there in the first place.

  1. Establish a money tracking system.

If I were to ask you where did you spend your money last month, do you have an exact answer? Without having an understanding of how you spend the money you have now, it becomes difficult to make and manage more.

Developing the skill of overseeing money will not only help you manage the money you have now, but when the time comes to manage more money you will have the skills in place to make intelligent decisions.

The best way to keep track of your money transactions is to place them into three main categories:

  • Income: Everything that generated you money for the month. This includes your job, any side hustles and/or business income.
  • Living expenses: These are recurring expenses such as rent/mortgage, monthly bills and food. The basic necessities that you need to survive.
  • Other expenses: These are things that are considered luxuries such as a streaming account, daily cups of coffee from places like starbucks, fast food and other expenses that are not necessary.

2. Develop the discipline of saving money.

It’s not shocking to know that the wealthy are very dedicated to putting money away. It doesn’t matter how much money a person makes if they spend it all as quickly as they earn it. The key to building wealth isn’t about how much you make, but how much of it that you keep.

As you might know, I’m a huge advocate of the richest man in babylon mindset of “A part of what I earn is mine to keep” and the pay yourself first philosophy.

Saving money is the foundation to building long term wealth. Especially for when unexpected expenses arise… you should have something put away in case of an emergency.

Statistics show that 57% of Americans have less that $1000 in their savings accounts and 39% have no savings at all.

Saving money can be challenging, but there are a few ways to do it.

The first way is to automate your savings. Many savings accounts allow you to schedule transfers from your main bank account to your savings account as soon as your paycheck arrives. Become a (richest man in babylon) fanatic like myself about paying yourself first before any of your other expenses.

Another method is to have your savings account with a completely different financial institution than your main bank. Not a checking account with a debit card, but just a savings account, preferably one that pays the highest interest on your savings that you can find. Those type of savings accounts are typically online banks.

The purpose of this is that it makes accessing your savings more challenging and makes it easier for you to keep it. It usually takes 2-3 business days for an electronic money transfer to take place so you’re less tempted to tap into your savings for an immediate purchase.

Just to be clear, having money saved doesn’t make you wealthy, even if it’s a large amount. Saving money is just the first step. There’s a difference between having cash and having equity.

Here’s another question for you. Would you rather have a million dollars in cash or a million dollars in real estate and/or good companies? The rich prefer that latter.

Cash is just that… cash. If you save a million dollars and don’t spend any of it, ten years later you’ll still have a million dollars. And when you factor in inflation, that million dollars loses purchasing power over time.

But chances are that a million dollars in equity of real estate and/or good companies in ten years will be worth much more than it currently is today.

3. The wealthy invest their capital into money-generating assets.

As I previously mentioned, saving is just the first step. The rich don’t save just for the sake of saving, they use that money to build long term wealth. So once you have a system set up to consistently save money, it becomes time to use this system to multiply the money. Money working for you to make more money is the goal.

Think of the game Monopoly. The game is about who owns the board, not who has the most money. You don’t win the game just by holding cash. The goal is to spend the cash to own the property that generates income. In the end, the one who owns the board ends up with all the cash anyway.

So which would you rather have? Money saved earning a minute percentage that looses value over time or a money-generating machine? The rich use money to build or purchase a money-generating machine that creates passive income.

This is why the wealthy don’t have to work for money. They understand that creating passive income allows them the benefit of putting their time to better use by not having to work for an income.

4. Most wealthy people live below their means.

Contrary to popular belief, most people with real wealth live below what they earn. This is especially true at the beginning when they haven’t amassed their wealth yet.

Research shows that wealthy people have a history of being quite frugal with their money. Many did not buy the expensive cars and mansions even when they were making a decent amount of money.

There are people who make six and seven figure incomes annually who buy all the luxuries and spend most of their money. However, the people who actually get wealthy have a bigger picture in mind. They aren’t looking to make a couple million, they are focused on accumulating massive wealth. So many of them continue to spend money like the average person.

The idea is to get used to not needing much in order to build long term wealth, even as your income grows. This is a very powerful strategy to employ as business and economic cycles go up and down.

So, as we begin to track our finances, build a savings and invest that saving into money-generating assets, there is one more thing the rich do so that they never run out of money.

5. Spend the residual, never the principal.

Most people start off with active income, the money we spend time to make. Once you start investing into income-generating assets, you then start earning passive income which is the cash flow that your assets produce.

The difference between the wealthy and the rest is that those building real wealth only spend the cash flow their assets produce, not their hard earned money.

it’s like planting a fruit tree, most people eat the seeds before planting the tree. Whereas the wealthy plant the tree first and only eat what the tree produces. Many wealthy people still maintain earning an active income, the difference is that they use their hard earned money only to invest and only buy luxuries with the money that their investments have produced.

That is how they make sure that they never run out of money, even when buying expensive luxuries.

So, what is a good practical step to take on your journey to building wealth?

As mentioned above, in order to begin investing, you need to save. In order to save, you must lower your expenses or increase your income.

These strategies may seem simple, but simple means nothing without discipline. As I’ve mentioned in previous posts, discipline is a key principal to achieving financial freedom.

As I like to say… “the journey begins with the first step”.

If you see value in this article then please be sure to like and subscribe to the blog if you haven’t done so already. I’ll be putting up more wealth building posts in the future and you can have them delivered straight to your email account.

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I’ll see you in the next post. Until next time… be sure to comment below and let’s get some dialogue going. I’m curious to know, what’s your opinion on wealth building strategies?

One last thing, follow me on twitter for daily tweets and updates https://twitter.com/RFinancially

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Why you should start investing now…

Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it – Albert Einstein –

When it comes to investing money, the best time to start is yesterday. The sooner you start, the more time your investment portfolio has to grow. It’s not so much how much that you have to invest that matters as much as when you begin. Smaller amounts over a longer period of time will grow more than larger amounts later due to the power of compound interest.

If you’re familiar with how compound interest works then great, you understand the value of time and reinvestment. If not, no worries, you’re about to be enlightened to another key principle of how to manage your money like the rich.

So without getting into technical jargon that can get confusing with calculations and formulas, let me put it into simple terms. Compound interest occurs from interest that is earned on an initial investment and then reinvested to earn interest on the interest previously earned. The money that your initial investment created is now working for you to earn more money. In other words, free money earning free money over and over again growing exponentially.

Once you grasp this concept, you’ll never see money the same way again and understand why money is a tool used to build wealth. This is where time is your friend. The interest starts out small but grows large over time just like the snowball rolling down a hill. This is why the sooner you start the journey to building wealth, the better. I don’t know about you, but I love the concept of free money earning free money.

Let’s put this into perspective with a hypothetical investment scenario. We’ll invest our principle and interest 10 times over and keep the numbers simple so it’s easy to follow:

$1,000.00 that pays 5% on the interest earned. Initial investment .05 x 1000 = 50.

  • 1000 x .05 = 50 + 1000 = 1050
  • 1050 x .05 = 52.5 + 1050 = 1102.5
  • 1102.50 x .05 = 55.12 + 1102.50 = 1157.62
  • 1157.62 x .05 = 57.88 + 1157.62 = 1215.50
  • 1215.50 x .05 = 60.77 + 1215.50 = 1282.27
  • 1282.27 x .05 = 64.11 + 1282.27 = 1346.38
  • 1346.38 x .05 = 67.31 + 1346.38 = 1413.69
  • 1413.69 x .05 = 70.68 + 1413.69 = 1484.37
  • 1484.37 x .05 = 74.21 + 1484.37 = 1558.58
  • 1558.58 x .05 = 77.92 + 1558.58 = 1636.50

So our initial investment was $1,000.00 which earned us $50 in interest. Had we just spent the interest earned (poor minded thinking) and reinvested only the $1,000 again 10 times over we’d have earned another $50 each time totaling $500.00 and not had the $136.50 difference. This is the beauty of compound interest. Because we reinvested the initial investment plus the interest each time (rich minded thinking), we made an additional 136.50 more and still have that interest working for us rather than had we just kept the $50 each time.

Now imagine having multiple investments doing this at the same time and consistently reinvesting the gains. This is where discipline and dedication that I talked about in the journey come into play. By leaving your investments alone to grow and not withdrawing from them, your investment portfolio will grow much larger and faster in the long run.

Remember, we’re paying ourselves first when we earn income and putting that to work to earn us more in perpetuity. Starting out small is better than not starting out at all so don’t let yourself get discouraged by not earning a lot in the beginning. Remember… we’re playing the long game here. Trust me, your future self will thank you for your delayed gratification now.

I can’t emphasize enough about the importance of getting into the habit of devoting a portion of what you earn towards your investment portfolio and putting that income to work for you. Anyone can afford $5 a month to get started and the next post I do will be focused on that topic to prove that it can be done thanks to modern day financial technology (fintech).

As I like to say… “the journey begins with the first step”.

If you see value in this article then please be sure to subscribe to the blog if you haven’t done so already. I’ll be putting up more wealth building posts in the future and you can have them delivered straight to your email account.

I’ll see you in the next post. Until next time… be sure to comment below and let’s get some dialogue going. I’m curious to know, what tips do you have on how to build your wealth portfolio?

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How to manage your money like the rich…

Wealthy people invest first & spend what’s left…

Broke people spend first & invest what’s left

– Unknown –

People have this misconception about wealth.  It’s common belief that building wealth is about how much money you make, but the truth is, it’s not about how much you make, but what you do with it from that point on.

There are many high income earners that make a six figure income but yet still live check to check.  So once again, don’t buy into the misconception that it’s about how much you make that matters.

If you truly want to build a wealth portfolio and watch it grow, then it’s imperative that you start taking on the mindset of those who have been successful already and follow the path in doing so. 

I’m not a financial advisor so I’m not going to tell you what you should invest in, but I am someone who is in the process of building wealth from scratch while taking lessons from the wealthy and putting them into practice.  As someone who’s taking the journey with me, you might want to consider doing the same.

At this stage in my wealth building adventure, I’m doing it at a micro level while I continue to pay down debt. However, I’m still able to follow the same principles that the wealthy use. The first place to start is taking on the mindset of the rich.

A key mindset difference between the wealthy and the poor is the abundance mentality vs the scarcity mentality. Here’s a couple examples of what I mean:

Scarcity mentality: “I want to be debt free”

Abundant mentality: “I want to be financially free”

Scarcity mentality: “I need to live below my means”

Abundant mentality: “I need to expand my means”

As you can see, the scarcity mentality exist within a place of confinement. Reducing expenses and living within a limited income and borrowing money to purchase things they can’t afford. Even if they are debt free, they are not financially free because they have to work to earn income. Let me reiterate… debt free does not equate to being financially free. Whereas the abundant mentality exist within a place of limitless opportunity by creating multiple streams of income and having those multiple streams of income fund their lifestyle.

See, the rich acquire assets. Assets are things that put money into your account. The rich focus on passive investments because they are assets that accrue wealth without actually having to physically work for it. These assets continue to work for them and make money even while they sleep. A few examples are:

  • Owning businesses that don’t require their presence
  • Dividend paying and growth stocks
  • Bonds
  • Notes
  • Royalties
  • Income generating real estate

Another difference between the wealthy and the poor is that wealthy people view money as a tool and nothing more. Money is merely a means to an end and not the end itself. The tool of money is the means to financial freedom which is the end goal.

If you’ve watched the video “The richest man in babylon” (hint… hint) that I have linked in the side bar to the right, then you probably understand that the rich follow the mantra “a portion of what I earn is mine to keep”. In other words, they pay themselves first and put that money to work for them which in turns creates more money to reinvest. It’s a perpetual cycle.

One example of this is reinvesting the dividends of dividend paying stocks into the purchase of more dividend paying stocks. The acronym for this is “DRIP” or dividend reinvestment program. Instead of spending the dividends paid out by the corporations, the wealthy reinvest those dividends to purchase more of the dividend paying stock so that when the next dividend payout occurs, they have more income to reinvest into purchasing more shares of dividend paying stocks. Do you see the pattern of having money work for you to earn yet more money to work for you over and over again?

Another difference between the wealthy and the poor is that the rich don’t keep a lot of money in the bank. Sure, they keep enough saved in an emergency fund account and some “dry powder” in an investment account for when buying opportunities occur, but the rest of what they earn is put to work for them. Poor people however, keep money in the bank earning very little interest while sitting in a savings account, often just fractions of a percent. Meanwhile the bank loans out that saved money at a higher interest rate and keeps the difference for itself. Notice how the banks are making money?

That leads me to the next distinguished habit of the rich. They legally use other peoples money to make them money. The rich use leverage in their favor. They borrow money to purchase an income generating asset like real estate and keep the difference between what income the asset generates and what the loan payment is. This is called cash flow positive for those not yet well versed in financial terminology. This cash flow is then wisely put back to work to purchase more income producing assets.

Another investment of the rich is the purchase of things that grow in value over time. Rare art and/or artifacts are good examples. But one of the main assets they purchase are growth stocks. Growth stocks are companies like Amazon, Facebook, Google and Apple just to name a few. Growth stocks can be riskier investments due to the fact that they can lose value, but risk management by doing due diligence before investing in them can be mitigated.

I hope you’re seeing the pattern… investing in assets that work for you so that you can then purchase more assets with the income your already existing assets create. That and one more thing that I will share with you about the mentality of the rich.

I saved the best for last. The rich understand the genius of compounded interest over time. It’s the snow ball affect of perpetually reinvesting income and interest generated by existing income that grows massively over time. It’s the “long game” mentality by delaying gratification now to reap the rewards later.

The journey of wealth building is a long slow one. The “get rich quick” mentality is for gamblers, not investors. Is it possible to get rich quick? Sure, but it’s not easy and it requires high risk to reward variables to achieve. Think about it, if getting rich quick was really so easy to do, wouldn’t everyone be doing it? Don’t let yourself fall for that trap… it’s those selling get rich quick methods that are getting rick quick by poor mentality individuals chasing the dream.

As I like to say… “the journey begins with the first step”.

If you see value in this article then please be sure to subscribe to the blog if you haven’t done so already. I’ll be putting up more wealth building posts in the future and you can have them delivered straight to your email account.

I’ll see you in the next post. Until next time… be sure to comment below and let’s get some dialogue going. I’m curious to know, what tips do you have on how to manage your money like the rich?

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In case of an emergency…

“Save what you can towards the emergency and life happens fund. Don’t worry yourself sick about the slow growth. The point is it’s growing even if it’s just one dollar at a time ” – Michelle Singletary –

When it comes to wealth building, it’s best to have some money put aside in case of an emergency. That last thing you want to have to do is liquidate one of your investments because you need money immediately. The whole purpose of investing is to build wealth over time. Your savings and your investments are two separate components to your wealth portfolio.

To be clear, your emergency fund is not an investment! It’s insurance you put into place to protect your investments so that you don’t have to liquidate them at the risk of penalties, taxes and fees. It is part of your wealth portfolio as a buffer.

I want you to think of building your investment portfolio like that of building a house. Before you can put up the walls and roof, you first have to lay out the plumbing and utilities network. Then you pour the foundation and after that you begin constructing the frame. So begin the journey to wealth building on the right path.

There’s some mixed philosophies out there about how much you should put into an emergency fund. Ranging anywhere from $1,000.00 up to six months of expenses is the norm. I’m more in the Dave Ramsey camp of $1,000.00 and then paying down debts with what’s left over after typical monthly expenses.

Where I differentiate from what Dave Ramsey believes is that I believe that you should put 10% of your after expenses money towards investing and then pay down debts with the remaining amount. Dave believes you should pay down all of your debts first before investing.

If you’ve ever heard the fable the richest man in babylon then “A part of all I earn is mine to keep” will make sense. And it’s putting that 10% to work so it can earn even more over time that attributes to financial growth.

Now don’t get me wrong, I’m not saying that you shouldn’t pay off your debts as quickly as possible. What I am saying is that I’m in the “pay yourself first” camp. You can still pay down debts quickly while you build your wealth portfolio slowly and save hundreds if not thousands of dollars in interest simultaneously.

Another reason I believe you should invest 10% of after expenses funds while paying down your debts is because of habit building. It’s extremely important to habitually invest every time you earn income. It needs to become so second nature to you that forget you’re doing it. It’s time to inherit the “set it and forget it” mindset. If you can’t afford 10% at the moment then start off with 1-2% if you can. The point is to form the habit and make a commitment to building your wealth portfolio.

The one thing that you definitely want to do with your emergency fund is keep it in a moderate yielding savings account that pays around 2% (200 basis points). This way your savings is earning you a small amount of money while waiting to be called upon. Two percent isn’t much, but most banks are only paying fractions of a percent on savings accounts these days. A 2% return is a lot better than a half a percent or less.

Another potential option is parking it into a Roth IRA. In the investment community it’s taboo to pull money from retirement vehicles like 401K’s and IRA’s. But a Roth IRA is a bit different in the fact that your contributions can be pulled without any tax penalties. The pros to parking your emergency fund into a Roth IRA:

  • The contributions can be taken out without tax penalties.
  • While the money is in the Roth IRA, the earnings made grow tax free.
  • You can put up to $6,000.00 a year into Roth IRA’s.

There is a con to this as well, there’s always the risk of the market crashing and the risk of your contributions being affected as a result. Since market disruptions do occur, that is something to consider.

I believe you should break up your emergency fund into different segments.

  • Cash, you can’t go wrong with having some cash on hand.
  • Moderate yielding savings account. Let your money earn something while it’s put aside.
  • Roth IRA since you can pull from the contributions tax and penalty free.
  • Dividend paying life insurance policies. This one is the most controversial because there is a low interest rate on the loan, but the upside is that you can delay paying it back indefinitely since the death benefits would cover the loan plus interest at the time of your death.

Building an emergency fund is being financially responsible by being proactive. Having financial insurance is wise even if you never need to use it. You hope to never get into a car accident, but you have car insurance right?

Don’t be like millions of Americans who right now can’t even come up with $400.00 for an emergency without having to sell something to do so. As a member of the Refresh Financially community, you’re on the path to being financially savvy.

Brad Finn explains what I’m talking about really well. Take a few minutes to check out this video:

As I like to always say… “the journey begins with the first step”.

Be sure to subscribe to the blog if you haven’t done so already because I’ll be putting up more wealth building posts in the near future.

Until next time… be sure to comment below and let’s get some dialogue going.

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What’s the financial blog about?

“I believe that through knowledge and discipline, financial peace is possible for all of us” – Dave Ramsey –

So you might wondering what the financial blog is about. Since this is the inaugural post, let’s get into more detail about that.

I’ve been through some serious financial turmoil in the past. At the time I was going through those difficult moments, it was extremely overwhelming. What I didn’t realize at that time is that I would come out of it all much wiser and resilient than I could’ve ever imagined.

Even though I never want to go through that again, I can truthfully say that I’m happy I did. Not because I’m a gluten for punishment, but because:

  • I can now put the wisdom I gained to good use. Hence, the conception of refresh financially as the result.
  • Inform people on ways to build wealth from scratch with very little money to start.
  • Provide content covering a variety of financial topics.
  • Mentor those who currently going through what I’ve already endured.

Putting a bad experience to good use so that others may benefit gives it value. And value is what I plan to provide to the readers of this blog.

I know for a fact that there are a lot people out there going through what I experienced and feeling what I felt. If you’re one of them, know that I can relate and plan to provide guidance on how to tough it out until things get better.

Know this though… things will get better, but might get worse before then. Please subscribe to the blog because I will be posting in the future about solutions that you may find beneficial.

Also, in the blog posts to come, I will be writing about not only those experiences, but ways for everyone to become better informed about financial issues and investment options for you to consider. I’m not the most astute financial person on the planet. In fact, I’m far from it. However, I do have enough financial acumen to mentor while still constantly striving towards higher aspirations.

If you’re just starting out and/or only have a small amount to put towards investing, you will benefit from this blog as well.

Because I’ve had to rebuild my wealth from scratch, and started out being able to invest with just a small amount. I discovered investment opportunities that don’t require very much to get started.

Did you know you can start investing for as little as $5 a month? Seriously, that’s not much, but it’s someplace to start if that’s all you can afford at the moment. Even someone on the strictest of budgets can commit to that. Then,as your financial situation improves and you have more money to invest, you can start designating more funds toward your wealth building goals.

Be sure to subscribe to the blog if you haven’t done so already because I’ll be putting up posts on how you can do that in the future.

Until next time… be sure to comment below and let’s get some dialogue going.

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