Money Lessons My Mom Taught Me

Money Lessons My Mom Taught Me

My mom was hugely influential in teaching me my first money lessons and instilling good financial habits at an early age. The underpinnings of her knowledge and encouragement were invaluable and still are to this day.

Coming from a prosperous family, she learned about hardship at an early age. Separated from her family, they perished at the hands of the Nazis. With $5 in her pocket from the US government, she made her way to the states in her early twenties.

Optimism In Her Future In America

She had lived in the Lodz Ghetto, forced labor camp, and then transferred to a refugee camp for the better part of eight years. Due to a back injury from being severely beaten, she spent a year in a hospital. Devastated from her experiences and losing her entire family, my mom was optimistic about her future in America. She wanted to able to take care of herself despite being destitute.

Mom never finished high school, but she knew at least three languages, was highly praised as a manager of Barton’s Candy, and started up two successful retail businesses. Unbeknownst to my father, or anyone for that matter, she left over a million dollars when she passed away. She worked tirelessly, obsessively saved, and invested her money.

Some of her teachings were extreme, and she was pretty quirky at times. In many ways, my mom was a trailblazer when it came to money. She believed women should be financially independent, have their own bank accounts, and invest their savings. I am forever grateful for all that she taught me, especially her money lessons that were priceless.

Valuable Money Lessons

Although she was not academically educated, she was incredibly savvy and read many books to learn. My children never met my mother, but fortunately, she passed on these valuable lessons to me so I can share them with my children.

Be Resourceful

Anyone who comes off a boat with few dollars must be resourceful and encouraged to be so. We had to make do in our modest household, but we never felt deprived in those years growing up.

Secondhand television sets, used cars, old bicycles were ours without apologies. Learning to borrow things like library books was fun to do. Relying on creativity, imagination, and having a persistent nature are traits that benefited me in my career as an equity analyst and professor now.

Needs Vs. Wants

Growing up, we knew about buying only necessities while everything was luxuries we couldn’t afford. For me, a Spalding to play to catch with my younger brother could be justified since both of us would play with it. However, we had to get a used ball that didn’t bounce very high. She did not allow us to pay a quarter for a can of Coke which had no redeeming value, preferring the money better spent on a quart of milk.

My kids, now in their teens, are living in different circumstances than I did. However, that doesn’t mean they should become spendthrifts. On the contrary, I reinforce the difference between needs from wants as an essential lesson.

Emergency Savings

Mom was an obsessive-saver from the beginning of her newfound life in America.  Settling in the Bronx, she first worked in sewing factories before being eyed by someone who needed a salesperson at Barton’s. There, she learned to speak English and the language of business, learning bookkeeping, managing inventory and sales. She shared an apartment with a friend and became a manager for Barton’s in the Bronx stores.

At first, skeptical of banks, she became comfortable about having her savings and checking accounts, visiting the bank to make deposits. Eventually, she married my Dad and had my brother and me. Savings were her mantra, and setting aside money for potential unknowns she said was always lurking around the corner. Hence, our family emergency fund was born.

Spend Less Than You Earn To Grow Savings

My mother taught me how important it was to save what you earn and not spend it freely. Your money has many jobs to do, starting with paying your bills on time and taking care of your needs. When there is money left over, it is savings for emergencies or your future needs. 

Saving money was only the first step to making more money. By putting it into the bank, you can expand your money through compounding. My mom opened a roll of pennies to explain how you can earn interest on interest. When I had learned the lesson, she took back the pennies to make more significant coins like nickels.

She opened up a bank account for me when I was about six years old. As I accompanied my mother to the bank, where she deposited money from the business, she often would introduce me to the bank officers. The bank had gorgeous Art Deco architecture, and Mom would tell me she felt rich putting her money in this particular bank.

Have Your Own Bank Accounts And Be Financially Independent

Mom kept her financial accounts separate from my Dad, except for joint accounts for the retail businesses. Like my Mom, I have always had my financial accounts different from Craig. Mom encouraged me not to disclose my earnings and investments to anyone, especially my husband. On the latter, I have always been open to Craig, more so than he has been with me, as I share in this post on financial infidelity.

My mother hid some of her money from my father. He played cards with friends weekly for entertainment and low stakes. Dad was a gambler before they were married. To a great extent, I believe that the practice of hiding money was due to her early experience when her family lost everything during the war.

Her encouragement was to have separate bank and investment accounts from a spouse so that I would never need anyone’s help monetarily. Mom went through substantial hardship, building a new life before meeting my dad. She was firmly responsible for her financial independence and was not letting go of her success. As a result, she wanted me to have my own goals to achieve in life and carve my own independence.

Being Frugal, Not Cheap

My mother was proudly frugal, not cheap, as she often discussed their differences. She scorned those who were cheap and focused on buying the lowest-priced items that often reflected the lowest quality. To her, frugality or thriftiness, a word she used more often, was a value proposition to weigh quality and affordability. 

She was happier buying things for other people and us than for herself. Occasionally, I would recognize a new bag or an outfit and compliment her. Instead of mom seeming happy about her purchase, she would pivot to how great a price she paid. Sometimes her expression sounded more like remorse. Her sadness at being the sole Holocaust survivor of her family overwhelmed her with guilt, especially those few times she treated herself better.

The Dangers of Credit Cards

My parents never had credit cards or accepted them in their two retail businesses. Instead, they relied on cash and checking accounts. Neither parent was big on borrowing money for cars or their business. I believe they took a short-term loan for the initial inventory for the first hardware store.

When it came to credit cards, Mom was adamant about their dangers of promoting overspending for things you don’t need. To this day, I use credit cards carefully by paying my balances in full every month. Although Mom is no longer with us, I think she sends spiritual vibes with approval when I pay with cash and checking accounts.

Never Buy Impulsively

My mother’s favorite words, “Do you need it?!” That was driven into my brain even after I no longer was living at home. The message was to buy quality to have it for a longer time but buy it at a lower and preferably bargain price.

Whenever she took me shopping, there was a lesson to share with me. We would go to many stores no longer around now (e.g., Alexander’s, Ohrbach’s, Loehman’s), and she tells me to feel the material and look at the price. It was often exhausting, with little to show for the day. The big treat for me was going to the counter at Chock Full of Nuts and sharing a cream cheese sandwich on raisin bread with her.

To this day, I am rarely impulsive and can overly research what I need to buy. On the other hand, Craig can be excessively impulsive and overspend, an issue that I often write about and can send mixed messages to our kids, especially when they were younger.

Investing Was Her Passion

My mother and a group of her friends began investing in stocks and bonds, much to my father’s dismay. He worried that she didn’t know what she was doing and was not encouraging her even if it was just dabbling. I was proud of my mother but never realized how interested she was in the stock market, knowing her daughter was working for a brokerage firm.

At one point, I found out that she had a retail broker, Michael, at my firm (Drexel Burnham Lambert), where I was a telecom analyst. One day, he approached me, telling me he was buying  ATT shares on a call I had made. I was baffled as I realized my mother wanted me to meet him and share her “secret of investing.”

About 15 years later, I learned that she had quite an investment portfolio of largely blue-chip stocks, various bonds, and some money markets. According to her broker, she called most of the shots in her portfolio and amazed him with her investment prowess.

Negotiation Skills

You would not want to be on the other side of the bargaining table with my mother. Everything is up for negotiation, and she is going to work to get what she wants. My parents dragged my brother and me to these “Gift Shows” to visit showrooms filled with household goods and gifts that they would buy for their housewares store. When my Mom had made her selections, and it was down to volumes and prices, my Dad would suddenly disappear.

As the buyer for the business, my mother was well-liked but somewhat feared for her negotiation skills. She taught me that you need to value yourself first before engaging with the salespeople who had wiggle room in their price points, and she tried to find the lowest levels possible. Often successful, she would buy more as her business grew and remembered who had treated her well.

Negotiating is an essential skill, especially for women, whether for your business or getting better compensation. I wished I had my mom’s bargaining smarts. It did not come as naturally for me as for my mother. However, my 16-year-old daughter is advocating for herself in a way that would have made her grandmother very proud.

Money Isn’t Everything

When you don’t have money to pay your bills and basic living expenses, money is everything. Mom never wanted money to be our only priority and thought the obsession with money was a danger in society. My mother always recited my grandmother’s favorite saying, “Poor or rich, money is good to have.” Money has its purpose, but it has its limitations.

Our family encouraged us to focus on what we value, besides money. Value like time, energy, health, family, friends, community, work, ethics, and love of learning have their worth. As financial scandals became more commonplace in the investment world, she worried that I was working too hard and not spending enough time with family. Hence, money isn’t everything.

The Importance of Education

For someone who didn’t finish high school, academic education was a significant priority in our home. I received my MBA in accounting and finance (and went to law school after my Mom passed away), and my brother, Mark, became a doctor, something my mother wanted for him from the day he was born.

However, she stressed lifelong learning through reading and picking up new skills. We all were avid readers in our home growing up, and that continued in our respective homes. Education was an excellent equalizer in society. Mom believed educated people would be welcome everywhere.

Being Grateful And Generous

Her family owned the largest bakery in the city where she grew up. As a result, my mother was a great baker in her own right. As gratitude to many people who helped along the way and neighbors, she often baked elaborate cakes and cookies. My mom always made more food and invited others who had were worse off to join us for meals on holidays and other occasions.

When buying presents, she was generous to a fault, seeking the best quality for others. Then she would be less price-conscious because giving to others was more important to her.

Final Thoughts

Moms are so influential as our first and most respected teachers. Through hardship and strive, they share their experiences that instill in us lessons they want us to learn. I remember my first money lessons, which shaped my financial habits to this day.

My mom was not always right, especially when hiding her investments from my dad. She passed us the best she had to give my brother and me. In turn, I am sharing my knowledge with my children, knowing that they will have their own experiences with finances. What we all want to do is to impart the best of what we know as parents.

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What has your Mom taught you that you wish to share? We would love to hear from you!

 

 

 

Yes, Money Can Buy Happiness

Yes, Money Can Buy Happiness

“Money is of no value; it cannot spend itself. All depends on the skill of the spender.”

Ralph Waldo Emerson

 

“Whoever said money can’t buy happiness simply  didn’t know where to go shopping.”

Gertrude Stein

 

Money Can Buy Happiness

Wealth can buy happiness, according to supporting evidence. However, it is up to you as well.

That is good news! I grew up with the notion that an excess of money may lead to feeling miserable. However, wealth alone is not a guarantee of a happy life. It can help you with your goals, make relationships more accessible, and allow you to be satisfied. Money can buy happiness when you can gain financial security for peace of mind. That is the icing on the cake.

Money Can Buy Happiness In Several Ways:

 

#1 Earning $75,000 A Year May Make You Happy

A classic study by Princeton University researchers Angus Deaton and Daniel Kahneman found a $75,000 salary to be an optimum level for two types of happiness: day-to-day emotional mood and more profound life satisfaction.

Their work studied 450,000 Americans polled over two years by Gallup and Healthways. The study asked respondents about their satisfaction, income, and adversities like lower income, divorce, and health issues. The more that income fell below the $75,000 benchmark, the unhappier people felt. However, those who made more than that amount did not report a more significant amount of happiness.

Another study at Purdue University and the University of Virginia found $95,000 to be an excellent salary for life evaluation or satisfaction and $60,000-$75,000 associated with emotional well-being.

Lifestyle Inflation

Researcher Andrew Jebb found that earnings above the ideal threshold coincided with a lower level of happiness. This result suggests the more you make, the more you tend to spend, leading to lifestyle inflation.

Jebb pointed to a degree of happiness through the fulfillment of both basic needs and increasing material needs. Evaluations tend to be more influenced by people comparing themselves to other people. There is an old adage, “Keeping Up With The Jones” used for increased spending.

More recently, Matthew A. Killingsworth’s 2021 study disputed the relevance of making more than the threshold of  $75,000 income did not lead to greater happiness. Killingsworth’s research suggested that “higher incomes are associated with both feeling better day-to-day and being more satisfied with life overall.”

I can assure you that earning $75,000 or $100,000 in NYC and living on your own would make your heart sing. For that matter, when someone earns half a million but has $550,000 in hard-to-reduce costs, they are not going to be a happy camper. That person may have a spending problem in need of fixing.

#2 You May Not Be Spending Your Money The Right Way

 

Consumers can realize more happiness if they spend their money according to core principles recommended by psychologists Elizabeth Dunn, Daniel Gilbert, and Timothy D. Wilson work in the Journal of Consumer Psychology.

Dunn and her colleagues have been proponents of the relationship between money and happiness. Following these tenets may add more satisfaction for consumers:

Buy More Experiences

For some of us, spending money on a new dress, a purse, gadgets, or other material goods makes us feel good. The question is, what produces longer-lasting benefits: material possessions or experiential purchases?

An experience can be a walk on the beach, an exotic or family vacation. True, not all experiences are good. The benefit of a great experience may allow for revisiting those happy memory years. When my children were younger, we often picked pumpkins at a farm, had apple cider, and visited the animals that roamed around. We all remember the fun we had. I’m sure we bought our kids souvenir t-shirts, lanterns, and hats, but they never used the purchases.

Giving to Others

Ever feel a high from helping someone in need? I have, and I am sure I am not alone.

The smallest gesture can mean so much to another that we are sometimes embarrassed that we didn’t act sooner. Making donations to your favorite charities feels good. Slipping a small bill to someone on the street provides us with an even greater satisfaction because it is an intimate form of giving.

This example is “prosocial spending.”  There is a positive impact on our social relationships when we practice this type of giving. Give a book to a friend you enjoyed or a tasty treat can improve your bond with that person.

Treat Yourself To Small Pleasures As Antidote To Hedonic Buys

When we make small purchases, we are treating ourselves with relatively inexpensive pleasures. Happiness is closely associated with the frequency of these treats. As financial resources are relatively finite, we are better off making smaller purchases.

Dunn and her colleagues point to the lesser likelihood of adapting to this more secondary and more limited spending. On the other hand, we adapt more quickly to the more expensive purchases if habitual. These are “hedonic buys,”  consumed for luxury purposes.

Let’s say you buy high-end specialty coffee drinks like cardamom lattes at $9 a pop daily from Starbucks ‘ Reserve Roastery. Over a short period, you may get accustomed to this rather expensive habit, and it is no longer unique.

When we buy showy sportscars or a bigger house, it may be consistent with our spending habits. We may not even enjoy these consistent expensive purchases as much because we are so used to these luxury goods. As mentioned earlier, this is classic lifestyle inflation, with more spending “required” to feed your happiness.

Extended Warranties Are “Overpriced” Insurance

Extended warranties can be a waste of money for consumers. From appliances to electronics, extended warranties may cost up to 50% of the product cost. On the other hand, retailers enjoy higher margins for this kind of insurance. I try to avoid those heavy-handed sales pitches we receive at the counter by saying I am in a hurry.

Extended warranties are often unnecessary. Consumer Reports recommends that you research the manufacturer’s initial warranty, which usually covers the product for at least 90 days. For most products, that is enough.

Pay Now, Consume Later

In our credit card-oriented society, we are conditioned to spending consumption and pay our bills later. We get immediate gratification from our purchase which doesn’t last as long as our card balances. Delaying gratification may sometimes allow us to feel the pleasure longer.

When booking a vacation, pay for it in advance rather than purchase it on your credit card. Your enjoyment may last longer.

Think About What You’re Not Thinking About: Remember The Details

We often focus on the best qualities of a purchase. By doing that, we minimize or ignore other features that may be critical. I know I have experienced this in some of our most significant purchases, only to regret it later.

Let’s say you want to buy a vacation home. You may be drawn to a cottage for its location and its charm, ignoring some of its downsides. Having a limited budget for your second home, you need to understand potential costs. Buying this cottage may require a lot of updating inside and outside of the building. Had you considered those costs, it may have helped you to negotiate the price down.

Related Post: How To Overcome Biases In Financial Situations

Beware Of Comparison Shopping

We are told to comparison shop to spend more consciously, but there may be a downside. Searching for a particular product available through different brands, we may use several websites like BizRate and Shopping.com. The sites may help us compare them. Retailers know comparison shoppers are ideal audiences for promotions because they have high intent to purchase.

The authors say these sites may offer comparisons based on available options rather than the attributes buyers seek. They may be purposely distracting you from what you are explicitly buying.. Don’t let them throw you off your game!

Follow The Herd Instead Of Your Head

You should read available reviews and pick movies, reading, and restaurants based on better customer ratings. By paying close attention to the happiness of others, you may better glean what you prefer. Be aware of what makes you happy.

I have found some reviews can be helpful through artificial intelligence, though, at times, they are faulty. Netflix recommends the next film we should watch. However, after I watched a murder mystery, Netflix suggested I watch Chitty Chitty Bang Bang. Hmmm.

#3  Buy What Fits Your Personality And You Will Be Happy

Spending increased our happiness when the purchases were for goods and services that match our personalities.

This ambitious 2016 study by Cambridge University psychologist Sandra Matz and others reviewed thousands of bank transaction records of customer purchases across categories. They studied Big Five personality traits: Openness to Experience, Conscientiousness, Extraversion, Agreeableness, and Neuroticism.

The study proved that money could buy happiness if spent according to the proper psychological fit. Our personalities influence our spending for experiential purchases, material goods, or to buy for others.

Our psychological fit matters. We look for similar traits when we choose our friends or colleagues, so we match up with each other. It also plays into how we each spend money individually according to our psychological makeup.

#4 Trade-Offs Between Time And Money

The relationship between time and money is well known. An old proverb, “time is money,” equates the two variables. However, we put different values on time and money. Time is a limited resource, but we don’t treat it as such and waste time often. Whether it refers to 24 hours per day or a lifetime, time is finite, and money may regenerate.

Saving money versus saving time was the theme of the Harvard Business School 2017 study by Ashley V. Whillans. Rising incomes around the globe have often come with stresses of time. 

Buying Some Time

This study set out to examine how to reduce stressful feelings of time scarcity. The growth of the sharing economy has made time-saving services for household chores increasingly available. Participants allocated discretionary income at $80-$99 per month to buy time-saving benefits such as meal delivery, house cleaning, and lawn services.

Their study found that people realized greater life satisfaction when linked to spending money for these time-savers by reducing stress.

Marital Bliss

In a 2018 Harvard Business School study led by Whillans, over 4,000 cohabitating adults (i.e., committed adults) extended the above research. Disagreements about household chores are a primary source of relationship conflict. 30% of the respondents cited disagreements over household chores as the number one reason for divorce.

They found that time-saving purchases promoted relationship satisfaction based on bought “marital bliss.”

There is a Chinese proverb:

“If you want happiness for an hour, take a nap. If you want happiness for a day, go fishing. If you want happiness for a year, inherit a fortune. If you want happiness for a lifetime, help someone else.”

#5  Money Can Buy Happiness. Find Financial Security:

  • Spend less than you earn.
  • Don’t spend to impress others.
  • Create an emergency fund for times of unforeseen circumstances.
  • Minimize debt by paying your credit card balances in full.
  • Reduce spending when you cannot pay balances fully.
  • Automate bill payments to timely pay your bills and regularly contribute to your retirement plan.
  • Save diligently and deploy into retirement and investment accounts.
  • Invest early with diversification to minimizes risk, using long-term strategies.
  • Money isn’t everything.

 

Final Thoughts

Various studies consider the relationship between money and happiness on our well-being. Indeed, if you can meet your basic needs and find financial stability, you should be happier than someone who cannot. The world has many unhappy millionaires and billionaires because money cannot solve problems like disappointments, health challenges, or broken relationships. Money can buy happiness!

My grandmother always said, “Poor or rich, money is good to have.” Managing your money well can’t hurt.

Related Posts:

Why You Need An Emergency Fund (And How To Invest It)

10 Ways To Better Manage Your Spending

 

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What makes you happy? How does money affect your satisfaction levels? Do you use time-saving services to smooth stress levels?

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter Schiff Net Worth – What You Need To Know

Peter Schiff Net Worth – What You Need To Know

What is Peter Schiff’s net worth in 2021, and how did he create his luxurious lifestyle? Let’s take a look at this controversial figure in the world of finance.

Peter Schiff is either loved or laughed at. While his supporters view him as a savant and hero who predicted the stock market crash and housing crisis of 2008, his critics write him off as a “doomsdayer” conspiracy theorist who will have you stockpiling gold bouillon while you wait for the economy to collapse.

Whether you agree with his theories or not, you can’t deny that he has made a windfall as a TV personality, author, podcast host, chairman of precious metals dealer SchiffGold, and CEO and chief global strategist of Euro Pacific Capital. Let’s dive into who he is, what he stands for, and how he makes his money.

Who Is Peter Schiff?

The name Peter Schiff is impossible to separate from the moniker “Dr. Doom.” For years before the 2008 stock market crash, he preached economic collapse and was often ridiculed.

In an August 2006 interview, Schiff said, “The United States is like the Titanic, and I am here with the lifeboat trying to get people to leave the ship…I see a real financial crisis coming for the United States.” He also released a book in 2007 right before the crash titled “Crash Proof: How to Profit From the Coming Economic Collapse.” In his book, he predicted the upcoming economic collapse and the decline of the American dollar.

It turned out he was absolutely correct…and his star began to rise.

In the 20+ years since he started his brokerage firm, Euro Pacific Capital, Schiff has amassed a fortune. He founded a full reserve bank, Euro Pacific Bank, which operates in the Granadines and St. Vincent. He also brings in a paycheck as the owner of the Euro Pacific Asset Management and SchiffGold, which deals in precious metals.

Schiff brings in more gravy as the author of six books, all of which deal with the threat of an imminent crash in the U.S. economy and how investors should prepare. His notoriety in the investment world leads to his own podcast, The Peter Schiff Show, and frequent invitations to appear as a financial commentator on networks such CNBC, FOX News, and Bloomberg TV.

As a vocal libertarian, Schiff became Ron Paul’s economic advisor in his bid for the presidency in 2008.

In 2011 Peter Schiff was listed as one of the Who’s Who of Wall Street.

Peter Schiff Net Worth

As of 2021, Schiff’s net worth is estimated at around 150 million dollars.

Investment Style

Schiff’s investment style is strongly influenced by his Libertarian political views and his belief that U.S. economic policies and the Federal Reserve are fundamentally unsound. His strategy stems from the free-market Austrian School of economics. This theory posits that investors will be repeatedly fooled (by temporarily low-interest rates) to make unprofitable investment decisions.

According to Schiff, the fed sets artificially low interest rates that encourage Americans to rack up credit card debt and discourages them from prudently saving their money.

He is opposed to government economic regulation and intervention through stimulus programs and corporate bailouts. He would like to dismantle most of the government agencies and restore economic freedom and small government. He refers to the American economy as a “house of cards” economy that will eventually collapse.

In his book, ‘The Little Book of Bull Moves,’ Schiff says, “The most important part of any U.S. allocation would be to avoid, like the plague, any stocks largely dependent on American consumers, especially when it comes to discretionary purchases or repaying their debts. That includes financials, retailers, home builders, and consumer discretionary. I would also avoid any high-multiple stocks, which excludes most technology or biotechnology companies.”

He also describes bitcoin as another “tulip bubble.” He doesn’t believe it will ever be actual currency. Ironically, his son, Spencer Schiff, transferred 100% of his portfolio into bitcoin in 2021. In response, Peter Schiff tweeted, “If my own son is this brainwashed, imagine how vulnerable most kids are.”

Peter further commented on bitcoin, claiming, “The young generation likes bitcoin because most lack the knowledge or experience to see through the hype. When they get older, they will prefer gold too, assuming bitcoin is even still around.”

All of his 6 books and appearances center around the idea that we are on the brink of another economic collapse. His recommendation is to invest mostly in gold and foreign markets. He is known for his advocacy for commodity-focused investments in countries with growth-friendly fiscal policy. Since 2000, he has been forecasting that gold would soar to $5,000 an ounce. Currently, the highest gold price was $2,067.15 on August 7, 2020.

Not surprisingly, the mutual funds his company manages focus on long-term investments in gold, crude oil and agricultural commodities, and international holdings. These are a hedge, he contends, against his prediction of the economic decline the U.S. will suffer due to its high debt and the fed’s market intervention.

He tells people to put 10 – 15% of their money in gold, with some of his clients adding another 10% in gold-mining shares.

The number one holding in his Gold Fund, as of Jan 2021, was Metalla Royalty & Streaming. Mr. Schiff built this company to increase share value by accumulating a diversified portfolio of royalties and streams with attractive returns. The second-largest holding was Fortuna Silver Mines Inc., a company with operations in Peru, Mexico, and Argentina.

The largest holding in his International Dividend Income Fund was Newmont Corp, a gold mining company.

It’s fair to say that Schiff’s business is selling gold, so he will continue to advocate for it whether it performs or not. Peter Schiff’s market predictions hinge on whether or not gold rises significantly. But his net worth will continue to grow as long as investors keep putting their trust and money into his funds.

Real Estate Investment

Real estate is not a substantial factor in the success of the Peter Schiff net worth equation.

Peter Schiff does not advocate buying a home as an investment. He sees it as a lifestyle choice. Nonetheless, he owns homes himself, in both Connecticut and Puerto Rico. Schiff purchased his 8,469sf Connecticut home in 2009 for $2.4 million. It is currently valued at more than $3.3 million.

He also owns a boat, which he doesn’t see as a good investment either. He believes that, like a car or a boat, a home will depreciate over time…and he says that he hates watching as it slowly falls apart. His massive Connecticut property requires constant upkeep and repair.

Regardless of his opinion, it doesn’t stop him from booking speaking engagements at real estate investment conferences to talk about the fiscal cliff, the dollar’s collapse, and government debt.

Schiff says that if you do own a house, you have to take advantage of the money. He doesn’t advise owning a home free and clear. On the ‘Real Estate Radio & Podcast’ in 2013, Schiff explains his opinion that “The only way that you make money as a homeowner is by being a debtor.

You are not really making money on the value of your house going up, but rather on the value of the debt being wiped clean. If you can buy a property with a 3.5% down payment, which you can with an FHA loan, you get a lot of leverage and take advantage of the chief financing. When inflation wipes out all the savers and debtors, they also wipe out your mortgage debt.”

Schiff goes on to say that, “Brokers try to con you into thinking you’re throwing away money if you rent. You’re not throwing away money because you get a place to live out of it.”

Income Breakdown

We can break down Schiff’s income into 4 main categories: salary and profit from Euro Pacific Capital and SchiffGold, his investments, his radio shows, and current podcast & other appearances, and lastly, his book sales.

By 2009, Euro Pacific Capital was managing $1.5 billion for nearly 15,000 clients.

The mutual funds charge fees on the capital invested, usually around 1.5% annually. Schiff’s income comes from the profit and the salary he earns from his firm. For example, between 2008 and 2010, he earned $17 million as his salary from the firm and reported dividends, interest, and capital gains between $1.4 million and $6.34 million.

Further, the profits from the sale of his books on economics and other media products. Given that his book ‘Crash Proof 2.0: How to Profit from the Economic Collapse’ was on the New York Times best-sellers list, it is likely he could have sold around 20,000 books in a week. According to standard contract royalties, at about $15 per book, that would earn him around 40k in one week. You can see how this can add up.

Schiff keeps himself in the zeitgeist and maintains his celebrity through social media, his podcast, “The Peter Schiff Show,” and other media appearances. He’s a true master at his own marketing. Schiff’s sometimes controversial and inflammatory statements, such as “All bitcoin is the latest iteration of fool’s gold and anybody buying it is ultimately a fool,” make headlines and draw in readers, viewers, and clicks.

Regardless of his accuracy at predicting the stock market or the track record of his management firm’s portfolios, his appearances as a TV and internet personality and commentator generate more celebrity and continue to pad his income.

His podcast on Apple Podcast has almost 5,000 reviews of 4.6 out of 5 stars. His revenue for the podcast has been recorded at $3 million. His youtube advertising revenue is estimated at around 30k+ for 2021. It is unknown what he rakes in as a speaker.

Family and History

Peter Schiff was born on March 23, 1963, in New Haven, Connecticut. His father, Irwin Schiff (a prominent figure of the US tax protest movement), died in prison, serving 13 years for tax evasion.

He attended Beverly Hills High School in California. He graduated with a bachelor’s degree in finance and accounting from the University of California at Berkeley in 1987.

Peter Schiff started his career in the early 90s as a stockbroker at Shearson Lehman Brothers. In 1996 he and his business partner acquired an inactive brokerage firm and renamed it Euro Pacific Capital.

His firm operated in Los Angeles, California, until 2005, when they moved it to Darien, Connecticut and later to Westport, Connecticut.

He is married to Lauren Schiff, and together they have 3 children.

He currently splits his time between Puerto Rico and Connecticut.

Puerto Rico Move to Save Taxes

Schiff lives in a gorgeous luxury beachfront home in Puerto Rico. He moved to Puerto Rico full time in 2017 because of the tax benefits and the beautiful weather. He encourages Americans to move to Puerto Rico and use it as a tax haven. Euro Pacific Asset Management and Euro Pacific Bank are now both based in Puerto Rico.

The Tax Incentive Code (Act 60), which incorporates tax incentives from 2012 into a single law, became effective in January 2020. The legislation provides tax exemptions to businesses and investors that relocate to Puerto Rico.

Industries that are eligible for the incentives in Act 60 include advertising, education, graphic design, trading companies, health services, legal services, taxes, and accounting, and more.

How do these industries benefit?

Here are all the goodies Peter and his businesses can enjoy in Puerto Rico:

  • 4% corporate tax rate on net income from sources outside Puerto Rico for 15 years, renewable for 15 more years
  • 100% tax-exempt dividends
  • 50% exemption on municipal license taxes
  • 75% exemption on property taxes

In summary, by moving to Puerto Rico, Peter can keep most of what he earns. He doesn’t pay taxes on his earnings to the US government. He pays only 4% to the Puerto Rican government and pays 0% on capital gains.

Peter Schiff Net Worth – Conclusion

We can learn great takeaways from the way Peter Schiff has built his enormous net worth.

Never pay more in taxes than you need to. While we can’t all move our businesses to Puerto Rico, we can make the most US tax benefits. For example, if you are self-employed, understanding how to incorporate yourself is essential for keeping more of your money in your pocket and protecting your assets.

Be willing to leave the party early. Schiff was predicting that the stock market bubble would pop years ahead of 2008. And he’s predicting it will happen again. No one can exactly time the market. If you want to get out before the market crashes, you have to be willing to leave some money on the table. You might feel like the only one missing out on huge wins, but eventually, you’ll be right. If you wait for an obvious sign, you’ll be too late.

Invest in the stock market with a strategy (and stick to it). If you want to become rich, you need to invest your money to watch it grow. Peter Schiff has a mistrust of any stocks largely dependent on American consumers. Many investors would disagree. But Schiff always sticks with his investment plan; no matter what happens, that could shake his faith. He is nothing but consistent. There are myriad philosophies about investing in the market, and you need to understand how to make your money work for you.

Take advantage of FHA loans to buy your first home. While Schiff doesn’t believe owning a home is an “investment,” he does recommend that you take advantage of the low down payment available for FHA loans. With a minimum credit score of 580, you can be eligible to make a 3.5% down payment. You must also have a debt-to-income ratio of 50% or less– meaning you must spend only 50% or less on your pre-tax income on your debts.

Invest internationally. Peter doesn’t have faith in the US economy or its markets and therefore invests his clients in many international holdings, as well as gold. Everyone would do well to diversify their portfolios with international holdings. If you choose to invest in real estate, consider looking outside the US for markets with upward mobility, such as Belize real estate.

This article originally appeared on Your Money Geek and has been republished with permission.

10 Reasons Why You Should Know Your Net Worth

10 Reasons Why You Should Know Your Net Worth

How are you today? I mean, how are you financially?

Know Your Net Worth:

  • It is a crucial benchmark at a particular time.
  • Will allow you to set near-term and long-term goals.
  • Track changes for better money management.
  • Highlight your liquid asset balances.
  • It helps you get a loan for a house, car, college tuition, or new business.
  • Pay down high-cost debt.
  • Refinance your mortgage loans.
  • Encourage you to save and invest more.
  • Buy your own home, rather than high rent.
  • Provides the best road map to building your wealth.

 

You need to know the difference between net worth and net income.

What Is Your Net Income

Your net income is based on your gross or pre-tax income and reflects your annual salary or based on hourly wages times the number of hours you worked.

Gross income consists of commissions earned and interest income from investments.

Deductions for taxes and pension and retirement accounts will be your net income for the year.

Using A Budget May Help You To Control Spending

 Net income pays your monthly bills, your monthly loans, and other items in your budget.

For a better description of what goes into your budget plan, see our post, “How To Control Spending With A Simple Budget.”

Having a reasonable budget plan and spending less than you earn will add to your net worth.

That is your roadmap to building wealth and greater financial flexibility. Take that road!

How To Calculate Net Worth

Your net worth is your personal balance sheet that provides a snapshot of your financial position at that time.

Net worth is all that you own less than all that you owe.

It is total assets less total liabilities.

An excel spreadsheet of different assets and liabilities discussed below is an excellent tool for putting all of your categories in one place. Update this spreadsheet periodically. You should do it on at least a quarterly basis. However, if you are true to your monthly budgeting, reviewing your monthly net worth is better.

Try putting it on a spreadsheet first, but you can use Personal Capital’s net worth app for tracking your investments. Frankly, any way you can keep on top of your net worth to build the amount will work.

10 Key Reasons Why You Need To Know Your Net Worth:

1. Key Benchmark

Your net worth is an important benchmark that measures your household’s successes. 

2. Set Goals

Knowing your net worth is essential to set your immediate and long-term goals and planning your family. Your net income is likely at a lower level early in your career than in the later years when your net income should rise from the potential upside coming from promotions, training, and better jobs. With careful planning and a budget plan in place, your net worth should increase over time.

3. Track Progress

You should track changes in your net worth as early as possible to make sure you are making progress in managing your money correctly.

4. An Emergency Fund Is Essential

You must have liquid or cash-like assets for the potential problems that are likely to arise. An ample emergency fund should provide some needed padding for unexpected events like a lost job. Liquidity can vary among different assets we own. A money market account is typically far more liquid than your car or your home.

5. For Borrowing

When you go for a loan to buy a house, a car, for college tuition, or invest in a new business, you will want to review your net worth to make sure you can afford the incremental costs you will be taking on. Your bankers will want to review your financial statements, including an income statement with your earnings history and your net worth.

6. Pay Off Debt

Pay down your high-yielding debt, typically your credit card debt, which uses the magic of compounding interest against us if we only make the minimum interest payments.  The average credit card interest rate for April 2021 is 19.49%. Get rid of credit balances in full on a monthly basis.

7. Refinance Mortgage Debt

You could pay off all or some of your mortgage debt if your interest rate is over 5%. If it is significantly above that, you should be seeking to refinance your mortgage.  On the other hand, if you pay a low-interest rate, don’t make any changes. 

8. Build Assets

Add to your retirement accounts to the limit,  earn your employer’s match,  and increase investments in a low-cost index fund. While stocks can be volatile year-to-year as it was in 2018 and again, early 2020, longer-term, S& P 500 annual returns have averaged 9.9% since the 1920s. If you are not facing imminent retirement, stocks remain a great place to invest your money.

 If you don’t own your home and pay high rent in, say New York City or San Francisco (the most expensive cities to rent one-bedroom apartments in the US), you may consider buying a home while mortgage rates are still relatively low at under 4%.

9. Financial Planning

Your road map to building wealth starts with knowing your net worth and making valuable changes like reduced spending, increased saving, and investing. Your net worth statement is the basis for having a financial plan to achieve short-term and long-term goals, and make adjustments to your budget. 

10. Financial Security

Having financial security means not worrying about money and living comfortably with peace of mind. Knowing your net worth is having a tool to measure your financial security at any point in time. There are terrific apps like Personal Capital that can help you build your net worth, track spending and all key variables to this statement, and make changes.

How do you calculate your net worth?

List all your the assets that have current monetary values in the following categories:

Cash and cash equivalent assets are those financial assets that quickly convert into cash. These assets include cash on hand, prepaid cards, savings accounts, checking accounts, money market accounts, certificates of deposit, savings bonds, and emergency funds. You can also include short-term IOUs, money expected from tax refunds. You can get these amounts off your latest monthly statements. List these individually based on their current balances.

Other monetary assets include your taxable investment accounts, retirement accounts, real estate investment funds, pensions, and cash value of life insurance policies. List these at their current market value.

Monetary assets are more liquid, meaning they can convert them into cash more quickly with little to no loss in value.

Tangible assets would include your most significant investments that are part of your lifestyle.

Real Estate

These real estate assets are your primary home and another real estate you own, including vacation or second home, timeshares, land, and rental property. Separate your primary home from the other real estate.

Use current conservative market values for real estate. Appraised values may not reflect actual sales or liquidated values.  You should not be inflating your net worth unrealistically.

You would need to approximate the value of your home, cooperative, condominium, cars, boats, and any other large items. To approximate real estate values, you can look at Zillow, Chase Home Estimator, or real estate websites for your zip code.

Your Business(es)

If you own your business or businesses, use conservative market values. It can be a complex matter. A simple rule of thumb is to look at sales at simple companies or a multiple of revenues, such as 0.6 times annual revenues.

Personal Property Is Tricky To Value

Unless you have a meaningful fleet of cars and boats, you should not add these to your assets even though they relate to those assets that you include. These assets depreciate too fast and sell too slowly to add much to your net worth. If you have that fleet, you can look at Kelly Blue Book, Edmunds, or AutoTrader for cars. Similarly, for boats, you can consult Boat Trader.

What Else Goes Into Total Assets

Art, rare books, rugs, and antiques may be a large part of many households’ net worth. Unless they are highly desirable or rare, these assets tend to wildly low liquidated values to count on if you needed money in a pinch. Musical instruments have their value, but they are challenging to peg, and their sales are less predictable to raise capital.

This category has a lot of sentimentalities but is complicated for the owners to peg its value. In my opinion, these assets should not be counted on unless you work with an estate professional steeped in knowledge and has a terrific network to help you sell the items.

Let My Mistakes Provide A Valuable Lesson

When I worked on Wall Street, my company restricted analysts from investing in financial securities. If I could buy certain securities on that rare occasion, I was often not allowed to sell that security when I wanted to. So, on either side of the trade, I was burned and finally abandoned investing until I left my career as an equity analyst.

So, what investments did I make?

A large part of our assets was in art, rugs, rare books, and antiques.

These assets are on our walls (art), in our bookcases (rare books such as the first edition of the Federalist Papers), on the floors (ancient rugs), and antique furniture (signed in the mid-1760s by the cabinetmaker).

Ever try to sell an 18th-century Tiger Maplewood card table? We have! And we are still waiting for that sale.

Beautiful stuff, but they can’t pay the bills! So I don’t include these personal assets. The few pieces we have sold were at prices 70% below what we paid for them.

I digress, but a worthwhile lesson for those who are collectors.

List all your liabilities according to their current balances.

Mortgage

Your mortgage loan balance is probably your most significant liability.

The home equity loan balance

Separate mortgage loan balances for the other real estate property (listed above in assets)

Other Loans

Student loans at the current balance

Loans associated with the business(es)

Personal loans

credit card account balances (you should break these out individually)

Professional services unpaid

Taxes owed

Total Liabilities

Total Assets minus Total Liabilities= Your Net Worth

How can you build your net worth? Start with writing out the ways.

You should look at your net worth statement with your budget to see what areas of growth and reduction in spending could build your net worth.

Look at your potential trade-offs.

Increasing your assets by increasing your savings could increase your net worth.

Making more income at your job would boost net worth.

Cutting your spending in areas that you can allow you to put more money into interest-bearing bank accounts or stock investments.

Investing in financial securities can expand your wealth.

Choose to invest based on your risk appetite and where you are in your life cycle.

Where should I invest my money to maximize my net worth?

Stocks are riskier but generate higher returns than keeping your savings in bank accounts at low returns.

According to Bankrate, the best annual percentage yield (APY) for bank savings accounts in April 2021 ranges from  0.40%- 0.60% for the top banks. Check for minimum balances and monthly fees that can go up to $15. These low rates will not make your net worth grow but will provide liquidity.

Having cash on hand is critical for your emergency fund. In November 2018, 76% of families reported having at least $400 in liquid accounts, according to the Federal Reserve.

Your net worth will grow faster if you invest in a diversified basket of stocks, which will provide more significant upside potential long term.

The younger you are, the more able you are to ride out the more significant risk found in stock investing, with the benefits of compounding effects.

Homeownership remains a worthwhile investment despite the slide in property prices in 2008-2009 but is less liquid than financial securities.

After household net worth plummeted in the Great Recession in 2008 to $58.996 trillion, having been impacted by declining home and stock market values, household net worth has improved to $130.0 trillion at the end of 2020, though consumer debt growth continues to dampen net worth for many families

Savings and investments in financial securities will enhance your net worth and are more liquid. Liquid net worth is a great benchmark for understanding your financial flexibilities when there are emergencies or opportunities. 

Decreasing your loans or debt liabilities will increase your net worth.

Reducing your debt levels will also improve your net worth situation.

Your mortgage loan deserves your careful attention

When borrowing, research rates for different time frames. Look at taking a 15-year mortgage loan versus a 30-year mortgage loan. The shorter borrowing time results in paying less overall interest. While your monthly payments will be higher for the 15-year loan, total borrowing costs will be lower.

Taking on a mortgage loan is a high cost, but home prices had generally kept pace with inflation until 2008-2009, when subprime mortgages played a massive factor in declining home values.

The median household net worth for 2019 was $121,700, up 18% from 2016,  according to the Federal Reserve’s latest survey.  

The Fed has kept the fed funds rate at zero to 0.25% in 2021. According to the latest Bankrate numbers, fixed mortgage loan rates remain low at 3.110% for the 30-year and 2.400% for the 15-year. 

Final Thoughts

If you receive a sizable tax refund this year, earned a higher bonus, inherited money, or experienced a sudden windfall, what would you do with the proceeds?

Lower your debt where possible, Then allocate to saving to invest more. Pay off your credit card debt. Card balances are likely your highest-cost debt, so use your tax refund or bonus to lower this amount. If there is some money, pay off more of your student debt. The way to build wealth is by growing your assets faster than your liabilities.

Thank you for reading! If you found this of value, consider reading other articles on our blog, and join us by subscribing to The Cents of Money.

What are some of the things you are doing today to increase your assets, reduce your liabilities, and raise your net worth? Where can you reduce your spending to put more money into savings and investments? We would love to hear from you!

 

 

 

 

 

 

 

 

 

 

 

 

 

A Guide To Owning or Renting Your Home

A Guide To Owning or Renting Your Home

Owning versus renting your home is a longstanding and often passionate debate. The reasons for owning or renting differ according to financial calculations and your personal preferences.

Factors To Consider

If you seek to own a home, do you prefer stability, building equity, control over home and its responsibilities, and tax benefits? Will you enjoy a sense of pride in ownership? On the other hand, does flexibility and freedom appeal to you, not having to deal with the home’s repair and maintenance, freeing you to use savings to make investments, and not have to worry about declining home values?

I understand the allure of owning your home as I have had with our primary home. We continue to hold a second home which we may one day make our primary spot. I grew up in the Bronx in an apartment building for affordable housing. As a result, my family paid a relatively low stabilized rent. Owning our home as inspired by the American Dream was out of my family’s budget.

My husband, Craig, is a real estate attorney dealing with residential and commercial transactions. When I went to law school, I was fascinated by the real estate field and became an investor in commercial properties for a time.

Before we review the advantages and disadvantages of owning and renting your home, let’s address critical factors to consider in making this critical decision.

Housing Market Trends

When it is the right time for you to buy or rent, it may be worthwhile to be aware of the overall housing market, that is, home prices, interest rates, and mortgage rates in particular. US homeownership had grown from 45.6% in 1920 to 66.2% in 2000. Homeownership rates peaked in 2004 at 69.2% (in both April and October of that year), then retreating to 65.8% in 2020.

Generational Gap In Buying Homes

According to a 2019 Zillow report, the average age of the typical first-time homebuyer in the US is 34 years old. Since the Great Recession, millennials were initially slow to purchase their home as they grapple with high student debt and slower wage growth. However, millennials’ average mortgage debt in 3Q 2020 is $237,349, just below $247,567 held by Gen X according to Experian data.

A major consideration in timing a purchase is the level of mortgage rates. Generally, mortgage rates rise during periods of strong economic growth and decline during weak or recessionary periods. Mortgage rates have been historically low, with current rates for 30 years, the fixed rate at 3.564%, and 15 years the fixed rate at 2.615%.

By pursuing a home purchase, make sure your finances are in order. That means being debt-free and establishing or expanding your emergency fund. When we review the financial costs, you’ll better understand the need to have a solid financial condition.

Substantial Financial Differences Between Homebuying And Renting

Financial costs differ between purchasing a home and renting. Homebuyers’ substantial costs can be divided into one-time payments upfront and at the closing. Purchasers face required one-time upfront and closing costs in addition to the ongoing or recurring expenses.

The process of buying a home through closing may be overwhelming, but each step is well defined.

Upfront And Closing Costs

Homebuyers are usually surprised by the number of required payments to those professionals (home inspector, bank attorney, title closer, appraiser, broker, attorney) who are assisting in their purchase. There are also other costs associated with securing the mortgage and protecting the lenders, as they will effectively own 80% of your home. You will pay mortgage application fees, points, and origination.

Upfront Costs

 

Earnest Money

Earnest money can range from 1%-3% up to 10% of the home price, depending on the locale. This money is a consideration for the mutual acceptance of a deal with the seller. As a credit, this amount reduces the purchase price at the closing. If you default before the closing, the earnest money can be the measure of liquidated damages to the seller.

Home Inspection

A qualified inspector will need to inspect the home for damages.  An inspection can help you decide on a house to buy, but before you put money down. The fee amounts vary based on the type of home, square footage, and locale. It is an essential cost as you may find structural damage or disclose other issues can reduce the price you are willing to pay.

Appraisal fees

These fees are for an independent certified appraiser’s report. The report is essential to protect the bank’s  collateral exposure. They are paid directly to the bank after inspection but before the closing and in conjunction with the mortgage loan agreement.

Escrow Accounts

The escrow account is for the bank’s benefit and the attorney’s.

The attorney escrow account holds your down payment for the house. The bank’s escrow covers prepayments for property taxes on the homeowner’s behalf for up to six months. Additionally, the buyer will be paying a full year’s homeowners insurance premiums upfront and one-twelfth of the premium into escrow. Some borrowers,  if applicable, pay private mortgage insurance (PMI) premiums. PMI is required if the buyer is making a down payment of less than 20% of the home price preferred by the lender.

Closing Costs

The final part of your purchase involves several closing costs associated with formalizing the mortgage processing and concluding the transaction between buyer and seller. They include charges for the loan application, processing, and underwriting. The latter may amount to about 1% of the loan. So if you are borrowing $300,000, you will pay $3,000.

You will be paying for a title search and other title-related costs to ensure you are purchasing a home with “good title” free of fraud and any liens for unpaid taxes, etc. The title company collects a premium and receives recording fees.

You will also be paying an attorney for closing your deal and representing you as the buyer in most states. The attorney’s fee ranges from $750-$3,000 depending on the deal’s complexity and your locale.

Recurring or Ongoing Costs

Your ongoing monthly costs of buying a home are your mortgage payments, utilities, garbage, property taxes, and homeowner insurance. These are predictable or fixed costs.

If you are buying a house (rather than an apartment), maintenance, repair, painting, and appliances may vary depending on the house’s condition and age. The costs are often difficult to estimate and may depend on your DIY abilities. You will also have other expenses for lawn care and snow removal, which differ based on your geographic location.

Costs of Renting Your Home

Upfront costs are far less. Landlords usually require 1-2 months for a security deposit at the time of the lease signing. Some landlords will increase additional security or fees for any pets you have for potential damage to their property.

The landlord may require an application fee for administrative costs and a possible broker fee unless the landlord pays this. There may be a move-in fee depending on the type of home you are renting.

Recurring Rental Costs

Tenants are responsible for monthly rent, all utilities, and renters insurance. While the homeowner has homeowners insurance, that doesn’t cover your personal property, including your furniture, clothing, electronics, computers, jewelry, and anything of value to you or liability insurance. The landlord will require you to purchase renters insurance.

Landlords are required to provide you with at least 30-day notice in most states with an increase in the rent unless stated as part of a multi-year lease.

What Is Your Financial Situation?

Before going house-hunting, if you plan to make a purchase, it is a good idea to check your credit report for any errors or issues. You need to be aware of any errors that you should correct. You should know your credit score and what amount of mortgage you can afford. There are steps you can take to raise your credit score.

By the way, your credit report matters to your landlord also. A poor credit report could be a thumbs down on your ability to rent. If your credit score is fair, it may mean providing your landlord with more security. However, a poor credit score has far more of a negative impact on your ability to borrow.

MyFICO’s loan calculator is handy for estimating your APR, monthly loan payment, and total interest paid. For example, using a $300,000 loan your payments for 30 years and 15-year mortgages as of April 9, 2021, based upon your FICO score will be:

30 Year Mortgage

Credit Score                APR             Monthly Payment        Total Interest Paid

760-850                      2.764%                  $1,227                    $141,702

700-759                      2.986%                  $1,263                    $154,517

680-699                      3.163%                  $1,291                    $164,881

660-679                      3.377%                  $1,327                    $177,583

640-659                      3.807%                  $1,399                    $203,664

620-639                      4.353%                  $1,494                    $237,826

 

15 Year Mortgage

Credit Score                APR             Monthly Payment        Total Interest Paid

760-850                      2.107%                  $1,945                    $50,162

700-759                      2.329%                  $1,976                    $55,736

680-699                      2.506%                  $2,001                    $60,219

660-679                      2.72%                   $2,093                    $65,685

640-659                      3.15%                   $2,093                    $76,822

620-639                      3.696%                 $2,174                    $91,255

 

A Few Observations

Irrespective of your FICO Score, the lower the credit score, the higher your APR, monthly mortgage payment, and total interest paid.

Financial Implications For 30 Year versus 15 Year Mortgage

When comparing the different loan maturities on a $300,000 loan:

  • The APR will be higher for the 30-year mortgage than 15 years, all else being the same.
  • The monthly mortgage payments will be significantly higher for the 15-year mortgage, given the shorter period. If you can afford to pay the higher monthly amount, you are better off with the 15-year mortgage because you pay less in total interest.
  •  Assuming you have a 720 credit score, the total home price, including total interest paid and down payment will be lower with a 15-year mortgage loan.
  • The 30-year mortgage is much higher because you are paying interest on your loan longer, so the total home price or principal is $375,000 plus $154,517 equals $529,517.
  • If you opt for a 15 year mortgage, your total home price or principal  is $375,000 ($300,000 loan + $75,000 down payment of 20%) + $55,776 in total interest equals $430,776 for principal and interest.

Advantages Of Buying Your Home

 

1. Building Equity

Paying your mortgage over time will result in building some equity in your home. You should be aware that your initial payments are predominantly for interest on your loan, especially if you have a 30-year mortgage and equity builds relatively slowly.

On the other hand, you will undoubtedly be owning your home much more quickly with a 15-year mortgage. A mortgage amortization calculator helps compare the principal and interest portions for the 15 and 30-year mortgages. Assume your loan begins in April 2021.

The comparison reveals that more than half of your first monthly payment goes to the principal than interest with the 15-year mortgage. However, only about a third of your payment goes to the principal with 30 years. The amount between principal and interest reaches parity until the year 2032, and equity rises slowly after that until the year 2050, when you satisfy the 30-year loan.

2. Your Home As An Appreciable Asset

Depending on your time frame, US new home median prices reflect appreciable growth. Median new home prices have risen from $17,200 in 1963 to $212,300 in 2011 according to the US Census of Housing. That is a 5.38% compounded annual growth rate. However, adjusted for inflation, the growth rate is 1.8%. On the other hand, inflation-adjusted monthly rent grew from $568 in 1960 to $934 in 2010, according to Apartment List Rentonomics. This 68% hike in rent is well ahead of the 18% rise in household income during the same period.

Your investment in your primary home essentially keeps pace with inflation rather than generating strong investment returns. When calculating returns you need to factor in the interest costs to the total price. That said, you are living in your home and hopefully enjoying a high quality of living which can be priceless for many.

There have broader differences in select markets across the US that exhibit stronger appreciation due to higher population growth, demand, and other factors.

Housing Bubble

The US housing bubble was particularly troubling for homeowners in the mid-2000s. Housing prices peaked in early 2006, then leveled off until record drops of 18% as reported by the S& P Case-Shiller index in October 2008.

While this drop was exceptional, it still provides a warning sign for those interested in purchasing their homes as loss in home values is real. However, some markets have recovered from the Great Recession and recent housing price trends seem more favorable.

3. HELOC As A Source of Funding

Once you have built some amount of equity and have paid your mortgage on time, you may be able to set up a home equity line of credit or HELOC. You can often get a loan more quickly and at lower rates because you are using your home equity as collateral. Part of these funds could go to building a new kitchen or expanding the house.

The HELOC, if not maxed out, can positively help your credit score. This is because the HELOC has increased the available amount of credit, lowering your utilization rate and improving your financial situation. Credit utilization accounts for 30% of your credit score. HELOC increases debt, so make sure you pay this loan on time and in full. To avoid a hit to your credit score, don’t close the HELOC unless you are too tempted to use the money or about to close on the house, as it will then lower the available credit.

4. Possibility of Rental Income

When you live in your primary residence, you don’t often think about renting out your property. However, your family may relocate for your firm for a couple of years, or your kids are moving out, and you want to travel more. You may decide to rent out your home or list it with Airbnb.

5. Stability In Owning Your Home

It is wonderful to raise your kids in one home, become part of the neighborhood and community. There is a certain calm feeling of not searching for a place to live and pack and unpack boxes. (Having just moved to a new home, I can share that I will be thrilled when our family settles in our home and the last box is gone.)

6. Tax Benefits After The Tax Law Changes

The 2017 tax law did impact some of the tax deductions enjoyed by homeowners. If you itemize your deductions on a joint filing, you still claim mortgage interest payments up to a $750,000 face value loan. Qualified loans include your mortgage, home equity loans, and HELOCs. This tax change is a reduction from $1,000,000 before the recent tax law. You can no longer deduct interest associated with home equity debt unless buying or improving your home.

Deductions for state and local taxes (known as the SALT deduction) and property taxes are capped at $10,000. This amount may be appropriate in Ohio but not in high-tax states like New York or California. This is a reduction from unrestricted amounts previously deducted. You can still deduct the proportionate interest associated with your apartment building’s mortgage if it is a co-operative.

Homestead Exemption

Certain states, like Florida, offer exemptions if you meet specific requirements. This exemption may protect a surviving spouse when the homestead spouse dies. A homestead exemption is a law that protects the value of a home from property taxes and creditors. Depending on the state, a property tax can get an exemption in the range of $25,000-$75,000 of a home’s assessed value from property taxes.

7. You Have Freedom To Do What You Want

Are you creative? Your home can be a good option for you. There may be some conformity required, but your wallet limits design and remodeling. You can do gardening and grow vegetables. Owning your pets is more manageable in your home. Your children can listen to loud music with fewer rules of noise after hours. Peace of mind can be precious for you and your family.

8. Sense of Pride In Ownership

For those who have rented for a long time. owning your home feels like an accomplishment. The land is a natural resource, and there is a good feeling of knowing you own the land where you walk and live.

Ask any refugee that has had their home taken away from them what a house meant to them. My mom was a refugee when she came to the US, having lost her family. Her home was taken away illegally and violently. While owning a home eluded her, she always considered owning a home away to wealth.

Disadvantages of Owning A Home

 

1. High Costs To Own

We addressed the one-time and recurring costs a homeowner has to realize, but it bears repeating. In particular, there are unforeseen events that require homeowners to do planning ahead of the purchase. Having an ample emergency fund is essential for all, but homeowners need to expand that fund to avoid borrowing unnecessarily.

Consider the age of the home and its condition when factoring in maintenance and repairs. Are you handy? We are not, and so we rely on a plethora of plumbers, electricians, and those who can help us around the house with shower breaking and leaky pipes. I keep wanting to spend time watching YouTube to pick up some tips but I am always afraid of starting a fire.

Our teens are handier but not always available given their schoolwork, friends, sports, video games, and sleeping late.

It may be worthwhile to watch the 1986 movie The Money Pit with Tom Hanks and Shelley Long. It left an indelible memory of what not to do with your house.

2. Lack of Flexibility

If you are adventurous, you may feel stuck in the same house and environment, especially as your friends may pick up and leave to try life in another place or country. You may want to sell your home and retire to another locale, but the local economy is weak.

We had next-door neighbors who experienced that predicament. They lived in Connecticut and had bought a house in Florida. The market had been terrible for the better part of a decade. They had to stay put in the colder climate they planned to avoid in their later years. They finally sold last year.

3. Your Home Has An Opportunity Cost

A home is usually the most significant asset you own. The mortgage, maintenance, repairs, and property taxes require a lot of capital that may be better invest in a diverse investment portfolio. Many people believe that when they sell their house, they will use the money for retirement. That is true, but there is no guarantee that you will be able to sell your property quickly or not be facing declining values.

Too much concentration on one asset is hazardous. You need to have investments in other assets but saving to invest in other vehicles is difficult when so much capital is in real estate.

One way to avoid this difficulty is don’t buy a house too big for you. The amount of space homeowners have been buying has dramatically increased since 1973. Specifically, median size homes have recently expanded to 2,467 square feet, up to 1,000 square feet. During that time, the average living space per person in the household has nearly doubled to 971 from 505. Do we need all that space and then have to furnish it too?

Advantages of Renting

 

1. Rental Costs Are Less

The lease agreement with the landlord provides your financial responsibilities, which are essentially predictable: monthly rent payments, utilities, lawn care, garbage disposal, and snow removal if applicable. There is a minimum of upfront fees. Finding an apartment may be harder in specific markets and more expensive based on demand.

2. Benefits of Ownership Without The Property Taxes

You may be fortunate to get the best of what property taxes pay for without having to pay these costs when you rent. Families are always willing to pay more money for a house to be located in a nice place with a great school district. Higher home prices and property taxes may put buying a home out of your range.

Our Recent Move To A Rental House

By renting, you can access the town’s beauty, infrastructures like transportation, town pool, and schools. These attributes are a big reason why we moved to a small town (from a big city)  to a house rental (from an owned apartment) and switched our kids from a private school to one of the best public schools in the state, if not the country.

Our son joined the football team, and our daughter is considering other sports not readily available at her previous school. It was a difficult decision, especially for me, having grown up in the city. Although it is early, it feels promising.

Renting may also help you get familiar with the area before purchasing and allow you to get your financials in order.

3. Free Of Maintenance And Repairs

Your landlord has primary responsibility for the care of the property. It is up to you to inform your landlord of the need for maintenance and care. For those not handy or not wanting to spend the money to fix things, renting can be ideal.  Usually, the landlord wants to use their folks (e.g., painters, electricians) for respective issues in the home.

4. Flexibility To Leave

At the end of the lease, you can leave the premises. Many people decide to move around and explore different areas or look for other jobs. You aren’t tied down, and as long as you make payments through the end of the lease, you are good to go. It is challenging to leave your own home as quickly as a tenant can.

Disadvantages of Renting

 

1. Higher Rent Or Sells Property

Your landlord can raise your rent with proper notice or sell the property. Renting has increased faster than household income has since 1960. Apartment List Rentonomics points out that inflation-adjusted rent rose 64% from $568 per month in 1960 to $934 in 2010, while household income grew only 18%.

Many homeowners turn to rent if they are unable to sell their property due to a poor market. Once the market turns, they may ultimately sell the home you are renting.

Markets vary, but in specific markets, there are fewer homes to rent.

2. No Equity Buildup or Tax Benefits

It is common for people to say that renting is throwing money away. Of course, this is not true as you are paying for the living space for some time. You have the freedom to find the best affordable apartment you can to live in an area you prefer.

You are not getting equity or tax benefits from your rent, but you are getting several advantages. You can divert your savings into other assets.

3. A Bad Landlord

It would be a drag if you rent an apartment from a bad landlord, but the good news it is not permanent. Before you rent, check out Yelp to see if there any red flags to know about your landlord. People are always willing to share their bad stories.

I recall some horrifying stories that painted their landlord as a reincarnation of Jack Torrance, played by Jack Nicholson in The Shining. Torrance was the caretaker at an isolated hotel.

If you are having trouble with your landlord, who is not providing services promised in the lease, there are legal actions to take.

4. No Upside From A Strong Housing Market

As a renter, you do not get the benefit of improving house values. It may feel bad when your friends are experiencing some growth in their home value, while you may be getting a notice from your landlord that they are getting ready to sell or raise the rent.

 

Final Thoughts

Hopefully, this guide provided you with good information to decide between buying or renting your home. Frankly, you can look at the calculations related to mortgage costs, building equity, home prices, square footage, but in the end, the choice is a personal one for you and your family.

If there is one point I would like to make, consider how your preferences line up with your long-term financial goals. Make sure that if you find your dream house, it is doesn’t break the bank. You don’t want to be too overladen with debt.  Remain disciplined in your spending and make saving a priority.

 

Thank you for reading! If you rent or own your home, would you kindly share your experiences with us? We always like to hear how you decided which shed light on a home decision.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

How To Become A Millionaire -16 Dos And Don’ts

How To Become A Millionaire -16 Dos And Don’ts

It’s no longer “Who Wants to Be a Millionaire” but how to become a millionaire. You don’t have to be a contestant on a game show, win the lottery, or receive a windfall from a relative. Just follow the 16 Do’s and Don’t in this article, and you’ll be on the road to becoming a millionaire.

Four Money Mindsets Used by Millionaires

While it might be easy to think that millionaires are just lucky, they think about how their money can work for them, not just how they can work for money.

1. Use Time to Your Advantage

Most people look for concrete paths to becoming a millionaire. But the essential ingredient to becoming a millionaire is intangible. It’s time. The majority of millionaires utilize the compounding nature of time, where growth builds on itself over time.

My favorite imagery to describe compounding is to imagine the growth of a tree. In the first five years of a tree’s life, it will only grow a few feet. Its shrubbery is the size of a basketball. It’s a small, weak plant. In the next five years, will the tree double in size? No! It’s more likely to quadruple (or more) in size. It’s growing in all three dimensions—height, depth, width. It’s not a simple doubling.

We’ve all seen the social media megastar who goes from broke to millionaire in less than ten years. But they are exceptions, not the rule. Most millionaires grow their wealth at a slow pace. Over time, they utilize an explosion of compound growth—like a tree—to become a millionaire.

2. Create Financial Goals

Millionaires develop written financial plans that serve as roadmaps to reach their destination. These plans allow them to make financial decisions based on their goals. A good financial plan means that to reach millionaire status isn’t an if; it’s a when. They know where they are going to get there because their personal finance is all planned out.

If you’re unsure how to create a financial plan, then a certified financial planner (CFP) might be an excellent place to start. They might suggest you start investing or open a Roth IRA retirement account or first fill up your emergency fund. A financial advisor is there to share millionaire wisdom with you.

Becoming a millionaire goes hand-in-hand with retirement planning and retirement savings. For some, reaching the millionaire club will enable their financial freedom or the ability never to work again. Saving money allows a high net worth, and financial independence is the reward.

Big financial success requires big financial goals. A written financial plan sets those goals.

3. Millionaires Increase Earnings

There are a few ways to go about increasing your earnings on your path to becoming a millionaire.

The fact is that most millionaires have a full-time job. And they might work it for a full 40 years. If routine work is how you make money, you could ask for a raise. Easier said than done, sure. But there are sure-fire ways to speak with your management about increasing your base salary. The best part? An increased salary affects your income every year from now until retirement. You aren’t just doing it for your current self, but for your future self too.

You could switch jobs. Self-made millionaire Steve Adcock attributes changing jobs (and getting raises each time) to be one of the critical factors in becoming a millionaire. Steve also focuses on the need to work hard and start investing as early as you can. Or you could find sources of passive income or secure a second job. Surprisingly there are easy ways to generate passive income, tons of side hustles to start, real estate ventures, and other easy ways to earn money and build wealth.

Increased earnings can be invested and grow into future millionaire wealth. A simple rule of thumb is that a dollar invested today will grow into $10 in 30 years. Using this fact, one can quickly see how a few thousand dollars in extra earnings can make significant headway on your path to future millionaire status. The bottom line: increasing your earnings is how to become a millionaire. There’s no “best way” to do this, but it’s critically important to reach your millionaire financial goals.

4. Millionaires Also Decrease Their Spending

Many financial writers point out that the stereotypical “millionaire lifestyle” is antithetical to becoming a millionaire. Why? We think of millionaires as having a big house, a fancy car, the nicest clothes. But if you spend all your money, then you aren’t a millionaire anymore. The truth is that most millionaires find ways to decrease their spending. They don’t buy dumb crap.

This behavior—spend less, save more—is how to become a millionaire. It’s counterintuitive to our traditional thoughts. The people who don’t look like millionaires are the ones who frequently are millionaires. It’s the adage of the “millionaire next door.” The authors of “The Millionaire Next Door,” a worthwhile read, have a target net worth ratio with age added as a factor.

They might drive used or old cars. They wear non-designer clothes. They enjoy low-cost or free activities. They don’t dine out too much. They vacation economically. These are all ways that millionaires decrease their spending without feeling deprived.

There are plenty of counter-examples. We all see millionaires on T.V. who genuinely live the millionaire lifestyle. But for the average reader, the simple path to wealth involves decreasing your spending, not increasing it.

Five Ways to Invest Like a Millionaire

Did you know that millionaires put 44% of their investable assets in stocks? And that 2/3 of millionaires lean on experts by consulting with advisors? Let’s take a look at the most common path to Millionaire Road.

1. Millionaires Do Simple Stock Investing

The stock market is one of the most common methods for people to become millionaires. One investing strategy is simple to describe. Invest a regular percentage of every paycheck into a low-cost index fund. Rinse and repeat for ~35 years. Boom—that’s how to become a millionaire. But let’s take some time to break down those terms and that math.

First, what’s a low-cost index fund? Many people mistakenly believe that successful stock investing involves picking individual winners and losers. But that’s not true, and an index fund helps explain why. An index fund owns every stock in a given stock index. It doesn’t pick winners and losers but buys entire swaths of the market instead.

You’ve heard of some indexes—like the S&P 500 or the Dow Jones. An S&P 500 index fund chooses to own every stock in the S&P 500, regardless of its recent success or failure. Other indexes and index funds are less well-known. For example, some indexes track the energy industry, the automotive industry, or precious metals.

History shows that index fund investing is very successful. One of the key reasons is that index funds charge meager fees. Since there is less expertise required—no “skilled” picking of winners and losers—there is no need to charge high fees.

2. Millionaire Investors Leverage Time

Next, let’s discuss the long-term aspect of stock investing. Many people see the most expensive stocks—like Tesla—and think it’s typical for stocks to grow by 10x in five years. “If only,” they ponder, “I can discover the next Tesla.” Index investing circumvents that wishful thinking. Since brokerages design index funds to be average (they own everything), index funds return average profits.

Over the history of the stock market, that return has been about 10% per year. Once inflation is accounted for, the stock market has a “real return” of about 7% per year. 7% is not a lot until it starts compounding. One year of 7% turns $1000 into $1070. But what do 30 years of compounding do? The average person might think 7% times 30 years equals 210%…turning those $1000 into $1000+$2100 = $3100.

But the truth is that stock market returns compound over time, just like our tree from before! A 7% return compounded over 30 years equates to (1.07)^30 = 761%. Your $1000 investment turns into $8610. But $8610 doesn’t make you a millionaire.

3. Regular Investment, Regular Frequency Is the Path To Millionaire Status

That’s why many experts suggest the average person invest using a regular frequency and a uniform amount. That’s how you reach $1 million net worth. For example, Americans could choose to utilize their 401(k) account. They’d be investing a consistent fraction of their paycheck (uniform amount) each time they are paid (regular frequency). Some people call this “dollar-cost averaging,” although the exact definition of dollar-cost averaging is up for debate.

Let’s look at an example of dollar-cost averaging using a 401(k). Mikey invests $400 out of each of his paychecks. He does this from age 22 until he retires at age 60. Some quick math tells us that Mikey’s contribution is $400 per check * 26 checks per year * 38 years = $395,200. The technical term for this contribution is principal.

But once we account for investing growth (again, using the 7% per year historical average), Mikey ends up with a whopping $2.07 million. Remember, our 7% is the “real return,” meaning that Mikey has $2 million in today’s dollars. He hits 1 million dollars at age 51. That’s the power of consistent stock market investing over decades. In this case, 30 years of simple investing is how to become a millionaire.

4. Millionaires Invest in What They Know

Cryptocurrency has undoubtedly created many millionaires (and even some billionaires). Whereas stocks return an average of 10% per year, Bitcoin has grown by 196% per year since its invention in 2008. Crazy! But your correspondents here suggest the following when it comes to cryptocurrency: invest in what you know.

If you understand how Bitcoin works and feel confident in its long-term growth, then you likely have the constitution to withstand any ups and downs it sees in the future. But if you invest in crypto ignorantly, simply hoping to make a quick buck, then you might be in it for the wrong reasons. If prices dive quickly—which we know can occur—it will scare you into selling after a significant loss.

Investing in stocks—which represent ownership in the companies comprising our economy—is much more tangible for the average investor than the boom in digital currencies.

5. Millionaires Invest in Themselves

While a smaller percentage, another path for millionaires is to “invest in themselves” via starting a business. Most business owners will tell you how this is a high-stress, high-risk, high-reward path.

First, there is stress. Business owners typically work long hours. They often take a little-to-no salary during the early years of the business. Instead, they opt to invest any earning to allow the company to grow. They are responsible to their employees (and those their employees care for) and responsibly for their customers to provide the best service possible. These responsibilities contribute to high stress.

And then there is the risk. Businesses frequently use debt (or borrowed money) to get started. This debt creates financial risk associated with the business failing. Some businesses utilize outside investment capital. In this case, the outside investors trade a share of the risk for a company’s percentage. This trade decreases the business owner’s risk but increases their stress (they now must answer to their investors) and reduces the owner’s reward (they share it with the investors).

After the risk and the stress comes the reward! Perhaps the most satisfying aspect of capitalism is that those who invest their capital (money and time) can later reap huge rewards. Business owners certainly fall into this category. Let’s go over a few quick examples of those rewards.

Bill Gates founded Microsoft with, essentially, zero start-up dollars. The company is worth $1.7 trillion today (though Gates is no longer close to being a majority or plurality shareholder). Elon Musk contributed $6.5 million to Tesla in 2004—yes, he was already a millionaire. But Musk earned his millions from cash-strapped start-ups, most notably PayPal. Jeff Bezos founded Amazon using “a few hundred thousand dollars” as a loan from his parents. The company is now worth $1.5 trillion.

Yes, this data set was cherry-picked in the “worst” way. These are possibly the three most successful entrepreneurs in the past 50 years. But it serves to drive the point home. A business can filter risk and stress to create an asymmetric reward.

Four Personality Traits of a Millionaire

Millionaires and other successful people tend to share similar personality traits. You might already have some guesses as to what those are. Authors Chris Hogan and Tom Corley identified the following characteristics the millionaires share.

1. Millionaires Seek Feedback and Have Mentors

Millionaires don’t exist in a silo. They often seek out external feedback to improve. In particular, millionaires frequently utilize experienced mentorship to help them stay on the path to wealth. Sure, some people strike gold by doing things their own way. But those people are exceptions to the rule.

2. Millionaires Persevere

The road of life is never smooth, whether you’re a millionaire or not. But one character trait that sets successful people apart is their ability to persevere through thick and thin. This perseverance might mean overcoming hardships. It might equate to ignoring critics. They keep pushing on, no matter the obstacle. It’s not guaranteed to make you millions. Plenty of hard-working people don’t end up as millionaires. But it’s even rarer for a lazy quitter to end up a millionaire.

3. Millionaires Are Consistent

Millionaires know that the tortoise beats the hare. Its slow and steady strategy wins the race. In other words, consistency wins in the long run. Consistency can take many forms. It can show up as hard work. It manifests as daily responsibility and intentional thinking. When these behaviors are practice day after week after month after year—consistently—then good results are sure to follow.

4. Millionaires Are Conscientious

Millionaires tend to be responsible and thorough. They follow through. They complete their duties to the best of their abilities. In other words, they are conscientious. Their inner conscience guides them.

Three Things Millionaires Don’t Do

On your journey to becoming a millionaire, it’s important to avoid some behaviors, or you’ll sink your efforts. You’ll be trying to fill your bank account with a leaky bucket. Let’s now discuss the actions that millionaires don’t do.

1.Don’t Accrue Dumb Debt

Debt is a double-edged sword. You can spend more money than you have and achieve wild growth. Or you can stumble into a pit of misery, stuck in debt for decades. Student loans, for example, are one of the most common debt vehicles today. Many current and future millionaires have suffered student debt. Why? Because education kickstarted their growth as nothing else could.

While some student loan debt is dumb, most people find their student loans manageable and worthwhile. Trading education for some debt was a good deal. But credit card debt is rarely worth it. It’s dumb debt. Purchasing consumer products using credit card debt is not a millionaire behavior.

2. Don’t Make Rushed Decisions

Remember when we said that “time is on your side.” That idea applies to more than just long-term investments. Millionaires realize that big decisions require significant time commitments. And how to become a millionaire is a big question to answer! It’s not something to rush.

Millionaires rely on well-researched decisions, rarely succumbing to hasty, irrational choices. What’s one example of a foolish choice? Millionaires don’t follow the crowd. According to author Tom Corely, the millionaires he has interviewed tend to separate themselves from “the crowd.” They don’t make decisions based on popular choices. Why? Because the popular opinion is often wrong!

3. Don’t Be Stagnant

Millionaires seek growth in both their personal and financial lives. They aren’t stagnant. Millionaires are constantly seeking to learn new skills and expand their knowledge set. They don’t settle for the status quo. And in their finances, millionaires understand the balance between risk and reward. They don’t use a savings account other than for their emergency funds.

In general, the most impactful rewards come from the highest risks. But there’s a “risk-adjusted” way to measure those rewards. Millionaires often strike a healthy balance between risk and rewards.

Final Thoughts

Even if (somehow) this advice doesn’t land you in the millionaire club, think of where you’ll end up. You’ll be a reasonably wealthy, high-earning, low-spending, self-invested, self-improving, perseverent, consistent, and conscientious person who avoids debt, doesn’t rush decisions, and never settles.

Not bad, right?

This article originally appeared on Your Money Geek and has been republished with permission.

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