Do You “Act As If?”

Have you heard the saying “Act As If” before? If you’ve seen the movie “Boiler Room” I know you have.  In “Boiler Room,” Ben Affleck is training a group of wannabe stock brokers to be fantastic but illegal stock salesmen on Long Island.  I won’t ruin the story for you but I want to talk about a specific part of the movie where he’s addressing the group of trainees…

At this point in the movie all trainees have just been hired and are preparing to start selling stock after passing their series 7 exam (the SEC requires any individual who wants to sell securities pass this exam). While conducting a morning sales meeting Ben brings up the fact that many of the trainees, who are all wearing suits, aren’t wearing suits that meet their companies standards.  He told them they dress like $hit and need to go out and buy at least one decent suit because the company they work for has a “minimum level of aesthetic professionalism they need to maintain.”  He also promises the group that it’s ok to buy an expensive suit even though they’re broke because they’ll be millionaires in a short period of time.

This then led to the “Act As If” speech, which I’ve always loved. Check it out… ***Disclaimer: Ben drops the F bomb in this clip.***

This is how the typical American thinks about money.  Most of us spend our money before we’ve made it and it gets us into trouble.  Luckily, no job will require anyone to act like millionaires if they aren’t millionaires.  I understand that the point of this talk is to build confidence and present an image of success.  But, you can’t just go out and buy an expensive suit because you think it’ll make you successful faster by influencing how others think of you.  Maybe you’ll boost your confidence for a brief period of time but you’ll become financially successful by being good at your job and telling your money where you want it to go.

I’ve never gone to a doctor because he drives a $100,000 car or a lawyer because he wears a $1,500 suit.  I pick a doctor by talking to patients of his and finding out his reputation. Is he smart? Does he have a good bed side manner? Will he be able to keep me from dying if I’m not supposed to die at that particular time? My point is that if you’re good at your job, no one will care what kind of suit you’re wearing or what model car you’re driving.

Like I said, I’ve always liked the “Act As If” mantra.  It can be applied to almost any situation, not just money.  It pumps me up, it’s motivating and it makes me want to go out, kill something, and drag it back home (metaphorically).  However, now that I’ve gotten a little older and gotten control of my finances and career, I don’t agree with this message as it relates to personal finance.  “Act As If” sounds an awful lot like keeping up with the Jones’ and no one can build wealth by trying to keep up with all of the other fools who either don’t care or are ignorant about personal finance.


When I was younger, I would blow all of my money right after pay day because, like the characters in this movie believed, I thought that I would earn money so fast that I wouldn’t miss the money I already blew.  I think most young professionals feel that way in their early 20’s.  It’s hard to think about retirement when you’re just starting a working career.  But, there isn’t one person on this earth that won’t run across a difficult time in there lives. It is said that everyone will have at least 1 financial emergency every 10 years. We just can’t keep spending money and expect to make it back, or make more, right away. We have to be prepared!

Fortunately, some of us finally wake up and realize that we work too damn hard for our money and we don’t want to look up after 30 years and have nothing in the bank to show for our hard work.

Success with money and more importantly, the speed with how fast you are successful with money comes from your level of dedication and what you are willing to sacrifice. “Act As If” DOES apply to you and your money but you have to reverse how you think about this phrase. “Act As If” you’re poor. “Act As If” you only make 50, 60, 70% of what you really make. “Act As If” you’ll be working for the rest of your lives if you buy that new car or bigger house…because you actually might if you make a poor decision.

Get rich by “Acting As If…”. How will you “Act As If?”

Net Worth Update: $131,203.01

Welcome to April everybody!  I hope March treated you well and you were able to take advantage of a market that wasn’t losing money.  The S&P 500 increased 3.98% over the last 30 days.  It wasn’t a great month for investments but at least it wasn’t like January!

Since this is my first post on my net worth updates, I’m just going to list everything out and I won’t really have any detailed explanations about what’s going on like I will in future net worth posts.  You can also see in the “My Net Worth” excel pic that there is nothing there for “last month.”  That’s because this is the first month I’ve started using it.

I’m currently not investing in any 401k’s or other investments.  I do have balances in 401k’s but the only changes in those investments are from my employers contributions and the ups and downs of the market.  Right now I’m in Step 3 and I’m just building up an emergency fund of 6 months worth of expenses.

So, here we go…

April Financial Breakdown

House: $379,531 – $322,085 $57,446.  I’m just using zillow.com as the baseline here.  They give their estimate for how much they think you’re home is worth.  I’m not saying it’s accurate but it’s a decent way to keep track without bringing an appraiser in every month to help you track your net worth.

My 401k: $17,660.16.  Right now 5% of my salary is going into my 401k via my employer.

Pension Fund: $7,975.  I’m one of the few remaining workers in America that contribute to a pension fund and if I decide to stay with my employer and retire 24 years from now I will receive a pension.  I DO NOT PLAN ON DOING THIS!  I’m all about early retirement!!!

My Old 401k: $7,991.85.  This 401k is from an old employer.  I need to roll this over into a Roth IRA.  Hopefully I get to this very soon…


Wifey 401k: $3,779. Same situation as my 401k.  5% match from her employer.

Wifey Old 401k: $3,300. Also in the same situation as my old 401k.  We also need to roll this over to a Roth IRA very soon.

Car: $13,000.  I know, I know.  Many people don’t like counting the value of vehicles towards their net worth for whatever reason they choose, but I do because I could easily sell my car and have $13,000 in cash if I needed it.

Jeep: $11,000.  Same here…

Emergency Fund: $9,051.  I’m sad to say that I do not have my 6 month emergency fund saved up yet.  But, we’re working on it and will hopefully be where we need to be in the next 6 months or so.  GOAL? $20,000 right now.

TOTAL NET WORTH: $131,203.01

So there it is.  My first post on my net worth.  It’s obviously not where I want it to be right now but when I’m done building a solid foundation I will be able to invest a lot of money and build my net worth much faster than I can right now.

The first few years of beginning to build your net worth are slow but once you get some momentum it’ll shoot up faster than you can imagine!

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How much house can you truly afford?

If you’re like me and you’re on a mission to retire early, you need to know that the choices you make always affect your timeframe for when you’ll reach early retirement.  It can shorten how long it is until you reach your goal or it can push it back further and further into the future.  How much of a house you buy will be one of the most crucial financial decisions you’ll make.

extravagant home
Why have a home like this if you have to worry about paying the mortgage for the next 30 years?

Like everything in the world, there are many different opinions when it comes to how much you should spend on housing.  There are many people who think that their house is an investment and it’s ok if they have a ridiculous mortgage payment on an extravagant home.  On the opposite end of the spectrum, there’s a large movement of individuals who lean towards keeping there expenses down to nothing which has in turn created a housing market for “tiny” houses.  Personally, I pretty much stand right in the middle.  I like to keep my expenses low but with a wife, 2 kids, and 2 dogs I can’t really force them to spend the rest of their lives in 300 square foot house.

I’ve never really liked to think of my house as an investment but I can acknowledge the fact that houses do appreciate over time.  At 3% appreciation over 30 years, a $235,000 house becomes worth $485,000.  Not too shabby, but it isn’t guaranteed and shouldn’t be relied on.


How Much Should I Spend On A House?

When figuring out how much you want to spend on a house, you want to avoid any advice from the banks.  Banks will allow you buy a house where the mortgage will be around 50% of your take home pay (and they wonder why there was a housing crisis).  If you’re spending 50% of your monthly take home pay on a house, you’re house poor ladies and gentlemen.  Personally, I’d like to see everyone keep their house payment around 25% of their take home pay when financed with a fixed rate 15 year mortgage.  At 25%, you have the ability to buy a decent house, pay off that house earlyinvest a lot of money, and have a little bit of a life.

House-PoorWouldn’t it be great if you owned a home that you could afford AND pay off early?  Doing it this way will allow you to not only invest more money in retirement but you’ll also have a possible appreciating asset ready to sell if you desire.  If it doesn’t appreciate?  You won’t have to worry about it because you don’t owe a dime on it.  I’ve never seen a bank foreclose on a house that doesn’t have a mortgage!

Most of house poor America is barely able to pay their mortgage because they received terrible advice from somewhere and significantly overpaid.  They invest less than 5% of their income, drive cars with car payments, eat out constantly, and spend every dime they receive.  Please don’t be like everyone else!  Don’t mess up the biggest financial decision you’ll make by over paying for a house.  It’s easy to get house fever while you’re walking around with a real estate agent.  Be patient, be disciplined, and remember to sleep on any decision you’re thinking about.  Your financial freedom is depending on it!

Remember, 25% of your take home pay on a fixed rate, 15 year mortgage!

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Escape The Rat Race With Early Retirement

Why is it that whenever I talk to anyone about retiring early, they look at me a little cross eyed and either shrug it off by not really responding because they don’t believe it can be done, or they ask me, “Wouldn’t you get bored?  What would you do if you retire?”

I can understand when people look at me like I’m crazy for thinking I can shorten my working years down to 15 years.  It’s extremely difficult to pull off and it’s hard enough to even get people to behave with their money, budget, and stay out of debt, let alone start an early retirement movement.  But I don’t understand why people would ask, “wouldn’t you get bored?”  Would you really stay in the rat race because “you might get bored?”  Do you know how bored I am working in the same office everyday?  I also have the same commute, same desk, and same type of work…EVERYDAY!!!  Early retirement seems like heaven when you look at it this way.  I don’t know about you, but I have a lot of things I want to accomplish in this life, and I feel like work just get’s in the way of that.  Sit down and think about what you would do if you didn’t have to work for money.  Dreaming is the first step in making it a reality!

day dreaming
Day Dreaming Just Let’s You Know Where You Really Want To Be. Early Retirement Will Help You Get There Faster!

The general perception of a normal retirement is that you’re now 65 or older and you’re just trying to organize the remaining years of your life so that you can be comfortable and have a little fun with the time you have left on earth (harsh but true).  But what if you could “retire” in your 30’s, 40’s or 50’s?  You could potentially have 50, 60, or maybe even 70 years to live life however you want!

As you can see, early retirement means that you have enough money to choose how you want to live your life and spend  your days!  If you just wanted to be lazy, sleep in and sit on the couch all day?  I guess you could do that, but I don’t recommend it.  If you wanted to pursue your passions and do something that is productive but excites you?  Do it, you have that freedom.

My hope is that I can reach millions of people and make them understand that early retirement isn’t impossible and that it isn’t about living a boring life.  Early retirement sets you free from being chained to your job! Early retirement IS financial freedom.  I really can’t imagine a better scenario for anyone than being able to choose how they want to live their lives!

Action-Changes-Things-AcronymIf you’re now like me, and convinced that the 65 and older “retirement” sucks, you have to TAKE ACTION NOW!  You have to pay off your debt, save money, invest, and not spend every cent of your working wages that you bring home.  The less you spend and the more you save/invest, the earlier you will be able to retire.

No one says that you need to listen to all of the conventional retirement advice and wait another 20, 30, 40 years until you retire.  Nerdwallet.com says that the average savings rate for families in America is just under 5%.  At 5%, you probably won’t even be able to retire at 65!  And, for the younger generations (millennials), what if you don’t even get social security?  You’ll be working until it’s not physically possible anymore.

If you’re ok with that type of life, I understand.  It’s easy and doesn’t require any kind of thoughtful planning or sacrifice.  But I can’t live that way.  I have a hard enough time going to work every morning and I can’t imagine doing it for more than a few years.  I’d rather save the most money I can and live the rest of my life writing a blog, trying to become a professional golfer, hunting, or working a job that I’m passionate about even if it doesn’t pay a lot of money.  I just want to be in charge of my future!

And that’s simply what I want you to takeaway from this post.  You can take control of your life!  Take control RIGHT NOW and don’t let anyone get in your way!

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Build Wealth and Gain Financial Freedom!

Congratulations!  If you’ve reached this step, you’re now living the good life!  You have zero debt and no payments of any sort.  Can you imagine what you can do with your life now?  Anything you want!  You’ve been investing 15% of your income into retirement and threw everything else at the house to pay it off as quickly as possible.  Well guess what?  It’s paid off!  You’ve been dedicated, disciplined, and intentional with your money so that you could be so close to accomplishing your goals of financial freedom and retirement.  Now what!?!

3 Steps to Building Wealth

You’re going to watch your net worth begin to skyrocket.  Now that you’re in this final step you’ll continue contributing the 15% you have already been saving towards your retirement but you’ll also begin to add your house payment and the extra money you were throwing at the house to your retirement and other investments.  Here’s how you want to go about investing:

  1. MAX OUT YOUR 401K– You’re allowed to contribute $18,000 in 2016.  If you have the money, DO IT!
  2. MAX OUT YOUR ROTH IRAIf you qualify for a Roth IRA, you should max out the $5,500 allowable contribution after you max out your 401K.
  3. INVEST IN STOCK INDEX FUNDS– I’ll go into this in depth in a future post but an index fund is a type of mutual fund who’s portfolio of stocks is built to mirror a component of a market index, like the Standard and Poor’s 500 Index (S&P 500).  You’ll want to invest any money you have left over after investing in your retirement accounts in stock index funds.  Look for index funds that mirror the entire market (or at least the S&P 500) while I write a more thorough review of index funds and recommendations for you.

If you can come up with enough money out of your budget to follow these 3 steps, you will become wealthy extremely fast.  If you can’t do all 3, it’s not a problem.  Work your way down the list and do the best you can!  Can’t max out your 401K?  That’s o.k., contribute as much as you can and work on building up your income so that you can invest more money.  The same goes for all of the steps!  Even if you’re on step 3, you want to increase your income so you can invest more money.

Gaining Financial Freedom

financial-freedom-beach-sea-sky-sand

So how much do you need to save to consider yourself financially independent?  25 times your annual expenses.  If you can save 25x your expenses and only withdrawal 4% of your money every year, you will be able to live off of this money forever.  This is the reason you need to keep your expenses as low as you can.  The higher your annual expenses are, the more money you need to save.  For example, if I spend $40,000 per year and wish to continue spending $40,000 per year during my retirement years, I will need to save $1 million ($40,000 x 25=$1,000,000).  Now you can withdrawal 4% every year.  You’ll have $40,000 to spend and the rest of your money will continue to grow.  Don’t worry about the details right now, just start to invest and continue to read these articles.  This blog is mainly about lifestyle transformation and attitude adjustments in how people think about finances.  You’ll learn common sense for your personal financing and investing over time and see that you will change as you save and grow financially.

Remember, you need to know that you’ll never become financially independent if you don’t keep your expenses low.  If you made $5 million per year and spent $4.9 million of it you would never achieve financial freedom.  Keep your expenses low and save as much as you can.  This will make you rich!

*Leave a comment to let us know how your investing is going!  Do you have ideas other than what is listed here that’s working well for you?

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Now That You Know Your Net Worth…

You’ve taken the time to write down, in detail, everything related to your finances and you’ve calculated your net worth.  Now you have this number staring you in the face and you’re probably having different reactions depending on your situation.  If you happened to have a positive net worth you’re probably thinking, “Well, at least I’m better off than the guy at Net Worth Explosion!”  But, if you’re like me and you saw a large sub-zero number punching you in the gut, you probably said something like, “Shit….I suck!”

I’m going to be honest, if you’re like the overwhelming majority of people in the world, it doesn’t matter if you have a positive or negative net worth.  You suck either way.  Remember the numbers I presented on my about page that referenced the net worth’s of individuals over the age of 65 in the United States?  It’s not pretty, but don’t worry, every starting number requires the same process for growing your net worth and becoming financially independent.

Pie chart on a stock chart with a budget
Budgeting is the first/most important  step to building wealth!
  1. Make a budget.
  2. Pay off Debt.
  3. Build an emergency fund big enough to fund 6 months worth of expenses.
  4. Invest in Retirement.
  5. Pay off your house.
  6. Build Wealth.

The process needs to be conceptually simple so that anyone can follow it with confidence.  Unfortunately, the majority of people have a hard time digging out of the financial basement and moving on to greener pastures due to the fact that they have to modify their behaviors and the way they think about money.  This is incredibly difficult.  Most people don’t even pay attention to their money.  They lead a life where they buy whatever they want, whenever they want it.  This is INSANITY!  A lifestyle like this leads to debt and a lot of it.  Debt keeps you in the rat race.  It prevents you from being able to save money!  It keeps you working a job you hate, making a commute you hate, and answering to bosses you hate.  In What Is Your Net Worth I explained how I accumulated $34,000 worth of credit card debt and following these 6 simple steps can help you avoid my mistakes.

Your goal, now that you know your net worth, is to work through these 6 steps and get out of the rat race so that you can do anything you want.  Want to take long vacations every month?  Done.  Want to work shorter hours so you can attend your children’s school events?  You can do it.  Want to stop working at all?  It can be done!  You can spend your day any way you want because you’ll have Financial Freedom.  All you need is a plan and I will be your guide as we work our way towards Early Retirement together!  It will not be easy, but this blog is here to offer support and motivation.

*What are your thoughts on Early Retirement?  What would you do if you could spend your day doing anything you want?  Leave a comment and don’t forget to subscribe to receive email notifications of new posts!