The Benefits and Risks of Investing in Index Funds

Index funds are a great investment vehicle to invest in a low cost and diversified way. However, there are some downsides as well to investing in index funds.

Investing in Index Funds

Disclaimer: I’m not a licensed investment professional. All investments come with risk. Please do your own due diligence before investing in any product and investing in index funds.

“V-T-S-A-X, V-T-S-A-X, V-T-S-A-X!”

If investing had rallies, I’d imagine Vanguard nation members would have be chanting about VTSAX, an extremely low fee index fund.

What is index fund investing, and why is it so great? Simply put, index funds allow you to own thousands of positions and capture the general stock market trends at an extremely low cost. I like index funds for these reasons: they are supposedly lower risk because they are highly diversified, and the fees are nearly 0. Comparing this to actively managed funds with fees of 1-2% or more, you get much more bang for your buck!

Investors and traders ask many of the following questions each year: what stock do you think will perform best this year? Is there a sector that will see success in the next 2-3 years? What companies’ have the best outlook?

For the everyday person, many of these questions are not worth asking, or answering. I personally own thousands of companies, and I never think about those questions. With so little time to devote to financial statements and investment research, it’s just not worth looking for the next Amazon or Apple.

How do I own thousands of companies? It’s quite simple! Index funds!

In this post, I will be sharing with you the benefits and risks of index fund investing, why I own thousands of companies through index fund investing, and how you can own thousands of companies too. I’m also going to touch on why index fund investing works, and the problem with passive index fund investing.

What are Index Funds and the Benefits of Index Fund Investing?

What are index funds?

Index funds are essentially a collection of assets which, as a whole, look to replicate the performance of some market or sector.

For example, a stock market index fund would be a collection of many stocks, such that the performance of the index fund would mirror the performance of the general market.

There are many index funds you can buy through different brokerage accounts. To give you a better idea of some examples of index funds, looking at my 401(k) account, I have access to the following index funds:

  • General Equity Market Index Fund
  • Large Cap Index Fund
  • Small Cap Index Fund
  • Dividend Index Fund
  • Bond Index Fund
  • International Equity Index Fund
  • And the list goes on and on

There are hundreds of funds out there for many different sectors, asset classes, and industries.

What are the Benefits of Index Fund Investing?

“A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money.” – Warren Buffet

Warren Buffett, John Bogle and many of the other great investors believe investors like us should invest in index funds. There are a few benefits to index fund investing vs. investing in individual securities.

One such benefit of index funds is diversification. It’s unfortunate, but it’s a fact that some companies will fail. It’s also a fact that some companies will outperform others. Humans don’t have crystal balls, and to be able to select which ones will fail and which ones will perform well is nearly impossible.

Instead, with index funds, we can own a piece of many companies, and if some fail, it is fine because others are likely doing well and can help make up for that difference – meaning we will also own the winners! On average, we will be able to replicate the general market.

Over time, the stock market typically has trended up, and as a result, index funds allow us to able to capture a piece of this trend.

Another benefit of index fund investing is a combination of lower fees and out-performance when compared to actively managed funds. Vanguard’s equity index funds average a 0.12% expense ratio vs. 0.62% for actively managed funds. In addition, these index funds have outperformed actively managed funds for many years!

Why pay more for less? Index funds are superior when considering fees and performance over time. In addition, if done passively (i.e. set and forget), your taxes and transaction fees are greatly reduced.

Why does Index Fund Investing work?

In the previous section, we talked about the benefits of index fund investing. Those reasons are contributing, but not exactly why index fund investing works.

Index fund investing works because the market is supposedly “efficient”.

The Efficient Market Hypothesis is a fundamental concept in portfolio management theory, and simply states the prices in the market reflect all information out there on a company. It’s a hypothesis, though it makes sense. (I don’t know if I’m completely on board with it, but that’s a discussion for another day.)

Under this theory, how does the market stay efficient?

Theoretically, active investors are constantly looking to determine if the price of assets is in line with expectations or not, and should be buying or selling to “close the gap” between the price and supposed expectation.

Index fund investing works because it follows the stock market trends, and also takes advantage of these active investors who are doing the heavy lifting of price discovery.

How You Can Own Thousands of Companies

I don’t have time to research the entire market for the best companies and stocks, and even if I did, my predictions would most likely be wrong.

I’m guessing you don’t have time to research and look over financial statements. If you are looking to invest passively, take a look at index funds.

With minimal fees, and the ability to own thousands of companies, properties, and bonds, you can capture the general trend of the market and reduce risk through diversification.

This may sound like a boring strategy to wealth, but it’s a time tested winning strategy for financial success.

Index funds are not exclusive to only high net worth individuals. Beginners and experienced investors alike can invest in index funds with little involvement and effort up front.

To own thousands of companies and get invested in the general market all that is required is to open up a brokerage account, do your due diligence and figure out which index fund is appropriate for your risk tolerance and financial situation, and boom! You’re invested!

Many people like Vanguard index funds. I know many personal finance bloggers who swear by these funds and will always invest in them!

Set and forget! Stay consistent with your investing, continue to learn more about finance and saving, and you will be on your way to financial success. Over time, you might be able to become a stock market millionaire!

However, with all investing, there is risk. For index funds, there are a few risks you need to consider.

What if Everyone Decided to Invest in Index Funds?

Something I like to do is think about different scenarios, take things to the extreme (if necessary), and think about the outcomes (otherwise known as a thought experiment).

Here’s something to ponder: what if everyone decided to invest passively in index funds – what would the outcome look like?

One of the common recommendations for investing in index funds is to dollar cost average (aka buy a little each month), and not touch the nest egg for 20-30 years.

At some point though, if everyone decided to invest in index funds, dollar cost average, and never touch their nest egg, wouldn’t the price of assets just keep rising (without care for the underlying fundamentals?)?

Would this be (dare I say) the beginnings of a Ponzi-like scenario and scheme?

While yes, at some point, people probably will start selling down their assets, the market can’t always go up. Otherwise, it’s not a market.

Index fund investing works because you have active money managers who supposedly “keep the market efficient”, but if those players went away, the market would certainly not be efficient.

The Problem and Risks of Index Fund Investing

Here’s the problem with passive index fund investing: with more people doing it, the less “efficient” the market will be, and this exposes you to a concept known as “the herd mentality”.

What do I mean? If everyone is always buying, regardless of price or the underlying value, then your expected returns will be less than prescribed. In addition, The Earth and economy is closed and there is a ceiling to everything.

Buying and buying and buying will just lead to boom, bust, and ruin at some point. It’s basic physics.

Don’t Be a Turkey when Investing

One of my favorite authors is Nassim Taleb. He is an author, philosopher, mathematician, former trader, and all around thought provoking individual. In one of his books, The Black Swan, he talks about the turkey problem:

“Consider a turkey that is fed every day,” Taleb writes. “Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race ‘looking out for its best interests,’ as a politician would say.

“On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.”

thanksgiving turkey


While I don’t necessarily see this drastic of a possibility to occur in the market, to say that the probability is 0 is to also make a mistake.

Considering all assets, having a safety net, and allowing for the possibility of failure of one asset will allow real financial independence and resilience.

Thinking Critically when Investing is Very important

There’s a few things here I want to touch on before concluding.

First, investing in stocks has been a great way to build wealth in the past, and something I do in my investment portfolio.

With this section of the post, I’m not saying investing in stocks is a bad thing. Rather, I’m trying to inspire unique and original thoughts for you to think about in personal finance life.

There are benefits and risks to everything in life, and it’s important to weigh them before making a decision.

Second, investing passively in low cost index funds has been, and probably will be, a solid investment going forward. With that said, if it becomes too prevalent in the future, there could be very wild swings in the market (and also the possibility for manipulation and a lack of liquidity overall).

There’s no such thing as a free lunch (even though many people hype index fund investing like it’s a gift from a higher power).

Third, speaking a little more in general, it is imperative to think critically about your situation. Everyone is different – everyone has different life experiences, perspectives, upbringings, and goals. Sadly, following the herd blindly will not result in success.

Instead, following what you believe, and have researched, works (and maybe that is following the herd) will lead to success.

Is Index Fund Investing the Best Way to Invest?

Index fund investing isn’t going away, and it’s a great way to invest and diversify your investments.

By investing in index funds, you can own thousands of companies, and get exposed to the broader market. There are many benefits for investing in index funds, as well as risks.

With the risks of index funds described above, am I going to stop using index funds in my investment portfolio? No.

Am I considering other assets and thinking more about my asset allocation, strategy, and the market going forward? Yes.

Am I trying to think critically in everything I do? Yes.

At the end of the day though, thinking critically is important in everything you do.

The markets don’t care if you succeed or not. It’s okay to re-balance your portfolio, it’s okay to assess the risk of your portfolio and see if there is anything you can do to navigate potential storms, and it’s okay to challenge yourself and your thoughts.

Index fund investing could be a great choice for your portfolio – you have to do you own research and decide what is best for you.

Readers: do you own a piece of thousands of companies? Do you enjoy researching individual assets? What are your thoughts on index funds?

The Benefits and Risks of Investing in Index Funds
The Benefits and Risks of Investing in Index FundsThe Benefits and Risks of Investing in Index Funds


Investing in Index Funds
Investing in Index Funds
Investing in Index Funds
Investing in Index Funds
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All Assets are Worth Considering (and Owning) for Financial Success

Should you buy stocks for your investments? What about rest estate? Which assets should you own in your investment portfolio?

When putting together an investment portfolio for personal finance success, it’s important to consider all assets.

While stocks and real estate are currently the hottest asset classes on the block, there are many other asset classes which might make sense for you to consider.

In this post, you will learn why you should consider all assets for your investment portfolio.

First, Personal Finance is Personal

Something which is constantly talked about in the personal finance space, but ignored when giving recommendations, is the thought that personal finance is personal.

Personal finance is not about what your friends are doing with their money, what your parents are doing their money, or what some celebrity is doing with their money.

Personal finance is the science and application of how you earn, spend, save, track, invest, and build your wealth over time. It’s personal – taking control of your finances and doing what is necessary is on you.

When thinking about personal finance, thousands of questions come up:

How much should I save, how much should I invest, what should I be investing in, what companies or assets could give me the best return on my investments, what banks or credit cards should I be using, who can I turn to for advice with my finances?

Before asking any of these questions, we should first turn inwards and realize it’s crucial to realize that personal finance is personal. We must first ask ourselves the right questions and figure out what our goals are. Some possible questions are:

  • What kind of lifestyle do you want to live?
  • What do you love to do?  
  • Do you want to travel around the world? 
  • What about spending more time with your family?
  • Would you want to eat out every week?  
  • Do you want to start your own business? 
  • Would you be interested in retiring at 45, 55, or 65?  
  • Do you want to pay for your children’s college?
  • What is you relationship to money?

Once you’ve figured out where you want to go in life, then you can start crafting a plan and starting on your journey to living the life you dream to live.

My Problem with Traditional (and more recent) Investment Advice

When reading about personal finance, “financial independence plans”, and investing, I’m constantly running into the same “return projections”. To be specific, if I invest $10,000 a year for 30 years in something, then assuming the typical 7% market return, I’ll be a millionaire!

First, check your investing privilege.

Second, this automatically pushes people towards stocks, as over the last 100+ years, the stock market has averaged roughly 7% per year!

Now, personally, I don’t have any problem with investing in stocks, and have a good chunk of my retirement accounts invested in stock market index funds.

The problem I have recently is about some of the advice regarding investing in stocks. Namely, when you are younger, you should overweight your portfolio with stocks (like 100% to 0% anything else) for a few reasons:

  1. By investing in riskier assets, you can hopefully get lucky and speed up the time to financial independence with bull market tailwinds.
  2. Even if there’s a market correction, you will have time to “recover” because the stock market always goes up (except the world is a closed system)
  3. and FOMO (I’m going to have to explain this one a little more…)

The FOMO is Real in 2018

track your income and expensesI hate to say it, but the FOMO (fear of missing out) is real in 2018.

I’m 26. I started getting into finances around the time I was 20, and didn’t invest my first dollar until 2015.

I’ve never seen a 2008, a 2001, or a 1987. I have no idea what it’s like to go through a crash; I was in 10th grade in 2008.

Why do I bring this up?

There are thousands of individuals who are between the ages of 22 and 30 who have never seen a recession. While it’s true that some of those people came out of college in a recession, they didn’t experience it in their investment portfolios.

For young people who are looking to improve their financial situation and build wealth, the push is to get into stocks because that’s what they are finding with a simple Google search.

This push is driven by #1 and #2 from above, but also the gambler’s fallacy of the last 10 years: we have experienced the longest bull market in history. This means we can’t lose (sarcasm)! 10 years is a long time, and now, people have forgotten the pain. There are seasoned investors pushing the stock narrative and everyone is rich.

The FOMO is real here.

Compounding on this (pun not intended), you have an investing environment which does not provide any yield in the fixed income market. Real estate investing has been tough to get into with downward pressure from student loans, and upward price pressure from low interest rates. Precious metals have been smashed since 2011, and cryptocurrencies are a gamble.

You can get into index funds for a few bucks. $10 a day times 7% times 30 years is mega dollars, right?

The FOMO is real and many people are piling into stocks without considering the advantages of putting cash in other investment classes.

Stocks are seemingly safe, always up and to the right, and are going to get me to financial independence in a few years. Why change? Why consider anything else?

The World is More Complex than This or That

The usual caveat applies in most cases: if it seems too good to be true, it probably is.

In the last section, I went on a little bit of a rant and I’ll admit that while it was fun to write, I left it opened ended.

One of my goals on this blog is to provoke new thoughts in your head to hopefully help improve your situation. Remember, this blog is called “The Mastermind Within” and within all of us is a mastermind which has the ability to think critically, make difficult decisions, and create a life for the better. 

The main point of this article is not to bash stocks and say it’s a bad investment.

If you live in a country with a great economy (the United States for example), investing in stocks is a fantastic way to build wealth.

That being said, just because stocks has been one of the best ways to build wealth in the past, this does not mean that it will be going forward. (The adage past performance does not guarantee future results)

What I want to get across in this post is to argue that all assets are worth considering (and owning).

Yes, that means you probably should own some real estate, own some bonds, own some precious metals, own some digital assets, and also work on yourself for the better. (yes, you are an asset too!)

True financial independence includes defensive positions as well as offensive positions. Financial independence is the goal, but if you are over exposed to one asset class, then a turn for the worse will create stress and headaches.

Financial Independence Redefined

In my opinion, financial freedom and financial independence is the ability to do what you want with your time and money because you don’t have to work for your money anymore. Being financially free means having “enough” savings, money, and income to live how you want to live.

But going a step further, I’d argue that true financial independence is being able to weather any financial storm and still be able to live your life the way you want.

If you are 80-100% invested in equities (even if you are diversified across sectors, across borders, and across company size), there’s certainly a possible of running out of money due to sequence of returns risk (if things go south way in the future, your lifestyle could take a hit in a big way.)

True financial independence would be protecting yourself and your wealth from these storms. What I mean then is to consider (and own) other assets which may or may not be thought of as your traditional wealth building assets.

Look, it’s great to go for $1,000,000, $2,000,000, $5,000,000 in net worth, but I’d rather have some money left over than $0 if a certain asset class went kaput.

Let’s talk about some assets worth considering other than stocks to become truly financial independent.

All Investment Assets to Consider for Your Portfolio

I want to stress this again, investing in stocks, especially in low fee index funds, has been a tried and true method for building wealth. Over time, investing in companies which are successful should give a solid return.

That being said, there are a number of other assets which make sense to own to bullet proof your finances:

  • Bonds and Cash
  • Real Estate
  • Insurance Policies
  • Precious Metals
  • Digital Assets

Bonds and Cash

the guide to banking for non-bankersBonds and cash have a place in everyone’s portfolio. In recent times, owning bonds and having cash has under-performed the stock market.

However, these assets are typically less volatile and should be uncorrelated to the stock market (when stocks goes down, bonds go up and vice versa).

Having short term maturity cash positions (either in an emergency fund or in a CD type product), will help in times of trouble because if you get laid off, lose your job, need cash fast, you’ll be able to access these funds.

This will ensure you don’t need to sell your future financial investments (long term investments such as bonds, stocks or real estate).

While it is true the returns are typically lower than stocks, there is still a case to be made for owning bonds and having cash on hand.

Real Estate

Real estate, both housing and land, will always have value. Shelter and a place to live is one of the basic necessities of life.

In countries which respect property laws, owning real estate will protect your wealth from inflation, give you a place to live, and allows for the potential of income (through rentals).

Going a little bit bigger, commercial real estate can provide solid returns as well (either through REITs or by buying a larger property and renting it out).

Insurance Policies

This one is pretty obvious for any one who owns a home, a car, or has a business. Having insurance is very important in case of disaster.

Insuring your house, car and life are all things which make sense for certain people, but I’d even include getting insurance above and beyond that with an umbrella policy.

Wealth preservation is as important as wealth creation and growth. One mistake or string of bad luck could lead to financial ruin.

Having the right protection in place can help if this were to occur.

Precious Metals

all assets are worth consideringMany people in the personal finance space hate on precious metals, but I do believe that these do have a place in a person’s financial situation.

Thinking along the lines of capital preservation and protection, owning precious metals could be your saving grace in the event of civil unrest or some other crazy event.

If you have to leave the country, these metals would be transportable (in theory), but also, over time, the use in industrial production has grown – leading to an increase in price.

Think about it this way: if the internet were to go away (highly unlikely but possible), would you have any wealth?

Digital Assets

The reasons why I started this blog were twofold:

  • To look to build a following and at some point, put advertising on the website to create a stream of income for myself.
  • To secure a place on the internet which I own and can do whatever I want with it.

Similar to real estate, by owning a website, you can potentially create income and value which isn’t in traditional investments.

Why do digital assets make sense to own? If in some crazy scenario you have to leave the country or have to transfer wealth across borders, all you need to do is remember your passwords and you can access your websites. The internet does not have a border.

I would also put cryptocurrencies in the digital assets category. Even if you think they are the biggest bubble in the world and a joke, they still is worth considering.

At the end of the day, remember: wealth preservation is as important as wealth creation. If things goes south and you need to flee the country, or think having exposure to things unrelated to traditional assets makes sense, then owning digital assets could be a great choice for you.

All Assets are Worth Considering for Financial Success

True financial independence is being able to do what you want with your time, but also being able to protect yourself and your wealth in all financial situations.

Stocks are great, but if you want to be completely financial independent, I believe that it’s crucial to consider all assets for your portfolio.

First, remember that personal finance is personal and your portfolio should reflect these personal preferences and thoughts.

Second, look to understand the current economic environment and look at which asset classes make sense for you.

Finally, put your plans into action and look to continue to build wealth in the long run with additional learning and consistency.

Again, I hope this post has been enjoyable and thought provoking.

Investing tips. How to invest without stocks. Real estate investing. Investing in precious metals.
Best assets to invest in. Investing tips. How to invest without stocks. Real estate investing. Investing in precious metals.
Investing tips. How to invest without stocks. Real estate investing. Investing in precious metals.
Investing tips. How to invest without stocks. Real estate investing. Investing in precious metals.
Investing tips. How to invest without stocks. Real estate investing. Investing in precious metals.
Investing tips. How to invest without stocks. Real estate investing. Investing in precious metals.

Assest You Should Consider To Build Your Wealth


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6 Reasons Why Financial Planning is Important

Are you one of those people who live paycheck to paycheck and often find yourself struggling to make ends meet? Do you have a hard time-saving money and planning for the future? If yes, then you are not alone. A recent survey found that nearly 78% of Americans live paycheck to paycheck, and about 25% have no savings at all.

But don’t worry; there is a way out of this financial rut. The key is to start financial planning. Financial planning is the process of managing your money to achieve your life goals, such as buying a home, saving for your children’s education, or retiring comfortably. In this blog post, we’ll discuss the top five reasons why financial planning is crucial for your financial well-being.

Financial Guidance:

Financial planning can be a complex and overwhelming process, which is why seeking the help of financial experts can be incredibly valuable. By working with professionals who have years of experience in financial planning and investment management, you can gain a better understanding of your financial situation, and they can help you create and execute a personalized plan that perfectly aligns with your goals. One such expert in this field is Plotkin Financial Advisors. Their team of professionals can help you manage your finances, invest wisely, and make informed decisions about your money. Whether you’re looking to create a budget, save for retirement, or protect your family’s future, they can provide you with the guidance and support you need to achieve your financial goals. 

Helps You Set Realistic Goals

Picture this: you have a long list of financial goals you want to achieve – buy a house, go on a dream vacation, save up for your child’s education, and retire comfortably. But where do you start? How do you ensure that you’re making progress toward these goals? This is where financial planning comes in. By taking the time to plan out your finances, you can set realistic goals and create a roadmap to achieve them. It all starts with creating a budget – tracking your expenses, finding ways to save money, and allocating your resources toward your priorities. 

Think of it like mapping out a journey. You know where you want to go, but you need a plan to get there. With financial planning, you can break down your big financial goals into smaller, achievable milestones. Knowing that you’re making progress toward the bigger picture will help you stay motivated and focused on achieving your goals. So, whether it’s saving up for a down payment on a house or planning for your child’s college education, financial planning can help you set realistic goals and take actionable steps toward achieving them. Don’t let your dreams stay as just that – start planning and making them a reality.

Helps You Manage Debt

Let’s face it – debt can be overwhelming and stressful. Whether it’s credit card debt, student loans, or a mortgage, it can feel like a heavy weight on your shoulders. But the good news is that you don’t have to tackle your debt alone. Financial planning can help you manage your debt and pay it off faster.

Creating a debt repayment plan is one of the first steps toward managing your debt. This involves prioritizing your debts and finding ways to pay them off quickly. Doing this can save money on interest charges and improve your credit score.

But how do you prioritize your debts? One approach is to start with the debt with the highest interest rate. This is usually credit card debt, with interest rates as high as 20% or more. By paying off your high-interest debt first, you can save money on interest charges and progress toward debt-free.

Another approach is to prioritize debts based on the size of the debt or the monthly payment. This can help you tackle smaller debts quickly and gain momentum toward paying off larger debts.

Whatever approach you choose, the key is to create and stick to a plan. This may involve making some sacrifices in the short term, such as cutting back on discretionary spending or taking on extra work to earn more income. But it will be worth it to become debt-free and improve your financial well-being in the long run.

Remember, managing debt is just one aspect of financial planning. By taking a holistic approach to your finances, you can set yourself up for long-term success and achieve your financial goals. 

Protects Your Family’s Future

Financial planning is not just about managing your money. It’s also about protecting your family’s future. By purchasing life insurance, disability insurance, and other types of insurance, you can ensure that your family is financially protected in case of unforeseen events. Knowing that your loved ones will be cared for if something happens to you can give you peace of mind.

Helps You Save for Retirement

Ah, retirement – it is the time in life when you can finally kick back and enjoy the fruits of your labor. But to ensure you can enjoy it to the fullest, you need to plan ahead. That’s where retirement planning comes in – a crucial aspect of financial planning that can help you determine how much money you need to save for retirement and how to achieve your retirement goals.

Retirement planning is not just about stashing money away in a retirement account and hoping for the best. It’s about taking a proactive approach to your future and creating a plan that works for you. This may involve estimating your retirement expenses, such as housing, healthcare, and entertainment, and determining how much income you will need to cover those expenses.

Once you have a clear understanding of your retirement needs, you can start saving for retirement in a way that works for you. This may involve contributing to a 401(k) or IRA, investing in stocks or real estate, or even starting a business. The key is to have a plan that is tailored to your individual needs and goals.

By saving for retirement early and regularly, you can avoid the stress and anxiety of not having enough money in retirement. Plus, you can maintain your standard of living and enjoy the retirement you deserve. So don’t wait; start planning for your retirement today and enjoy the peace of mind that comes with being financially prepared for the future.

Protects Your Family’s Future

When we think of financial planning, we often focus on things like budgeting, saving, and investing. But there’s another important aspect of financial planning that can sometimes be overlooked – protecting your family’s future.

Life is unpredictable, and unexpected events can happen at any time. That’s why it’s important to have a plan in place to protect your family in case of the unexpected. This may involve purchasing life insurance, disability insurance, and other types of insurance that can provide a safety net for your loved ones.

Life insurance, for example, can provide your family with a lump sum payment if you pass away. This can help cover expenses such as funeral costs, mortgage payments, and other bills your family may struggle to pay without your income. Disability insurance, on the other hand, can provide a monthly payment if you become unable to work due to an illness or injury.

With these types of insurance, you can ensure that your family is financially protected in case of unforeseen events. Knowing that your loved ones will be cared for if something happens to you can give you peace of mind.

In addition to insurance, estate planning is another important aspect of protecting your family’s future. This may involve creating a will or trust, designating guardians for your children, and ensuring that your assets are distributed according to your wishes.


In today’s world, where financial security is a top priority, financial planning has become more important than ever. It helps us better understand our financial situation, set achievable goals, and create a plan to achieve them. It is an ongoing process that can be adjusted according to our changing financial circumstances. Whether you are just starting out or nearing retirement, financial planning is an essential tool that can help you attain financial well-being and live a more fulfilling life. So, make financial planning a part of your life and secure your financial future today.

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Why the Stock Market Cannot Always Go Up

“The stock market always goes up! It’s a sure thing! There’s 90 years of data backing me up, and look, just in 2008 when it seemed all was lost, the stock market came roaring back! The stock market is always up and to the right!”

I want to throw up.

Here’s the only issue with saying the stock market will always trend up: the earth is a closed system. 

I could end the post there, but that’s not interesting, productive, or informative for you to understand the underlying and fundamental reasons of how my statement proves why the stock market cannot always go up.

Saying the stock market will always go up ignores physics and biology. It’s not too difficult to reason the conclusion when presented with the following case, but I’m sure there will be push back 🙂

In this post, I’m going to be sharing with you why the stock market cannot always go up.

What My Argument is Not About

First, I need to clarify what I’m talking about when I say “the stock market cannot always go up.”

Here’s a simple picture to visually explain what I have an issue with: (picture of the stock market always going up)

stock market goes up over time

My problem is the comment that it assumes infinite growth in a finite system.

I have no problem with the argument, “the stock market will always come back to its previous high, and possibly go above that previous high, because humans are resilient and will come up with better technology” because this is true. Over time, technology does improve, processes become more efficient, and businesses become more profitable (in a capitalist society).

However, this statement is a completely different picture:stock market doesn't go up over time

I have no problem with this picture and the statement behind this picture. A boom followed by a bust, followed by a boom, is nature.

I have no problem with investing in the stock market, and have a fair amount of my net worth in equities and index funds.

It’s the first picture here, which has infinite growth baked into it that gets my blood boiling.

The Problem with Infinite Growth

stock market cannot always go upThe statement, “The stock market always goes up” assumes infinite growth.

Saying, I’m at $200,000 in investments today, and in 30 years, I’ll have $2,000,000 assuming 10% growth is an exercise in absurdity. (While yes, it’s possible that with wonky money printing techniques we will all be millionaires and billionaires, what do you think the dollar will actually be worth?)

Here’s the thing with infinite growth of stock market trends: it assumes a number of things which are not consistent with what we experience on a day to day basis here on Earth.

What do I mean?

First, let’s remember why stocks have value. A stock has value ONLY because the underlying company is PROFITABLE and PRODUCTIVE.

To be profitable and productive, that company needs to use energy and other materials to produce value. There are a number of finite inputs to this process (seemingly ignored by economists).

First, energy is finite. Second, the materials are finite. Third, the customers are finite. To assume infinite growth is to assume one of these is infinite.

It’s that simple, but I need to say a few more things.

Your Data Driven Argument is Flawed

Again, I need to make this point: I think equities are a solid investment in most economic environments. In a growing economy, by definition, the stock market will go up.

Over the last 100 years, the United States stock market has trended upward and has stayed up:

dow jones over time

I’m going to make the joke again… is that the chart of Bitcoin?

The United States has had the world’s number one economy for the last 50 years, so yes, the economic growth of the general stock market should be up and to the right.

What’s interesting though, to say, “In the future, I’m going to project economic growth at 7-10% annually” is to mistakenly go against one of the fundamental pieces of statistics and econometrics: past performance doesn’t guarantee future results.

To say “the stock market always trends up”, is to make this mistake.

In addition, this ignores many of the limits which we talked about in the previous section, namely customer base, materials, and energy.

These cannot be ignored as money is a claim on energy, and debt is a future claim on energy.

Again, it’s a systemic issue rather than a financial issue. The economy is a subset of the environment (the Earth), not the other way around.

An Example of Growth Gone Wrong: Cancer

We all know about unrestrained and infinite growth in a finite system gone wrong – its name is cancer. Unfortunately, there are many things that cause it, and doctor’s haven’t quite found a cure for it.

Cancer happens when certain cells go rogue and stop functioning the way they are supposed to:

If not treated (and even if it is treated), these rogue cells can overtake the human body and can lead to death.

I hate that I just had to write that sentence, and I hate that this is an example on my blog, but the point is true: infinite growth in a finite body is NOT sustainable.

A Case Study of Wall Street Analysts Not Understanding Biology and Physics from 7/25/2018: Facebook

In July 2018, the market had quite the shock. After hours, Facebook had their 2nd quarter earnings call and talked about headwinds for future financial performance.

Facebook’s stock dropped 23%. Factors leading to this were a number of things, but most prominently was a comment about how user growth had slowed.

facebooks users over timeThere are two things which are funny here:

First, 44 of 48 market analysts had Facebook rated a buy for recommendation.

Second, I don’t see how the “slowing user growth” narrative wasn’t sniffed out earlier looking at the above chart. (Oh wait, Mark Zuckerberg made that comment 3 months ago) Maybe those analysts should read my blog, because they obviously are ignoring one of the fundamental pieces to biology and population growth: carrying capacity.

There are only 7 billion people on this Earth, and about half of those people don’t have internet.

Population growth, user growth, really any growth in a finite system follows the following shape:

population growth picture

It’s not rocket science. But for whatever reason, in the name of infinite growth, it’s ignored time and time again.

How to Think About the Stock Market

At this point, maybe you agree with my argument now, and maybe you don’t.

The goal of my work here on The Mastermind Within is to inspire new thoughts and perspectives to challenge you and help you become better in your life.

If I can succeed in doing that then I’m happy.

Let’s change the perspective I’d ask you to view this post through here and shift it to one of sustainability.

Here’s what I want you to take away from this post:

  1. When using statistical arguments, look to understand the underlying assumptions and consequences of those assumptions to ensure your argument is sound
  2. Look to promote sustainability (and work to become more sustainable in your ways) where possible, and understand that there are limits to our world (there are limits we need to acknowledge unfortunately even if we live with an abundance mindset)
  3. Realize things can be different than they appear. We all come from different perspectives and experiences, and have different biases and opinions. I’m not an expert and could be completely wrong here. At the end of the day though, I’m challenging myself and hopefully challenging you.
  4. Challenge yourself on your portfolio and asset allocation. It’s okay (and probably a good thing) to own a basket of assets and become more financially resilient.

Concluding Thoughts on the Stock Market

I’m going to get some heat for this one, but I don’t really care. The conclusion is obvious when you dive in and think about it.

I’ve been searching for the truth – looking inward to who I am as a person, looking outward to examine the world around me, and drawing conclusions based on my observations.

I’m not an expert. I’m not a guru or a financial expert. The only thing I know is that I know nothing at all. Being eternally curious is how the mind grows. I’ve been all over the map and learned a ton from writing this series. I hope you have as well through reading it.

Here’s the thing: we live in a closed, finite system. The Earth has limited carrying capacity. There is no infinity here on Earth. It’s physics. It’s biology. These points can’t be ignored. The stock market cannot always go up.


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6 Tips to Improve Your Business’s Financial Management

emergency fundThe economic downturns have put the corporate world on the verge of financial constraints. Businesses struggle to make ends meet due to low consumer demand and shortage of raw materials. The only way to keep a business afloat is by staying on top of money-related matters. 

Entrepreneurs must look into business inflows and outflows to understand their financial standing. Likewise, evaluate your company’s reliance on debt and external financing to define your equity and assets. In short, implement practices for competent financial management that foster long-term business profitability. It doesn’t require any changes to the business model, but only a different approach towards financial matters. 

Entrepreneurs can use automation, financial technology, and effective debt management. Likewise, work on your credit score, redesign billing strategies, and explore opportunities for business growth. To help you out, here we have highlighted six tips to improve your business’s financial management. 

Leverage Digital Financial Tools 

Most accountants and financial analysts rely on manual bookkeeping and records to draft financial statements and analyses. These records have a high chance of discrepancies and errors as humans prepare these. So, why not automate a few tasks? Digital record keeping can improve data accuracy and reliability. In addition, software solutions have built-in AI-enabled servers that can prepare custom reports using that data. 

Besides this, you can integrate advanced financial tools like lease accounting software to manage lease payments. It will track the lessee and repayment dates, ensuring you get paid timely. These savvy tools can also renew the lease term automatically after getting the client’s approval. Therefore, leverage technology to streamline financial management practices wherever you can. 

Invest in Growth

Another aspect of effective financial management is investing in business growth. After all, the more money is coming into the business, the better you can allocate resources. Therefore, set aside a share of your business profits and look into growth opportunities. You can purchase a franchise of an international brand to expand your market share. Likewise, consider buying shares of a leading eCommerce giant to earn profitable returns.

Further, you can continue to innovate and launch new products under your brand’s umbrella. It might require massive capital investment, but you can always contact venture capitalists for funds. It will enable your business to prosper and move in a healthy financial direction. 

Stay on Top of Invoices

Most entrepreneurs need help with their financials due to delayed payments from customers and retailers. These late payments can drain financial resources, resulting in cash flow problems. Hence, you must stay on top of all invoices and follow up with your customers to inquire about payments. And for this, a cloud-based accounting system can come in handy. It keeps track of all unpaid invoices and sends reminders timely. 

Moreover, you should also develop a billing strategy with clear payment terms and conditions. Upon delivery of goods, communicate the payment deadline to the customer and inform them about potential late payment penalties. You can also offer cash discounts to clients who pay on time to encourage timely payments. This way, you will collect all debts owed while ensuring no invoices go unpaid. 

Manage Inventory Smartly

All products lying in your warehouse have a cost that impacts business profitability. Often managers overstock inventory which leads to surplus and damage. 

Similarly, the problem of shortages turns customers away and affects business revenue. Integrating an inventory management system will keep track of stock levels, ensuring sufficient inventory is always available. Similarly, utilizing the best barcode readers that work well with the software can also contribute to a more efficient process. A well-designed scanner will be able to communicate with the system quickly, will not freeze or lag and can scan barcodes of all types and sizes. This can help to improve efficiency by increasing the number of codes that can be scanned in a day, and reduces employee downtime if they fail as little as possible.

These intelligent inventory management systems also enable managers to determine how much of each item they have in stock. Based on this, production can be increased or decreased. In addition, it provides data on sale trends, enabling entrepreneurs to monitor the patterns in consumer demand. 

With this information, you can also forecast demand and seasonal trends, allowing you to take full control of inventory levels. Procuring the correct number of stock levels ensures entrepreneurs don’t have their money tied up in inventory, improving cash flow. 

Improve Credit Score 

As the business grows, there is always a need for more cash to fund working capital needs like purchasing inventory and payments to debtors. You would contact a financial institute for a credit line or working capital finance. However, getting approvals for financing with a poor credit score won’t be possible. Thus, focus on improving your credit score. 

Credit scores define the credibility of the borrower and assess the default chances. You should keep your credit cards from running a balance over a few weeks to maintain good credit. Likewise, ensure the utilization rate of your business credit cards is less than 30%. Similarly, avoid taking loans with an interest rate that is difficult to repay. These practices go a long way in building a healthy credit score and helping you with loan approvals. 

Draft a Debt Management Strategy 

Has your business taken any loans? If so, you would know how much interest adds to your total expenditure. It drains business profits due to its additional costs. Thus, the earlier you pay off the debt, the better will be your company’s financial position. For this, make a strategy to repay loans. You can make early payments from your reserves to save up money on the interest expense. If the reserves don’t have a sufficient amount, set a fixed amount aside from profits. 

It might lead to lower profits for re-investment in the business but offers long-term returns. Besides this, you can opt for debt consolidation if you have taken multiple loans. It will allow you to make repayments together at a standardized interest rate. Lastly, a debt strategy can also improve your credit score, making you eligible for a bigger loan for business expansion later. 

Final Thoughts 

Financial management has become a topic of concern for most entrepreneurs. They want to stay on top of all money-related matters while maximizing profitability. Even though handling finances can be complicated, proactivity is the key to financial management. You must look into emerging trends in the industry and take advantage of them. Likewise, adopt smart billing and expense management techniques to minimize outflows. These adjustments to your strategies can lead to massive improvements in finances. 

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Should you Pay Down Debt Fast or Invest Your Money?

The Million Dollar Question of Personal Finance: Should I pay down debt or invest? What if you could do both?

Traditional personal finance tells us to choose between paying down debt or saving and investing. The conversation usually goes like this, “Does the interest rate on your debt exceed the returns you could get investing in the market?”

For example, if you have a credit card at 20% interest, it would be in your best interest, no pun intended, to pay off your credit card because there are not many investments which will return 20% or more.

In another example, if you have an auto loan at 4%, it might be better to invest your cash in the stock market or other investments because you can earn higher returns than 4%. The stock market has historically returned 7-8% on average over the last century.

By investing in the stock market, you can theoretically grow your wealth 3-4% more than by paying off debt.

To pay off debt or save and invest is the million dollar question of personal finance. What can I do to prudently grow my wealth?

“Wealth is the ability to fully experience life.” – Henry David Thoreau

Benefits of Paying Down Debt

First, let’s start this section off by talking about mortgages: The word mortgage is derived from a “Law French” term used by English lawyers in the Middle Ages meaning “death pledge“, and refers to the pledge ending when either the obligation is fulfilled or the property is taken through foreclosure.

Literally, mortgage = death pledge.

“A man in debt is so far a slave.” – Ralph Waldo Emerson

Debt is mentally draining, financially draining, and affects your entire life if you are weighed down by the large barbell of debt.

The main benefit to paying down debt is increased cash flow. No more giving your hard earned cash to those pesky lenders!

If you choose to pay down debt, you will want to put extra cash towards your debt each month. This will increase the speed at which you pay down your debt.

By sacrificing short term and putting extra cash towards your debt, you can eliminate those debts in a much shorter time frame and pay off your debt fast. In addition, by paying off your debt faster, you will save money on interest!

Let’s do an example together.

Let’s say you have a $20,000 loan with a 6% interest rate and a 10 year term. Using an online calculator, your monthly payment will be $222.04.

Over 10 years (120 months), this will cost you $6,867.01 in interest. If you pay $100 extra a month, you can cut the time you are paying off your debt to 6.25 years (75 months) and you will pay $4,008.09 in interest. By paying an extra $100 a month, you will save yourself $2,858.92 and will be debt-free 3.75 years ahead of schedule!

As shown above, by paying extra each month, you can save money and reduce the amount of time you are paying off your debt. In addition, once the debt is gone you effectively give yourself a raise; you have more money falling to the bottom line each month for you to save, invest, donate, spend, etc.

Benefits of Investing

“Risk comes from not knowing what you’re doing.” – Warren Buffett

To the average person, investing seems to be complicated. Just look at the list of financial terms: 

Really, investing can be as simple as you want it to be. Investing is not gambling. Investing consists of buying assets which have value and have the potential to appreciate in value over time.

Financial Markets

If you are interested in investing in the stock market, you have the capability to invest in low cost index funds. These index funds will “mirror” the market. As I mentioned above, the stock market has historically returned 7-8% on average over the last century. If you invest $10,000 a year in index funds for 30 years and get 8% returns, you will have a portfolio worth $1.2 million!

Vanguard has many excellent options if you want to diversify index funds (domestic stocks and bonds, dividend growth stocks, international stocks and bonds, etc.).

Real Estate

If you don’t want to invest in the stock market, and would prefer to invest in real estate through rental properties, you can do that. There are many advantages to investing in real estate. Why do I love real estate as an investment class? Real estate is:

Other Investment Options

Or if you don’t want to invest in either the stock or rental market, you could start a blog and look to build a business online! There are 7 billion people in the world, do you think you can carve out a niche for yourself and your business?

Again, there are many investment strategies out there. Personally, I believe rental properties offer many long term wealth building benefits. I also believe there are many benefits from holding low cost index funds.

If you want to read more on investing, please take a look at the following books:

Should You Pay Down Debt or Invest?

There are many questions to ask when thinking about making decisions related to personal finance.

Before asking yourself the million dollar question of personal finance, should you pay off debt or invest, you should ask yourself the following questions:

Once you are able to answer the questions above, it will be easier to decide whether to pay off debt fast or to invest.

Remember the golden rule: the person who has the gold makes the rules. – Unknown

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How Can You Set, Prioritize and Track Financial Goals Like a Pro?

How can you set financial goals that you are going to keep? How can you make a budget that you’ll stick to? Let’s talk about the answers to these questions and give you what you need to become a financial success.

Some people think worrying about tomorrow will spoil the goodness of today. But, the reality is, financial planning is as important as eating food. If you want to enjoy a stable and healthy financial life, then you need to plan for your financial future.

The problem is, when it comes to planning for the financial future, many people fail to understand where to start. A major part of Americans set up financial goals in the beginning of the year, but just 8% of them can achieve their goal successfully. What is the reason behind this poor result? The reason is, many people don’t know which goal to prioritize and how to achieve it.

How can you set financial goals?prioritize and track financial goals

The golden rule is – set a plan and follow that plan.

Here are 9 basic plans you can follow to improve your financial situation:

1. Formulate a budget and stick to it

Most experts agree that budgeting is useful and a great first step when it comes to setting and reaching your financial goals.

It helps to track your expenses and to get a clear understanding where your money is going. By planning a budget, you can meet your necessary expenses while saving a certain portion of your income regularly.

However, you have to create a realistic budget, stick to it, and revise it from time to time.

2. Pay off financial obligations

This is considered one of the top financial goals. Interest charges on credit cards or other debt accounts can eat up so much of your cash flow that could be put toward other objectives and financial goals. So paying off debt should be your first priority.

At a bare minimum, make sure you pay off the owed amount on time every month. Consider lifestyle changes to save more money to use it for paying off your debts. Once you pay off the debt, you can easily manage your financial situation effortlessly. However, if you feel your debt burden is unmanageable, then it is advisable to seek professional help.

3. Putting money into a savings account

Saving money in a savings account should be a given as part of planning for your financial future. When you are planning, make sure you start contributing a stipulated amount each month into the savings account.

The experts always recommend to save at least 10% of what you make in a month to build a savings fund. Irrespective of the amount you make in a month, you should save at least this amount to secure your financial future.

Having money in a savings account will provide you with a sense of confidence to achieve bigger financial goals.

4. Spend less than what you earn in a month

Make a list of the income that you make in a month from your day job and any other sources of income, and any investment assets. Then make another list of what you spend in a particular month on all your needs and wants.

Check whether or not your expenses are more than your income. If they are, you need to take some solid steps to curb your expenses and always keep them less than what you make in a month; lest you fall in a deep financial mess.

To do this successfully, you need to fill your wallet with cash instead of credit cards. Thus, you can avoid pushing yourself further into the credit card debt hole. When you can’t afford to buy something with cash today, you should postpone purchasing that thing.

5. Build an emergency fund

When you have an emergency fund, you can avoid taking out a loan during a financial crisis. You can use your emergency fund to paying off any unexpected expenses without having to go into debt. In a fragile job market or during an economic crisis, an emergency fund is a life saver.

So, saving a considerable amount in an emergency fund should be one of your financial goals. It is recommended by most experts to save at least 3-6 months’ worth of expenses in an emergency fund, with some suggesting saving up to a year or more of expenses. 

6. Prepare for retirement

You should prepare for your life during retirement, therefore, you need to have a proper investment plan so that you have a smooth financial life after retirement. Is your workplace providing you with a retirement account?

If so, are you contributing a portion of your monthly income? You should be contributing at least up to your employer’s match, if they offer one, otherwise you are literally missing out on free money!

Though a matched contribution from the employer is a boost, you also shouldn’t delay making contributions just because you’re not getting a matched contribution if that is not something your workplace offers. This should act as an untouchable fund and you shouldn’t withdraw money before your retirement age so as to avoid any kind of unnecessary fees.

7. Review your insurance policies

If you don’t regularly review your insurance policies, you may pay more on insurance coverage by unknowingly paying for coverage that you don’t need. You should review your auto insurance policy and your health insurance policy periodically and check whether or not you need all the coverage that you’ve taken on.

For example, you may have chosen a full coverage auto policy when you first bought your car, but now it’s several years old and you don’t need coverage to be as comprehensive. It’s also a good idea in general to shop around for different insurance policies because you could save by switching to a new company or plan. 

Prioritizing your Financial Goals

The golden rule is – categorize and prioritize.

Not every goals is the same. Some are more far reaching while others are easier to achieve. So it’s important to to categorize and prioritize your financial goals.

Renovating the home, replacing the thermostat, or planning a vacation are all examples of short-term financial goals, whereas, buying your dream home, building a fat retirement fund, investing money, or saving money for child’s education fall under the category of long-term financial goals. These financial goals usually take much longer to achieve.

Things like purchasing a car or paying off debts (credit card debts, student loan debts, payday loans) might be called mid-term financial goals, depending on the amounts owed

How can you be more focused on your financial goals?

Many people set financial goals, but few remain focused on achieving them. Most people fail to achieve their financial goals because they lose interest soon.

To remain focused on your financial goal, you can:

  1. Write down one goal at a time in detail. The goal should be realistic, achievable.
  2. Set a timeline for the goal and decide if it is a short term, a long term, or a mid term goal.
  3. Revise your budget and make necessary changes as per your planning to achieve the goal.
  4. Consider some room for fun. Self rewarding is very important to remain inspired.
  5. It may be helpful to set easy and short-term goals first. Accomplishing the easiest goals can boost a sense of confidence and give you the push you need to keep working toward the bigger goals.
  6. If achieving your financial goals requires some lifestyle changes, take note and plan accordingly. You may need to cut unnecessary expenses, save aggressively, or earn some extra money. Think positively, otherwise you may not be able to stick to your plan. All these may sound daunting, but not impossible.

Tips to Set Financial Goals Smoothly

Keeping track of your goal is very important. If you set a number of goals and don’t keep track, you will be stuck in the middle. Plus, you can celebrate when you meet your goals!

  1. Affix a note of your goal to the door or wall for a visual reminder.
  2. Mark a calendar with goal milestones as you achieve them.
  3. Take advantage of apps that make tracking goals much easier.


Lastly, there is no other option but to set monetary goals when you want to lead a peaceful financial life. If you don’t know the right path, walking randomly will not help you to reach the right destination.

By planning for your financial future, you’ll set yourself up for success in reaching your financial goals.


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What a 25 Year Old’s Financial Situation Looks Like

Many personal finance bloggers provide net worth, income and expense, and goal updates each month for their financial situation. Some of these bloggers go in-depth into the details and are fully transparent, while others will tell you at a high level their net worth and how it changed during the month. I’m a fan of being fully transparent with my life and I also believe you, my reader, appreciate it as well.

In this post, I want to lay it all on the line: I’m going to give you an in-depth look at my personal balance sheet, income statement, and talk a little bit about areas for improvement going forward. First, I will give you a high level overview of my assets and liabilities, my income, expenses, and taxes over time, and my savings rate for the first 6 months. Then, I will dive deeper into the details for my income and expenses and discuss my goals for the next 6 months.

My sincere hope is that you look at my transparency around my finances and look to take steps to make your financial situation better. I truly believe that everyone can get their financial situation in order and can be successful with money. It doesn’t matter how much you make, it doesn’t matter how much you have currently. By taking steps each and every month to earn money, save money, and invest money, you will be on the road to wealth.

Wealth is the ability to fully experience life.” – Henry David Thoreau

My Financials at a High Level at Age 25

This is a snapshot of where my finances were at age 25, in 2017. Personal finance is personal, so this will look different for everyone, but hopefully it gives you an idea of what one 25-year-old millennial’s personal finances look like.

First, I want to show you a high level view of my personal balance sheet and income statement. At the beginning of 2017, I had a net worth of $68,919. At the end of June 2017, my net worth was $96,073. This number is my assets minus my liabilities. The assets include my cash in my checking and savings accounts, my house and car, my 401k, IRA, HSA, and any other investments. The liabilities includes my credit cards, my mortgage, and my security deposits.

I was lucky to graduate college with only $8k in student debt, which I paid off in 2015, and while I did take out a loan on my car, I paid it off promptly in the few months after to keep my financial situation liquid. I’ve missed out on some market gains, but still did pretty well for 25.

2017 Balance Sheet over time
2017 Balance Sheet Over First 6 Months

In 6 months time, I was able to increase my net worth by nearly $30k through a combination of building my investments, and paying down my mortgage. I will go into more detail later in this post.

For my income, investments, expenses, and taxes, I break them out below. By June 2017, I’d made $56,178, invested $16,002, paid down my mortgage $9,934, spent $16,590 on various things, and paid $12,333 in taxes.

2017 income statement over first 6 months
2017 Income Statement Over First 6 Months

I really like looking at this table because it tells me the story of each month. In February, I received a nice bonus from work and was able to put $5,500 into my Roth IRA, and paid off an extra $2,800 in mortgage principal. Also, I break out taxes, because it’s interesting to see how taxes affects my savings rate.

Now, I will go into the details for each line item.

An Examination of a 25-Year-Old Millennial’s Balance Sheet

I break up my assets and liabilities into high level categories: cash, property, investments, credit card debt, mortgage debt, and miscellaneous debt. Each of these categories includes multiple accounts. Becoming wealthy is about increasing the quality and quantity of assets you have, and decreasing the liabilities you have.


As mentioned above, my assets includes my cash in various checking and savings accounts, my house and car, and my investments in various accounts (401k, IRA, HSA, taxable, and business accounts).

2017 balance sheet assets


I could be a little more aggressive with my investments given my cash situation, but I like having at least $5-7k in cash from a psychological standpoint. I never know what will happen to my house, my body, or my life. Therefore, I treat my savings account as my emergency fund. As you can see below, my total cash has been relatively constant between $5k and $12k.

balance sheet cash balance over time

I’m fairly comfortable where I’m at right now with cash, but wouldn’t mind having at least $15k in cash when I’m done hitting my debt paydown and investment goals (more on this later).


For property, I have a 2014 Volkswagen Jetta which I bought last February, and a house, which I bought July 2015.

balance sheet property 2017

For my car, I reduce the value by multiplying each month by 98% to simulate depreciation. This is not a scientific method, but it works for now.

For my house, I’m taking the most recent appraisal value (August 2016). I’m skeptical of Zillow’s Zestimate because earlier this year, my Zestimate was $360k, but then dropped to $315k, and now is back to $340k. I would rather not see big peaks and valleys in my net worth, and as a result, I’m keeping the house value at the appraisal value.

Overall, I’m happy with my property valuations and these numbers will be staying relatively the same over the next few months as I’m not planning on buying another car or another house!


I have a few investment accounts, some tax advantaged, some taxable, and one business line item. For the tax advantaged accounts, a 401k account, a Roth IRA, and my HSA. For taxable line items, I have a taxable account with some shares from the company I work for, and RSU’s from the same company. I’m happy my 401k balance has nearly doubled, but this is far from being satisfactory if I’m going to have a fat tax-advantaged retirement account 🙂

2017 balance sheet investments

2017 was the first year I contributed to an IRA. Technically, I contributed the max for 2016 and haven’t contributed anything in 2017. I want to change this soon, and will look to max out my 2017 contributions in the next month or so.

My 401k account is a Roth 401k and I’m contributing about $800 a month. I’ve upped this contribution a little bit more to 10% of my salary, but am always tinkering with this number. I’m also thinking of switching to traditional because I was recently promoted and got a decent raise.

I’m maxing out my HSA account since this is almost free money… I put pre-tax dollars in and can spend those dollars without paying any tax – such a good deal!

Overall, I’m generally pleased with my investment growth, but will have to stay consistent with my contributions.


For liabilities, I have 4 credit cards, a mortgage, and security deposits for my roommates. My one roommate never gave me a security deposit, which I’m a little upset about, but haven’t (and won’t) taken action.

2017 balance sheet liabilities

For my credit card debts, these are generally below $1,500 a month. I put all of my purchases on my credit cards and average 2% cash back. I pay off my balance each and every month.

My mortgage is a 5/1 ARM at a 2.625% rate. So far, I’ve paid off $9,934 in mortgage principal – a combination of regular and prepayments. I’m currently at roughly 85% LTV and have PMI to pay each month. To get rid of PMI, I will need to pre-pay roughly $20k of principal. I want to address this in the next 6 months, by either accomplishing it, or getting a solid start on it for 2018.

Net Worth: Up $27,154 From Beginning of Year

For the year, my net worth is up $27,154, mainly driven by an increase in investments of $16,002, and a decrease in mortgage of $9,934.

2017 balance sheet net worth over time

In the second half of 2017, I expect my net worth to hit $100k, and my investments to increase at least $15k, and my mortgage to decrease $10-20k.

One area of improvement that I see is increasing the distribution of my net worth to investments. Right now, my house makes up roughly 50% of my net worth (roughly $48k of $96k). I’m not sure if I want to address this concern this year given my goal of getting rid of PMI.

An Examination of My Personal Income Statement

To get to the balance sheet, we must examine what happens behind the scenes: what is my income and what are my expenses each month? Tracking your income and expenses is incredibly important in personal finance. What gets measured gets managed!


Currently, I have 3 streams of income – 2 active and 1 passive. I work a 9 to 5 doing statistical analysis for a regional bank, and I have a few hours of statistical consulting work a month. My two roommates pay me $1,300 a month in rent, and this has allowed me to increase my income by roughly $8k per 6 months. I also include my utility income (which is technically income but is offset by when I actually pay the utilities), and any other income.

2017 income statement income


It doesn’t matter how much you make, it matters how much you keep. It is important to live within your means – spend less than you make! I track expenses to make sure I’m living within my means!

The main expense categories are discretionary spending (Food and drink, shopping, recreation, travel, home improvement, donation, etc.), utilities and mortgage, auto insurance and gas, other expenses (investment contributions), and paycheck items (taxes and investments).

Discretionary Spending

My main expense each month is food and drink. I’ve definitely became a little more loose with food and drink as my income has increased (lifestyle inflation at its finest).

2017 income statement discretionary spending

I’m averaging about $450 a month in food and drink, most of which comes from eating a $5-10 lunch at work. I don’t buy drinks or go out for dinner too much any more, but lunches add up!

Also, at the end of June, I booked a flight to Vegas to hang out for the 4th of July weekend. I haven’t done too much traveling, but realize if I want to widen my perspective on the world, it’s essential to get out there and see new things!

las vegas downtown

Recreation is another one that I think can get out of hand quick: this one is gym membership fees, golf greens fees, and other fun expenses, etc.

Utilities and Mortgage

Each month, my mortgage payment (principal and interest) is $1,104, insurance is $114, PMI is $144, and property taxes is $339. Utilities run about $300 a month, and this is split 3 ways.

2017 income statement utilities mortgage

As mentioned above, paying down the mortgage principal by roughly $20k will get rid of the PMI payment of $144 a month. Without any extra payments towards principal, my wealth grows roughly $530 a month through equity build.

Auto Insurance and Gas and Other Expenses

I usually fill up my gas tank one time a month because I don’t drive too much. In May and November, I have my car insurance payment of about $800. Car insurance is expensive!

For investment contributions, you will see in February, I contributed $5,500 to my Roth IRA, and in May, I put $6,000 to work in my business endeavors. Investment contributions aren’t technically aren’t expenses, they are a balance sheet transfer, but since cash is going out, I treat it as an expense.

These expenses are not a concern for me.

Day Job Paycheck Taxes and Investments

Everyone needs to pay taxes, and I’m no exception. With each bi-weekly paycheck, there are a number of things taken out, both pre-tax or post-tax. The main items I’d like to call attention to are the 401k and HSA line items. I’ve recently increased my 401k contributions and am maxing out my HSA account.

Overall Takeaways From My Personal Income Statement

Overall, I’m saving a good amount of money each month, and I’m able to put that money to work in a variety of ways. A savings rate of 49% post-tax is very good, but can always be improved upon.

One thing I’m hoping to do is travel a little bit more in the second half of 2017. Like I mentioned above, this past weekend, I went to Vegas on a whim and had an amazing time 🙂 I’m looking to continue to travel around the Midwest and continue to widen my perspective on the world.

bellagio fountain show

What did you think of this detailed breakdown of my personal balance sheet and income statement as a 25-year-old millennial? I hope it inspires you to track your own finances, including income, expenses, assets, and liabilities, to ultimately have an idea of your net worth. As I’ve said earlier – what gets measured gets managed!

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How to Set Goals You Can Actually Achieve

Have you ever set goals, and not achieved them? What went wrong with these goals? What steps can you take to succeed in life? How can you set goals you will actually achieve?

Setting goals is critical for reaching your dream life, and living the life you WANT and DESERVE.

Throughout childhood, and even into adulthood, we are always told how goals will change our life, and the importance of setting good goals.

How can you set goals you will reach? Is there a goal setting framework for success? Many people don’t know how to set goals, or don’t have the consistency to achieve their goals.

For example, a recent study by the University of Scranton found that over 92% of people who make New Year’s resolutions will fail to complete them.

Even if you’ve never tried to set concrete goals for yourself there are a number of steps you can take that will significantly increase your odds.

In this post, you’ll learn how to set goals for success, learn about S.M.A.R.T. goals, and learn a framework for setting goals you will actually achieve.

How to Set Goals for a Successful Life

The process of setting goals is not too hard.

However, the process of setting goals which you will actually achieve is a little tricky.

Make no mistake though, you can definitely learn the steps to setting good goals, and get in an action based mindset to achieve your goals.

When creating goals for your life, career, health, money, etc., there are a few things you need to do:

Let’s get into each of these goal setting techniques so you can get on to setting goals you will actually achieve.

Deconstruct Your Goals into Smaller Sub-Goals

What is deconstruction?

Essentially, deconstruction is exploration.  To deconstruct something is to dig around, get the lay of the land, and understand what there is to do to reach your goals.

After getting a feel for what is out there, the next step is to try to figure how the smallest steps which you will be completing.

How can you find these steps?

Some of these goal setting methods will be better than others. Think critically about which one makes the most sense for you, and figure out what the best path is for your hopes, wants and dreams.

Set Both Short and Long-Term Goals to Achieve Your Goals

reaching goals through actionsWhen setting goals, it’s important to distinguish between short term and long term goals.

I want to become a millionaire during my lifetime, and realistically, I realize that this probably won’t happen in the next day or week.

However, if I make it a goal of mine 10 years down the road, and set short term goals which can build up to the long term goal, then I will be successful.

For you, as we talked about when deconstructing your goals, if you can find the smaller steps, you can make these your short term goals. For the long term goals, this is your dream.

Short term goals include things like cleaning your room, paying the bills, and things that are on a week to week basis. This could even be something like not spending money during the week so that you can go out during the weekend.

Long term goals include things like saving money for a car or house, losing weight, and learning a skill.

By chipping away at the short term and long-term goals, you will be able to get more done and get closer to your dream at the end of the road.

The Power and Potential of Using S.M.A.R.T. Goals

When learning about goal setting, a very popular goal setting framework and template are S.M.A.R.T. goals.

Setting S.M.A.R.T. goals allows you can clarify your ideas, focus your efforts, use your time and resources productively, and increase your chances of achieving what you want in life.

S.M.A.R.T. stands for Specific, Measurable, Achievable, Realistic, and Time-Bound.

Creating your goals using the S.M.A.R.T. framework is one of the highest impact ways you can set yourself up for success.

Which do you think you would be more likely to follow through with:

“I am going to lose weight”


“I am going to lose ten pounds in two months by eliminating sweets and fast food and exercising for a minimum of twenty minutes per day”?

The first goal is too vague, and vague goals will most likely never be achieved.

The second goal is much better because it gets captures exactly what the final result is (lose ten pounds), specifies when it will happen (two months), and lays out the precise actions necessary to achieve it (eliminate junk food and get exercise).

By using S.M.A.R.T. goals, you will be able to create goals which can help focus your thoughts and actions.

The Power of Writing Goals Down on Paper

Setting goals is straightforward, but the real power comes from making them REAL. When setting goals, it should be more than just thinking about them.

To be successful with setting goals, write them down on a piece of paper and hang that piece of paper on the wall.

By writing your goals down on paper, you will keep your goals front and center. You will allow yourself to have them in the front of your mind every time you see that piece of paper.

To quote Aristotle, “We are what we repeatedly do”.

You’ll be much more likely to keep doing whatever action is necessary to reach your goal if you have a constant reminder.

By writing down your goals on paper, you make our goals REAL. When you put your goals out into the world, this makes them that much more tangible and powerful.

Share Your Goals with Friends and Family to Have Accountability

Do you know any people who constantly are setting goals and talking a big game, but never go anywhere in life?

What do you think of those people?

Instead of telling people about your goals and not following through, telling others about your goals can be a powerful tool.

You can keep yourself accountable by sharing your goals with friends and family.

Any goal becomes much more achievable with the right support network! 

If you want to lose weight, then say to your friends, “I am going to lose 10 pounds in the next two months.”

As time progresses, your friends and family will ask about how you are doing on your goals and want to help. With this support, the grind becomes a little easier.

Writing down your goals on a piece of paper will make them feel real, while sharing your goals with others will keep you accountable and motivated.

Now, let’s talk about the importance of action when setting your goals.

Focus on the Action, Not the Result When Creating Goals

What are your goals? What do you want to achieve?

When I read those questions and think about my answers, I generally will go straight to the result.

What are my goals?

All of these thoughts are fantastic, but how am I going to do any of this?

Let’s talk about becoming debt free for example.

It’s a great thought to have that you want to be debt free, but if you are just putting the minimum payment towards your debt and hoping it goes away, do you think you’ll get there?

Instead, we need to focus on the actions: pay off an extra $200 a month. Pay off an extra $600 a quarter. Pay off $2,500 this year.

YOU CAN CONTROL YOUR ACTIONS. You cannot always control the result.

This is why it’s so critical to focus on actions for achieving your goals this year.

Focus on actions, you cannot always control the result.

A 3 Step Framework to Setting Goals for Work and Life

Here are 3 simple steps for setting goals for your work and life.

As we discussed above, it’s first about asking yourself the right questions and understanding what you want in life, and then working backwards to find the actions that make sense.

  1. Identify your goals and dreams
    • Split your goals and dreams into multiple buckets: social, financial, spiritual, physical, emotional, work, fun.
    • Ask yourself: where do you want to be in 1 year? In 5 years? In 10 years?
    • Do you want to get a promotion at work?  Do you want to increase your savings rate? Are you looking to retire early? Do you want more friends? Are you happy with your job? What things stress you out? Do you want to lose 10 pounds?
  2. Figure out which actions you must take to reach those goals and dreams
    • You have your dream, now what do you have to do to make it happen? GO DOWN THE RABBIT HOLE!
    • Do you want to retire early? Ask yourself, what’s your savings rate? What is your retirement income goal? Are you currently saving enough to allow yourself to retire at age X?
    • Are you looking to get a promotion at work? Who are the key influences of your career? What skills are necessary to be successful at the next level? Should you be networking X times a week?
    • Do you want to lose 10 pounds? What are you eating each day? Are you exercising enough to get your body in a calorie deficit?
  3. Make a Plan and Take action
    • If you goal is to lose weight, decide to cook your own food 5 times a week. If your goal is to save money, pursue money saving options in your housing, transportation and eating. The possibilities are endless!
    • It’s great to know what you have to do, but if you never take action, you will never achieve your goals and dreams.

Through using this framework for setting goals for work and life, you can create a plan for your success. There are so many ways to reach your dreams, and through effective goal setting, you can get there.

The Importance of Taking Action for Achieving Your Goals

“An ounce of action is worth a ton of theory.” – Ralph Waldo Emerson

Ideas, goals, and dreams are worthless without action.

Humans underestimate how much they can accomplish in a year, but overestimate what they can accomplish in a day.

Everyone on this Earth has 24 hours in a day, 168 hours in a week, 720 hours in a month, and 8,760 hours in a year.

What’s your idea? Where do you want to be in a year? What about 3 years? 5 years? What’s your goal?

Successfully setting goals is possible and doable. Now, that you have a framework for setting goals you will actually achieve, it’s time to get out into the world and achieve those goals.

Readers: what are your goals? What are you looking to achieve? How do you set goals?

How to set goals you can actually achieve

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