House hacking is an incredible way to improve your financial situation in your 20s and 30s. House hacking allowed me to pay down my debt, increase my savings, and grow as a personal.
In this post, you’ll see the true financial results from my house hacking experience.
From 2015 to 2019, I hacked my housing expenses by renting out multiple rooms to friends in my house.
House hacking is a great way to reduce your housing expenses, and also a great way to gain experience as a landlord.
Over the past 4 years, I’ve learned a ton and improved my financial situation greatly. For anyone in the early stages of building wealth, house hacking is definitely something to consider.
In this post, I want to share with you the financial results of my house hacking, talk about how expensive houses are, and give you some inspiration to consider house hacking.
Why I Decided to Sell vs. Rent My House
Before I get into the financial results of my house hacking, I want to talk about why I sold my house vs. wanting to potentially rent out my house.
I bought this property in 2015 for $287,900. Previously, it was a rental property and was renting for ~$1,900.
In 2018, I started having thoughts that I didn’t need as much space and wanted to downsize.
While the property was amazing, and definitely had potential to become a rental property again, I started to run the numbers and I wasn’t so sure it made since for my financial goals.
When I started looking at comparable houses in my neighborhood in 2018, I looked at my house and thought I could list it for sale somewhere in the $350,000 to $400,000 range.
At the time, my mortgage balance was sitting around $250,000, and with this sale price, I could get out a significant amount of equity from the property.
In terms of it being a rental, I think I could have rented it out for ~$2,200-$2,400 a month, and with a mortgage of $1,835 a month, I would be cash flow positive.
$400 a month is $4,800 a year in cash flow, and while this seems decent, when looking at the potential of what kind of cash I could get out, this didn’t seem like an no-brainer use of the capital.
Also, even though the location and house is amazing, there were upcoming repairs and challenges with the house. It was built in 1900 and needed some updates.
My decision came down to if I could get $50,000 to $100,000 out of the property via a sale, then I could potentially buy multiple rental properties, start a business, invest in stocks, etc. With these proceeds, I could potentially make more than $4,800 a year in cash flow – and not have to worry about property management of this property.
This lead me to wanting to sell vs. renting it out.
Financial Results from 4 Years of House Hacking (from Purchase to Sale)
Below I’ve created a table with all of the housing related income and expenses I had over the last 4 years.
As mentioned above, In 2015, I bought the house for $287,900, and using FHA, I put down 3.5% (and it ended up being more like 2% due to some fees).
With mortgage closing costs included, I started off on my house hacking journey with ~$10,400 into the property.
After moving in, I had 3 roommates join me. My initial mortgage payment was $1,820, and my monthly rental income was $1,650.
Increasing my income is a goal of mine, and with house hacking, I was able to accomplish this.
Over the next few years, friends and roommates moved in and out of the property, and also had a few housing improvements and repairs.
With all of this income and expense, I’ve looked to categorize it appropriately above.
Fast forward to July 2019, I decided to sell my house, and was able to sell for $375,000.
My mortgage balance when I sold was ~$245,000, and after agent commission and other fees, I walked away with roughly $110,000.
Tallying all of this up, over the 4 years of house hacking, I “made” just over $11,000 to live.
But I’ve left out where the cool part of house hacking comes in.
House Hacking vs. Renting – An Opportunity Cost Analysis
In the calculation above, I included the principal payoff as an expense. When you pay down the principal, yes, technically it is going back to you, but it’s not unlocked until you sell.
Since I’ve included the principal payoff as an expense, I need to make an adjustment to the final profit number.
I haven’t considered the opportunity cost of renting a place.
If I was to rent out the room I lived in for 4 years to myself, I would have charged $800 a month. Adding in $800 a month for 4 years, I actually “made” nearly $50,000 to live.
$50,000 over 4 years, or $12,500 a year to live.
As mentioned above, when I got my house, I paid $10,400 upfront (down payment and closing costs).
Looking at the final profit number, I made $12,500 a year for 4 years – a return on investment of 120.19% a year for 4 years.
Those are some ABSURD returns.
These kind of asymmetric pay-offs are what you need if you want to build wealth fast without having a lot of money.
Real estate has this type of potential, but there are also some other thoughts I want to reflect on and share with regards to real estate and house hacking.
Houses are Expensive and The Potential for Real Estate Gone Wrong
While I made out really well on with my house hacking experience, there are a number of things which could have gone wrong, or also lead to much lower returns.
For one, I didn’t have any major repairs or accidents with my house.
For example, I could have easily had to repair the roof, replace a water heater or furnace, or dealt with water damage in the basement.
These things would have potentially cost thousands of dollars and also lead to headache and stress.
In addition to these potential repairs and damages, house prices are NOT guaranteed to always go up.
We live in a world with finite resources and finite space. Real estate is very cyclical and dependent on location and demand.
I happened to buy at a great time and rode some nice appreciation (33% in 4 years).
However, this might not be the case for other people who buy in other areas or at other times.
Finally, property taxes is another factor I want to discuss.
Property taxes keep going up all over the United States. As you may have noticed above, from 2016 (the first full year of living in my house) to 2018 (the last full year), my property taxes increased $1,500!
In 2019, they were set to be $5,200 – an increase of $2,200 in 3 years!
In 3 more years, would they be $7,400 a year? I have no idea, but depending on the area you live, this could definitely play into lower returns.
Again, I was pretty lucky with my house hacking, and am thankful for my experience. What do you think?
What are My Thoughts on House Hacking?
I’m done with house hacking for now, but still believe it’s an amazing way to reduce your housing expenses and improve your financial situation.
House hacking allows you to cover some of your mortgage and increase your monthly cash flow.
One thing I should say, though, is house hacking is not for everyone.
As a 20-something person without a spouse or kids, I was able to take this risk.
However, you may not have as flexible of a situation as I did, and I want you to think critically before jumping into real estate.
There’s no guarantee that house hacking will work for you, but there is certainly great potential!
Thank you for reading 🙂
Becoming rich is more than just having money in the bank. You can also be rich if you have the right mindset, and know what you want in life.
At a young age, you most likely understood the difference between “poor” and “rich”.
Rich people have money. Poor people do not.
The financial difference between a poor person and a rich person can be pretty significant.
However, there’s another difference between the poor and the rich which has nothing to do with how much money is in the bank. The difference between being rich and poor is mindset.
Some of the wealthiest people I know aren’t rich financially, but they understand how to use their money for happiness.
Through saving and investing, you can use your money to live the life you want and deserve. You can become rich over time, and do what matters to you.
Your mindset towards money influences all of your habits pertaining to money:
- how you earn money
- how you spend money
- where you save your money
- how you use your money over time
While there are always going to be factors outside of your control (where you were born, your parent’s financial wellness and education, etc.), we all have the ability to change our mindset from one that makes us poor to one that brings us riches.
What do I mean by the mindset of the rich?
A rich mindset is the belief money is a tool, and you can use money to create a life you love. A rich mindset is also having the understanding that money should work for us, rather than us working for our money.
The rich know a dollar saved and invested today is better than a dollar spent today.
Put another way, it’s the understanding that putting our money to work is a better use of our money than buying stuff we think will make us happy.
Let’s dive more into detail about how you can cultivate a rich mindset.
The Mindset for Building Wealth to Fund Your Dream Life
Whatever your dream life is, you can fund it through understanding the mindset of the rich.
People without the mindset of the rich are often caught in the trap of trading their time for money – they’re on a financial treadmill leading them to nowhere fast.
Conversely, people with a rich mindset are busy building assets. These assets leverage the power of time to generate passive income – passive income which isn’t dependent on them directly swapping their time for money.
We all have limited time on this Earth, and if you are spending a lot of your time trying to make money to make ends meet, you probably aren’t living your best life.
Spending money on things that don’t bring you happiness, and doing things which don’t align with your purpose and passions will lead a less than a truly fulfilling life.
People with a rich mindset have a long term mindset and are able to delay gratification. If they have a job and get a pay raise, they don’t look to spend money upgrading their home to an executive condo.
The rich are more likely to invest their money in buying a run-down property and fixing it up.
Rich minded individuals believe money, when invested in stocks, bonds, or other assets, can lead to a secure financial future.
People with a rich mindset understand compounding and the time value of money. People with a poor mindset believe that money can be used to buy stuff to make you happy right now.
Understanding the time value of money is very important.
Having a wealthy mindset, or a poor mindset, is not how many zeros you have in their bank account.
Instead, it’s how you approach making an income and where they invest (or spend) their resources.
How People Make Money
One of the best books about building wealth is Rich Dad Poor Dad. In Rich Dad Poor Dad, the author presents four categories in how people make money.
Most people will fall into the first two categories that are related to a direct trade of swapping time for money.
Jobs are a perfectly okay way to make money.
However, if you want to become financially rich, you need to consider the last two categories while currently being employed or self-employed, This way, you can step off the financial treadmill known as the rat race and start walking the path to financial freedom.
The four ways a person can make money are through the following roles:
- Small Business Owner
- Big Business Owner
Let’s discuss each of these roles in detail.
Working as an Employee to Make Money
Being an employee is a very common way to make money. Being an employee is probably the most common, but yet, the most ineffective way to go about making money.
While it can be stable and provide security, as an employee you are trading time for money – and someone else is pulling the strings.
Working for a corporation at the higher level can certainly have its perks.
You can drive fancy cars, travel business class, and earn a great income.
However, being an employee is a similar to renting rather than owning a house. You’re not building something that will become an asset.
You are simply trading time for money, and when you stop trading time, you stop making money.
Being a Small Business Owner to Earn Income
The second way people make money is through owning their own small business.
Many people take the entrepreneurial leap to run their own small business.
Small business owners often find themselves trading the comfort, stability, and regular income with a stress, instability and a volatile income. While many small business owners are able to do what they love and make their own hours, it is very tough to make it.
As a small business owner, at least in the first year, you will most likely have doubled the amount of time you spend working, and make a lot less money than before starting the business.
The financial rewards of having a small business can be substantial, but for most people they are simply trading a job they don’t own for a job they own.
Becoming a Big Business Owner to Build Wealth
The third way people make money is through big business ownership.
Small business owners, in this context, relate to people who ‘own their job’. For example, small business owners might be massage therapists or personal trainers – they are still trading their time for money.
These small business owners are limited by time. They could be a great massage therapist, charging $100 an hour, yet there are only so many hours in each day to realistically work.
Big business leverages systems and other people to create their income.
For example, let’s take an ice cream van. The small business owner mentality runs an ice cream van generating $200 profit from selling ice cream.
The big business owner, however, goes out and buys five ice cream trucks and employs five people to serve ice cream. The big business owner now has leverage. A system has been created, and there exists a network which is able to scale.
Construction of this system is how the wealthy become wealthy.
Using Investing to Become Rich
Finally, the last way a person can make money is through investing.
An investor has true leverage. Rather than work for his or her money, in the conventional sense of swapping time for money, they put their money to work for them.
Think of it this way, if you have $500,000 in a savings account earning 2% in interest each year, then, by doing nothing, you have a savings account is generating $10,000 a year.
The challenge is getting that initial $500,000 in the first place. However, the concept remains, investors create assets that generate income automatically in perpetuity.
Now that we have gone over the four ways you can make money, and discussed how through creating systems and investing, you can create passive income, now let’s talk about the principles for living a life of wealth and abundance.
Five Principles for Living a Life of Wealth and Abundance
I look to live my life with an abundance mindset – there’s so much money in the world and we just need to get a little bit of it.
From the last section, we have a grasp of the four ways of making money.
Now, let’s look at five general principles to help you create a life of financial wealth and abundance.
These five principles are:
- Dream Big
- Envision a Prosperous Future
- Learn More
- Start a Business or Start Investing
- Do What Matters and Live a Life You Love
Below, let’s get into each of these five rich mindset principles in more detail.
1. Live a Life of Abundance by Dreaming Big
Dreaming big is step one to living a life of abundance.
Why is dreaming big important?
You are capable of everything and anything you put your mind to. You can have and build towards your dream life – you just have to set a goal and start working towards it.
While this may not happen overnight, over time you can get there.
What do you want your life to look like? What’s keeping you from living it today? What steps do you need to take to get there?
Dreaming is the first step to living the life you want and deserve.
2. Envision a Prosperous Future
Many highly successful people talk about the importance of having a vision board. A vision board is used to help you connect what your hearts desires with what your future life looks like to you.
Similar to how athletes use positive visualization techniques to picture themselves winning that big race, you can do the same for your dream life.
Through visualization and affirmations, you can set yourself up for success and lean into the experiences you want.
Dreams are just that, dreams. However, by visualizing and planning, you can start to make it real.
Now, it’s time to take action and make those dreams and visualizations a true reality.
3. Invest in Yourself, Learn and Become Better
Your level of success is rarely exceeded by your level of personal development, because success is something you attract by the person you become.
Education and investing in yourself can have an amazing return on investment, if done correctly.
Learning, growing, and gaining experience in the field of your interest will help you grow the necessary skills for success.
Investing and building systems are complicated endeavors which require some understanding of different industries and companies to be successful.
To learn, you can go the traditional route with academic courses, or look to learn through experience.
Some academic courses are required to enter a particular profession, and these should be considered. However you can find highly educated white collar workers attending weekend seminars on topics such as real estate investing, Amazon selling, and digital marketing which are led by people who didn’t go to college.
The one thing to bear in mind, when it comes to learning, is to ensure the time and money you put into the course provides a decent return on investment.
“Your level of success rarely exceeds your level of personal development, because success is something you attract by the person you become.” – Hal Elrod
4. Start a Business or Start Investing to Earn Passive Income
Running a business is difficult, but the experience and knowledge gained through this endeavor will be very beneficial.
The last four years of my entrepreneurial adventures have been incredibly beneficial for my development.
While I haven’t had amazing financial returns, my mindset and skills have grown and I’m confident I can become successful through business in the future.
Again, it’s very hard to become super wealthy by being an employee.
By learning how business and systems work, you can increase your skills and value, and start to tap into passive income sources to make more money.
If starting a business doesn’t make sense for you, you can putting your money to work with investing.
By investing in the right assets, you can earn passive income. Passive income allows you to make money without work.
Even if you have just $100 in your bank account, start investing, you should still get into the habit of saving to build your asset pile over time.
The main difference in mindset between the rich and the poor is the poor tend to spend money in order to derive pleasure or gain comfort (e.g. a fancy car, nice meal, or expensive outfit), whereas the wealthy invest their money in order to derive long-term financial stability (e.g. houses, savings accounts, stock portfolios).
5. Live the Life You Want and Deserve
The final step for living a life of abundance is realizing you are enough and you have enough – regardless of the number which appears on your financial statements.
While having more money is great, being happy, helping others, and doing what matters to you with your time is the true meaning of life.
Money is a tool which you can use to live the life you want and deserve.
Living with a rich mindset will allow you to create your dream life and live the life you want.
Become Rich Through Learning, Investing, and Action
Hopefully this article has opened your mind into looking at the different ways people make money, and the fundamental difference between mindsets of the rich and the poor.
Making money will not make you happy, but you can use money to live a great life. Money can bring peace of mind, security, and the freedom to live life on your own terms.
That’s what being rich is about.
Being rich has nothing to do with how many zeros are printed on the end of your paycheck.
Being rich is all about living your best life, and being happy with how you spend your time.
Money is a tool, and it’s like jet fuel – it can transport you from where you are to where you want to be!
Change your mindset, and over time, you will become rich.
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!
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:
- By investing in riskier assets, you can hopefully get lucky and speed up the time to financial independence with bull market tailwinds.
- 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)
- and FOMO (I’m going to have to explain this one a little more…)
The FOMO 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).
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
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, 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).
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.
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?
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.
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
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.
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.).
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:
- Accessible – Anyone can buy it
- Appreciable – Can increase in value over time
- Leverageable – You can buy on margin and borrow against equity
- Rentable – Cash flow baby!
- Improvable – Through sweat equity or contracting out
- Deductible/Depreciable/Deferrable – Amazing tax benefits
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:
- How to Think About Money (book review)
- The Richest Man in Babylon
- The Millionaire Next Door: The Surprising Secrets of America’s Wealthy
- The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich
- Money: Master the Game (book review)
- Think And Grow Rich
- The Intelligent Investor: The Definitive Book on Value Investing.
- How to Win Friends & Influence People
- Rich Dad Poor Dad
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:
- Do you have enough money each month to cover your debt payments? Do you have additional money at the end of each month to invest?
- How much debt do you have? What are the interest rates? Do you feel debt has a grip on your life or finances?
- If you have extra money available to you, will you actually invest it? Or will you spend it?
- Do you have an emergency fund?
- What are the terms of your debt? Are there any penalties for prepayment? Is your interest rate adjustable?
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
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?
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:
- Write down one goal at a time in detail. The goal should be realistic, achievable.
- Set a timeline for the goal and decide if it is a short term, a long term, or a mid term goal.
- Revise your budget and make necessary changes as per your planning to achieve the goal.
- Consider some room for fun. Self rewarding is very important to remain inspired.
- 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.
- 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!
- Affix a note of your goal to the door or wall for a visual reminder.
- Mark a calendar with goal milestones as you achieve them.
- 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.
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
Erik’s 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.
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.
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).
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.
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.
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 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.
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.
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 Erik’s 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.
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).
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).
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!
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.
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.
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!
Would you ever consider taking a pay cut in your day job if it meant more balance in your life, more time to do the things you enjoy, less stress, or more happiness in general? Would you ever consider leaving your day job altogether? Or would you always rather just keep grinding at your current day job, suck it up and save for the future? What if money didn’t matter? What route would you take? In this post, I want to explore the question, does money really matter?
Questioning the Default
In the book, Originals, the author Adam Grant advocates for individuals to question the default when going through life. Why is it that we peel bananas from the top? What if you peeled bananas from the bottom? Why are my habits the way they are? What if I changed some of my habits to live a better life?
As a personal finance blogger, I care a lot about money. I love seeing my savings rise every month, I love talking with other people about money and I’m always looking for new ways to build wealth. To question the default, what if money didn’t matter? What if I didn’t care about money at all? Would my daily habits change? Would I spend more, or would I save more?
If Money Didn’t Matter
If money didn’t matter, I would do a number of things differently. First, I’d explore taking more risk in terms of leverage and investment allocation. I’d start to treat making money more like a game, rather than a restriction on my lifestyle. Look at how many businesses are run these days: get into debt, try to extract as much profit out of as many units as possible, hope to not fail, rinse and repeat.
Could I amass $1,000,000 in the next 3 years by using leverage and taking extreme risk? Possibly. Could I lose everything by not being careful? That’s also possible. I try to map out all possibilities and scenarios, and even if money didn’t matter, my target would be somewhere in the middle, at the appropriate risk/return level.
If money didn’t matter, I’d spend more money on education and look to continue to gain more experiences. I’d spend more time with the people who matter to me, and help others with their goals. Being a mentor and seeing people make connections is something I love. I wouldn’t worry about needing to hit a promotion, get a bigger bonus at work, or even work those extra 2-3 hours a week.
My mindset toward finances wouldn’t change drastically, but instead of putting my money into the bank, I’d be putting it to work – to improve myself and my current situation. I’m looking to build a future of abundance for my future family members, and by using my knowledge and abilities, I’ll be able to do so.
As you can see, the importance of money can dictate a lot of choices in life as we know it. But I don’t want to let the importance of money be the reason why I don’t accomplish all those things listed above. So what’s the solution? Live like money doesn’t matter? Continue living the same was because money does actually matter? Where is the balance?
Would Treating Money as if it Didn’t Matter Be Reckless Behavior or the Right Behavior?
To anyone reading this post, the world is our oyster. There is so much opportunity in our world right now and we are just starting to see the effects of globalization. I have a virtual assistant in Africa that I’m paying $40 a week to help perform different graphic design tasks for my business. $40 a week puts him in the top 25% of earners in his country. Can you imagine the impact I’m making on him just by giving him work? $160 a month is scraps compared to what many people make in the U.S.A. and yet I get messages like, “Thank you Erik for payment. I’m very grateful and I appreciate.” I love doing things like this because I’m actually affecting other’s lives.
If money didn’t matter, why wouldn’t I go with friends to Vegas on a whim? Why not go travel the globe for a few years? What’s the risk in taking out a personal loan to increase my investments? I’m throwing around a lot of questions and thoughts in my head, and trying to be remarkable. I’m excited to see what the future holds.
Appointment at 9 am, meeting at 10:30 am, lunch plans with a friend at 12 pm, another meeting at 2 pm, hit the gym around 6 pm, and work for a few hours until bed. Life escapes the busy worker.
Mediation and visualization are two helpful ways to find peace with yourself and situation. I’m seeking peace and by writing and visualizing, I’ve become accepting of my situation and am excited for the next steps in my life.
Every day is a new day – a day to learn, a day to experience the wealth of the earth, a day to help other people. Saving at least 20% of your income a month will set you up for financial success. Become debt-free and build an emergency fund of 3-6 months of expenses and you’ll be on your way. At a certain point, money won’t matter. At the end of the day, our relationships, how we interact with others, and our experiences will be the only things that matter.
Does Money Really Matter?
After a certain point, money doesn’t really matter. If you have the income in place for your lifestyle, and have goals to increase your income and savings in other ways, money shouldn’t matter. Until you are debt free and have an emergency fund, money matters. Financial freedom is just that: freedom from finances – money doesn’t matter anymore, and now you can enjoy each day the way you want to enjoy it. I can’t wait to get there.
Readers: do you care too much about money? What would life look like if money didn’t matter? How much would you have to have in the bank for money not to matter?
Does it make sense to go into debt for home improvements? Should you pay cash for home improvements? When does it make sense to finance making your house look and feel nicer? Does financing energy efficiency projects for your house ever make sense?
These are some common questions when thinking what actions you should take with your money when considering doing work on your house.
Traditional personal finance says to stay out of debt. However, sometimes, going into debt for home improvements can make sense, and potentially improve your home value.
Usually, I’d say to avoid getting into debt if you can, because debt is restricting, constricting, and not fun.
But, there are times when it is okay to go into debt. The circumstances are rare, but sometimes it is okay.
In this post, I’m going to share with you why I’m going into debt for home improvements, how these improvements will improve my home value, and talk about the pros and cons of financing home improvements.
Is Debt for Home Improvements Bad?
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 person in debt is so far a slave.” – Ralph Waldo Emerson
Debt is horrible: it is mentally draining, financially draining, and affects your entire life if you are weighed down by the large barbell of debt.
The main problem with debt is you are obligated to the bank or creditor to pay a certain amount each month. You signed a contract to pay them a certain amount and there are consequences if you don’t pay.
These loans and lines of credit can be seriously troublesome if a person is not careful.
I pay $1700 a month towards my mortgage – if I lost my job, I’d be in serious trouble paying my mortgage and avoiding delinquency or default.
As the title states, I’m going into debt. That prompts the question, is all debt bad?
Is All Debt Bad?
In actuality, not all debt is bad.
There is non-productive debt, which is debt that does not lead to a gain or cash flow, but there is also productive debt.
Debt’s role in society actually makes sense. If there was no one lending money, it would be difficult to build wealth over time as a society. To buy a house, you would need all of the cash on hand.
While no debt would solve many issues that people have today, it would be restricting on our lifestyles.
That being said, debt can certainly get out of hand, and I’m mostly speaking in general about the concept of debt. (I’m not going to get into how government and central banks use debt and the money supply in this post. This post and video is amazing for that: How the Economic Machine Works by Ray Dalio)
What is Productive Debt?
Productive debt typically involves financing an endeavor which will lead to an increase in value or cash flow.
For example, financing for rental properties can be considered productive debt. A person puts 20-25% down on the house, and is able to own a house to rent out to others.
In this case, if the renters cover the mortgage and the maintenance and upkeep is relatively low, that person can build wealth very effectively.
Without debt, that person may not be able to buy the rental property and as a result, would have to continue to save their cash until being able to buy in full.
Another example where debt may not be all that bad is when an interest rate is below the risk free rate. Typically, investors and bankers will use the Treasury Curve as the risk free rate curve. Right now, the 10 year Treasury rate is between 2% and 3%.
Since the probability of the U.S. Treasury defaulting is near 0%, we consider Treasury bonds to be risk free and the interest rates associated with them to be the risk free rates.
In recent years, many people have bought cars and other property where the interest rate they received was less than 2%.
Mathematically, you should never pay more than the minimum on these debts and instead invest the difference. If you invest at 7-8% returns and pay 2% on your debt, you are essentially getting a 5-6% risk free gain.
Are 0% Interest Rate Loans a Good Deal for Home Improvements?
In the previous section, I mentioned loans where the interest rate is below the risk free rate.
In particular, 0% interest rate loans and 0% debt is an absolute steal.
The lending companies are giving you free money. These companies are saying, “Here, have $10,000 and you can pay it back evenly over X amount of years and pay $0 in interest.”
This is free money!
For me, I received a 0% interest rate offer from a company willing to provide financing for windows. I was curious, and wanted to see if doing these improvements would lead to a favorable outcome.
The rest of this post talks about my experience updating my first floor windows with energy efficient windows, and the financial results behind this project.
Will Updating an Old House Lead to Improved Home Value?
My house is old. My house was built in 1900. The windows are original, the wood floors and wood trim are beautiful, and while the layout isn’t optimal, the place is a great place to live.
I received a post card in the mail a few weeks back that said: “Upgrade your windows with 0% financing!”
Pella Windows is one of the highest reputation window makers and installers in the industry, and I was definitely interested:
- I had been thinking about updating my windows for quite some time.
- Previously, I had to use 3M Plastic Wrap on the majority of the windows on the first floor.
- Also, 5 of the 8 windows on the first floor don’t even open because they were painted shut or stuck.
- Whenever I see 0% financing, my personal finance light bulbs start going on.
I called the next day and the company said they would send out a sales representative to give me a quote.
Using Debt to Improve my Home Value
When the sales representative arrived, I wasn’t sure how many windows I wanted to replace. I didn’t know if I wanted to replace any doors either. Honestly, I just wanted to learn more about how much windows would cost, how much it would be to install, and what I could expect going forward.
We walked throughout the first floor. The windows sales representative explained to me how my windows were single pane and were most likely the original windows. They were not energy efficient, and potentially were letting in UV rays into my house.
He showed me the catalog and noticed that we could have an extra match of color and keep many of the same nice elements by replacing the windows.
I was interested, but ultimately, I’d want to see the price for new windows.
How Much Does a New Window Cost?
We went through the house and identified 8 windows which I was interested to replace. There are two windows like the one on the right, and 3 windows like the one on the left.
For the window on the left, these would cost $750 for the materials and installation. For the window on the right, it would be about $1,300 for the materials and installation. I was actually a little bit drawn back.
Before the house tour, I thought I was going to be at least $1,000 per opening, and expected the price to be roughly $1,500 an opening.
For 8 windows, I was quoted roughly $8,500.
How much does a Nice New Door Cost?
Walking through my house, and seeing the old door, I stopped and wanted to see how much a new door would cost.
My front door has a little bit of a gap between the floor and door. In addition, the window is a single pane window. All together, the front door is very energy inefficient and makes the house quite cold when it’s below 0 in January and February!
For the front door, I was quote for $3,500 for the door and install. The door and window will be energy efficient and give a little bit more privacy into the main entrance.
In addition, the trim will be matching and I’ll have a fancy door handle.
Does 0% Financing Make Sense for Home Improvements?
After I received the quote, I decided with these window prices, it would be a good idea to replace the windows. Also, with the option for 0% financing, financing made sense for these home improvements.
We went through the numbers. I could get 8 windows and a door for roughly $12,000, and finance this purchase at 0% for 3 years.
This seemed to be a pretty good deal, and while $12,000 is a lot of money, I believed I was improving my situation in the following ways:
- I replaced 8 windows, 5 of which didn’t open
- This will be great for Spring and Fall days when I can open up the windows for a breeze
- I now have a new stylish door which will increase curb appeal
- I’ve increased the energy efficiency of my house.
- A value add for my energy bills and my comfort living in the house
- The 0% financing is free money and I’ve upgraded the value of my house
- This is a great selling point and a great value add for renting the place out if I ever do that
The downsides are obviously getting into debt and losing out on some market investment opportunities, but I feel this is relatively safe for my situation (your situation might be different).
Now, let’s talk about the results from the last year of installing these new energy efficient windows.
Results from Getting Energy Efficient Windows and Doors
After getting my windows and front door replaced, I’ve been loving life.
No longer do I have to mess around with 3M plastic in October, nor do I have to worry about sitting in my living room with a massive blanket to stay warm.
In the winter, I enjoyed the warmth of my house without having to run the heat 24/7 and could actually walk around without having to be bundled up in a sweatshirt, sweatpants, and wool socks.
In the summer, some days we had the windows open, and on days when it was humid, the new windows kept the house cool.
The new comfort and look of these windows were definitely worth the dollar amount.
Comparing Energy Costs Pre- and Post- Improvements
Let’s compare the numbers of gas and electric costs over the last 10 months to the same time period from the year before.
In Minnesota, it’s gets very cold in the winter (typically February and March are the coldest), and my house is heated by a gas furnace. In the summer time, I have central air and this system uses electricity. Due to this, the energy usage for these two accounts are cyclical.
Here’s the monthly breakdown over the last 3 years:
Comparing the yellow to the green (pre- and post- improvements), the costs have 23% lower.
The sample size here is small, and also doesn’t take into consideration all the variables which go into energy efficiency, but the results seem to be pretty good.
If I save roughly $50 a month on energy costs, then to pay back the initial investment of $12,000, this comes out to about 20 years.
In reality then, until the loan is paid off, I’m paying $300 a month for more comfort and a nicer house.
Is it worth it? Maybe.
When I see it like that, $300 is a lot of money every month to spend on more comfort. At the same time though, I do believe that part of this investment was to also increase the value of my house.
All in all, I think it’s been a good choice and I’m definitely pleased with my decision. While it’s a little restricting to leading a flexible lifestyle, my income has increased to a level where I can afford this expense.
Going into Debt for Energy Efficient Home Improvements Can Be Worth It
While going into consumer debt is not a great option, I want to share with you an update on my housing situation with regards to these home improvements. My conclusions is energy efficiency is worth paying for (even with debt).
When making decisions about debt, it’s important to realize that debt will have an impact on your future self and future lifestyle.
In actuality, not all debt is bad. Debt’s role in society actually makes sense. If there was no one lending money, it would be difficult to build wealth over time as a society. To buy a house, you would need all of the cash on hand. While no debt would solve many issues that people have today, it would be restricting on our lifestyles.
I went into debt for home improvements and it made sense for me. Personal finance is personal after all.
I considered my current situation and goals, thought critically, and went into debt. Now, I’ve been paying the price over the next 3 years. At this point, since the interest rate is 0%, I don’t plan on paying it back any sooner than I have to.
At the end of the day, I’m glad I got the home improvements done and if I go to sell my house, then I’ll certainly be able to recoup my investment.
Readers: Do you think all debt is bad? Have you ever financed a home improvement project? What was the result? Did you look at the returns like this?
Powerful quotes can have a huge impact on your journey to success. If you can find a quote which you love, you’ll have a guide on your path to success.
Below, I’ve gathered up a number of personal finance quotes to inspire you to become wealthy.
Financial freedom is a fantastic feeling, and it is something I hope everyone can experience in their live.
Hopefully, one of these quotes resonates with you and provides you some motivation to get out of debt, increase your income, save money, and build wealth.
Personal finance can be boring, but having lots of money is far from boring.
Here are some inspiring quotes on money, wealth, and life to get the motivation flowing:
Money is better than poverty, if only for financial reasons. – Woody Allen
Money is a good servant but a bad master. – Sir Francis Bacon
Riches are not an end of life, but an instrument of life. – Henry Ward Beecher
You can be young without money, but you can’t be old without it. – Tennessee Williams
Remember the golden rule: he who has the gold makes the rules. – Unknown
Money isn’t everything, but it’s right up there with oxygen. – Zig Ziglar
When I was young, I thought that money was the most important thing in life; now that I am old, I know that it is. – Oscar Wilde
Wealth is the ability to fully experience life. – Henry David Thoreau
Money can’t buy happiness, but it can make you awfully comfortable while you’re being miserable. – Clare Boothe Luce
Saving Money Quotes
We all know that saving more money is important, but sometimes it’s hard to cut your expenses. Having a big bank account is better than having a small bank account.
Let’s get motivated from some of the greats like Ben Franklin, Warren Buffett, and Abe Lincoln!
The question isn’t at what age I want to retire, it’s at what income. – George Foreman
A penny saved is a penny earned. – Ben Franklin
If you can count your money, you don’t have a billion dollars.-J. Paul Getty
Save a part of your income and begin now, for the man with a surplus controls circumstances and the man without a surplus is controlled by circumstances – Henry H. Buckley
Prosperity is the fruit of labor. It begins with saving money – Abraham Lincoln
Save money and money will save you. – Unknown
Do not save what is left after spending, but spend what is left after saving. – Warren Buffett
Save your money. you’re going to need twice as much money in your old age as you think – Michael Caine
All days are not the same. Save for a rainy day. When you don’t work, savings will work for you. – Unknown
If saving money is wrong, I don’t want to be right! – William Shatner
Money Investing Quotes
Growing wealth over time requires consistency, remaining calm and choosing the appropriate assets.
Whether you are a beginner or pro investor, hopefully you can learn from these quotes on investing.
The goal of the nonprofessional should not be to pick winners – neither he nor his “helpers” can do that – but should rather be to own a cross section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal. – Warren Buffett
When you look at the results on an after-fee, after-tax basis, over reasonably long periods of time, there’s almost no chance that you end up beating the index fund. – David Swensen
Surprise, the returns reported by mutual funds aren’t actually earned by investors. – Jack Bogle
An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative. – Benjamin Graham
Risk comes from not knowing what you’re doing. – Warren Buffett
Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves. – Peter Lynch
Life and Money Quotes
Becoming successful with your personal finances allows you to live the life you want and deserve. Here are a number of quotes for some motivation on your path to getting rich (both financially and in living a rich life).
Whatever the mind of man can conceive and believe, it can achieve. – Napoleon Hill
Those who have a “why” to live, can bear with almost any “how”. – Victor Frankl
The most difficult thing is the decision to act, the rest is merely tenacity. – Amelia Earhart
The man on top of the mountain didn’t fall there. – Vince Lombardi
A journey of a thousand miles begins with a single step. – Lao-Tzu
He who chooses the beginning of the road chooses the place it leads to. It is the means that determines the end. – Henry Emerson Fosdick
Your choices are made in a moment, but their consequences will transcend a lifetime. – MJ DeMarco
Debt sucks! Debt restricts you from living the life you want to live. Getting out of debt is possible, but will take some motivation and consistency.
If these quotes don’t motivate you to get out of debt and stay out of debt, I don’t know what will!
The rich rule over the poor, and the borrower is slave to the lender. – Proverbs 22:7
Good times are when people make debts to pay in bad times. – Robert Quinlin
What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience? – Adam Smith
When you get in debt you become a slave. – Andrew Jackson
Christmas is the season when you buy this year’s gifts with next year’s money. – Unknown
Running into debt isn’t so bad. It’s running into creditors that hurts. – Unknown
Rather go to bed supperless, than rise in debt. – Benjamin Franklin
Never spend money before you have it – Thomas Jefferson
If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours. – John Maynard Keynes
If you think nobody cares if you’re alive, try missing a couple of car payments. – Earl Wilson
Become Inspired to Build Wealth and Become Rich
Building wealth is not overly complicated, but will take time. Hopefully, you can use these personal finance quotes to motivate you on your path to financial success.
Personally, my favorite is:
Christmas is the season when you buy this year’s gifts with next year’s money.
That’s bad, but it’s a little bit sad because it’s true. People seem to go into credit card debt because they don’t have the cash to buy gifts… hopefully this isn’t you!
I also really liked the quote,
All days are not the same. Save for a rainy day. When you don’t work, savings will work for you.
This quote is about the concept of passive income – if you and I can build up passive income streams, then we won’t have to work for our money.
Take a scroll through these quotes again before you go and pass them on! Maybe a friend or family member could use some financial motivation!
Thanks for reading!
What is your favorite personal finance quote? What are some of your financial goals and do any of these quotes motivate you to become better?
I’m seriously considering a 401(k) loan.
For the past few years, I’ve been contributing to my retirement accounts, and this year, in 2018, I will max out my 401(k) at work for the first time.
Currently, I have just over $40,000 in this account, and recently, I’ve been having many thoughts on why I have this much money stored in such an illiquid asset.
In this post, I want to touch on a number of things regarding 401(k) loans, the current state of the economy and markets (in my eyes), and talk about why I’m considering a 401(k) loan.
Disclaimer: I’m not a financial adviser or financial professional. Please do you due diligence and research before buying or selling financial securities and assets.
How do 401(k) Loans Work?
First, let’s lay the ground work with some definitions and examples of what a 401(k) loan actually is.
While many financial advisers say “never touch your retirement accounts”, I think a 401(k) and Roth IRA could be great sources of cash (if tapped in a smart way).
One thing to point out here: a 401(k) loan and withdrawing from your 401(k) are two DIFFERENT actions. Withdrawing from your 401(k) potentially comes with fees, penalties, and taxes.
Taking a 401(k) loan is different.
With a 401(k) loan, you are taking a loan funded by your past contributions. You end up liquidating a piece of your account, and get it tax-free.
This piece of your account cannot be more than 50% of your account balance, and cannot exceed $50,000. For example, if I have an account totaling $30,000, then I cannot loan myself more than $15,000.
Most 401(k) loans have some sort of upfront fee, and then you pay the loan back for yourself at a certain interest rate (typically, Prime Rate+ 1%, or 6.25% as of today).
Paying back your loan happens over 12 to 60 months (depending on what you choose). The payments come out of your paycheck.
There is a risk here. If you don’t pay back your loan, it’s considered a withdrawal and you will possibly be hit with fees, penalties, and taxes.
Also, if you leave, or are fired from, your job, you’ll have to pay back your loan in full, or the remaining amount will be considered a withdrawal.
There are a number of benefits and negatives to taking a loan out of your 401(k), but it should not be a definite no when considering ways to access YOUR money.
Now that we have established what a 401(k) loan is, let’s get into the meat of the article.
Related… a challenge here… what’s the difference between taking a 401(k) loan and not contributing at all?
A Dangerous Misallocation of Capital to Non-Productive Industries
Over the last few months, I’ve been embracing a number of alternative thoughts and thinking critically about the world around us.
I want to talk about something not many people are discussing: in the 21st century, capital has been misallocated in a very dangerous way, and now, is having huge effects on society.
Social, political, and environmental problems at their core are a result of wonky monetary and fiscal policy and incentives gone wild.
Think critically for a second: historically, what drives productivity and wealth?
Companies and customers, working in a synergistic relationship, drive productivity and wealth. Markets, political systems, and the environment will govern what this looks like in reality, but at a high level, it is companies, employees, customers, and consumers who drive the economy.
Currently, this relationship is out of wack. It should not surprise you for me to state that fact. The distribution of wealth and income is at levels not seen for 50-75 years!
The last time these lines were close to each other was the 1930’s (when the Great Depression happened).
The 1920’s were a roaring time, but what is commonly left out of storytelling is how the financial markets was a huge, debt-driven bubble. This bubble ultimately burst and laid waste to companies, housing, families, and the government. Without extreme measures in 1933 (FDR’s Gold Confiscation), the economy would have collapsed completely.
Now, we are at a time where there is a similar wealth and income distribution between the rich and the non-rich.
Financialization and the Misallocation of Capital in the 20th and 21st Century
How have we came to this point?
Starting in the 1970’s, a number of things have happened which has lead to growing inequality and a misallocation of resources: unsound money, decreasing interest rates, globalization, and financialization.
During the 1980’s, there was some amazing innovation and opportunities in many areas of the economy. One of them, which I’ll highlight here, was the explosion of Wall Street. Why try to find the next big invention when you could just trade the companies’ shares? If we can finance the deal and get a handsome fee, why take any risk?
It started a cycle: more talent went to banking and finance because of the higher salaries, and as the salaries kept rising, more attention was placed there.
The Great Recession (2007-2009) was caused by the financial industry, and yet they came away unscathed.
Another development I want to highlight is globalization. Instead of investing in employees in the United States, profits were prioritized, and wages have stagnated, statistically, on a national scale.
Historically low interest rates, government subsided loan programs, and corruption I’ll also throw in here. These things have lead us to a massive bubble, instability in our social and political systems, and inequality of wealth today.
Now, you have companies Facebook and Apple who are “leading” the way with digital products. Does everyone need a $1,000 iPhone? How is this productive (in the grand scheme of things)? Why isn’t there more focus on sustainable energy, housing and health?
This is what I mean by MISALLOCATION of resources. 50%+ of the population is struggling in debt up to their eyeballs, and yet, because companies and investors can get “returns” from selling them a handheld piece of crap, it’s worth it to pour millions and billions of dollars to squeak out more money.
I’m being over the top here with the example of Apple, but I’m trying to drive home a point that we live in a crazy time. For some reason though, it feels normal because it’s been going on for so long.
Why I’m Considering a 401(k) Loan
Let’s get to the real purpose of this article. I have a number of investing and economics posts on this blog, but this article is about why I’m considering a 401(k) loan.
First, I’m struggling with my alternative thoughts on how markets revert to means over time. I don’t want to play into the misallocation of funds anymore.
I want to provide VALUE to the world. There are a few other reasons why a 401(k) might make sense here.
At a high level, these reasons are:
- If I want to become VERY wealthy in the near future, I need to take on a significant amount of RISK.
- Many backwards looking calculations show an average rate of return for stocks of 7% over time. I believe I can do better with my entrepreneurial efforts and investing.
- There are numerous stock market headwinds (valuations, increasing interest rates, massive debt, and an aging population) which are not favorable to for returns in the next few years.
Gotta Risk it for the Biscuit
If you’ve poked around on this blog before, I’ve tried to make it clear that I’m trying to build extreme wealth at a young age.
I have a goal to become a millionaire by the age of 30.
The equation to building wealth is simple. It is simply:
Future Wealth = Current Wealth * Return * Time + (Income – Expenses) * Return * Time
Take your current wealth and multiply by some return and time. Take your income, subtract out expenses, and multiply this difference by some return and time. Add these two numbers together and you’ll get a projection for your future wealth.
I’m ignoring a ton of variables here (YES, the return will be different depending on situation and asset class), but at a high level, this is the wealth equation.
Filling in the numbers here, I’m currently at just under $200,000 in net worth. My income minus expenses is about $50,000 a year.
By staying on track with my savings, I’ll be at a net worth of roughly $400,000 at the age of 30 (a great achievement, but well short of my goal).
The one variable I haven’t touched here is return. To seriously increase wealth, I need to take a lot of risk to increase my wealth through investment returns and/or increasing my income. There is no such thing as a free lunch.
Look, the stocks and bonds in my 401(k) are not going to get me to my goal. 7% (???) over the next 4 years on my investments is not going to move the needle. I need 50%, 100%, 200% gains on my money through my various entrepreneurial endeavors, asymmetric bets, and strategically allocating money to improve the value of my work and assets.
Strong Inner Belief
I can already hear the haters.
“You can’t time the market!”
“Don’t touch your 401(k) – you are losing out on compounding!”
“You are stealing from yourself!”
Throughout my life, I’ve spent various times with massive chips on my shoulder. Each time, I’ve pushed to become better and the outcomes have been great.
I’m the owner of my life, and I can do AMAZING THINGS.
I can do achieve anything I put my mind to.
I’m the owner of my actions and choices, and have an incredibly strong belief I can accomplish my goals.
This strong inner belief applies to my money and wealth building habits and strategies. I can and will be disciplined with my earnings, hustles and investments to build wealth over time.
I cannot let the “markets” do their dance and play me like a fiddle.
I’m in control here.
Headwinds to Traditional Investments
Besides all of the stupid motivational crap I just wrote in the last section, the outlook for future returns do not look great in the financial markets.
Short term bonds are yielding about 2.25%. Long term bonds are yielding about 3.25%. Stocks and companies have huge headwinds from debt and valuations being higher than they have ever been.
What could have been an incredibly bullish use of funds at the beginning of 2018 (tax cuts) turned into a dud. Corporate buybacks is the biggest waste of capital in the world today.
This alone makes me feel negatively towards stocks, among the countless other factors I’ve talked about here and on the blog before (government debt, student loans, corporate debt, high valuations, an aging population, a depreciating dollar, and instability socially and politically).
A quantitative blog I’ve really enjoyed reading lately is Fat Tailed and Happy, by a PhD Economist. I appreciate how he takes into consideration many assumptions and variables when doing an analysis (and doesn’t cherry pick or ignore key assumptions to make things look good).
One of his best posts looks at the yield curve and valuations of stocks. What the author argues and shows is the yield curve is an important predictor of equity performance in the intermediate term.
Based on the author’s analysis, the 5 year annualized returns based on where valuations are in 2018 are negative. Looking out 10 years, the 10 year annualized returns are near 0%.
At a 6.25% interest rate, the 401(k) loan statistically speaking seems to be a decent bet against bonds and equities.
Taking a 401(k) Loan Has Downsides as Well
As I mentioned above, there are a number of risks and downsides to taking a 401(k) loan. There are other financing options available to me, and I can always just hustle a little harder to save up money for a splash in another investment or opportunity.
I’m just nervous and weary of how I’ve over-allocated my personal portfolio for a time over 30 years from now (is there any guarantee I’ll even be able to access it then???).
I believe in myself and believe I can do amazing things.
Maybe I’ll be right and achieve my goals. Maybe I’ll be horribly wrong and end up broke.
At the end of the day though, I do NOT care if I’m right or wrong about what I’ve written above.
A quote that stuck with me from a book I read the other week:
To get a woman, you need to be willing to lose her.
While the book was about dating and relationships, this quote applies to this situation and goals.
If I want to become wealthy, I need to be willing to lose my wealth. No, that doesn’t mean I should be careless and stupid with my money.
No, it means I should take smart risks with my money and look to strategically grow it (but also not be afraid of this potential growth).
I could also become a millionaire at 30 through strategic action taking. Buy low and sell high, take continuous action and work towards becoming better every day – this is my plan.
At the same time, the financial markets might continue to go bananas. The government might be able to get out of their fiscal mess. The dollar might reign supreme forever. My businesses could fail. I could get sick. I could get laid off from work.
If I’m wrong, I’ll accept the consequences and life will go on. It will be a learning and growing experience.
If I’m right and take the actions necessary for success, I’ll be very wealthy at a young age. I will be an overnight success (4 years from now).
I’m not sure if I want to do the 401(k) loan yet, but my rationale for why has been documented. What would I do with the cash? Invest in myself. Invest in my businesses. Invest in undervalued assets. Now, I just need to figure out what’s best for me.
Thank you for reading,