I was
talking to a younger friend at Church this morning about investments and it dawned
on me that I hadn’t posted anything in sometime about personal finance,
which is likely the most read about subject of late for me.
Disclaimer:
Anything shared here is strictly my opinion for entertainment purposes and
should not be taken as financial advice or direction .…
Some best
practices for me personally the past few years (in order) include the
following:
· Budget/Track
Net Worth: Before
you do anything else, gain an understanding of what your spending habits are
and where you are at to begin with. You can’t have a plan until you take stock
of where you are currently at. Every Dollar is the tool I have used.
· Set Short,
Mid-term and Long-term Goals:
Once you have an idea of what you are spending money on, determine whether expenses
align with your values. For me, this automatically led to cutting costs in
several areas. Then, set some goals for where you want to be in 1, 5 and 10
years.
· Eliminate
Debt: Before you
can build wealth, eliminate the biggest hindrance to being able to do so: debt.
Think about investments you can make if you don’t have $100 a month going
towards credit cards, $600 a month going towards vehicles or, better yet,
$1,600 towards a house payment (my own personal hindrances a few years ago) …
· Build an Emergency
Fund: 3-6
months of basic expenses should be in an account that is easy to get to in the
event of a crisis.
· Live Below
Your Means and Invest the Rest:
Strive to save/invest 50% of your bring-home pay. Additionally, take advantage
of low-cost investment opportunities through online brokerages like Vanguard
and Fidelity versus paying someone to manage your money (unless you have a
trusted adviser like I do). Compound interest is the one area you cannot make
up ground, so I differ with a lot of folks out there who say you have to
eliminate debt before starting to invest. Find a happy ground and start the
process of creating your future.
· Minimize
Taxes/Fees:
Maximize 401ks, IRAs and other vehicles to reduce your taxable income.
· Maximize
Free Money: This
includes maxing out employer matches for retirement, high yield savings accounts
(look at Synchrony for a 2.25%
rate), cash-back credit cards (Fidelity is offering 2% right now), dividend-paying stocks/mutual funds, etc.
· Increase
Knowledge: To
paraphrase Warren Buffet: “The best
investment you can make is in yourself.” I’ve read more than 25 books the past
few years on personal finance and investing, along with being currently enrolled
in the U.G.A. Terry College of Business
Certified Financial Planner Course to increase my understanding of how to
manage my wealth. Do what you can to understand our economy and how to profit from
it. This has led to a 37% increase in net worth for me the past 2 years.
· Protect
Assets: Use
insurance and safe investments (CDs, bonds, high yield saving accounts, etc.)
to hedge against major market downturns while also dollar-cost averaging with
your primary accounts.
· Have Skin
in the Game: Once
you acquire knowledge, test your own investment philosophy. I currently use Robinhood for my low P/E, low
debt, high-dividend, -20% from 52 week high approach to picking stocks.
There are
other methodologies for improving your financial standing, but these are the
ones that have worked best for me the past few years…
Best
of luck…
