Please join me in a new program focused on one simple long-term goal. Let's spend 2016 putting an additional $10,000 in your bank account!
You remember Y2K? Lots of people look back and say it was "nothing" because the world went on without a blip and computers did not crash much. In reality, the Y2K rollover from 1999 went smoothly because tens of thousands of people worked really hard to make that happen. I know because I worked with about 25 programmers between 1993 and 1999 on millions of lines of code.
Well, Y$10K will be a bit different. It is 100% focused on YOU and your money. No one is going to help you. You have to do all the work. I'll give advice where I can, but YOU have to dedicate yourself to executing your decisions.
I am amazed at how many people I meet who have essentially nothing saved for their retirement. And even more have not enough saved for their retirement.
It doesn't matter where you are in your career or how much money you have: We could all use an extra $10K. This series of blog posts is dedicated to helping you by showing you the way.
Note: I'm not making any money on this. I don't sell stocks or bonds. I'm not asking you to send me anything. At the same time, I'm not a financial adviser. I'm just a guy who has run several successful businesses and I think this is valuable information to share.
So let's get started.
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You don't have to read The Buckets of Money Retirement Solution: The Ultimate Guide to Income for Life by Raymond Lucia (although it wouldn't hurt) in order to understand the basic concept that you need to have various "buckets" or places to hold money. You need a retirement bucket, and emergency fund bucket, etc.
Step One: Create a Sacred Place to Keep Your Money
You need a place to keep the money that we're going to be building/saving in this project. I call this a sacred place for one simple reason: You must commit absolutely that you will not take money out of this bucket ever, at least in 2016. If you can do that - If you can resist taking out any money for 12 months - then you will have the habit of saving.
So where do you put your money? The worst place is in the bank because you will early approximately nothing. And no matter how much they promise you that there are no fees, they will figure out a way to charge you for something. So with interest rates around zero percent, you will lose money by putting it in the bank. Under your mattress is the second worst place because there is no growth potential. And there's at least a microscopic possibility that it will be stolen.
The best place to keep your Y$10K nest egg is in a brokerage account. Don't worry: We're not taking any risks and we're not going to do any wild stuff with your money. In a brokerage account, your money is safe, it might grow a little, and it will all be there when we get around to deciding how to invest it.
Note: Do not go down the road of day trading and trying to make a killing with investments. If you're interested in this program, there's a near-100% probability that you don't have the training or skills to make money with that stuff.
The formula for getting rich is pretty simple:
- Earn money in the job you know best (technology consulting)
- Invest that money is something safe
- Never take money out of the investment account
- Watch the power of compound interest do it's job
If you need a good place to start investigating brokerages, check out the Motley Fool website: http://www.fool.com/how-to-invest/broker/.
I use eTrade. I don't know if they're any better or worse than the others. I used Schwab for many years, but their fees are higher, so I switched. Here's what you do:
1) Pick one of these sites (eTrade, TD Ameritrade, Capitol One, etc.)
2) Open an account on their site. That means you create a username and password.
3) Connect that site to your bank account so you can move money into it. You normally have 10-30 days to "fund" your new account. So you don't have to put money in today in order to create the account.
4) Fund it. Even if you can only put $100 in that account - Do It!
I'll give you two weeks to get this done. I don't care who you are, you can siphon off $100 in the next two weeks and stick it in an account. Send me an email when you do this. I want to hear from you. [email protected]
Lesson Number One: You Cannot Get Wealthy with Earned IncomeThere are two primary kinds of income, which the government calls "earned" and "unearned" income. Earned income is the money you make from working a job. You will get a W2 or 1099 (or the profits from your S-Corp of LLC, etc.). Basically, that's the money you make.
Unearned income is money that you acquire from investments. This might be the mortgage on your house, investments in a brokerage account, rental property, government bonds, and so forth.
Earned income is used to live your life. You use it to buy groceries, drive your car, pay the light bill, go on vacation, and all the little things in life. The sad truth is that there's a Law of Rising Expectations, which says that you will spend as much money as you have. If you make $50,000 you will lead a $50,000 lifestyle. If you make $100,000 you will lead a $100,000 lifestyle.
And too many of us lead a $110,000 lifestyle on an income of $100,000. That means going into debt a little deeper every year.
The reason you can never take money out of your investment "bucket" is that it will probably disappear into your lifestyle. It will probably never be paid back. It will simply go away as if you never earned it.
As you can see, the place to make money is with earned income. The place to keep money is with unearned income.
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I hope you'll start down this journey with me. You can start any time, but the sooner the better. Send me an email and pledge to reach the $10,000 goal. Write it down. Put a sign on your wall in front of your computer. And if that's too easy, make is a $100,000 goal.
Remember: You have two weeks to make that initial investment. Put as much as you can in there. But remember that you can't take it out. So don't put in too much. You never want to get in the habit of taking money out. We'll talk about how you'll come up with a little spare money here and there to throw into the bucket.
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