You are starting to make decent money and want to know how to get out of college or credit card debt while also growing your wealth. You may one day want a house and family or have already bought one and/or started one. Now is the best time to secure your future.
Negotiating Your College DebtThanks to the current political suggestion to create legislation that would pay off American college debt[1], many Americans have ceased making these payments altogether, putting many companies holding college debt at risk of becoming insolvent. These debtors must maintain some income in order to survive long enough to see if such legislation ever comes to fruition. So how can you take advantage of this? The temptation may be to follow the herd and discontinue making payments. However, this puts your credit score at risk and the odds of such legislation passing are not optimal.
Instead, if you have a lump sum of cash saved up, call the company who manages your loan and offer a one-time payout significantly less than the total sum owed under the condition that the entire debt would be wiped clean. A recent client of ours was able to pay off a $40,000 debt with only $10,000 by using this strategy. You would be surprised what offer they may be willing to take. If you have no such sum of money at your disposal, make minimum payments and start diverting some of your budget into secure investments that will allow your wealth to grow. A few years down the line you will be in a position to make a cash offer for significantly less money than you would have paid by following their payment plan. Schedule your free consultation today to strategize ways you can grow your wealth.
Dave Ramsey’s Debt Snowball is highly effective in extinguishing credit card debt. It starts with restricting your spending and putting yourself on a budget. Make minimum payments to all of your credit cards and start making the largest possible payment to the credit card with the smallest balance. When that credit card is paid off, cancel it, then move on to aggressively paying off the next lowest credit card balance. As you continue to eliminate credit cards, you will have more funds available to tackle the next one, creating what Dave Ramsey has coined the Debt Snowball. For step-by-step details on the most effective way to implement this strategy, read Dave Ramsey’s Total Money Makeover. You can also attend Dave Ramsey’s “Financial Peace University” course through many local churches.
At no other time in your life will you have the biggest advantage in earning compound interest on money you set aside for the future, whether for items similar to those listed above or for retirement. Done correctly, your money will have the opportunity to double about every 10 years. Add to this the willingness to continue adding to your initial investment, and the potential for growth becomes quite significant. Where then should you invest this money?
It’s easy to want to get rich quick when you hear of celebrities and nobodies growing their wealth seemingly overnight with their investment in the newest cryptocurrency. We are inundated with these stories on Twitter, Facebook, TikTok, and the like from people we believe could just as easily be us. So why not invest my savings where so many others are seeing success? The danger in following their lead is in asking why they are telling you to do this. Many advocates will teach you their secrets if only you subscribe, which earns them money. Celebrities may very well have had a huge pay day from a crypto investment, but how many cryptos before that did they lose money on? The truth is that you have no idea how many losses they took or even what percentage of their wealth they risked on these investments. It is quite likely that the majority of their investments are in much safer and secure places. If you really want to follow suit, do not risk more than you are willing to lose because your odds of losing far exceed your odds of winning.
Celebrities who have already invested in a crypto are going to encourage you to do so as well so the value of the crypto can grow before they pull out, take their gains with them, and the crypto begins to plummet. To hedge against this risk, many cryptos are implementing buy and sell limits and controlled burns. While this certainly reduces the risk of big fish superficially inflating the value of a crypto only to pull out all at once, you still have to ask yourself if a currency backed by no government or real assets will retain its value in the long run? Certainly, whichever direction you believe this market is going may or may not be correct. It could be that cryptos are here to stay. But if you truly want to grow your wealth, you cannot afford to risk it all in a single market or venture. A wise decision may be to risk only a little and diversify the rest of your investments.
Most company-sponsored plans and individually sought plans today involve investing in the market. Whether you have a 401k, a Roth IRA, a trading account, or a combination thereof, your money is subject to the rise and fall of the markets.
A look at history indicates that we may be on the precipice of a large market correction (see What History Can Teach Us About the Markets Today). Whether true or not, we can certainly count on daily fluctuations in the marketplace, some bigger than others. In 2008, many Americans saw their investment portfolio diminish by 25%. Many of these portfolios took 10 years to recover what was lost. As recently as February 2020, retirement funds lost 10% in one month.
Why are these market losses the status quo? Sure, the markets bounced back and even gained some, but why do we need to accept these losses while hedge funds simultaneously make billions (see Don’t Listen to Hedge Funds or Financial News)? What if instead of using these traditional investment funds, you put your money in a secure account where your money only participates in the market when it’s on the rise? Imagine if you had pulled out in 2008 and in February 2020, then reinvested only to participate in all the gains that were made to get us back to where we are today? How much more wealth would you have accumulated compared to the other funds that also took the heaviest losses? Find out how by scheduling your free consultation.
With modern medicine and the advances made across the last century, Americans are living longer today than they ever have. Let’s say you have a million dollars saved or invested by the time you retire at age 65. Assuming the market doesn’t plummet in those years, you may still outlive your money. Let’s even be optimistic and say that throughout these years, your investments continue to grow, and you will have $1.5 million paid out across the rest of those years. If you can accurately predict that you will die at 75, then you could equally distribute $150,000/year (of course, this is before Uncle Sam takes his cut). However, what happens if you live to 85? Your annual payout drops to $75,000/year. What if you lucky enough to live to 90? Now your annual payout drops to $60,000. All of this is before even considering the fact that you have no idea how long you will live and may actually take too much too soon. How can you mitigate this risk? Schedule your complimentary consultation now to go over strategies you can put in place to ensure you won’t outlive your money.
The answer is actually yes to both. Having tax deferred investments is important for gaining the advantage of company matches. If your company’s 401k does a 4% match, then by all means, you should certainly take advantage of that match. However, the question of whether you should invest more than what will be matched is an emphatic no for the simple reason that there are better ways to invest that surplus. There is also the problem of your silent partner in tax deferred investments. In your 20’s and 30’s, you are paying less in taxes than you will during retirement. You may have work deductions, child credits, and home credits during this period. When you retire, you will no longer have work deductions, your kids will have grown and ceased to be dependents, and you mortgage will likely be paid off. As a result, you will be paying more in taxes than ever before. Compare this to tax-free income you can receive in pre-taxed investments, and the answer is a no brainer. To hear options about where your money could make steady tax-free gains, schedule a consultation today.
In the year 2020 more money has been printed than in the entire history of our country. What does that mean to you? Your dollar today is worth less than it was 10 years ago, and this trend is likely to continue. Why are they printing more money? The country is spending more money than is being brought in through taxes. Funding bills in the senate used to be in the millions, which at first was shocking. Then, when citizens became comfortable with these numbers, they moved to the billions. In 2021, a bill is being introduced in the trillions. Is this the new normal? How can you hedge against inflation created by the printing of more money? Real assets are the only assets that actually move with inflation. Real assets include precious metals, land, real estate, commodities, and natural resources. If the dollar is worth less, it is natural that your home will be worth more money. Diversifying your portfolio means more than investing in various stocks, it also means hedging against inflation. Schedule a consultation today to go over options for diversifying your portfolio.
Should I Invest in Crypto? Is this a Passing Fad or True Asset? In a world driven by technological advancements, cryptocurrencies have emerged as a hot topic in financial discussions. The rise of Bitcoin, Ethereum, and numerous other digital currencies has captivated the attention of...
By understanding the potential time bombs that financial advisors may not always disclose, individuals can better equip themselves to make informed decisions and adjust their strategies accordingly.
