Tag Archives: vision

3 Factors to Look at When Determining Where to Live

As a financial blog, I have dealt a lot with individual personal finance issues, like what to invest in, how to budget, and what to do in different areas financially. Here I want to step back and cover 3 financial factors that you should think about when considering a city to live in. While these three aren’t the only things to think about, they certainly will cover the broad range of financial determining factors:

Job and Career Potential

Here you’re just trying to get an idea as to how easy or hard it will be to have employment, and sustain employment in your chosen career field. Two of the things to consider are the unemployment rate, which is a good indicator of how many people who want jobs have them, and job growth. With job growth you want to look at the number of new jobs being created, specifically in your career field, over the last decade.

Cost of Living

Housing costs will be broken down into to two big areas: housing and everything else. When looking at housing, there are usually two broad options available. You can either rent or you can buy. You are going to want to compare the costs of rent vs the rest of the country. Pay special attention to the rent increases. For example maybe your area currently has slightly higher rents than the national average, but over the last couple years the rents have been skyrocketing. You want to be mindful of areas in which the costs of living, including rents are rising quickly.

The second housing option to look at is homeownership. What is the average costs of a home in the area. This can vary greatly from one neighborhood to another. For example one neighborhood might costs $300,000 but just across the road might be $250,000 for a similar house. Find the area you’re thinking about and start comparing prices.

After paying for housing there are the rest of the general costs associated with living and breathing. These costs can include food, insurance, transportation, recreation, and especially taxes. Taxes are a huge part of your yearly expenses. There are income taxes (both federal, state and sometimes city), as well as sales tax and property tax. Look at these rates for you area.

Long-Term Stability

The last thing you want to look at after job potential and cost of living is the general stability in the area. The stability of the area is both the economic factors and the political factors.

For example look at one of the leading factors of growth for cities: population growth. Take a look at the recent trend in population. For example are massive amounts of people entering or leaving the area? This might be a sign that things are changing. With the change in demographics and population comes changes in political preferences.

Maybe these changes will lead to political leadership upheaval in the local government. Think about how these changes could potentially impact your life in terms of local taxes, regulations, social programs, and building projects in the future. Are you okay with these potential changes and the uncertainty that comes with them?

Conclusion:

Overall, these three factors can paint a pretty clear picture of the financial concerns about one area over another. After going through them, you should know whether this area is something you would want to consider moving to. Naturally though, there will be others things of concern, like climate, education, health and other issues. While these concerns might not directly impact your finances, most of them should be looked at closely for the effects they could have down the road.

3 Things to Have in Your Wallet

While most Americans are saddled with credit card debt, student loans, and monthly car payments, the underlying issued usually relates to how we view money in general. Most people would like to say they are responsible with their finances, but their actions tell a different truth.

Out of this basic mentality toward money often comes many damaging habits we see today. For example the uncontrollable, erratic spending that characterizes consumers can go back to the root cause of lack of responsibility.

Responsibility over every area of your financial life, especially what is in your wallet, comes from an understanding that personal finances are a crucial area to match with your values.

When someone takes responsibility over their wallet they should be aware of three items:

1. Cash

Most have heard the saying “cash is king” whether on the Dave Ramsey show or elsewhere. But is cash really that powerful? The truth is that sometimes yes and sometimes not so much.

For example if you’re buying a table on craigslist, cold, hard cash will probably be the most powerful negotiator. However if you’re buying a home, pulling out cash might make you look a lot like a drug lord…

Make sure to always have a good amount of cash in case an expense comes up that you can’t use your cards for.

2. Debit cards

Even more important than the credit card is the debit card. A debit card gives you access to your bank checking account and can often be the most popular means of payment. While you certainly don’t need to have multiple debit cards and different banks, there is certainly a case to having at least one.

3. Credit cards (maybe)

Some of the most daunting debt in the US is the credit card loans. According to the NY post, credit card debt in the US is approaching $1 Trillion. Why would you want to have a credit card?

When it comes to credit cards I believe that about half of people should not have them because of lack of discipline. The other half of people should have a few quality cards that are used regularly but sparingly to build credit. There might be some points or cash back in there, but that’s just icing on the cake.

Ultimately your use of credit cards should depend on your discipline and self-control. Everyone should have debit cards. And everyone should carry an adequate amount of cash in both fives, ones and a ten (maybe $50 total?).

Besides the payment-related items there are of course things like ID and insurance cards but I hope you have enough common sense in those areas. I hope this helps your spending habits on your financial journey for many years to come.

2 Things I learned from Ray Dalio’s Book

While often seen on TV and financial journals, Ray Dalio is somewhat of an unheard of figure outside of the financial world. He started broke, developed his skills, knowledge and habits, and today is the billionaire funder of the largest Hedge fund in the world.

In his new book, Principles, Dalio focuses on the principles or set of beliefs that have been the baseline of his success in both life and business. Throughout the chapters he illustrates just how crucial principles are, not matter the principles, to how you perform in each area of your life.

From his book I have taken 2 main points:

1. The things we do know are much smaller than the things we don’t know

While everyone would say they believe this idea in theory, when it comes to the actions we take, many of us, including myself, will puff up our egos higher than is actually the case.

Dailo states that people who have more knowledge, success and experience on a topic, should carry more weight in our decision-making.

2. Set up systems, or processes that help make decisions and see around emotions

While emotions are a natural and good part of life and human interactions, when it comes to making the best decisions, especially the business decisions, logic should be the ultimate decision maker.

Two of the greatest roadblocks to making quality decisions are the ego and the blind-spot barriers, which are both covered by the entrepreneur’s planet in their post: https://wordpress.com/read/blogs/150799291/posts/16

Ultimately being committed to integrity, open-mindedness, and self-improvement, are the largest factors that have contributed to Ray Dalio’s success and the principles he teaches.

 

R.E. Strategies: Investing Debt Free Vs. Leveraging Properties

When making financial plans there are two basic schools of thought to get your information from. One group says that debt is bad, and that you should limit or eliminate all debt as soon as possible. The other group argues that getting rid of consumer debt is wise, but that borrowing money to buy investment properties or start businesses can be a smart investment.

Who do you listen to? The answer is that it depends. For example let’s look at the debt approach.

If your strategy is to purchase single family homes at favorable mortgage terms, receive monthly cashflow, grow equity and increase the value of the property over time then this strategy may work. However the alternative, no-debt strategy would leave you saving up and purchasing the whole investment with cash. Sound difficult? You bet!

So which strategy is better? Well that depends on which provides a better, risk-reward ratio. The following are a few risks we should be aware of when investing in real estate: Law suit risk, credit risk(that we won’t be able to pay the mortgage, thus losing the property), cashflow risk (that costs will rise to the point where we don’t receive adequate cashflow). These are just a few risks.

Of these three risks, which ones are effected by taking out a loan? Credit risk and cashflow risk are both effected. Credit risk isn’t even a concern with the no-debt approach(because there’s no mortgage) and cashflow risk increases with the debt approach because there’s increased monthly expenses in the form of loan payments.

A different risk we haven’t discussed yet is the risk of loss of capital. For example let’s say you make the investment in a limited liability entity and are thus only able to lose the money you have into the deal. With the all-cash approach your risk is much higher than the debt approach.

Overall the risks of using debt are slightly higher. However in terms of returns the returns can potentially be much higher than if you only use cash. In addition, purchasing a property with cash takes longer to save up for , lengthening the time it takes to make the original investment in the first place.

So which is better? It all comes down to if you are willing to take slightly more risks to potentially make much more ROI. As long as you are sure to never borrow more than 80% of the value of a property, the debt approach will usually work slightly better. Lastly, the most important takeaway is that simply investing is the most important step. So stop waiting and start taking steps towards financial freedom today!

Reading: Things That Will Change Your Life

As simple as it sounds, reading will change your life.

As I have lived on campus I have seen many different views when it comes to reading. Most students prefer to avoid it altogether if possible. A few people enjoying reading fiction, and then there are the true readers.

As part of this “club” of true readers I have seen firsthand how the books we read can change our life. And I don’t mean just any books, I mean nonfiction. Why nonfiction? There are two reasons nonfiction is more beneficial in our life over fiction:

1. Fact-based learning

When it comes to reading in general you are uncovering stories, facts and emotions. With nonfiction specifically, the base of your reading is centered around actual facts, not something made up.

2. Nonfiction books are often more relatable to real life

Whether it’s a nonfictional story, or a self-help book, reading nonfiction has a much greater footing in reality, and therefore more relevancy in our lives, than simply another story out of someone’s head. And often, depending on if it’s a self-improvement book, you’ll receive applicable steps for your life as well.

Other benefits to reading in general:

a. Learning and experiencing human emotion

This is by far the most dynamic and variable part about reading. As soon as you dive past the writing structure and all the mechanical, necessary aspects of the text, you are left with the “meat on the bone” so to speak. This gives us exposure to real or conjured human emotion, whether you’re reading fiction or nonfiction.

b. Inspiration

When you open the pages to a book, you are often met with unanticipated emotional boosts of energy, or inspiration. It is these sparks that can make all the difference in either our professional or business lives. Mark Cuban, Billionaire and owner of the Dallas Mavericks, is quoted as saying, “I’ll read hours every day because all it takes is one little thing to propel you to the next level.”

c. Literacy

The last major benefit to reading is the learning and literacy is brings to a person’s life. Learning new words, exposure to new ideas, and learning in general all enhance the reader’s perspective and knowledge about the world. The benefits apply whether you’re reading a nonfiction book or not.

Conclusion:

Frankly I don’t dislike fiction either. I certainly have enjoyed many bestsellers over the years like Harry Potter and others, that have inspired and entertained me. However I believe while reading fiction is good, reading nonfiction is better.

The Purpose of Investing

The whole purpose of investing is to turn money into more money – it’s to be able to buy more things than you bought in the past. However, why not put all your money into savings? If I can lose “all” my money in the stock market, why not play it safe and keep everything in savings? There are two reasons. 1) You probably want to grow your money, not simply keep it safe. And 2) the value of money goes down over time. Wait, you might be asking, isn’t $1 always worth $1?

Yes and no. While $1 will always be the same, the amount that $1 can purchase generally goes down over time. Let’s use an example. Let’s say you have a small collection of 10 Legos. While you really love Legos, you only have these 10, so you tend to be really careful with them – you like them a lot.

One of your friends offers you an apple for one of your Legos. You refuse because you don’t want to have 9 left. However, a few months later, after Christmas and a birthday, you have received 36 more Legos. Your friend comes to you again and asks to trade one apple for two Legos. While you don’t like the idea of giving away more Legos, you don’t mind as much any more because you now have 36. So you do the deal.

What changed? Why were you willing to give more Legos up for an apple when before you wouldn’t even trade one for one? That’s because the Legos became less rare. This has to do with supply and demand. While demand for Legos stayed relatively the same, the supply increased, which decreased the value of the Legos relative to the apples.

We could get really technical with economics but for now the general principle can ring true with money as well. As the amount of money out in circulation, both physical and electronic, increases, the perceived value, and therefore the purchasing power of those dollars, decreases. In the last 100 years, inflation has gone up at about 2 to 4% per year.

The scary thing is that inflation continues even when your money isn’t growing. For example in 2008 when the whole real estate market and stock market crashed, inflation continued. Meaning, not only did stock investors lose 37% on their money, they also lost an additional 3%+ in purchasing power! Ouch!

In times of great economic panic gold often increase in price because it can act as a fear mechanism for investors when times get tough. When people in the market see inflation increasing and economic certainty decreasing, they often view gold, which has been used as money for literally thousands of years, as a safer location for their money.

The bottom line: real estate and stocks are fantastic investments for anyone looking to outpace inflation over long periods of time.

Stocks vs Real Estate – Which is Better?

Nearly all of the world’s billionaires have created wealth through business ownership. And the way most of them owned businesses was through stocks. So stocks, by default, are the vehicle by which many of the world’s wealthy have gotten there. Does this mean stocks are always the best investment over others? Not necessarily.

Is the list of richest people duplicatable? In other words, is it possible for someone starting off with nothing today, to buy and own businesses that eventually make them billionaires? The answer is clearly yes.

However there are other methods, less versatile that can provide the same type of opportunity: real estate investing. I am talking specifically about rental real estate, real estate built for the purpose of providing cashflow.

So if I’m a young person, deeply interesting in investing and committing to becoming rich, which paths should I take? Well real estate and stocks are both broad categories that are broken more specifically into numerous other sub-categories. So let’s take a brief look at your stock and real estate options:

Stocks

Stocks, which are ownership certificates in little pieces of publicly traded companies, can be broken down into various groups depending on the size of the company. They can also be categorized based on the industry or other factors. There are two general ways to get involved with stocks: direct purchase of stocks (through a brokerage account of some kind) or the purchase of shares of a mutual fund (a “basket” of stocks that is managed by a group of investment managers).

Individual investment in stocks can be a fantastic way to build wealth if you meet the following requirements: 1) Able to control your emotions in favor of logic, 2) time commitment to researching and analyzing your choices and 3) patience.

The other stock option, mutual funds, is perhaps the least involved option. I recommend this path for most people who aren’t wanting to spend a lot of time on their investments. One thing to be aware of in this type of investment is both the type of mutual fund (large-cap vs small-cap) and the fees that the mutual fund charges.

Real Estate:

Real estate is a vast field with both commercial and residential properties to choose from. When considering an investment path you need to pick somewhere and stay consistent. Building your knowledge up in a specific area of real estate can go a long way in mitigating risk, which should always be a big concern.

The best way to create wealth with real estate is by buying rental properties. You can either buy single-family homes, multi-unit properties (2, 3 and 4 units) or commercial apartments (5+ units). You should only invest in real estate if you have both time, interest and are capable of networking and management.

Conclusion:

Stocks can be good for people who have less time and more analytical skills. Real estate also requires analytical skills, but you also have to have interest and time to make money. The best choice for you depends on these factors.

3 Fun Things To Do With Your Money

Give it

If you’re a Christian this can be represented by tithing. However for non-christians generosity can still play a big role. Consider giving to charities, friends, organizations, causes and people in need.

With technology there are now so many ways to connect and give to others. Giving can change the way you see the world around you, make you more compassionate, and just make you feel better about yourself in general.

Enjoy it

Enjoying money can be fun! I remember spending money to go out to eat at a nice restaurant. It felt like such a reward to myself for the work I had done. Enjoying money, specifically money you’ve earned, can feel very, very good.

Stop and thing the ways in which you could enjoy your life and your money today. Prioritize the fun with your long-term goals about investing, giving and leaving a legacy. Often people struggle with spending too much money on things that don’t actually provide enjoyment. That is just stupid.

If you’re buying something or going somewhere to impress someone else you are committing two mistakes: 1) You’re spending money you could be investing or giving (which in and of itself isn’t a crime) and 2) you’re spending money on something that doesn’t really matter to you. Leaving a little money for your future should always be at the back of your mind. Which leads us to the third thing…

Grow it

Not a lot of people in society enjoy investing. The truth is, not many people have really gotten into investing, which hurts them more than they know. When I opened my Roth IRA, I put $5,500 in it. Even in the first half year it grew to almost $6,000, a $500 increase. I was pumped.

Realistically though, investing in a well balanced, thought-through planned investment portfolio isn’t always going to go straight up. Sometimes, even often, the balance is going to go down a little. That’s part of investing.

But as your balance grows steadily over time, you will begin to see why so many people are hooked on investing.

Conclusion:

Prioritizing these three things is both a challenge and a beautiful dilemma. It can feel like a blessing to have resources (money) to mange for your future and for your family’s future. That’s why it’s so important to think about these three things.

7 Things That People Never Spend Enough Money On

1. Paper

That’s a strange thing to lead the list with. However paper represents a mentality in the U.S., and especially in other countries, that puts people in a scarcity mentality. I’ve been personally at fault of doing this. Often I’ll try to save paper by writing on the other side or cramming everything on to one page.

This is particularly true when I am in school. I’ll take notes by putting everything close together. Any learning and memorization expert will tell you that leaving space on the paper gives your brain room to process and compartmentalize concepts and facts in your brain.

You need to be comfortable using up more paper, even if that means spending a minuscule amount more.

2. Seminars

Honestly this type of personal improvement hasn’t been something I’ve looked into in the past. However in recent months and years I’ve begun to see how others have used these as networking, learning, and inspirational events.

3. Health

I hope most people value health over money. The natural outcome of this value priority is that you should be spending the money you need to to keep your health at its prime. Don’t forget about health.

4. Others

Pouring money into others, whether through time and experiences, or generous gifts of items and money, is both a heart-warmer, and a perspective-changer. As soon as you begin to look outside yourself to help others, life becomes a ton more meaningful.

5. Car Maintenance

Changing the oil, replacing break pads, and doing general maintenance on your vehicles is a responsible thing for adults to do. It feels like you’re throwing money away, but in the long-term it can save you money in emergencies, breaks, and issues.

6. High Quality Items

Often it is wise to skip the name-brand items and go with cheaper things. This is especially true with things that don’t matter as much like cereal brands or food in general. However if you find an item is cheaper than another, this doesn’t mean instantly that it’s a deal. It’s possible that down the road you’ll spend money on replacing that cheaper item.

7. Books

Call me old fashioned, but I find books are particularly useful in learning. I have personally read hundreds (yes hundreds) of nonfiction books in my free time. While spending $1,000 on books (both e-books and physical books) can seem like a big waste of money when the library is just down the street, I see books as an investment.

When you see nonfiction books as resources and insightful gems of knowledge, it becomes natural to look at the cost-benefit of each book as a more than worthwhile investment.

I personally find physical books to be easier on my eyes and simply to read than e-books.

Conclusion:

Seeing every purchase as an investment can be a fun game to get your mind racing on ways to save and spend money wisely.

Excitement and Saliency: Why Accounting Is Important for Everyone

…Well technically accounting isn’t crucial for everyone. But accounting and the field of financial as well as tax accounting are very useful, valuable, and foundational fields to study for the vast majority of people.

As a business major I might have a slight bias, but the argument still holds for any other career or academic path – accounting is foundational. Why, you might ask, is accounting so important?

Accounting is important for two types of people: Business people (people involved in business decisions, management, and keeping business records) and regular people who make logical financial decisions.

First I will lay out merits of accounting for business people (who I’m sure already know a lot of them). Secondly I will cover reasons for accounting for individuals in their finances.

Accounting, specifically financial accounting is highly useful from a business perspective. Accounting has been known by many as the “language” of business. Accounting is a world of financial terms and figures that mean precise, crucial things to business owners and managers.

The three things useful to “business people” are: 1) Analyzing where the business is at, 2) keeping the business legal for tax purposes, and 3) presenting the business to others in a clear, conscience way.

 

Moving on to personal finances, there is a different use for accounting which lies primarily in the realm of clarity and accountability. Accounting on a personal level with individual or household finances is a fantastic way to get on track with finances.

There are two primary uses for accounting on a personal level: 1) Tracking where you’re at financially and 2) where you want to go. In addition, just like business, accounting on a personal level can prepare you for tax season and take away a lot of the headache. To be clear, business accounting is presented and formatted in a different manner than personal finances, but nonetheless the principles still apply.

Where can you go from here? Begin taking accounting seriously! You don’t have to become a financial major or geek out about it. But you should definitely learn the basics, and as a result set yourself up for many wise decisions to come.