The Best Financial Advice

What is the best financial advice that you’ve ever received?

I had the great opportunity to ask a number of experts this exact question. The answers they provided were all quite different, yet are all so important.

Make your money work for you, not against you. Debt works against you, investing works for you. – John Lee Dumas

Compound Interest:

The wealthy understand the power of compound interest. Albert Einstein called compound interest “The most powerful force in the universe,” and “The greatest mathematical discovery of all time.” Debt uses compound interest against you (for example, if you buy a house for $150,000 and pay 7% interest and minimum payments for 30 years, you actually pay $360,000 for the house!). Alternatively, investing the right way works for you. $10,000 invested every year at a continual 10% growth rate will be $1,000,000 in fewer than 25 years! If you start at 22 years old, this is $1 Million from a mere $10,000 investment each year by the age of 47. Of course, the plan is to increase the amount you save/invest and achieve this milestone much, much earlier. Learn the power of compound interest, and utilize it.

Simplification is one of the great things. Get to a point in life where you don’t need to make too much, because most people are trapped. The other great thing is having multiple streams of passive income. Passive income is taking your income and putting that money to work for you. So while you sleep, that money is working harder than you work. – David Wood

Passive & Residual Income:

Multiple streams of income are a huge part of becoming wealthy, and will be a big focus for YoPro Wealth. With working income, you only get paid once for the work that you do. With residual and passive income, you get paid over and over again for your efforts – even while you sleep! These other income types are very similar. Passive income is derived from investments in which the individual is not actively involved (doesn’t require effort from you). Residual income is recurring payments after an initial effort. Examples of each include:

• Passive income: online advertisements, affiliates, rental property, royalties from invention, dividends and interest from stocks/bonds, etc.
• Residual income: books, songs, network marketing, online training courses, etc.

It is easy for young professionals to create financial freedom – all that you have to do is create passive income that exceeds your expenses. If you keep expenses low, then this is relatively easy to achieve.

The thing my mother taught me is not to define yourself in terms of inanimate objects. For young professionals, building an identity around the things you own can be an easy trap to fall into–but the bottom line is a leased BMW won’t make you any happier or cooler, and it will make it harder to take care of the more important and fulfilling things in your financial life. – Zac Bissonnette

Happiness:

We think, “As soon as I get (___insert item___), I’ll be happy.” That is not true. Happiness is not a goal; it is a byproduct of living a meaningful life. It is fighting a struggle worth fighting for. Success and happiness are found in the realization of a worthy ideal. Notice that these three definitions have nothing about buying a BMW, fancy house, or any item at all. Wealth is not just money, and happiness cannot be solved by dollars alone. We’ve all heard it, but few actually listen to it: money doesn’t buy happiness.

Stay out of debt, no matter what. – Michael Hyatt

Debt:

The ultimate goal, as I see it, is freedom – freedom to do the things that you want, when you want, with whom you want. If you have debt, you do not have this freedom. You are tied to, and obligated to owe, someone else. Debt is a quickly growing concern among young professionals. 54% of millenials say that debt is their biggest problem, with the average student loan debt over $28,000. 39% of Americans have credit card debt, and 53% of 20-somethings are un-employed or under-employed. Let me repeat that you cannot have freedom with debt. As these numbers state, a large portion of millenials are not “free”. The first step towards true wealth after working to develop the proper mindset is to get completely out of debt. Michael’s advice is spot on. Take care of your debt. Set, go!

Don’t spend more than you earn, and pay yourself first. – Pat Flynn

Budgeting:

The same is true in handling your finances as with investing your money: you need to have a plan. The only way to build wealth is to bring in more than you pay out. Budgeting, and monitoring expenses, is a basic first step towards becoming financially free. Most people will use up whatever they have. If they get a raise, their spending goes up. So, you have to take certain steps to put your money to work before you spend it on something that is unnecessary. A great tool to define your current financial situation and to set goals and budgets is Mint.com. There you can evaluate where your money is going and set goals to reduce your spending. Sign up, and find what expenses you can reduce by 20%. And don’t forget to pay yourself first. Most small business owners want to work themselves so hard, but forget to pay themselves. You have to get paid a regular paycheck, and then you’ll find money and make money to be able to pay everyone else off. All in all, it is easy to grow your wealth: don’t spend more than you earn. Simple enough? Well said by Pat.

As a newlywed dual-income family, we were told to live off only one income and save the other. Best advice I ever got. – Joshua Becker

Saving:

There are two ways to increase the amount of money in your bank account: 1) reduce expenses or 2) increase money coming in. The easiest and quickest way is to reduce expenses and save money! Joshua preaches the power of minimalism and simplicity, previously discussed, and is able to live off of a portion of the income. Most people can live off of much less than they do. Joshua and his wife made saving an automatic. A good way to save more is to set up a direct deposit into a savings account for a percentage of your income. If you don’t see it, you don’t spend it. Also, any person or family should have an emergency fund readily available. The wealthy young professional should have $10,000 in liquid assets, and at least 6 months of living expenses saved for you and your family in case of the unexpected.

Decide where you will get out before you get in. – Jack Schwager

Investing Plan:

Investing is scary, challenging, and difficult… if you don’t have a plan. The stock market is a measure of human psychology, including fear, greed and everything in between. We are not built to be good investors. We get anxious and sell at the bottom (the panic point), or impatient and buy at the top (the euphoria point). However, if you have a plan, investing can be simple, efficient, low stress and extremely profitable. Having a specific plan for each investment is an essential part to any wealth strategy.

Remember that money’s only real value is the good you can do with it. – Devin D. Thorpe

Purpose:

Money is just a byproduct of the work that we do. It gives us the opportunity to be free. And freedom usually leads to fulfillment, meaning, purpose, and lots of other cool things. The truly wealthy, either in the process of creating financial or once they achieve financial freedom, give back and make a positive impact on the world. Zig Ziglar said, “You will get all you want in life if you help enough other people get what they want.” For young professionals, we often chase the money, or the latest craze. When in fact, the best way to build wealth long-term is to find out what your purpose in life is, and what value you can provide to society, and go do that. You’ll then achieve more wealth than you’ve ever dreamed of.

The Best Financial Advice Resource

Action Steps:

• Work to develop the mindset of a millionaire or billionaire
  • Read Think & Grow Rich, and send me your thoughts/questions
• Define your current financial situation
  • Sign up for Mint.com
  • Create financial goals, and look to reduce expenses by 20%
• Pay off any debt
  • Pay down as much as possible on your highest interest rate loan
  • Pay at least the minimums on all other loans
• Work towards taking your finances to the next level
  • Create multiple streams of passive income
  • Develop an investing plan based on your goals
• Connect with me on Facebook! Send me your questions and concerns, and we’ll talk about how to take your wealth to the next level!

 

As for all articles on YoProWealth.com, please note the important disclaimer on advice provided and affiliate links.