I have set myself up for a bright financial future.
~ Thursday, July 18, 2024 Blog Post ~
Let’s face it: Life is expensive. Yet, I am well aware that the market is brimming with exciting opportunities and possibilities ahead for strategic investment. Thus, it is crucial for myself as an investor to keep a prudent and well-informed approach. In this manner, I can maximize my potential for financial growth within this dynamic and ever-evolving investment landscape.
I can make wise decisions and discover whether to be opportunistic or if the present climate is not the correct time to take on substantial risks. As I have emphasized in this blog, my primary objectives are capital preservation, financial security, and maintaining my current comfortable lifestyle forever.
There are plenty of ways to achieve my targets and accumulate savings and investments for the long term. Among them is constantly keeping myself financially savvy and financially educated.
Here are some important personal finance insights, strategies, and my perspectives that keep me guided in my savings and investing journey:
1. The Law of Compounding
I don’t really have to be rich to begin investing, but I need to commence investing to be rich. Through the law of compounding, the more money I invest at present, the more money I will enjoy in the future.
Indeed, Albert Einstein famously referred to compounding interest as the world’s eighth wonder. The renowned physicist went on to state that people who comprehend this financial concept earn it, while those who don’t will pay for it.
Since I want to achieve my financial goals faster, I have invested my savings in online time deposit accounts with sizable interest rates to conveniently grow my savings. The interest rates are higher than regular savings accounts.
Additionally, in working on my personal financial objectives, I explore various investment vehicles such as interest-bearing securities and stocks. I invest in money market instruments, insurance investments, mutual funds, variable universal life insurance, and unit investment trust funds.
I will certainly be in the market for the long term. After all, the odds of myself winning in the market are higher for as long as I am an investor.
2. Living the basic investment and personal finance tips I learned
Of course, I want to secure my financial future. Ever since I began investing when I was in elementary school, I was already able to gather and grasp fundamental personal finance know-how such as the following:
a. Creating a budget — Outlining my monthly income and expenses helps me identify areas where I can save;
b. Diversifying my revenue streams — I explore new services, products, and markets. In this manner, I can diversify my revenue streams and reduce risk;
c. Setting clear investment goals — By defining my financial goals, like retirement and wealth accumulation, I can guide myself in terms of my investment decisions;
d. Tracking my expenses — I use mobile applications and a trusty notepad which enable me to monitor where my hard-earned money goes. This method also helps me find opportunities to cut unnecessary spending;
e. Understanding my risk tolerance — I assess my risk tolerance and select investment products that align with my financial objectives and comfort level;
f. High-yield savings accounts — I have been able to maximize my savings by looking for savings accounts from trusted financial institutions with competitive interest rates;
g. Diversifying my investment portfolio — I can optimize returns and minimize risks for my benefit by spreading my investments across various asset classes, such as real estate, bonds, and stocks;
h. Fighting impulse buying — I don’t have any problem avoiding impulsive buying. I think twice before making non-essential purchases. In this way, I can avoid unnecessary expenses and get to save more of my hard-earned money;
i. Staying informed — I always ensure that I stay updated on investment opportunities, economic trends, and market news to make informed decisions;
j. Reviewing and adjusting my savings and investment agenda — I regularly review my savings plan and make adjustments as needed. In this manner, I get to ensure that I am on track to meet my savings and investment goals;
k. Practicing delayed gratification — This personal finance advice is quite basic. I surely wait before I make significant purchases. In this manner, I can determine if a merchandise or service is truly necessary, which enables me to prevent myself from impulse buying;
l. Monitoring fees and expenses — I am mindful of investment fees and expenses that can eat up my investment returns. I am quite adept at choosing cost-effective investment options; and
m. Considering long-term investments — I focus on long-term investments offering growth potential and withstanding market fluctuations.
Through these investment and personal finance strategies, I can identify the industries with the strongest potential for growth and those sectors facing notable challenges in the present market. As an investor, I can determine the significant sectors to concentrate on at this period, which aid me in achieving my long-term investment and personal finance objectives.
3. Watching educational webinars
It has been my hobby to watch educational and informational finance webinars. Some of those online presentations I have learned considerable saving and investing know-how from are about central bank monetary policies’ impacts on the stock market; trends in the financial sector funds to future-proof one’s investment portfolio; exploring global investing; and investing for retirement.
Additionally, I habitually read articles by finance professionals who offer financial and investment advice and recommendations. These habits are truly enriching for myself, personal finance and investment-wise.
4. Being aware of the prevailing investment landscape
During tight monetary policies, interest rates rise. As an investor, I would rebalance my investment portfolio in favor of interest-bearing securities once interest rates match up or even beat stock market returns.
I will let go of stocks, which results in stock prices declining. Furthermore, as an investor, I participate more in the loanable funds market and less in the stock market, and this action of investors like myself causes value turnover to weaken.
Besides rewards, I also consider the risks attached to the financial securities with interest-bearing securities which are known to be less risky than stocks.
5. Concentrating on wealth accumulation
It may be bothering to hear that the market is bearish. However, I am fully aware that it is in the downtimes when I as an investor can get stocks at very bargain levels. In this scenario, I maximize the opportunity of getting the fundamentally undervalued stocks. I perform my accumulation slowly and at identified strong support levels. I usually don’t go all out until I see clear reversal signs.
Furthermore, I look for stocks that are religious dividend payers, with dividends beating the interest rates. I seek ones that have low volatility.
Finally, I seek stocks that are negatively correlated with the market. This technique is certainly advantageous for myself since I want opportunities for capital gains while the market is on a downtrend.
6. My desire to be “wealthy” and not “rich”
There is a massive difference between “rich” and “wealthy.” Based on a MarketWatch article I recently read, net worth and not income is what defines if a person is rich or wealthy. This figure is computed by adding the value of a person’s or family’s assets and subtracting their financial liabilities or debts.
On being rich
DJ Hunt is a financial adviser from Florida in the United States. He pointed out that a person can earn a big salary but still have a low net worth. Hunt said he knows people who make seven figures yearly, spend every bit of their earnings, and have great material possessions. However, he remarked that these people are a couple of missed paychecks away from bankruptcy.
I read from the article that multiple financial advisers told MarketWatch that when people think “rich,” they think of flashy status symbols and big spending. Matthew Echaniz is a vice president of relationship management at Osaic. This wealth-management firm executive remarked that being rich is a measure of the accumulation of many assets like money, real estate, toys, and boats.
Echaniz said the “rich” label does not necessarily portray a person in control of his finances or is financially free. Thus, any person might be considered “rich,” yet can still be in a financial precarity position.
Paul Sullivan is the author of “The Thin Green Line: The Money Secrets of the Super Wealthy.” He described rich people as highly leveraged and spend as much as they earn, and oftentimes spend more than they earn. Sullivan relayed that rich people’s situations go along fine for a while, and then they don’t. He said the reason is that with their spending approach, one unexpected obstacle — such as, for example, a sudden job loss or an increase in interest rates — could seriously jeopardize a rich person’s financial health.
On being wealthy
According to Hunt, wealthy people can be those who are seven-figure earners driving Toyotas, shopping at JCPenney, and having eight-figure investment portfolios. Based on the MarketWatch article, finance experts said being “wealthy” signifies a kind of financial freedom, longevity, and resilience. They emphasized that I don’t need to be in the top 1% of earners — or even the top 10% — to achieve the freedom and stability that characterize wealth.
Echaniz defined financial freedom as possessing the ability to say “no” to anything you want and to say “yes” to anything you want. He described a financially free person as not being beholden to interest-rate changes or employers. The wealth-management company executive said people who enjoy financial freedom have set themselves up in a way that there is no impediment they cannot overcome and there is nobody they cannot say “yes” or “no” to.
Echaniz provided a strategy I can use in focusing on wealth-building. Like other finance professionals and advisers, he affirmed that a super-high income is not always a requirement.
According to Echaniz, to build wealth even with an average income and to bridge the gap between the wealthy and the rich is by keeping one’s spending in check. This advice might mean foregoing luxury or big-ticket purchases that only depreciate in value like luxury cars, expensive clothes, and similar splurges, even if I can technically afford them.
Echaniz added that funneling that income instead into appreciating assets and investments is a component of the recipe for building long-lasting wealth. Typical examples comprise real estate, mutual funds, and a 401(k) account. Moreover, Echaniz pointed out that wealthy individuals usually have multiple income streams, which could include business ownership, dividends, employment, or property ownership.
Meanwhile, Sullivan described wealthy people as being often prudent with their debts, concentrating on “good debt” that funds investment in things that appreciate in value, such as a growing business or real estate. He pointed to a family member of his. This former schoolteacher saved prudently for retirement during her career.
Sullivan’s example lives in a two-bedroom condo and drives an average-priced car. Nonetheless, she can take frequent trips to Europe and to visit her grandchildren. Sullivan described his family member as “wealthy” because she can make the choices she wants to make in her life.
Indeed, I want to be financially free for the rest of my life and be able to do whatever I want according to my own terms. Investing with confidence is not a problem with me. Fortunately, I can hit my investment goals in a breeze, thanks to the tailored investment advice I receive from dependable and authentic investment experts. These investment partners manage diversified investment portfolios. They offer expert guidance on investing and ensure risk management and mitigation.
As I live on my own terms, I am in full control of my finances. I also take advantage of the funds and investment strategies that assist me in winning big in the long term and short term through these personal finance and investment insights I have long observed in my financial life.
References:
https://moisandfitzgerald.com/dj-hunt/
https://www.newyorker.com/news/john-cassidy/just-how-rich-is-donald-trump
https://www.regenesys.net/reginsights/the-eighth-wonder-of-the-world-compounding-interest
What’s the difference between rich and wealthy? (Excerpt from MarketWatch article)
RICH
There’s no formal dollar-based distinction between being rich and being wealthy, advisers said. But there is one working definition: “Look at net worth, rather than income,” said DJ Hunt, a Florida-based financial adviser.
Net worth is calculated by summing up the value of an individual’s or family’s assets minus their debts or financial liabilities. You can earn a big salary and still have a low net worth, Hunt added.
“I know folks who make seven figures a year and spend every bit of it. They have really great ‘stuff,’ but are a couple of missed paychecks away from bankruptcy,” Hunt wrote in an email to MarketWatch. “Then, there are other seven-figure earners who drive Toyotas, shop at JCPenney, and have eight-figure investment portfolios.”
Multiple advisers told MarketWatch that when they think “rich,” they think of big spending and flashy status symbols.
“It’s a measure of accumulation of a lot of assets: real estate, boats, toys, money — that sort of thing,” said Matthew Echaniz, a vice president of relationship management at Osaic, a wealth-management firm. The label “rich,” he added, “doesn’t necessarily portray someone who is in control of their finances or financially free.”
In that sense, an individual might be considered rich but still be in a position of financial precarity.
“It means they’re highly leveraged. It means they spend as much as they earn, and oftentimes spend more than they earn,” said Paul Sullivan, author of “The Thin Green Line: The Money Secrets of the Super Wealthy.” “It goes along fine for a while, and then it doesn’t.”
That’s because, with that approach to spending, one unexpected obstacle — an increase in interest rates, for example, or a sudden job loss — could seriously jeopardize that person’s financial health, he said.
WEALTHY
On the other hand, being “wealthy” signifies longevity, resilience, and a kind of financial freedom, experts said.
“Financial freedom means you have the ability to say no to anything you want and to say yes to anything you want,” Echaniz said. “You’re not beholden to employers or to interest-rate changes. You’ve set yourself up in a way that there’s no obstacle you can’t overcome, and there’s no person you can’t say no or yes to.”
How to build wealth — even with an average income
There are some strategies people can use to focus on building wealth, advisers said — and a super-high income isn’t always a requirement.
One tip for bridging the gap between rich and wealthy is keeping your spending in check, Echaniz said. That might mean foregoing luxury purchases that only depreciate in value — luxury cars, expensive clothes, and similar splurges — even if you can technically afford them.
Funneling that income instead into investments and appreciating assets are a part of the recipe for building long-lasting wealth, he said. Common examples could include a 401(k) account, mutual funds, or real estate.
Wealthy people are often prudent with their debts as well, Sullivan added — focusing on “good debt” that funds investment in things that appreciate in value, like real estate or a growing business.
Wealthy individuals also typically have multiple streams of income, Echaniz said. Those could include dividends, business ownership, property ownership, or employment, he said.
You don’t need to be in the top 1% of earners — or even the top 10% — to achieve the freedom and stability that characterize wealth, experts said. Sullivan pointed to a family member of his, a former schoolteacher who was saved prudently for retirement during her career. She lives in a two-bedroom condo and drives an average-priced car, but is able to take frequent trips to Europe and to visit her grandchildren.
“She is wealthy,” he said. “She is able to make the choices she wants to make in her life.”
