If you didn’t know, a tricenarian is someone aged in their 30’s. According to a European Study, age 36 is the ideal age… what that has to do with this blog, I am not really sure aside from the fact that I am 36-years old currently and overall, am pretty happy with my life. That being said, I feel like I have learned a lot during my years that I can share with others. Even if the message resonates with only one person, it’s worthwhile.
While working out at the gym, I generally listen to an audio book of some sort… currently it’s The Millionaire Next Door. Despite being released in 1996, the principles still hold up today. Some of the thoughts I am about to share are things I notice in my day to day life and some have resonated with me from this particular book thus far. If you don’t like to read books (like me) then listening to them through a service, like Audible, works well.
Here we go:
1 – You do you. Just like the casino commercials say… except I am thinking of a different meaning. I see so many households trying to “keep up with the Jones”. Don’t worry about what everyone else has or is doing… focus on what you are doing and working towards. You never know the full scenario of other people so it could be a solid game of charades. It’s easy to fall into the comparison trap, especially with social media, but don’t. (I am far from perfect in this arena)
2 – Make and Maintain a Household Budget!!! This one is super important. Seriously. If you don’t know what you’re spending or where you’re spending it at, then there is no accountability. You don’t need to order the latest edition of Quickbooks for this… write it on a piece of paper if need be. Just have a breakdown for your monthly/annual outgo versus receivables. While I do have multiple Quickbooks accounts, I still use a Word Document for some of our household budgeting purposes. Back in 2008, when the economy and real estate market tanked, is when I began these strict practices. At the time, I was 24, newly married, had our first child on the way and was sinking about $30K per month into various properties and businesses that were barely hanging on. The bleeding wasn’t possible for very long. I had some tough decisions to make, but learned a whole lot in the process, which has helped guide me to make some real smart choices subsequently. At this time, we literally broke down EVERY SINGLE PENNY spent from receipts collected each month and put into categories. I would spend considerable time preparing and then go over my findings with my wife, Jennifer. As market conditions improved and we regained savings, our budgeting and analyzing did not stop. It became a little different, but this is how we plan ahead and are prepared for just about any emergency scenarios that could arise. In addition to the routine expense categories, Taxes, Retirement Funding, Life Insurance & Vacations are all accounted for. To this day, twice a month I run “projections” to see where funds are moving in and out.
3 – Set Goals. Milestones will help you stay accountable and track progress along the way. Professionally, I set goals not only for myself, but for my team and for our office. Personally, I have goals to hit not only this year, but staggered out to the year 2039 (when I am 55 and semi-retired). It’s not just me though… there are family goals in mind too.
4 – Get on the Same Page. Unless you’re flying solo through life, make sure your spouse and children understand your vision. Having that buy-in at home goes a long way with the support system necessary to succeed. Family members will better understand your grind and be willing to put in the same efforts. Unfortunately, I see such a lack of communication within relationships. Husbands and wives do not speak with eachother, or else it’s just about immediate tasks at hand. Carve out time for discussion about life, goals, interests and continue Date Nights.
5 – Status Symbols. For some, it’s about buying the latest model sports car each year while others spend frivolously on clothing & accessories. The vast majority of millionaires drive ‘middle of the road’ vehicles and often have them for at least a handful of years before buying something else. You’ll notice I said “buying”… rarely will one with substantial wealth lease a vehicle. Our daily drivers are nice, but not over the top. They were bought new, but at substantial discount and I flew out of state to make that happen. The brand of clothes one wears shouldn’t really matter. I’ve had a lot of luck with JC Penney, Ross & SteinMart over the years… no Nordstrom, Brooks Brothers or Burberry accounts held by us. My watches are Relic brand and didn’t cost thousands of dollars either. I like to think of myself as a frugal opportunist. Hell, I still use an iPhone 6 and I recently just replaced my 2012 iPad.
6 – Use Credit Cards Wisely. Before real estate, I briefly worked for Morgan Stanley – Discover Card. While there, I noticed so many saddled with credit card debt subject to high interest rates. Each month, the minimum payment made but the principal balance barely moved down. That’s no way to get ahead. I understand that sometimes you do what you need to do to survive. However, some just let that credit card debt hang out there for many years. Personally & professionally, we use credit cards for just about everything, due to the rewards, but NEVER pay a dime of interest as each card is paid in full twice per month. This means we reap a couple grand in bonus restaurant gift cards and such per year just for using a plastic card. That really adds up over time. Don’t be quick to say yes when the cashier asks if you want to sign up for a department store card because you’ll earn 10% off that $100 purchase today. That means $10 immediate savings, but lots of interest should one not resist the temptation to use the card more.
7 – Live Below your Means. As one’s incomes increases over time, often times so will their spending. That shouldn’t be the case. Before anything else, a percentage of household income should be directed toward savings and/or investments. This will allow for long-term wealth growth and financial independence. Easier said than done, but following a guideline will lead to many more future benefits.
8 – Balance is Hard to Find, but Try Anyway. Some will save so much that they live without any enjoyment… they are afraid to go on vacation, travel, eat at nice restaurants, buy nice things, etc. However, nobody knows how long we will live. Sadly, not all of us will make it to “retirement age”. That means, we may not get to enjoy the fruits from our earlier planning. If you don’t save at all and just live for the now, then later on could look bleak and you’re working a job until the day you die. Somewhere in the middle of these logics is the sweet spot, which will look different for everyone. It’s a moving target, but do your best to enjoy life now and prepare for later too.
9 – Don’t be House Poor. Just because you get pre-qualified for a $500,000 home loan doesn’t mean that’s what you should go buy. The majority of clients I sit down with do not have a true household budget to know what they can really afford and are comfortable with on a monthly basis.
10 – Create a Retirement Strategy. Sometimes this can be done yourself… but I encourage the use of a good financial advisor as well. Personally, I play with some stocks, but that is a very small portion of our portfolio. Our financial advisor manages the bulk of funds with stocks, bonds, notes and other investment vehicles. Since I know Real Estate well, of course we have some rental properties and plans for additional over time. Each property is a ‘retirement account’ with no cash flow taken now. There are emergency savings for each, should costly repairs come about and then the debt service is paid down to create future passive, residual income in addition to the equity availability. If you have access to a 401K, contribute to the max possible, if you’re able, and take advantage of any employer matching.
11 – Hire an Accountant. So many use online programs and/or file their taxes alone, but a good accountant is worth their weight in gold. They know the loopholes and tax laws to maximize your exposure, while keeping you protected. For life’s important situations, you need the best supporting cast around you. Doctors, Financial Advisors, Tax Planners, Real Estate Brokers (ME), etc. The right people will add value to your life, not just take your money.
12 – Life Insurance is Important. Ever since I was 20 years old, I have had life insurance. However, it’s important to know the different options available. There are two main groups: whole life and term. Whole life is where you can have the policy until the day you die and they can be designed to accumulate wealth along the way. They can also have more fees attached and hefty surrender values, should you need to cash out. Term policies are good for a specific time frame and then they go away. The premiums paid in over time are lower and do not accumulate any wealth; they cover the plan fees. We had whole life plans for some time, but have now changed to term since we are financially in a place where the cost of a funeral wouldn’t be a burden and at the end of the “term”, theoretically there would be no need for such a sizable amount upon death if the rest of the financial strategy plays out how desired.
13 – Your Time is Valuable. We all have 24-hours in a day, but how we use it varies dramatically. As I mentioned, while working out, I normally listen to something positive, educational, motivational and/or productive. This means not only am I fueling my physical body, but also my mind at the same time. Spend as much family time as you can… kids grow up so fast and you’ll never get those opportunities back. Our schedules are jam packed, but might as well fill it with memories and experiences. Also, if you find yourself in a down mood after scrolling through your timelines, then it might be time for a break. Eliminate the time wasters and mood downers in your life.
14 – Learn From Past Mistakes. There is a saying… You either Win or Learn. I like that. Earlier I described my life in 2008. There were some failed investments… I was young and too aggressive. I got burned… to the tune of hundreds of thousands of dollars. Fortunately I was young and smart enough to recover fairly quickly. I look at potential investment properties & opportunities differently now. I trust my gut instincts a lot… if something doesn’t feel right, I don’t force it. In 2005, I bought a brand new AMG Mercedes. I did this as I thought it would add some instant credibility as I was young for my profession. While it likely did some, it was also a terrible investment. After paying just shy of $70K for the car, I sold it for $10,000 7 years and 100,000 miles later. Won’t make that same mistake again.
15 – These Principles Should be Taught in School. I didn’t want to end a list with 14 items so here we are. True story though… more about economics, investments, budgeting and overall life skills should be intertwined with schooling from a young age. Society would be better off, in my opinion.
If you have any questions about any of these items, I am happy to discuss with you. I am pretty much an open book when it comes to how I go about my business and live my life. No secrets, just a lot of planning, hard work and persistence.