There are thousands upon thousands of familiar financial tips. And many aphorisms offer excellent guidance given the right situation.
But real financial wisdom is less common. Here are 11 twists on traditional advice that might be worth considering.
I’m a huge fan of Benjamin Franklin, but he could have done better with his advice that “a penny saved is a penny earned.”
he wasn’t wrong. This phrase emphasizes the importance of thrift, thrift, and savings. Saving money and avoiding unnecessary spending are undoubtedly good habits to increase your wealth.
But Franklin missed an opportunity to point out a perhaps more important point. 1 penny saved and invested It’s actually worth more than a penny earned.
Given the right investment vehicle and time period, a penny invested can be worth much more than just a penny.
For more investment wisdom, check out John C. Bogle’s quotes.
Perhaps Jones isn’t as rich or happy as you think. And families with modest homes who drive old cars can be much wealthier than you might imagine. But what really matters is that they don’t matter.
you are not living their life they don’t live yours Do what it takes to find happiness in your life. Prioritize what is important to you.
Don’t try to catch up with Jones. Create and maintain a financial plan that allows you to:
- Feeling in control of today’s financial obligations
- survive unexpected economic events (car crash, inflation, unemployment)
- Supporting a rich lifestyle now and in the future
- Setting and achieving financial goals
If you can do that, you will be confident and satisfied and Jones will want to be like you.
See, it’s easy to get blinded by what other people have and how they spend their money.
But rather than simply comparing material possessions and luxury spending, it’s probably a better idea to focus on the qualities and behaviors that contribute to financial success.
If you can predict the future, “buy low, sell high” is definitely good advice. The problem is that you can’t predict what will happen tomorrow, let alone 10 years from now. As such, it is impossible to know exactly when the lows and highs will be.
Many financial experts advise against trying to time the market to buy low and sell high because you never know what will happen.
The better investment strategy for most people is to just buy. And more specifically, entering the market on a regular basis, regardless of the price of your investment.
This strategy is called dollar cost averaging. By investing a fixed amount on a regular basis, investors can reduce their exposure to market volatility. Dollar-cost averaging allows investors to diversify their investments over time rather than making a one-time lump sum, potentially reducing the impact of short-term market fluctuations.
Dollar cost averaging:
- Reduces the impact of market timing as there is no need to anticipate short-term market movements
- Encourage Disciplined Investment
- Eliminate the urge to make emotional investment decisions based on short-term market volatility
You probably realize that the clothes you wear and the car you drive say something about you. Have you ever thought that it reflects what is important to you?
With so many demands on your money and time, it can be difficult to make sure you’re spending each of them in a way that’s true to who you want to be. Paying attention to your choices and prioritizing what you really want can help.
There are countless ways to live your life, and you’ll want to make sure your choices reflect your values.
Buying a home can be one of the best ways to create wealth, even if you are in debt.
When you buy a house, you get the utility of a place to live. This is a must. However, as you pay off your mortgage, you also build your assets. Equity represents the portion of your property that you own wholly. Over time, property values tend to rise, so your home will appreciate in value and you’ll be able to build more wealth.
This will give you valuable assets and potential wealth accumulation.
Use the NewRetirement Planner to model the future value of your home and explore how you can leverage your home equity to cover retirement and other expenses.
Too many people think that personal finance is about math and insider information. it’s not. There is a simple strategy to adopt and what you really need is the discipline to:
- spending less than income
- savings and investments
Financial success for most people requires 5% intelligence and 95% discipline to be able to manage spending, save and invest.
7. Money can buy happiness
Indeed, material wealth and possessions are no guarantee of true happiness or contentment. But a constant income that meets basic needs is fundamental to happiness. And once you’re done covering your needs, there are a variety of ways you can spend improving your health.
Explore 11 ways to spend money to improve your happiness.
Your return on investment is probably not as good as you think.
Return on investment refers to the profit or loss of an investment relative to the amount of money originally invested. It is a measure of the profitability or performance of an investment over a specified period of time. It’s basically a measure of how much your money has increased (or decreased). (This metric is more specifically called nominal return.)
The problem is that inflation, taxes, and fees must also be considered when calculating returns. And these factors can seriously hurt profitability.
inflation: When factoring in inflation into the return on investment, the “real return on investment” is basically calculated by subtracting the inflation rate from the return. So even if you make a 10% return on your investment, with 4% inflation, your real rate of return is only 6%. (Including the inflation rate in the return on investment is called the “real return.”)
price: Many households pay investment fees to brokers and advisors who invest their money. These fees are typically around 1-1.5% of the amount they are investing for you. So if you earn 10% on your investment and pay a 1% commission, you really only get 9% (10% minus the 1% commission).
tax: Taxation of investments can be complex. But that’s another factor that can affect your returns.
After factoring in inflation, fees and taxes, your actual earnings can be more than half of what you think.
Note: NewRetirement Planner provides comprehensive modeling. If you enter a nominal rate of return, the system will take inflation into account in all forecasts. You can deduct a fee from the rate of return you entered for an investment, or add a fee as an expense.
See, if you’re excited about investing, it might be a bad idea. Gambling is exciting. Investing should be boring.
When making long-term investments, you need:
Consistency and Patience: Successful investing requires consistency and patience. That includes staying focused on well-thought-out investment strategies and avoiding impulsive decisions based on short-term market volatility and noise. This patient approach may not involve frequent trading or tracking the latest investment trends, which can make investing seem tedious or tedious.
Focus on long-term goals: Investing is primarily about achieving long-term financial goals, such as saving for retirement, funding a child’s education, or building wealth over the long term. The process of steadily contributing to an investment account and maintaining a diversified portfolio does not come with constant excitement or dramatic returns. Instead, you should focus on your long-term perspective and the discipline to stay on course despite short-term market volatility.
Minimize risk: Boring investing often revolves around minimizing unnecessary risk and avoiding speculative or volatile investments. Instead, it emphasizes strategies such as diversification, asset allocation, investing in low-cost index funds and other proven investment vehicles. By taking a more conservative and prudent approach, investors aim to protect their capital and generate stable and reliable returns over the long term.
Reduce Emotional Decisions: Emotions can hinder investment success. Boring investing encourages rational decision-making and discourages emotional reactions to market movements. By maintaining a calm and objective mindset, investors can avoid making impulsive decisions based on fear or greed, which can lead to poor outcomes.
Most debt is bad, especially high-interest credit card debt.
However, debt can also be an effective tool for increasing wealth, especially with careful consideration of interest rates, loan terms, and ability to repay.
Examples of using debt to improve your financial situation include:
Real Estate Investment: You can use debt to increase your wealth, whether it’s your own home or an investment. Obtain a mortgage or loan to acquire property and profit from the potential increase in property value over time, rental income, or profits from the sale of the property. Using debt increases your chances of accumulating wealth by giving you access to a larger investment than your savings alone could afford.
Education and skill development: Using debt to invest in education and skill development can greatly increase your earning potential and long-term wealth. Taking advantage of student loans to pursue higher education or vocational training in high demand and profitable fields can lead to improved employment opportunities and higher salaries.
Flexibility: Securing a line of credit or borrowing against your home can increase your financial flexibility. For example, a low-interest loan may be a better source of capital than selling an investment at a loss.
don’t know? Use NewRetirement Planner to run “what if” scenarios to determine if debt can actually improve your financial situation.
The dictionary defines “retirement” as not wanting to be the center of attention or to be with other people.
While you may want to step away from your colleagues at work, retirement these days is usually not a time of calm and solitude. It’s a great opportunity to do so.