This is a redux of a 2009 post, but it’s about time that I gave my newer readers a heads-up as to what we’re all about … if I had to point somebody to just one of my posts to get them started this would be the one; putting in all of the links nearly killed me 🙂
I get a lot of questions, comments, and e-mails in general from new readers, and this one – from Chad – is reasonably typical of what I might see:
I’m turning 27; just got a job making 50k/yr.; on the market for my 1st condo to live in (and hopefully rent out a room); have 1 student loan at < 3% fixed interest. My goal is $7 million in 13 years.
1. I have very little to no knowledge of finance/investing. Do you recommend any resources to get me up to speed so I can understand what you write about?
2. Where does my situation put me in terms of Making Money 101 and 201, i.e. where do I go from here?
I appreciate ANY direction you can give me as I do not want to be stuck behind a computer in a cube for the next 30-40 years.
While I love reading these sorts of e-mails (AJC: I really do!], I have a hard time responding because I can’t / don’t give direct personal advice … but,
I can suggest that Chad think about:
1. Exactly HOW important that $7 million in 13 years is to him, and
2. Assuming it’s VERY important (critical even), how he is going to get there.
a) If low – say, no more than 10% to 15% – then I would point Chad to the various ‘frugal’ blogs (my personal favorite is Get Rich Slowly) and ‘starter books’ like The Richest Man In Babylon, or the more modern equivalent: Automatic Millionaire by David Bach, or anything by Dave Ramsey or Suze Orman.
Each would probably suggest something along the lines of:
– Keep your job; times are tough!
– Save as much of your salary as you can (max your 401k’s, then your IRA’s)
– Pay down ALL debt, following a Debt Avalanche or Debt Snowball, whichever is your favorite
– Invest any ‘spare change’ (after all debts are paid off and the requisite ’emergency fund’ has been built up) into a low cost Index Fund
… and, wait until your government-directed – or, employer-forced if you are retrenched and become unhireable – ‘retirement’. This is where that fully paid off home and a lot of candles and canned food stockpiled will really pay off … you won’t be able to afford real food 😉
a) If high – say, more than 10% to 15% (and, I would venture that $7 million in just 13 years would well and truly put Chad in the 50+% required annual compound growth rate category!) – then I would instead point Chad to books like Rich Dad, Poor Dad and The E-Myth Revisited and then towards this blog and its 7 Millionaires … In Training! ‘sister blog’ and suggest that he starts working his way through the back issues (well, posts).
After reading/digesting properly, he should be able to come up with his own plan … something along the lines of:
– Keep your job, but get into active stock and/or real-estate investing – better yet, start a side-business; because times are really tough(!):
i) A mildly successful part-time business might provide additional income to help you weather the financial storm and supercharge your savings, investment, and debt repayment plans
ii) A more successful part-time business might provide a built-in ’emergency fund’, tiding you over should you lose your job and/or unexpected expenses crop up
iii) An even more successful part-time business that can be started and/or survive during a recession may prove to become wildly successful once the clouds of the recession begin to lift, maybe even carrying you directly to your Number [AJC: do not pass Go, but do collect $200 million 🙂 ]
– Control your spending, and save as much of your salary as you can to build a war chest for starting / running your business
– Pay down ALL expensive debt, following the method laid out in the Cash Cascade, but keep your mortgage (lock in to current low rates) subject to the 20% Rule and the 25% Income Rule and seriously think about keeping your other cheap debt loans.
– Invest any ‘spare change’ from your job and business (after all expensive debts are paid off and the requisite ‘business startup fund’ has been built up) into quality ‘recession-priced’ stocks and/or true cashflow positive real-estate.
… and, wait until you have reached your Number (through sale of business and/or conservative valuation of your equity in your investment assets).
That’s it 🙂