There has been a lot of discussion about buying gold in the media over the past several years. You may have wondered how exactly do you go about making such a purchase. Mark Griffith, a former floor trader with the London International Financial Futures Exchange, gives a concise introduction in this topic. In this EHow video, Mark outlines the options available in purchasing gold in the marketplace.
Further aspects of using precious metals for achieving financial freedom will be presented in future editions of FFN. FFN Editors
(Disclaimer: The views expressed in the above video are strictly those of the presenter. They do not necessarily represent those of FFN. Please use due diligence prior to applying the concepts, recommendations and/or in purchasing any products or services from the presenter). FFN Editors
The road to financial independence is not a simple one. Lisa Smith, writing for Investopedia, outline the issues and dilemmas we face on that journey in the following article. With over 20 years as a financial writer, Ms. Smith offers a very clear analysis of the pitfalls that can slow or even divert us on our way to financial freedom. FFN Editors
Two Roads: Debt Or Financial Independence?
- Get a job
- Start to save
- Get raises
- Save as salary increases
- Take advantage of dollar-cost averaging (DCA)
- Benefit from a bull market
- Hit magic number
It sounds simple and straightforward on paper, but in reality, earning a high income does not automatically translate into a high net worth. This article will explain why.
Income and Expenses
When most people are starting out, they rent a small apartment. Getting married or setting up a living arrangement with a significant other generally results in a higher income, but it is also likely to lead to the desire for more space – often at the cost of the desire to make maximum contributions to a pair of individual retirement accounts (IRAs) or 401(k) plans. Unfortunately,there are many things that people may not know about an IRA, and the opportunity to increase savings often takes a back seat as living accommodations are upgraded to a single family home.
After a decision is made to have children, buying a minivan, paying for clothes, toys, soccer, hockey, ballet, and other associated costs results in an increased outlay of cash, not only eliminating the ability to save more, but potentially resulting in a diminished savings rate. Having children can also result in moving to a larger home in a better school district and,the decision to pay for tuition at a private school, and then maybe even a college education. All of these things start to take precedent over funding your own retirement savings.
Lifestyle decisions can also have negative impacts on savings rates, even as income increases. Scrimping and saving simply isn’t fun. If we can afford to take a luxurious vacation, buy that sports car, upgrade the wardrobe, spend a weekend at the spa, buy that place at the beach or chalet in the mountains, don’t we deserve it for all the hard work we have done?
The desire to spend instead of save is also fostered by a quick look at the shenanigans on Wall Street and the poor investment returns in our portfolios. Anybody holding Enron, Worldcom or dozens of other failed firms in their portfolio aren’t likely to be singing the praises of savings. A look at most investment statements during a bear market also serves as a reminder that a 20% loss is not recovered by a 20% gain. If we’re going to be cheated by the firms we invest in and watch our portfolios decline in value even when we diversify, it’s easy to justify the purchase of something we will at least be able to enjoy in exchange for our money.
Geography can also work against the ability to save. In Silicon Valley, a modest ranch house can sell for $500,000. In New York City, private school tuition for three children can reach six figures and mortgage payments of $150,000 per year are not uncommon. Moving up in the world also places one in a different position on the socioeconomic scale.
If you are living the upscale lifestyle of an investment banker to the rich and famous, driving to a client meeting in a Ford Focus is out of the question. Similarly, if everyone in your social network has a housekeeper and vacations in the Hamptons, those items become an expected part of the lifestyle in order to maintain your social network and class. That correlation between standard of living vs. quality of life is very common.
The Eye of the Beholder
Although it might sound extravagant to those of us earning the national median of around $50,000 (according to Census Bureau figures), having more money (even much more money), doesn’t always put people farther ahead. In fact, those earning more almost always have a lifestyle that leaves them with more things to pay for. That said, before class envy takes hold, those of us at the lower end are also not skipping our lattes, nights on the town, cable television, cell phones, cigarettes, alcohol, new cars, and other nice-to-have-but not-strictly-necessary expenses.
In the end, everybody wants whatever they can afford, and instant gratification is a whole lot more fun than watching a quarterly brokerage statement for 20 years or more. As a result, most of us end up financing our lifestyles with debt. And many are worried that standard of living vs. quality of life is very common.
The Bottom Line
Sticking to the seemingly simple plan of earning more and saving more requires serious discipline and sacrifice. It means living below your means, regardless of the level of your means, and making savings a priority. If requires having a plan, saving and maximizing the amount you invest in our 401(k) and other savings vehicles before spending on the extras. It may not sound like fun, but years from now, when you look back at all the people who seemed to have it all but were really just getting by, you’ll be one of the ones laughing all the way to the bank
Michael Yardney, a director with Metropole Property Strategists, offers property advice and advocacy to his clients. In this featured article, Mr. Yardney gives us an interesting analysis of how the wealthy tend to make their money.
As you will see, the wealthy do some things very differently from the rest of the population that helps to increase their wealth. Geared towards property investing specifically, Michael explains these differences in this edition of Financial Freedom News. FFN Editors
Why property investors develop financial freedom
Friday, 06 September 2013 08:19
How did they do it? How can we do it too?
The truth is wealthy people don’t do different things; they just do things in a different way – from the way they think to the actions they take.
I’ll let you in on a little secret – not everybody has to work hard for their money.
People who own businesses have employees who are willing to work for money, whereas the business owner generally has his money working for him. The same is true for investors, their money works for them.
It’s called passive income. Being a property investor or a business owner is like owning the proverbial money tree – you control something that makes money for you, without the need to even be there.
In his Rich Dad, Poor Dad series of books, Robert Kiyosaki explains how the rich differ from the poor. It’s not just because they have more money. The main difference is how they think about and interact with their money and that when it comes to how people make money, we can all be placed in one of four categories.
1. The employed – have a job
Employees trade hours for dollars; however, what they really get are leftovers – after the government takes its share in taxes.
“So what? They do that to everyone!” you may be thinking.
Well no, they don’t. Business owners and investors only pay tax on what’s left over after their bills are paid.
Wouldn’t it be nice to only have to pay tax on what you don’t spend?
2. The self-employed – own a job
Self-employed people and professionals usually want to be their own boss. They’re prepared to work hard, but often what they’ve done is swap one boss for hundreds of bosses – customers or clients.
In reality, self-employed people aren’t business owners – they still work for their money, but they’re somewhat better off than employed people because they’re able to take advantage of tax deductions that allow them to pay their business expenses before being taxed on what’s left over.
3. The business owner – owns a system and people work for them
The true business owner not only doesn’t have to work, he doesn’t have to be at work every day, because he has a system and people to do it all for him, and possibly even supervisors to manage his workers.
The true business owner asks, “Why do it yourself when you can employ someone to do it for you?”
After initially investing in a business idea, and a business system, they let the money they have invested – which is now in the form of a business – work for them.
4. The investor – money works for them
Investors don’t have to work either, because their money works for them.
If you hope to become rich at some point, you have to belong to this group; because investors convert money into wealth.
Obviously, you’re not going to jump from being an employee to a full-time investor overnight. But you can start taking the steps to move from being an employee or self-employed, by building your own property portfolio.
Done correctly, income-earning residential real estate can be your vehicle for getting out of the rat race!
There are also many legal tax advantages available to investors. One of the reasons the rich get richer is that in some cases, they make millions and legally pay very little tax. That’s because they build their assets, not their income and make their money as investors, not workers.
Imagine you own investment properties worth $1 million that increases in value by 8% each year. In 12 months your asset base will have increased by $80,000, yet no tax is payable on this. Wealthy property investors can borrow against the increased value of their assets and use the money to reinvest or live off.
Where do you stand?
Which category do you fit in? Are you an employee, self-employed, a business owner or an investor?
In the past there has been a slow but steady transfer of wealth from employees and self-employed to business owners and investors. They’re all playing the same game, but each group is playing with a different set of rules and their mindsets are poles apart.
Employees and the self-employed work harder and harder, trying to build cashflow, yet many dig themselves deeper into a hole of consumer debt.
In the meantime, business owners and investors slowly build up their assets. The employed and self-employed pay the most tax, while business owners and investors take advantage of legal tax loopholes.
Logically, if you want to become wealthy you are going to have to become either a business owner or an investor. It’s just too hard to become rich as an employee or self-employed worker.
Does that mean you should give up your day job?
Not necessarily. Many employees have become very successful investors – in particular, property investors.
So rather than relinquish your job, I suggest you start educating yourself with the aim of becoming a property investor – initially in your spare time and then maybe, if you choose, on a full-time basis.
Should you become a business owner?
Most small businesses fail in the first five years.
In general, I think the opportunity to become rich through successful property investment is much easier for the average Australian. That’s why I recommend you seriously consider making your fortune as an educated, financially fluent real estate investor who treats their property like a business.
(Michael Yardney is a director of Metropole Property Strategists, who create wealth for their clients through independent, unbiased property advice and advocacy. Subscribe to his Property Update blog).
Let us know your thoughts regarding this information in the Reply section below. Also, please click “Like” and “Share” us with others who may be interested in achieving financial freedom.
(Disclaimer: The views expressed in this article are strictly those of the author. They do not necessarily represent those of FFN. Please use due diligence prior to applying the concepts and recommendations and/or in purchasing products or services from the author.) FFN Editors
Our featured writer, Richard Eisenberg, continues his analysis of the benefits of planning for financial independence instead of retirement. This, the second part of his article, includes a review of several retirement calculators. These calculators can give you a sense of what sort of capital is needed in order to realize the type of retirement you wish to have. As you will see, not all calculators are the same. So, choosing the right one is important. FFN Editors
Plan For Financial Independence, Not Retirement (Continued)
Richard Eisenberg, Contributor to Forbes Magazine, Personal Finance Section (www.forbes.com)
Two Types of Retirement Calculators
If you’re trying to figure out your Financial Independence day, should you bother using an online retirement calculator? I think it depends on the tool.
Most retirement calculators are actually best for people in their 20s, 30s and early 40s who have years to save furiously once they see their “number.” The electronic number crunchers typically ask few questions, partly because younger people can’t possibly determine for sure their retirement income sources or expenses.
“When you’re further away from retirement, these calculators are directional in nature,” says Kent Allison, a PwC partner and leader of the firm’s financial education practice, based in Florham Park, N.J. “When you get closer to retirement, you really have to get into a nitty-gritty cash flow analysis.”
He’s right. If you’re three to 10 years away from retirement, that’s the time to figure out where the money will come from to cover what Pat O’Connell, executive vice president for the Ameriprise Advisor Group, calls the three types of expenses:
Essential expenses that’ll be covered by guaranteed income sources, like bonds, Social Security and a pension.
Lifestyle expenses purchased with money from your investment portfolio.
Unexpected expenses, like health care and long-term care costs, paid for out of your emergency savings fund.
Three Good Calculators for People 50+
There are, however, a few excellent calculators – not always free – that are specifically geared for people in their 50s and 60s. They can help you firm up a retirement cash-flow analysis.
One is Retirement Works2 for You, created by retirement adviser Chuck Yanikoski primarily for what he calls “nonaffluent people trying to play their cards as smartly as they can.” It costs $189 for the first year; annual renewals are $44.50.
RW2, as it’s sometimes called, asks a lot of questions; Yanikoski says you should plan to spend one to three hours answering them. (“Retirement is an extremely complicated thing,” he says.) But the results can be valuable.
As soon as you input your data and answer the questions, you’ll get an online report card with retirement planning advice and letter grades telling you how well you’re set under “normal” circumstances, if you live an extra long lifetime, if your investments don’t perform well, if inflation shoots up and if you run into high medical expenses, including long-term care.
You’ll also see how your cash flow would be affected if you delayed retirement and lowered your standard of living.
Two other calculators worth considering:
The free Ballpark E$timate from the Employee Benefit Research Institute’s Choosetosave.orgsite and the American Savings Education Council; Next Avenue has a link to the Ballpark E$timate calculator.
E$Planner, created by Lawrence Kotlikoff, an economics professor at Boston University. There’s a free version of E$Planner Basic as well as one that costs $40, with “what if” investment scenarios and Social Security options. The downloadable $149 product also offers “retirement spend-down” strategies, helping you determine how much to withdraw from your portfolio.
Use an Adviser to Plot Your Findependence
Whether or not you use a calculator to come up with your Financial Independence Day, I strongly suggest you work with a financial adviser to run the numbers.
“The decisions are major,” Allison says. “A wrong one could cost you a lot. So even if you don’t normally want to spend money on a financial planner, this is the one time to do it.”
Richard Eisenberg is the senior Web editor of the Money & Security and Work & Purpose channels of Next Avenue. Follow Richard on Twitter @richeis315.
(This article is available online at: http://www.forbes.com/sites/nextavenue/2013/07/01/plan-for-financial-independence-not-retirement/)
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Let us know your thoughts regarding this information in the Reply section below. Also, please “Like” and “Share” this article with others who may be interested in achieving financial freedom.
(Disclaimer: The views expressed in the above article are strictly those of the author. They do not necessarily represent those of FFN. Please use due diligence prior to applying the concepts, recommendations and/or purchasing any products or services offered by the author). FFN Editors
Our featured article in this edition of Financial Freedom News recommends a very different approach to the idea of planning for retirement. Richard Eisenberg, a contributing writer for Forbes magazine, recommends that we focus on attaining financial independence instead of planning for retirement. In this two-part article Richard outlines his views on how to make this goal a reality.
In this article, we are given the 5 rules for declaring our financial independence. The second part of this article, in our next edition, will discuss several types of retirement calculators and their role in the planning process. FFN Editors
Plan For Financial Independence, Not Retirement
Richard Eisenberg, Contributor to Forbes Magazine Personal Finance Section (www.forbes.com)
Declaring your Financial Independence Day is a better idea than trying to come up with “the number” you need to retire, especially if you’re in your 50s or 60s and don’t have much time to pump up your savings.
What exactly is financial independence or, as some call it, financial freedom? That depends on your own definition.
In a new Capital One 360 survey, 44% of U.S. adults said financial freedom meant not having any debt, 26% said it meant having enough saved for emergencies and 10% defined it as being able to retire early.
I go with Jonathan Chevreau, the Toronto-based author of the new U.S. edition of Findependence Day, a “fictional finance” book, and creator of the Findependenceday.com site. His novel is about a young debt-ridden couple, Jamie and Sheena Morelli, and their road to reaching you know what.
Chevreau says that when you’re financially independent, you work because you want to, not because you have to. “Findependence is necessary for retirement,” he says. “You can be findependent and not retired, but you can’t be retired without being findependent.”
Chevreau targeted April 6, 2013 – his 60th birthday – as his Findependence Day and reached that goal, but he still edits Canada’s MoneySense magazine. “I have a job I like, so why would I quit?” he asks.
5 Rules to Declare Your Findependence
Chevreau’s five rules for achieving findependence:
1. Pay off your home in full. “That’s really the foundation,” he says.
2. Find multiple sources of income for retirement. These can include interest and dividends from your investment portfolio; rental real estate; freelance or consulting work; Social Security; an annuity; and perhaps a guaranteed pension.
3. Develop “guerrilla frugality” habits. Chevreau calls this “becoming a Frooger.” Keeping expenses low while working full-time will make it easy to live that way in retirement and reduce the amount of savings you’ll need for a comfortable retirement.
“If you spend like a millionaire, you’ll end up a pauper,” says his book’s protagonist, Jamie. “Spend like a pauper and you have a shot of becoming a millionaire.”
4. Save 20% of your gross income. This will be impossible for many people, but not for others. If you can’t save 20%, try for 15 or 10%.
5. Invest with a “Lazy ETF” portfolio. That means selecting, say, three exchange traded funds– a U.S. stock fund, an international stock fund and a U.S. bond fund – and holding onto them.
Review their performance once a year. Then rebalance your portfolio if the markets shift and you discover you have a higher percentage in one of these asset classes than you want. (Use index funds instead of ETFs, if you prefer.)
Women, Men and Money
At the risk of overgeneralizing, I think many women gravitate toward the concept of financial independence, while men often prefer focusing on “the number.”
In the initial episode of the two-part Consuelo Mack WealthTrack public television series on Women, Investing and Retirement that premiered June 28, Jewelle Bickford, senior strategist for GenSpring Family Offices, said the first question her male clients ask in their monthly or quarterly meeting is “how has their portfolio done, whereas the women tend to think: ‘Will I have enough?’”
(This ends part 1 of this article. Part 2 will follow in our next post). FFN Editors
Let us know your thoughts iregarding this nformation in the Reply Section below. Also, please click “Like” and “Share” this artilcle with others who may be interested in achieving financial freedom.
(Disclaimer: The views in the above article are strictly those of the author. They do no necessarily represent those of FFN. Please use due diligence prior to applying the concepts, recommendations and/or in purchasing any products or services offered by the author). FFN Editors
Given the challenges in achieving financial freedom, here are 10 lessons from Street Smart Finance that can help keep you on track. These are seminal recommendations taken from 10 different financial management thinkers. They represent the best thoughts on the financial independence process and broaden the range of expert knowledge available to us.
Let us know your thoughts in the Comment Section below. Also, please “Like” and “Share” this information with others interested in achieving financial freedom. FFN Editors
Achieve Financial Freedom: Awesome Lessons to Spruce up Your Finances
Posted by Shilpan for Street Smart Finance (www.streetsmartfinance.org)
“An investment in knowledge always pays the best interest”. — Ben Franklin
Achieving financial freedom is no small feat to undertake. Bogeyman is around the corner to snatch up your money before you even know. Even brightest among us face peril of losing wealth, if few major bumps come along the way.
How can you achieve financial freedom amid the ocean of financial information to explore? If you’ve felt hapless finding your safe harbor of financial freedom, you’re not alone!
Isn’t it a fabulous idea if you can get valuable advice to achieve financial freedom from 10 brilliant articles of financial wisdom on the blogoshpere? Of course, it is.
1. Saving money is the key to achieve financial freedom
The first step is to save aggressively. I’ve been saving 50%-75% of my after tax income every year for the past 13 years. I try not to be a miser and have done my best to try to spend money on things I enjoy e.g. vacations, food, a home, and tennis. Where I did “sacrifice” was not buying higher-end new cars (all but one were second-hand and under $20K) and going on less exotic vacations. Amanpulo I’m coming for you eventually! www.FinancialSamurai.com
2. Live Modestly
A lot of rich people constantly stress about their financial situation, all the while spending like there’s no tomorrow. If you’re making $500,000 this year and spend $400,000, you’d better hope that the economy doesn’t crash because once you’re out of a job, good luck funding that $400,00 a year hole in your pocket. By living modestly, you can relieve your stress and sleep well at night. Ostentatious living creates stress over your bills. – www.ModestMoney.com
3. Become a Renaissance man
What does becoming a Renaissance man mean? Think of a man like Leonardo da Vinci. Not only is the man famous for his inventions and scientific studies, but he is also one of the most famous painters of his time. His talents and interests were broad and deep, and there was no shortage of things to work on and explore. – www.InvestItWisely.com
4. You can’t go wrong with an Index fund
A portfolio of 100% stocks, which is what VTSAX(Vanguard Total Stock Market Index Fund) gives you, in study after study provides the greatest return over time. The only downside, and I mean only, is that the ride will be very rough at times. Admittedly, it’s a big one. If you are not tough enough to stay the course, if you get scared and bail when the storms are raging you are going to drown. But that’s a failure in you, not a downside of this asset class. – www.jlcollinsnh.com
5. You are responsible for your financial destiny; choose well
It is widely believed that small changes, practiced regularly, lead to out-sized results. Many great accomplishments began with tiny actions, implemented again and again. There’s research supporting the financial and personal benefits of quite a few of these habits. – www.barbarafriedbergpersonalfinance.com
6. Ordinary people can do great things too
I used to think that only geniuses and superheroes could achieve fantastic things in life. Or, at the very least, I felt that to have any success you had to be a totally go-getting, risk-taking, all out entrepreneurial maverick. At heart, I’m a cautious, down-to-earth kinda guy. My personal experiences, though, have shown me the potential that comes when you take positive action – even if it is only one step in the right direction. Extraordinary things are happening around us every day … all achieved by ordinary folk like you and me. — www.Vividways.com
7. Learn to invest in dividend growth stocks
The goal of Dividend Growth investing once retired is to maintain and grow your income from the dividends your portfolio produces. You maintain steady uninterrupted monthly retirement income as long as collectively your stocks will continue to produce 4% or more income annually and the dividend is not cut. – www.SeekingAplha.com
8. Think like a hamster, live like a hamster
Think less about money, more about time. Stop thinking of physical possessions in terms of money and start thinking of them in terms of time. Mentally convert money into minutes and you’ll achieve financial freedom faster. – www.FreeMoneyFinance.com
9. Save as if you were a 60 years old
Three things saved us: 1. Our unwavering 50% savings rate. 2. Avoiding debt. I’ve never even had a car payment. 3. Finally embracing the indexing lessons Jack Bogle perfected 40 years ago. – www.Mr.MoneyMustache.com
10. Learn from the Greatest Investor
Making money isn’t the backbone of our guiding purpose; making money is the by-product of our guiding purpose.” If you’re doing something you love, you’re more likely to put your all into it, and that generally equates to making money. – www.WarrenBuffett.com
Achieving financial freedom is all about developing mind-set to develop laser sharp focus on every aspect of your financial health. If you follow these articles of financial brilliance, you will be well on your way to the road of prosperity and happiness.
Disclaimer: The views expressed in the above article are strictly those of the author. They do not necessarily represent those of FFN. Please use due diligence in applying any concepts, recommendations and/or in the purchase of products or services from the author). FFN Editors
When investing in the financial markets, managing risk is a critical factor. How to accomplish this is a widely debated topic. Our featured presentation from the Wealth Directions Channel (http://GetWealthDirection.com), offers an approach which uses stock options as a vehicle for risk reduction in investing.
Options use for the average investor gets mixed reviews. Some swear by it, others feel it’s too complicated and therefore unacceptable for the average investor’s needs. However, the presenter asserts that stock options need not be that difficult. He suggests a 3 step process to make options a viable tool in the financial freedom seekers arsenal.
Let us know your thoughts in the Comments section at the end of this page. Also, please “Like” and “Share” this information with others who are interested in achieving financial freedom. FFN Editors
(Disclaimer: The views expressed in the above video are strictly those of the presenter. They do not necessarily represent those of FFN. Please use due diligence prior to applying any of the concepts, recommendations and/or in purchasing products or services from the presenter). FFN Editors