Here at Forehand Financial, every month we will find a new financial blogger to provide his/her knowledge to a series of important and meaningful questions/statements regarding in the financial space. At this time, they primarily include written commentaries, but this will continue to evolve through podcasts and videos as we expand our offering. Please Enjoy!
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Paul: In your journey through finance, what is a common misconception you initially had when it came to money?
Eirin: To be honest, I can’t remember having any misconceptions about money. I started working on my wealth-building journey quite early. I was 18 years old and knew I didn’t want to depend on one salary and trade my time for money to live my life. What I do remember hearing growing up at home is that you have to work hard in life to earn money and live well. I didn’t fully agree with it though as I had influence from other people in my life who had built their wealth outside of a traditional job. They had started their own businesses and invested in the stock market and in property. When I look back at my life now I realise how important the saying “You are the average of the 5 people you surround yourself with” truly is. I think having a positive influence from others and seeing what’s possible for you is key. Then it’s up to you to plan and make it happen!
Paul: What practices do you try and implement in your life to achieve your (financial or non-financial) goals faster?
Eirin: One of the most profound practices that I created and implemented in my life is a daily morning routine. I love waking up really early before the rest of the world wakes up and noticing the peace and quiet. I do my workout first thing in the morning. I follow this with journaling and mindset work. Our mindset is at the core of everything we do. I work on my mindset so that it always matches my aspirations in life. I also write at least 5 things I'm grateful for every day. Then I set my top priorities for the day and write out what would make my day a success. My morning routine is a practice where I dedicate time for myself. I don’t put a time limit. I just let myself flow. I have no stress to get to a job or to be somewhere else. This is something that I’m constantly so grateful for. I’ve created a life where I choose what to do with my time. I'm usually ready to work between 9:00 and 9:30 am feeling motivated and with so much positive energy.
I also recognise that sometimes life gets in the way and it’s not about doing everything perfectly. If I miss a day or two, it’s not the end of the world. The most important thing is to be consistent with your habits and come back to it quickly if you fall out of it.
Other practices I implement to achieve my goals is to hold myself accountable. No one will care more about your success than you. I like to think of it as a game and I make it fun to work towards my desires. I track and review how I’m doing consistently and at a minimum once a month. Lastly, I think celebrating your progress is part of what makes the process and journey enjoyable. I like to recognise the efforts I am making by celebrating my small and big wins.
Paul: After a long day of work, what do you like to do to destress, wind the day down and reach a relaxed mood to be fresh to take on the next day?
Eirin: I prioritise self-care as much as work. I believe that in order to be productive it’s just as important to rest and slow down. I like to switch off completely when I’m finished with work although it’s hard to always follow through with this, especially since I have my own wealth coaching business. When I do switch off I like to spend quality time with my fiance, friends, or family. I enjoy slow evenings with a good glass of wine and good food. I really enjoy cooking, baking, or any kind of creating in the kitchen. It feels like meditation for me. I also like to spend time reading a good book or watching a show or movie with my fiance. Finally, I love going for walks in nature but the only thing I’m missing is having a dog that I can bring with me.
Paul: If you were to recommend one movie, show or book that has changed you for the better what would it be and why?
Eirin: I always find it so hard to just mention one so I’m going to share two books and one documentary that have impacted me.
1) One of the first books I ever read on personal finance was Rich Dad, Poor Dad by Robert Kiyosaki. My parents knew I had an interest in business and learning how money works in the world so they gifted it to me when I was 18. This is also around the time I started working on my building my wealth and it definitely shaped my financial independence journey. The biggest takeaway I took from this book was about the difference your mindset makes in your life.
2) Your money or your life by Vicki Robin: This book is different from other personal finance books because it guides you through the inner work needed to transform your relationship with money. To achieve true change in your life you must first change your beliefs about money and bring consciousness to the way you spend and earn your money. It’s not really about money but about what you are trading your life energy for. I love it because it truly highlights the difference between making a living and making a life.
3) Minimalism: A Documentary About The Important Things. I am not a minimalist although I am closer to practicing some form of minimalism than the consumerist lifestyle of modern society. I really resonate with the idea of finding freedom by living with less. Through my own wealth-building journey I have learned to live life more intentionally, aligned with my values, and following what truly matters to me. I really enjoyed seeing how other people in the documentary have made changes in their lives to prioritize happiness over external and superficial measures. It focuses on the virtues of downsizing your life and understanding the true meaning of “enough” which also Vicki Robin writes about in her book Your Money or Your Life. The documentary really inspired me to embrace minimalism even more although I can’t say I am even close to the authors Joshua and Ryan’s way of living.
Paul: Ten years ago, have you expected to be where you are now? What financial advice would you tell your younger self or someone in their teens or twenties?
Eirin: Yes, I had no doubt that I would be well on my way to financial independence. I also think that this strong self-belief that I had in myself is what made it possible for me. I started working on my wealth-building journey when I was 18 (over 13 years ago now) and I set myself savings goals and investing goals every year to get closer to my ultimate goal of financial independence. I think the best financial advice I can give to someone else is to get financially educated. The biggest risk in life is not to understand how money works and how you can use it as a tool to build your dream life or create a safe future for yourself. I would also recommend women to start talking more openly about money between each other. It’s definitely something I would tell my younger self to do. I felt quite alone in my wealth-building journey and would have loved to have a community of other women to speak to about this. That’s also one of the main reasons why I decided to build one myself through my business.
Paul: What advice would you give to someone who has trouble sticking to a budget? Any strategies to help them stay the path?
Eirin: Budgeting has such a bad reputation and often makes people think and feel that they have to restrict or deprive themselves. Nobody enjoys this so I would start by changing the perspective. A budget is supposed to feel expansive. It gives you the freedom to spend on the things that matter to you. Start with your why and set yourself a goal. Why do you want to create a budget? Is it to get out of debt? To break the paycheck to paycheck cycle? To start saving more money? To invest for your long-term goals? One of the reasons that budgeting may be difficult is because there are so many emotions tied to the way that you spend your money. It is important to address your emotions when it comes to your budget. I always advise my clients to start tracking their money first, before they create a budget. Tracking your inflow and outflow of money is a great way to become aware of your money habits and the emotions tied to your spending. When you’ve been tracking your money for a few months you can really start to analyse your spending. You will probably notice certain trends and patterns. From here you can start to be forward-thinking and make decisions about what you want to allow yourself to spend in each category and how much you allocate to your savings. This is the perfect time to make a budget! Make sure you set aside fun money each month that you can spend guilt-free.
For additional strategies to set yourself up for success: Schedule a review with yourself at the end of the month (or as often as you like) to check-in, see how you did, learn from your results, and make adjustments as needed. Make it a fun experience. What do you enjoy doing? Make it a special occasion and something you look forward to doing. For the biggest chances of success, find yourself an accountability partner or invest in a wealth coach that can support you and hold you to your highest potential.
Paul: If you were to give advice specifically to women on things, they can do to maintain their lifestyle, while concurrently achieving their financial goals what would they be? Is there anything that you or other women may have experienced when it came to money?
Eirin: I think my biggest advice to women is to get financially educated. It is especially important for women to take control of their finances and to build their own financial independence.
We are aware of the gender pay gap, that women take more career breaks to care for children/elderly, we pay a premium on most products our entire financial lives, and we live on average 5 years longer than men. Research shows that women end up with around 70% less money than men in their retirement!! The huge wealth gender gap that women experience is a result of systemic issues and a lifetime of income and workplace inequality which is why it’s so important for women to start building their own wealth.
I would advise women to start by understanding themselves and their own relationship with money so they can choose to live authentically and maximize the time they spend working towards their desires. I always advise my clients to identify their “why” for wanting to achieve their financial goals. You will constantly be challenged and there will be things tempting you every day. That means that you have a choice presented to you in every single situation. Coming back to your “why” will help you when you need to make a choice between something now or your goal later. Additionally, learning to identify what you value and what you love spending money on will help you maintain your lifestyle and make it easier to say no to things that don’t matter so much to you.
Paul: If someone were in bad debt, what advice would you give to them regarding getting out of it?
Eirin: It can be tough to face up to your financial situation but it is such an important first step.
I think the most important thing to remember is to look at it with no judgment. Remember that your debt does not define you and it does not determine your worth. It can also feel like a lonely journey but there are so many others who are experiencing the same. Speak to someone you trust who can support you. Start by creating a list of all your debts (credit cards, overdrafts, loan and mortgage, personal loans, etc.). Then check how much you owe on each one, the interest rate on each debt, the minimum payment on each debt, and the payment due date on each debt. After you’ve listed it all out, prioritise what you want to pay off first. Look at your budget to see how much you have left after your expenses are covered. How much can you afford to put down toward your debt payment each month? The most important is to not overpay as you need to make sure you have enough for your monthly expenses so you don’t end up taking on more debt. Once you start eliminating expensive debt and can afford to pay down more, you can start adjusting the amount. Eliminating debt can end up taking a long time so celebrate your progress along the way. Create a reward system and be specific about how you will celebrate each small win.
Paul: What investments have you found the most rewarding both from an impact perspective (ESG or supporting other local causes), but also a strong rate of return?
Eirin: I’ve always been conscious of our impact on the environment and I try to look for ways where I can live my life more sustainably. I started looking into this with my investments and specifically how we can use renewable energy to combat climate change. In 2015, in my stock picking research, I came across a company in the green hydrogen industry. I started reading more about how excess solar and wind power can create operability challenges. I learned about how the excess wind and solar power could be converted to hydrogen and used elsewhere or even to produce electricity which made me realise that hydrogen would play a key role in transitioning towards green energy. I opened a long position in a growth stock in this industry in 2015. It’s definitely been my best investment to date as well as one that is in full alignment with my values too. I got in early and I have a 620% return so far. The best part is that this stock is just in the early stages of its growth journey. I’m planning to hold it for many years.
Paul: What traits do you see in most successful people financially? Can these be learned, and if so, how would you recommend adopting them into one’s life?
Eirin: I believe successful people have common traits which come from a desire or purpose to achieve a bigger vision for themselves in life. They have a long-term mindset and a strong belief in themselves. They also have a strong commitment to follow their dreams. They use this for direction and implement consistent daily habits and discipline to work towards their goals. However, I think it’s also important not to put successful people on a pedestal. They also have their own insecurities and moments of self-doubt. They can also have bad habits and have gaps in their knowledge too. The difference is, they know, that all of these things are perfectly normal. The goal is not perfection, it’s to take imperfect action towards your desires. Lastly, and maybe most importantly, successful people have a genuine desire and willingness to learn. So yes, I believe anything can be learned. Start by identifying one new habit that you want to implement in your life. Set yourself up for success by doing it first thing in the morning or at a time you know you are most likely to follow through. If you have too many things that you are trying to change at the same time you will probably get distracted and not be fully focused on them. By just focusing on one at a time you can place all your energy on implementing it and you will have a higher chance of success.
Thanks everyone for reading this thoughtful and actionable content! To stay and touch with Eirin, please be sure to follow and support @eirin.holmeide on Instagram!
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Paul: What is the most exciting thing you have encountered on your journey so far blogging, coaching, and educating?
Marco: Without hesitation, for coaching and educating, it has been the interaction with my clients.
I love my clients’ reactions when they achieve their financial goals like becoming debt-free.
For the blog, I would say that the most exciting part was when I launched it. I worked so many hours to develop my website that when it went online, it was an achievement.
Paul: What hurdles have you had to overcome in your journey so far? What hurdles lie ahead that you are starting to work on?
Marco: I think the biggest hurdle I had to overcome was my impatience. It takes a lot of time and patience to start a business from scratch.
However, I tend to get excited when I have a new idea. At the beginning, I was a bit frustrated to see only a few people reading my articles because my goal is to help as many people as possible.
The next hurdle I need to overcome is growing my client base. It has been difficult to find new clients. I don’t have a big budget to spend on advertising so it takes more time to get new clients.
Paul: When it comes to developing your skills, what areas do you want to focus on that will bring the most value to your personal life and career?
Marco: I would say communication, organizational, and analytical skills are the three most important skills I need to improve continuously.
My job is to understand my clients’ financial situation and help them in their path to financial freedom.
Paul: Any sports or healthy activities that you embark on to help reduce stress or keep a level head?
Marco: Sports play a big part in my life. I played a few team sports like soccer, volleyball, and handball when I was in college. And I still play soccer as much as I can here in California.
Another activity that helps me reduce stress is meditation.
Paul: What is the best non-finance book you have read in the past year and why?
Marco: I’ll say The Power Of Now by Eckhart Tolle. This book is eye-opening for me.
Before reading it, I tried meditation a few times, but I hated it. I didn’t understand how it worked and my mind was not open to it.
Now, it’s the first thing I do when I wake up in the morning. It changed my life!
Paul: What are some of the most challenging topics in finance that you must explain? How do you break it down for your audience?
Marco: In personal finance, the most challenging topics are the ones that trigger emotional reactions like debt or budget.
Debt is a tricky one because it’s a touchy subject. People get in debt for multiple reasons, but it’s not because they want to. As a financial coach, you need to understand the reason behind it, so you can find the best solution for each situation.
Most debt relief businesses offer plans for their clients to follow in order to pay down their debt, but it’s not enough.
Let’s take the water leak analogy to illustrate my point. Your ceiling is leaking water. Are you going to dry it out and move on with your life or are you going to find out the reason of the leak so you can fix it properly?
To learn about the 7 step plan to become debt-free, you can read this article.
Paul: As a financial coach, how would you encourage people who are living paycheck to paycheck during these times to get by, that was recently furloughed or laid off?
Marco: The first thing I would tell them is to keep calm. Taking financial decisions when stressed or letting emotions control your finances is not a great idea. Keep in mind that every situation has a solution.
The next step is to assess their financial situation. Before trying to make things better, they need to understand how bad it is. Most people know that their financial situation is not in the best shape, but they don’t know how bad it is until they look at the numbers.
Then, they can find a solution to get out of this paycheck to paycheck cycle. If they can’t save money on their salary, they are living above their means. Creating a budget is a great way for them to take control over their finances.
Paul: Do you have any pet peeves regarding the topic of money and poor stewardship of it?
I could probably write an entire article on inconsistent behaviors around the topic of money. But here are a few of them.
Paul: For someone in their 20’s or 30’s, what advice would you give them to not fall into a debt trap?
Marco: The best advice I can give millennials and generation Z is to only buy what you can afford. In Jay-Z’s words: “you can't afford something unless you can buy it twice.“
Other advice I give my clients is to use their credit cards as debit cards. That way, they can pay off their credit cards every month on time and not pay high interests.
Paul: Through coaching individuals financially, what methods have you found the most effective at seeing positive changes in their spending or debt tempting habits?
Marco: I don’t think there is a universal method that can work for everyone. We all have different life experiences, backgrounds, and things we love to do in life. So it really depends on each individual.
However, the most effective way to improve your finances is the willingness to change. For example, if someone wants to improve their household finances, but only one person in the household is willing to make changes, it won’t work.
Thanks, Forehand Financial for inviting me to do this blogcast. If any of you are interested in financial freedom, I started a new program that aims to help you in your pursuit of financial freedom.
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Paul: What about your blog and financial education drives you to wake up every day and continue working on your successful blog? Have you had any epiphanies in the past decade or so knowing that this is what you wanted to do and where you wanted to be?
Brendan: Wow, this is a tough one. I don't always wake up feeling motivated to continue working on my blog and sometimes feel a little despondent about it. I'm really motivated by emails that I receive from readers, often sharing personal stories about how they have managed to change their finances by implementing some of the things I've written about. I also love reading stories of how people have managed to pay off debt and not only change their financial position, but their relationship with money too. It's these stories that keep me motivated and feeling that I am helping people.
I've only been blogging for 3 years now and I see this as a great way to escape the "rat race" as I can literally blog from anywhere in the world, at whatever time suits me. That's quite a motivating factor as I am keen to travel more and will be able to fund my travels through writing.
Paul: What do you do to stay current on industry trends in the finance space, do you happen to subscribe to any publications, online courses, or mastermind groups?
Brendan: I get most of my information from the finance section of newspapers as well as the many finance folk I follow on Twitter. I also read finance books on investing and try to keep up with some of the FIRE community although there really is just too much information out there that one has to limit oneself.
Paul: What are some of the biggest obstacles you have had to overcome building up your successful blog? Did you ever have any doubts?
Brendan: I started my blog as an experiment to learn about blogging, social media, SEO and all the rest that goes with a blog. I certainly didn't imagine that my blog would become what it has and that I would get radio interviews or be working on marketing campaigns with some of the largest banks in the country. My first year was definitely the hardest as I had incredibly low readership numbers and really struggled to get a Twitter following. I enjoyed writing though and decided to just keep going as long as I had interesting topics to write about.
I got into the habit of writing at least one blog post a week and set up a weekly email newsletter to force me to keep it up. The popularity of the blog has grown exponentially and my advice to any new blogger is to just keep going. Do something on your blog every day, no matter how small.
Paul: After a long day at work, what do you do to de-stress or wind down effectively? Do you partake in any healthy habits that keep you energized throughout the day?
Brendan: I don't have a particularly stressful job but my usual day starts at 6 AM with a yoga session. I practice the Mysore style which is a self practice under the guidance of a teacher. You simply memorise the full sequence over time and do the same sequence each day. It's a form of meditation and can be incredibly hard, especially on cold winter mornings or on those days that you simply cannot get out of bed. After yoga it's usually a race to the office to continue the day.
My wind down is usually an episode or two of something on Netflix, followed by some mindless social media or reading. My partner and I often joke that we're the most boring people in the world as we live a simple life and are content with our routine and lifestyle. Early to bed and early to rise.
The past few weeks of lock down have been a change of pace as I've been working at home and can wake up a little later and enjoy the peace and quiet of my garden during breaks.
Paul: Do you have a favorite quote, and if so, what is it?
Brendan: "If you don't like where you are, move! You're not a tree" - Jim Rohn
Paul: What advice would you give to someone who's trying to pursue higher education, but does not want to take on any debt?
Brendan: It's tricky as higher education is expensive and student loans are almost inevitable. I'd suggest to start by applying for all bursaries or financial assistance programs that are available (and for which you qualify). You may find that you're selected for a program from which you can benefit tremendously. Many would suggest taking up a part-time job to fund your studies. This is certainly an option but could lead to burn-out if you're working too hard and trying to keep up with studies. If you're spending time and money to gain an education then that should really be your focus so that you can get the most out of it and get the best value for your money.
Crowd funding is another great way to fund studies as friends and family (and even strangers) can contribute to your future. There are probably more people willing to assist than one would think, they just don't know how.
Paul: What are the best investments that you have made(both financial and non-financial)? With financial investments, what process do you typically go through to evaluate the viability of a prospective opportunity?
Brendan: I've invested in many interesting things from standard investment products to property, art and antique coins. One of my best investments was a series of courses on property investments and how to use various legal entities, gearing, managing the risk and ultimately building wealth. The courses were quite expensive but have been well worth it as I learnt so much and have been able to put it into practice.
The first property that I bought (long before attending any courses) also happened to be my best financial investment as I bought and sold at just the "right time" to more than double my money in a 3 year period. This was just luck though and had I known better I would actually not have sold and would still be sitting with a great investment.
I also have a piece of art which has increased in value by around 11% per year. It's not necessarily the best growth, but I do happen to love the painting and it's a tangible investment which means I can see something real for my money. I don't necessarily recommend art as an investment, that's something I should blog about.
Paul: What negative financial habits have you seen people bring into their lives and do you have advice on how those with bad financial habits can get out (in addition to following your wonderful and informational blog )?
Brendan: The worst financial habit I see is consumerism. Simply buying for the sake of it.
I have friends who shop online daily simply because of the special offers available. They literally have a garage full of boxes of "stuff". As they buy new things each day the older ones get stored. And as the house and garage get full, they opt for more storage.
It's hard, if not impossible, to tell people what to do with their money. That is why I blog about everyday situations, basic financial decisions and how to track your money. People unfortunately need to recognize that they have a problem for themselves and then seek help. Hopefully they find me or any of the other great finance blogs out there.
I am also always excited to talk about money and how I feel about certain situations. So whenever I get asked about finances, I’m happy to share.
Brendan: What is the biggest lesson you have learned from money and what would you say to yourself to your younger self to have avoided this misstep?
Paul: My absolute worst money mistake was to cancel insurance on my car. I was young, had gotten into debt to buy the car, and couldn't afford the insurance anymore. I must have the worst luck in the world as my car was stolen within weeks of cancelling the insurance and I ended up having to pay the car off over the next 2 years even though I didn't have it. I couldn't afford another car and had to walk and cycle everywhere. It was a terrible event and one which I'll never forget!
Advice to younger self "Take out insurance!"
Paul: Some people use leverage(debt) in a way that brings a larger investment upside and a stream of cash flow (Robert Kiyosaki, GrantCardone, Graham Stephan to name a few). What are your thoughts on the utilization of debt to attempt to achieve higher returns?
Brendan: I use this concept myself in property investments. It really works. I would however caution anyone considering this to attend courses, read books and really be sure that you understand the risks and are able to carry yourself through the tough times. You need to have a good buffer fund in place and be able to analyse your investment strategy to know whether it is working or not.
If it's a guessing game and you’re hoping for the best then I’d be worried.
Paul: With all that is happening right now in the world with the pandemic, are there any specific finance or investments tips you would encourage readers to consider getting through the other side in a fruitful manner?
Brendan: Everyone’s situation is so different that I would hate to offer some kind of “one size fits all” advice. I’d simply say that we don’t know how long this will last, what the effects on the economy will be, and what our families job situations will be like. Be cautious with your money now. Don’t make rash decisions and try (as far as possible) to avoid increasing your debt.
Paul: Thanks for your time Brendan! I appreciate your wisdom on all things money and finance. Let's stay in touch!
Please visit Brendan's website for more information on taking control of your money! Link is below.
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Paul: In your journey through finance, what books have you read that really have helped you grow? What books do you recommend people just starting out in finance read?
Derek: The book/course that most impacted me was Financial Peace University, by Dave Ramsey. I used the tools in this book to get out of consumer debt, build up an emergency fund, invest in the market, and pay off my house! Today, I enjoy a peaceful life (even among the turmoil all around us) with plenty of funds to live on for years. I'm so glad I'm not like the 67 million Americans today that are worried about making their next credit card payment.
Other books that have impacted me over the years:
Paul: How did you balance working a full-time job, doing a "hustle", maintaining relationships, social lives, physical shape, etc. while also performing optimally? Is there anything you had to sacrifice?
Derek: Ha, it's not always easy!! With wife and kids, a full time job, and a blog... For a while there, I was thinking about selling the site because it was simply taking up too much time! Thankfully, I didn't get the 6-figure offer I wanted and decided to keep it...with a little bit of hired help. I now have a virtual assistant that handles my advertising and emails, and I also have 3-4 staff writers at any given time.
I've come to realize that I'd rather spend 5 hours a week on my blog and earn $2,000 a month than 20 hours a week and earn $3,000. It's a wayyyyy better scenario!
Also, I've cut way back on screen time (used to be video games and TV). It's just not that important to me. I'd rather use the time to play with the kiddos, work out a bit here and there, and continue to learn by reading!
Paul: Over the past couple of years, what is the biggest lesson you have learned through your finance blog, and what suggestions would you give to beginners?
Derek: Oh man, a big one sticks out in my mind... I was running the blog, working Corporate America, trying to be a great husband and dad, but also to propel us ahead financially. My wife and I already had one rental house and saved up a good chunk of change for another. It took a few months of searching, but I finally found that diamond in the rough! Or so I thought...
It was going to be great! We'd fix it up, I'd blog about the process and increase my following, and then we'd rent it out for $1,300 a month, which would double our rental income. I was in love!
And then we got into month 6 or 7 of the "fix-up" stage...
This house was a disaster. It smelled like cat, dog, smoke, you name it. We had to tear down drywall, pull up sub-floor, remove ceiling tiles. It was a HUGE project! I still wasn't overly concerned, but my wife was fed up with me working mornings, nights, weekends... It nearly broke our marriage to be honest. I still found time for the kids, but had no time for the wife. NOT SMART!
Once we were finally done, she could barely even look at that house. We had to sell it to get rid of the reminder of that awful time. We still made $27,000...but it truly wasn't worth the sacrifice of those 8 grueling months...
Yes, money is important and we all need to have it, but there is such a thing as 'enough' money. Relationships, exercise, our spiritual walk...there are so many other things that are important as well. It's all about the balance of everything, not the domination of one.
Paul: To unwind and relax, what activities do you take part in that gives you a second wind, so you can start fresh the next day?
(1) Getting outside. My favorite way to do this is go golfing. If there's not enough time for that, I'll just go for a walk or a run through the woods!
(2) Talking with people. I always learn something and grow a bit more, just by chatting with someone else.
(3) Exercise. Lifting weights, swimming, and running - those are my staples. They get my heart pumping, my mind cruising, and they distract me from my day-to-day work.
Paul: Do you have a favorite quote, and if so, what is it?
Derek: “We buy things we don't need with money we don't have to impress people we don't like.” -- many have claimed to be the originator of this quote...
The point is, stop living your life for someone else. Live it wisely, and live it for you.
Paul: During volatile times, what measures do you take to protect from downside risk, while concurrently maintaining upside potential?
Derek: After sifting through dozens of articles and thousands of data points, I've come to the realization that investing with the market (ie. Index funds) makes way more sense than trying to time the market or pay someone else to try to time the market (ie. active mutual funds). So, I put a good portion of my retirement investments into Vanguard index funds.
Besides this, I'm a huge fan of real estate investments. I have one rental house now that's a complete cash cow and my wife and I plan to buy a couple more in the upcoming years.
And, a solid chunk of cash is never a terrible thing. We all need a safe-guard against job loss and unfortunate accidents.
Paul: What type of investor are you (income investor, growth investor, combination, speculative, etc.)?
Derek: I'm more about growth. I never got that big into dividend investing - the concept makes sense but too many people end up investing heavily in a company purely for a 6% dividend...while growth stocks can average 10%+. Sure, it's more volatile, but on average it's the absolute truth!
And...like I said before, I just chunk my money into Index Funds modeling the S&P 500. Unless you have a ton of money and a lot of time on your hands to learn the ins and outs of the market, betting your funds of single stocks here and there just isn't worth it. You might have some big winners, but you'll also lose many times as well.
Paul: What advice would you give someone who has a partner who is bad with finances and is simply uneducated in the world of finance?
Derek: Ugh, this one is tough...and it's more or less why my first marriage failed. She saw no reason in having more than $1 in our bank account. I wanted millions in investments. Needless to say, it was tough to find a middle ground. So, the first point of advice is,
"Find a partner that shares your spending habits, your religious beliefs, and your exercise habits" -- or at least, comes close.
If you've already chosen a partner and didn't quite get the saver you wished you had now, it will never be easy, but the best thing to do is set some common goals.
- Where do you want to be in 5 years? 10 years? 20 years?
- What do you have to do with your money today to get you there?
Even the biggest spender should realize that money needs to be saved if you want to travel the world in retirement or buy that cottage on the water.
Also -- be willing to compromise. You're not fully right and neither is your partner. Learn to meet in the middle.
Paul: What is the best investment you have ever made (You don't need to name the specific company if you don't want), and what research led you to this investment?
1st - my best investment was in me - my education. I'll earn millions more than the average person because of my college degree, my MBA, and most importantly, what I've learned through both of those programs (ie. the application of what I've learned is probably more important than the piece of paper I earned).
2nd - my spouse that I'm on the same page with. I put tons of time into wooing my current spouse. 7 years later and I still say the investment was totally worth it. We're on the same page with money, with our kids, and with our future selves!
3rd - my Roth 401k at work. I get a match, an additional 4% from my company, and I don't have to pay taxes on the money in retirement! And of course, I invest largely in index funds. :)
Worst investment? When I was broke and bought 5 shares of Coach. The stock went up and earned me $60, but I spent $20 on transaction fees and another $60 to file the additional tax schedules to record my earnings... Therefore, I lost $20 and had to pay taxes on my "earnings".
When you're broke, pay off debt. It's the best investment you can make.
Paul: What is the biggest mistake you have made investing or doing personal finance?
Derek: Ha, I guess I jumped the gun on this question! Refer to the above...
Oh, also, I invested $2,000 in silver a few years ago. The stock market soared and my silver tanked. Pretty sure I sold that investment for $1,400... Not worth it!
My investments today are real estate, index funds, and cash. It's simple, but good enough for me!
Paul: Any general finance rules of thumbs you would like to share with my audience?
- Never take out a mortgage that's more than 2X your yearly income.
- If you have consumer debt, do everything you can to pay if off quickly!
- Once you have consumer debt paid off, keep living frugally - preferrably on 50% of your take-home pay. Invest the rest. It's amazing what a pile of money will allow you to do -- take a different job, start working for yourself, retire extremely early, give money away to those in need... Having money is way better than not having money, so why not just work at having the latter!
Derek Sall is a lover and writer of all things personal finance. And, there's nothing he'd love more than to see you succeed!! Follow him on his site at https://lifeandmyfinances.com