stock market/financial ?'s

[BleedBlueGold]

My uncle (very wealthy man) told me when I was very young. There are only a few ways to get rich.

Inherit it
Win it
Get some crazy job making tons of money
Borrow it

He also told me to make sure 10 percent of my daily income (money from working at your job) made me 10 percent. He said think about it every day.
I know this seems like a very small amount of money. It took me years to realize that it was about figuring out how to create the 10 percent more than the 10 percent its self.

I took it to heart. And so far (although i'm far from rich) It has worked very well.

Based on your list, he left out one of the most common ways to get wealthy...Hard Work. The majority of millionaires in this country are first-generation wealthy, which means none of them inherited it. They almost always own their own business, which means they didn't win it. The majority of them have a strong dislike for debt, which means they didn't borrow it (unless they borrowed at first to get it started...but there are statistics against this thought as well). And the majority of them started small (which means they weren't making heaps of money in the beginning)...but through Hard Work....they built their empires.

Read The Millionaire Next Door....it's fantastic and totally changed how I view people and money.

 

[BleedBlueGold]

That is an awesome story. Congrats! Regardless of your income or the things you have being totally out of debt at 30 is quite the feat.
I have herd of these books and know some people that it has worked well for. Maybe not as good as you but well regardless. However I do not see any way possible asides selling assists or winning the lottery that I can become debt free in even 10 years.

I owe a incredible amount more than that. I have very very large monthly payments. I have increased debt at least twice a year since I turned 19(built my first home)

I am hoping to double my debt over the next 5 years and be debt free around 65. May not happen but its the plan.

Thanks. I should have specified earlier that the debt we paid off is consumer debt and student loan debt. The mortgage is not included. So we do still have that payment. However, we'll attack the mortgage debt at a later Baby Step. (Ramsey has a method to this madness)

 

[Ndaccountant]

You make some great posts, but I always picture your avatar making the statement lol.

Says the Mexican wrestling monkey.

I am due for a change, so be on the lookout.

 

[cody1smith]

Based on your list, he left out one of the most common ways to get wealthy...Hard Work. The majority of millionaires in this country are first-generation wealthy, which means none of them inherited it. They almost always own their own business, which means they didn't win it. The majority of them have a strong dislike for debt, which means they didn't borrow it (unless they borrowed at first to get it started...but there are statistics against this thought as well). And the majority of them started small (which means they weren't making heaps of money in the beginning)...but through Hard Work....they built their empires.

Read The Millionaire Next Door....it's fantastic and totally changed how I view people and money.

As someone who has inherited nothing and own small businesses. I have a very hard time believing that you can start a business with out borrowing money. If one of your books explains this sign me up.

Hard work i agree is the main key to wealth. But a very small percent of the time can you achieve it by itself.

The main reason Gates Buffet ect. are so successful. Is not because they worked harder than you or I. Its because they worked 1000 times harder than we do. But both owed large amounts of money at one point and time in there life.

And not trying to sound like a bad ***. Because im not by any means. But a Millionaire is a pretty small task this day and age. I Could have been considered a Millionaire on my 25 birthday.

I graduated high school with 63 Kids. 4 of my best friends out of that class could be considered Millionaires today. All owning a Business or multiple businesses. 3 of which started building wealth early by borrowing money. 1 inherited large when his father passed away 6 years ago.

 

[Irish Houstonian]

If "hard work" also includes entrepreneurship, business sense, access to capital, a high risk-tolerance, and a good idea, then I agree all you need is "hard work" and you'll be rich.

 

[RDU Irish]

Ramsey's ELP (endorsed local providers) are a great place to start if you need a second opinion from someone you can trust.

I currently invest equally into 4 mutual fund groups: growth, growth + income, aggressive growth, and international. I try to find the best performers in each group that have a 10+ year history. I'm skeptical of ones that are too new and also skeptical of putting everything into one basket. Probably not the best idea.

Forgot to post the ELP link: https://www.daveramsey.com/elp/investing?ictid=rt.nav

Ramsey is great for learning basic financial discipline but his investment advise gets sketchy pretty quick. He should really stick to his bread and butter but his ego gets in the way. His real estate obsession is dangerous, most people I know can't handle the being a landlord and never fully account for the time they put into managing rentals. The whole ELP thing is largely advertising, paid placement for exclusive territories.

 

[RDU Irish]

This is where I am at right now and am doing fine. However they said the allocation fund is just a group of diversified mutual funds that are constantly monitored and adjusted based on which sector is performing the best. So if stocks are doing better, the mutual funds that are stock heavy are more represented and if something is just performing poorly, the managers move the money into better performing areas. So in the end the whole allocation fund stays diversified but is in "one" managed allocation fund. My worry is that the whole of my money will be in one "pot" but is allocated amongst a diversified mutual fund portfolio which spreads the risk.

i will check out the ELP thanks.

My first question, is this a front loaded solution? Changing out of A shares to a different fund family will incur a new expense. This could be a motivating factor for the "advice" you are getting. There are plenty of good global allocation funds out there with 10 year + track records that are great one stop solutions, I think more for early investing or start-up Roth type of situations. Once you get to a particular critical mass, it makes sense to branch out to other options to compliment.

 

[cody1smith]

Ramsey is great for learning basic financial discipline but his investment advise gets sketchy pretty quick. He should really stick to his bread and butter but his ego gets in the way. His real estate obsession is dangerous, most people I know can't handle the being a landlord and never fully account for the time they put into managing rentals. The whole ELP thing is largely advertising, paid placement for exclusive territories.

Rentals are very hard work and very very risky. 1 million dollars on arm loans is scary to anyone with any sort of a brain. But they also make money every month and if you keep them up and buy/build them at the right price they gain value over time.

I am in the process of finishing up another storage unit now. (rained out today, doing book work now) They are way easier than home rentals.

 

[RDU Irish]

As someone who has inherited nothing and own small businesses. I have a very hard time believing that you can start a business with out borrowing money. If one of your books explains this sign me up.

Hard work i agree is the main key to wealth. But a very small percent of the time can you achieve it by itself.

The main reason Gates Buffet ect. are so successful. Is not because they worked harder than you or I. Its because they worked 1000 times harder than we do. But both owed large amounts of money at one point and time in there life.

And not trying to sound like a bad ***. Because im not by any means. But a Millionaire is a pretty small task this day and age. I Could have been considered a Millionaire on my 25 birthday.

I graduated high school with 63 Kids. 4 of my best friends out of that class could be considered Millionaires today. All owning a Business or multiple businesses. 3 of which started building wealth early by borrowing money. 1 inherited large when his father passed away 6 years ago.

Wilt Chamberlain approves this message.

 

[RDU Irish]

Rentals are very hard work and very very risky. 1 million dollars on arm loans is scary to anyone with any sort of a brain. But they also make money every month and if you keep them up and buy/build them at the right price they gain value over time.

I am in the process of finishing up another storage unit now. (rained out today, doing book work now) They are way easier than home rentals.

As Lee Corso would say, NOT SO FAST... Vacancy = cash drain even if you don't carry a mortgage. Or an unusual expense can push you in negative territory pretty quickly for a month or two.

Not to mention getting stiffed by tenants and the fun of evicting someone. What about skipping out and destroying the house? What about failing to account for capital improvements (I don't think I have ever worked with someone who didn't stress out when a water heater blows, and anything like a roof usually entailed refinancing the debt on the thing).

Storage would be A LOT less stressful. Turn off their key fob access to the compound and auction the bad boy off.

 

[Cackalacky]

My first question, is this a front loaded solution? Changing out of A shares to a different fund family will incur a new expense. This could be a motivating factor for the "advice" you are getting. There are plenty of good global allocation funds out there with 10 year + track records that are great one stop solutions, I think more for early investing or start-up Roth type of situations. Once you get to a particular critical mass, it makes sense to branch out to other options to compliment.

He explained it that way too. I am under that critical mass right now and consolidating makes sense now according to him until i reach that mass. I was not familiar with the allocation funds, which is essentially a collection of mutual funds with a higher expense ratio than the individual fund ratios. I already have paid for the A-class so I would not be switching families or incurring new expenses by buying A-class, just consolidating and reinvesting in one allocation fund.

 

[cody1smith]

As Lee Corso would say, NOT SO FAST... Vacancy = cash drain even if you don't carry a mortgage. Or an unusual expense can push you in negative territory pretty quickly for a month or two.

Not to mention getting stiffed by tenants and the fun of evicting someone. What about skipping out and destroying the house? What about failing to account for capital improvements (I don't think I have ever worked with someone who didn't stress out when a water heater blows, and anything like a roof usually entailed refinancing the debt on the thing).

Storage would be A LOT less stressful. Turn off their key fob access to the compound and auction the bad boy off.

not all of my rentals make money every month. Water heaters, roofs, hvac ect. That kind of stuff happens. Naturally if a water heater goes out and you have to spend 400 dollars on one that month money was lost. I used the word THEY. If you only had 15 rental houses you would never make any money.

As far as units getting trashed or people not paying. I get a deposit of double 1 months rent. And so far i have never let someone get more than 2 months over. (im a dick though) I have replaced doors in the middle of winter To get people to leave. Only ever had one get trashed and the prosecuting attorney got my money within the year. (well im still getting it monthly in the form of a wage garnishment)

 

[BleedBlueGold]

There are plenty of people who don't like Dave Ramsey or frown upon his advice. That's ok. I'm not naive enough to blindly follow his every opinion, etc. I still do my own research and ask around. With that said, I mainly listed the link to the ELP as a second opinion. Dave's ELPs are notoriously known for teaching people.

Second, I personally know enough Cash Millionaires (people who not only have a net worth of $1M+ but have at least $1M+ in liquid cash). ALL of them started with nothing and slowly built their wealth into what it is now. I hate to break it to you, but while a million bucks isn't what it used to be, it's still a rarity to find a cash millionaire.

Living below your means is a foreign practice, especially in this country. When you live a frugal lifestyle and save/invest the rest, you'll always come out ahead. And on the topic of buying rental properties on ARMs and having to worry about tenants...there is a method in which 1) you pay cash for a property and have no mortgage and 2) you hire a management team to deal with it. Do each of these hurt your ROI? Of course. But it's safer. (Btw, Dave's obsession with real estate is a direct result of his passion for real estate....that's how he became rich the first time).

 

[cody1smith]

There are plenty of people who don't like Dave Ramsey or frown upon his advice. That's ok. I'm not naive enough to blindly follow his every opinion, etc. I still do my own research and ask around. With that said, I mainly listed the link to the ELP as a second opinion. Dave's ELPs are notoriously known for teaching people.

Second, I personally know enough Cash Millionaires (people who not only have a net worth of $1M+ but have at least $1M+ in liquid cash). ALL of them started with nothing and slowly built their wealth into what it is now. I hate to break it to you, but while a million bucks isn't what it used to be, it's still a rarity to find a cash millionaire.

Living below your means is a foreign practice, especially in this country. When you live a frugal lifestyle and save/invest the rest, you'll always come out ahead. And on the topic of buying rental properties on ARMs and having to worry about tenants...there is a method in which 1) you pay cash for a property and have no mortgage and 2) you hire a management team to deal with it. Do each of these hurt your ROI? Of course. But it's safer. (Btw, Dave's obsession with real estate is a direct result of his passion for real estate....that's how he became rich the first time).

I have a cash value of 6 dollars. I am a very long ways from being a cash millionaire.

They did not borrow any money? That seems unreal. Im from a small town in mid Missouri. So maybe the trickery from out east has not made it here. but everyone here that has something and started from nothing, borrowed money to get started or is old as ****.

 

[GO IRISH!!!]

Ramsey is great for learning basic financial discipline but his investment advise gets sketchy pretty quick. He should really stick to his bread and butter but his ego gets in the way. His real estate obsession is dangerous, most people I know can't handle the being a landlord and never fully account for the time they put into managing rentals. The whole ELP thing is largely advertising, paid placement for exclusive territories.

Dave is the first one to tell you if you aren't prepared to be a landlord, then you shouldn't do it. He always advises against becoming an "accidental" landlord for the very reasons you mention above. He never pushes people to buy real estate. He will never advise going in to debt to invest in real estate especially if the person doesn't have their primary home paid off and is completely debt free.

As for the ELP program, it is advertising to a certain extent. However, the people listed as ELP's do not pay to be listed as such. They apply to the program and they have to maintain certain scores in various categories depending on their field of expertise based on customer feedback. I have used the ELP program several times and the customer survey after my transaction was completed was very extensive. A Dave Ramsey team member called me personally. If an ELP does not maintain certain standards of customer service, they are dropped from the list.

 

[BleedBlueGold]

I have a cash value of 6 dollars. I am a very long ways from being a cash millionaire.

They did not borrow any money? That seems unreal. Im from a small town in mid Missouri. So maybe the trickery from out east has not made it here. but everyone here that has something and started from nothing, borrowed money to get started or is old as ****.

Just because you find it unreal, doesn't mean it's not true. There's no trickery involved. Why can't people put up their own life savings into a business and as it grows, re-invest the money back into the business (instead of taking a huge salary)? It takes time. Yes, they're older but that's because they built their wealth slowly, over time. There's no tricks or secrets involved.

I'll try and find the excerpt from The Millionaire Next Door that explains the mindset of the millionaires Dr. Stanley interviewed before writing his book, and how it pertains to borrowing money...

 

[Bobias]

If "hard work" also includes entrepreneurship, business sense, access to capital, a high risk-tolerance, and a good idea, then I agree all you need is "hard work" and you'll be rich.

This. As a double major in Finance and Entrepreneurial Management with experience in the start up environment both as a consultant and my current entrepreneurial idea; it is incredibly important to realise that it is the combination of all of these factors that lead to really getting rich. Hard work is only useful if it is being directed the right direction (the good idea), but if it is really a good and novel idea then you will naturally be willing to take the risk because the benefit far exceeds the risk if you use no risk fincing options. Having a good business sense (this is intuitive but can be refined through higher education) will allow you to get creative with financing so that a lack of capital is really only an illusion.

I just see so many people with ok or decent ideas just throwing money at it using traditional debt financing options with little to no business sense complaining that hard work isn't the key to success. Successful people don't view working harder or smarter as mutually exclusive, rather, they view working smarter as a continuous improvment goal to compliment their strong work ethics. You can only learn to work smarter by constantly researching, observing, making mistakes, taking risks and challenging yourself to constantly learn and refine your work method to increase the amount of productivity per hour worked.

In case you were interested.

 

[MJ12666]

This is a very interesting discussion. But I can tell you from personal experience that you can become fairly wealthy without owning your own business or working extraordinary long hours. I have worked my virtually all my career with fortune 500 companies. I own my home outright and have cash and investments in excess of seven figures. If I could give some simple advise it would be to not spend a lot of money on a house and take out a 15 year mortgage. Max out on your 401K contributions and allocate your investments between a S&P 500 index fund and a Small Cap index fund. If you consistently invest in these funds on a monthly basis the market ups and downs will even out (never panic when the market drops, just keep buying). Trying to "time" or "play" the market is the surest way to lose money fast. If you buy and hold consistently, over time (we are talking 20-25 years, not months) you will be surprised how much your net worth will grow especially after you pay off the mortgage.

 

[drayer54]

I own 2 rentals and firmly believe that getting the right tenant and renting a good property can land you a steady source of income and a great return.

Stocks aren't cheap right now, but the big dividend payers are still out there. My current favorite is LINE.

Index funds?! Did someone say index funds? Dividends! Dividends! DRIP! No index funds!

Most importantly, diversify your assets...diversify..diversify...

Invest in what you want and good luck!

 

[Rack Em]

Most importantly, diversify your assets...diversify..diversify...

Time to enter the 36 Chambers

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[pumpdog20]

Dave is the first one to tell you if you aren't prepared to be a landlord, then you shouldn't do it. He always advises against becoming an "accidental" landlord for the very reasons you mention above. He never pushes people to buy real estate. He will never advise going in to debt to invest in real estate especially if the person doesn't have their primary home paid off and is completely debt free.

As for the ELP program, it is advertising to a certain extent. However, the people listed as ELP's do not pay to be listed as such. They apply to the program and they have to maintain certain scores in various categories depending on their field of expertise based on customer feedback. I have used the ELP program several times and the customer survey after my transaction was completed was very extensive. A Dave Ramsey team member called me personally. If an ELP does not maintain certain standards of customer service, they are dropped from the list.

This is wrong:

"Smiler pays to be an ELP. He wouldn't say what that fee is, but MONEY spoke to other advisers advertising their ELP status who said that it was roughly $80 per lead. "

Save like Dave Ramsey...just don't invest like him - Sep. 26, 2013

 

[Wild Bill]

There are plenty of people who don't like Dave Ramsey or frown upon his advice. That's ok. I'm not naive enough to blindly follow his every opinion, etc. I still do my own research and ask around. With that said, I mainly listed the link to the ELP as a second opinion. Dave's ELPs are notoriously known for teaching people.

Second, I personally know enough Cash Millionaires (people who not only have a net worth of $1M+ but have at least $1M+ in liquid cash). ALL of them started with nothing and slowly built their wealth into what it is now. I hate to break it to you, but while a million bucks isn't what it used to be, it's still a rarity to find a cash millionaire.

Living below your means is a foreign practice, especially in this country. When you live a frugal lifestyle and save/invest the rest, you'll always come out ahead. And on the topic of buying rental properties on ARMs and having to worry about tenants...there is a method in which 1) you pay cash for a property and have no mortgage and 2) you hire a management team to deal with it. Do each of these hurt your ROI? Of course. But it's safer. (Btw, Dave's obsession with real estate is a direct result of his passion for real estate....that's how he became rich the first time).

I have a cash value of 6 dollars. I am a very long ways from being a cash millionaire.

They did not borrow any money? That seems unreal. Im from a small town in mid Missouri. So maybe the trickery from out east has not made it here. but everyone here that has something and started from nothing, borrowed money to get started or is old as ****.

I bought six units in the last three years (two single family homes and a four unit) without financing. Hard work, living way below my means and avoiding labor expenses is the way to get it done. I'm at my office during the day and I rehab these places at night and on the weekend. I've been ripping through 80-90 hour work weeks for the last three years. I invest about 50% of my wages in the market, savings (to purchase the next property) and material (for the property I'm rehabbing). My old man built every house we lived in growing up. I was his slave labor, but he taught me everything. We work together on the houses I purchased and I save a huge amount of money on labor. I firmly believe you should invest in what you know. Without the skills my father taught me, I wouldn't touch rental property.

 

[magogian]

GET THIS BOOK AND LISTEN TO NOBODY ELSE'S ADVISE.

+1

 

[magogian]

Most importantly, diversify your assets...diversify..diversify...

!

Crack, weed, and meth?

 

[BleedBlueGold]

This is a very interesting discussion. But I can tell you from personal experience that you can become fairly wealthy without owning your own business or working extraordinary long hours. I have worked my virtually all my career with fortune 500 companies. I own my home outright and have cash and investments in excess of seven figures. If I could give some simple advise it would be to not spend a lot of money on a house and take out a 15 year mortgage. Max out on your 401K contributions and allocate your investments between a S&P 500 index fund and a Small Cap index fund. If you consistently invest in these funds on a monthly basis the market ups and downs will even out (never panic when the market drops, just keep buying). Trying to "time" or "play" the market is the surest way to lose money fast. If you buy and hold consistently, over time (we are talking 20-25 years, not months) you will be surprised how much your net worth will grow especially after you pay off the mortgage.

Great work! Great post as well!

I bought six units in the last three years (two single family homes and a four unit) without financing. Hard work, living way below my means and avoiding labor expenses is the way to get it done. I'm at my office during the day and I rehab these places at night and on the weekend. I've been ripping through 80-90 hour work weeks for the last three years. I invest about 50% of my wages in the market, savings (to purchase the next property) and material (for the property I'm rehabbing). My old man built every house we lived in growing up. I was his slave labor, but he taught me everything. We work together on the houses I purchased and I save a huge amount of money on labor. I firmly believe you should invest in what you know. Without the skills my father taught me, I wouldn't touch rental property.

Awesome! Exactly what I want to do. Great post!

 

[drayer54]

Crack, weed, and meth?

Probably more return on those than buying an index fund at these levels... But yes... Diversify

 

[Irish Insanity]

I graduated high school with 63 Kids. 4 of my best friends out of that class could be considered Millionaires today. All owning a Business or multiple businesses. 3 of which started building wealth early by borrowing money. 1 inherited large when his father passed away 6 years ago.

I had 2 soon after high school, I can't imagine 63 before graduation.

Rentals are very hard work and very very risky. 1 million dollars on arm loans is scary to anyone with any sort of a brain. But they also make money every month and if you keep them up and buy/build them at the right price they gain value over time.

I am in the process of finishing up another storage unit now. (rained out today, doing book work now) They are way easier than home rentals.

My GF's career is in property management. We currently own a second rehab house that may or may not be used as a rental when we are done. But storage units are something we've discussed owning as they carry a lot less up keep and risk.

Probably more return on those than buying an index fund at these levels... But yes... Diversify

No taxes either.

 

[RDU Irish]

Insanity - No taxes? Try deferred taxes.

I agree with you guys, if you have the skillset (handy with a hammer/DIY project + temperament to deal with tenants) jumping into real estate with both feet can be very rewarding. My biggest question, how do you account for your hours worked relative to the "profit" of the business. Are you really getting that much further ahead than if you were to pick up a second job working 20-40 hours per week at $10/hour and dumping the entire paycheck into income generating investments (example a stock portfolio yielding 4% on average). With the tax advantages of real estate and the way you are doing it, I bet you are getting ahead. I just wonder about the scalability, how many properties can you really manage and does profitability fall apart once you have to hire support staff?

Another thing I see people getting in trouble with is renting out their old house because they don't want to take a loss or thinking they want a rental or two when they don't even mow their own yard or know how to fix ANYTHING. More often than not, their real "investment thesis" is built on the building appreciating more than anything and time spent managing is valued at $0.

It is far from a get rich quick scheme, it is immense amounts of hard work and sacrifice to build an real estate empire. It is then harder to transition to where you can actually take a week or two off or even retire. Kind of a farmer model to wealth, live poor - die rich.

 

[RDU Irish]

For example

If $100,000 can pay out $350/month without lifting a finger your $100,000 property might rent out for $700/month less maybe $250/month taxes, insurance, regular maintenance expense. To "beat" the passive investment, that only leaves $100/month for CAPEX reserves to replace the roof, driveway, sidewalk, dishwasher, fridge, carpet, etc, etc, etc.

The investment dividend increases say 4% to 6% per year average of 5%. If you spend the dividend you still get a pay raise every year so that in 10 years your $350/month turns into $570/month. 20 years it is $930/month. 30 years = $1500/month. Get sick and the checks still show up, kids inherit it and they can dispose of it easily. No future cash infusion necessary if the roof leaks or have to pay a lawyer to evict and garnish wages.

Reinvest those dividends and you are compounding that income growth that much faster.

 

[cody1smith]

Insanity - No taxes? Try deferred taxes.

I agree with you guys, if you have the skillset (handy with a hammer/DIY project + temperament to deal with tenants) jumping into real estate with both feet can be very rewarding. My biggest question, how do you account for your hours worked relative to the "profit" of the business. Are you really getting that much further ahead than if you were to pick up a second job working 20-40 hours per week at $10/hour and dumping the entire paycheck into income generating investments (example a stock portfolio yielding 4% on average). With the tax advantages of real estate and the way you are doing it, I bet you are getting ahead. I just wonder about the scalability, how many properties can you really manage and does profitability fall apart once you have to hire support staff?

Another thing I see people getting in trouble with is renting out their old house because they don't want to take a loss or thinking they want a rental or two when they don't even mow their own yard or know how to fix ANYTHING. More often than not, their real "investment thesis" is built on the building appreciating more than anything and time spent managing is valued at $0.

It is far from a get rich quick scheme, it is immense amounts of hard work and sacrifice to build an real estate empire. It is then harder to transition to where you can actually take a week or two off or even retire. Kind of a farmer model to wealth, live poor - die rich.

I take less than 10k a year out of my rental. And between me and my wife hours that's way less than min wage. But it is a huge tax shelter, it makes all of its own payments and for the most part is gaining in value annually. So other than the being in debt seven figures its a pretty good deal if you are willing to put in the time.