Ok.I want to build resources for myself and to help others. How should I do that?
Many people rely on jobs to grow security for themselves and giving to others. But because of technology, we need less and less labor to produce all the goods and services people will buy. Down Arrow for trend. And we have been paying less for labor (as a percent of Gross Domestic Product) for decades.
But Capital invested in a portfolio of stocks has done very well for decades. Arrow to show trend Better than bonds or money in a bank. Owning bonds is like you being a bank and loaning directly to businesses. Not loaning to the bank so THEY get their cut. Owning a diversified portfolio of shares in companies around the world historically has done better than loaning money to those companies. Those firms would not borrow unless they expect the money to help build their company value faster than the interest cost THEY pay. That is why the equity lines rise faster (though with more volatility).
A traditional investment account can help you become financially secure. It works by growing the cash investments you make through investment returns. And what is stored in the available funds can be used today or later to pay expenses. Wealthy people do this. They live on investment returns from their capital (and invest more when they can), rather than live on wages. Remember the earned or wage income we saw is declining in importance to the economy?
Adding a checking account with Bill Pay can integrate wealth management with daily finances. You can pay bills directly from the checking account. The investment funds can serve as a personal endowment to cover some portion of your bills. It is best to set a “budget” to be covered by investments as some percentage of the assets in the investment account (say 5 % per year). This is so we can expect the account (and budget) to grow over time, but pay some of your bills so you see progress on meeting goals. (Animation to illustrate growth) Charities we work with call this a Working Endowment. But you too can gradually endow payment of more and more of your budget this way. It helps a lot, and is motivating to visibly measure and manage progress on meeting your financial goals.
Raising insurance deductibles (lower premium) is one place to get money to start or expand investing. Do that justafter or while paying down debt. This also adds permanently to investment cash flow (whenever not drawing insurance payments, but you will be building resources for this when needed). Remember, Insurance Companies are in it to make money. 1ht tp://moneywatch.bnet.com/saving-money/article/7-insurance-myths-that-can-cost-you/3461842 http://www.carinsurance.com/state/Texas-car-insurance.aspx3 http://www.insuranceagents.com/average-costs.html4 http://www.ahipresearch.org/PDFs/StateData/StateDataTexas.pdf
How much do I need to save, for how many years, to become “independently wealthy”. These numbers are approximate and have assumptions. Your return may be different. Think about your annual income. If you save $ one tenth of that each year and earn 10 % returns, you could replace your income in about 26 years. And become independent of that income. So, live on some amount less than your income, and save the difference. Then you will at least be making some progress.
Ok.I want to build resources for myself and to help others. How should I do that?
