How to Make More Money in 2015

How to Make More Money

How to Make More Money

Every year you should take the opportunity to reevaluate your investment accounts and strategy. Many people make the mistake of thinking they need a large sum of money in order to start investing. The most important thing however is to invest consistently regardless of the amount.

Tony Robbins in an interview with Warren Buffett asked what the secret to his wealth was. Buffett replied “No. 1, it’s being born in America. No. 2 is good genes, so I live long enough, and No. 3, it’s compound interest. Compound interest – people have no idea the power that it really has.”

As an example, one UPS employee never made more than $14,000 per year, but he set aside 20% of his income and invested it in his company stock. By the time he was 90 years old, the value of his investments grew to $70 million dollars!

Here are tips that you can immediately implement to start off on the right foot in 2015 and start to earn more money. 

  1. Start early, start now. The best time to invest may have been in the past, but the second best time to invest is today! Everyone, regardless of income, can take advantage of the power of compound interest. Einstein called it the “8th Wonder of the World.” Compound interest is the interest you earn on the initial amount you invested and the interest you already earned. It is basically “interest on interest.” The growth becomes exponential the more time you have. Of Buffett’s $63 billion dollar net worth, approximately $60 billion came after his 50th birthday and $57 billion after his 60th. While you can always work to get more money, invest wisely to get a higher return, you can never get more time. Since the power of compound interest comes from time, you need to get started as soon as possible! 
  1. Get Automated and Use Psychology. Opening up an investment account is easy if you don’t already have one. You can setup an automatic withdrawal from your bank account to put away as little as $10 dollars a month. Contact your investment company to find out how. Studies have shown that consistent investing over time is more effective than waiting to accumulate money than invest. In a recent interview I had with Mike Michalowicz, best-selling author of Profit-First click here to listen to the free podcast. Mike mentioned that psychologically, we tend to spend what is readily available in our bank accounts. This is called Parkinson’s Law, where our demand for a resource (time and money) increases to meet the supply of it. This is why when we have a week to do a project it takes a week, and when we are given four weeks to do the same project, it will take four weeks. The same goes for our money, if we see money in our account, we tend to spend it. By using Parkinson’s Law as an asset and move money straight into an investment account, we start investing on a regular basis and we are forced to find ways to get the same things done for less money.
  1. Be an investor, not a consumer. Instead of paying to own an Apple product, you should pay to own Apple. The first Apple ipod cost $399 in 2001. If you had bought Apple stock with that money instead, you would have over $25,000 dollars today! You want an investment that will appreciate, not a product that will depreciate.
    Be committed to investing a portion of your income every month. One of the biggest regrets retirees have is not saving enough. Stick with it even in good or bad times. Look at a market downturn as an opportunity to buy more shares at a lower price. It is interested to see that people will buy products on sale in a heartbeat (just look at Black Friday!), but when a stock is on sale, many head straight for the doors. If you invested $10,000 at the bottom of the market in March 2009, you would currently have now over $27,000. How many do you know sold near the bottom instead of buying? Stay disciplined and look at the long-term, you will thank yourself later!
  1. Know what you are paying for. For years I have helped manage finances for clients that didn’t have the time, knowledge, or desire to do it themselves (or a combination). If you are in any of these categories, you should hire a financial professional. But it is important to understand the fees you are paying for that advice. Are you paying a commission? Or are you paying a fee? Do you have mutual funds? What are the expense ratios? What hidden costs are in the fine print?
    Just like there is compounding growth, there are compounding costs that can eat away at your investments. This is your hard earned money, so take the time to see how much you are paying and how it will affect your financial future. If you have a $100,000 investment and were lucky enough to get 7% each year with a 1% annual fee, you’d have about $574,000 after 30 years. If you paid 3% in fees, you’d only have about $324,000, a difference of $250,000! 

    On the other hand, you get what you pay for. Many of the wealthiest people pay top dollar to their financial advisors to grow their wealth, find investment opportunities, and reduce their risk. A great advisor that focuses on your overall financial picture and not just a financial product can add tremendous value. The average investor the past 20 years barely beat inflation, but those who had an advisor that set a diversified portfolio and help manage emotional trading saw huge gains in the same time period.

  1. Evaluate your asset allocation and diversification strategy. This month the Dow Jones crossed the 18,000 threshold for the first time in history. This is a great time to rebalance your investment portfolio. This means you should maintain the right mix and amount of each investment type. If you have a stock and bond mix in your portfolio and haven’t rebalanced this past year, chances are the stock portion of your portfolio has grown much faster than your bond portion. By rebalancing, you get to lock in your gains and lower your risk! Reevaluate your investments and make sure they are right for you. You want to be well-diversified with different types of investments such as stocks, bonds, cash, and alternative investments like senior-secured loans, real estate, and commodities. You also want to make sure money in your short-term bucket are put in conservative and liquid investments. Your mid-term and long-term buckets can potentially have more risk for a greater return.
  1. Know Your Financial Number. Do you know how much you need to save every year? What is your financial number goal? What level of investment return do you need? Many people have no idea what their number is and either don’t get started, save too little, or save too much and don’t get to enjoy it! Create a financial plan so you know how much you need for financial security and financial independence. You want to make the game winnable and realistic so you can stay focused on your own goals, not someone else’s.
  1. Know What To Do With Your Financial Number! What is the purpose of investing? Many people believe it is to grow your assets as much as possible. Actually it should be to create as much income as possible. Assets won’t let you travel, buy food and other necessities. I have clients who have spent years accumulated assets that are worth quite a bit, but unfortunately don’t produce income they need to live off of. Often some investment assets are difficult to sell, which defeats the purpose of investing. Create a lifetime income plan so you know how much and what you need to invest in to become financially free.
  1. Look to be educated, not just entertained. The best investment you can make is in yourself. Learn from the very best investors and learn how to apply those principles. You will achieve financial freedom faster than any other way. Never stop your personal and professional growth. Either you will master money or it will master you. 
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