How To Start Investing For Financial Independence, Part 1.Written by Chris Anderson, PhD
Today, I am going to start a multi-part series about how to go from being a beginning investor to being “financially independent” in a steady and predictable way. At our website, we get tons of e-mails about how do I start, how do I start with little $’s, etc., etc., etc. If you are asking this question, congratulations because you are ahead of most. All of us have been there at some point. I must warn you…. What I am about to share here for free is what “gurus” across nation charge thousands of dollars for in weekend seminars. The “secrets” revealed are going to seem pretty simple because quite frankly, there are no secrets. The methods used here have been done for centuries and there is no real reason to complicate them. Let’s apply these principles to see how fast someone might become financially independent without betting farm. Realize that everybody has wildly different starting points and different financial goals. For this series of articles, we assume that an individual has access to at least $15,000 liquid capital (or home equity) to start, is at least breaking even with their current income versus expenses, and has decent credit to obtain financing. Note there yet?.... See footnote below. To start, what you need is to make your money grow while keeping your current income stream, and current expense level in place. I can’t say this more plainly…..To change your current financial path, you have to us your money and your time to grow additional income streams that increase wealth. There is many ways to do this but we are going to use investing in real estate as an example. Now for beginners, here is really bad news…… As an investor, you reap rewards by putting your money in HARMS WAY. You do everything in your power to minimize your risk but bottom line is that real investors make money by taking CONTROLLED risks. As investors get better, they learn how to make fantastic investment returns doing things that all their friends and relatives thing is crazy….. However, they know exactly what risks they are taking are why those risks are small in comparison to potential rewards. One reason people really like real estate investing is leverage; i.e, you can purchase an expensive property using 0-20% of your own money while financing rest. So if you put 10% down for example, and then property goes up by 20%, you have made a 200% return (ignoring expenses, taxes, etc. for simplicity). Of course this works in reverse… If property drops by 20%, you have lost not only your original investment but have to come up with another 10% as well….. Ouch! For someone beginning, here is what I would suggest: 1) Look for an opportunity that will return at least 150% in 2 yrs or less; 2) Be mentally and financially prepared if investment does not work out; 3) Have VERY good reasons why you don’t think you will lose money…… You may not make as much as expected but you would rather not lose money at this stage. 4) Be patient. This single result should not either make or break you but it is crucial to a longer term plan. In our Mastermind Group, we are bringing out a land project (see related article Land Investing that appears to meet these criterion (each investor has to decide for themselves). So let’s say purchase price is $150,000, with 10% down and another $3,500 in closing costs. With good credit, then financing obtained would make land payments for 2 years while waiting for growth.
| | How to Help the unbanked Save MoneyWritten by Ethel Robinson
The first and most basic step to financial wealth is having a checking or saving account. This sets stage for future endeavors, such as investing, homebuying, etc. Many people are unable or locked out to do this due to past bank situations. Some mistrust financial institution and hide their money around house. Others use money orders or cash for method of payment. This group of population is often referred to as unbanked. There are thousands upon thousands of people in arena. Some banks see this as a problem. These individual or families are potential customers, which mean more accounts, which means more money made by institution. Suppose there are 10,000- 15,000 individuals in a city without checking accounts. At a potential eight dollars per account, per month, can add up to a hefty sum year after year. And depending on profitability or bank this can be big business. While banks see unbanked as a problem, check cashing and payday loan companies see it as a windfall. These operations take advantage of an already bad situation making it worst, charging outrageous fees. Bringing in bucks. Many of these companies are located in low income areas and prey heavily on minorities. One way a person can save on fees from a check cashing business or to help in his every day business transactions is purchase a prepaid debit card. These cards can be used like a credit card. One would load money on card when needed. The difference is when using your debit or prepaid card you are using your own money. With a credit card you are using someone else money, accruing interest and a bill. These cards have Visa and Mastercard logo and can be used anywhere these cards are accepted nationwide or internationally. A person without a checking or saving account, can have his employer deposit money to card, eliminating need for a check cashing, saving money. Not only will it save employee, it can save employer money in check cost. Another way a person can save money, is by transferring money to others that have same type card for a minimal fee. Many minorities send money home weekly to families. With minimal transfer fee, more money can be sent home for family. Some cards charge as little as $2.45 per transfer.
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