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Investing

How You Can Build Wealth (Use This Millionaire Strategy)

If you want to build wealth it’s going to require time and knowledge. There is no get rich quick method. There are a few ways to begin building wealth. Building wealth involves a unique combination of passive income and active income.

Want passive income? Register now to get on the waitlist for my next LIVE passive income class

The Difference Between Passive Income and Active Income

Can You Build Wealth Using Active Income?

Active Income is income you earn based on your own personal efforts to make money by exchanging hours for dollars.

It is the income that comes in when you are actively earning it, but ceases to exist when you stop your earning activity.

That means, if you work you get paid. If you don’t work, you don’t get paid.

It’s a simple concept.

So simple that the majority of humans follow it and exchange their hours for dollars.

For example, you could stand around for 4 hours, pass out samples, and make $200. Or, you could work as a cashier for 4 hours and make $40.

Your choice. Both provide active income.

Earn More | Passive Income

The Problem with Active Income a.k.a. The Rat Race

I first read about the rat race in Robert Kiyosaki’s book Rich Dad, Poor Dad.

In the book Kiyosaki describes the cycle of working for money that leads to nowhere, kind of like a rat running on his spin wheel inside his cage.

Working for money and exchanging hours for dollars is the hardest way to make it out of the rat race, and often it’s near impossible.

Disagree?

How’s it working for you?

This is because once you are in the rat race you spin your wheels to try to maintain or advance your lifestyle and you often create more debt to do so.

Those in the rat race may not know how to get out because they do not know how to use assets and instead they keep creating liabilities.

If you have not read the book Rich Dad, Poor Dad by Robert KiyosakiI recommend it as a must read just to understand the basics of how you must think to build wealth.

See all of my recommended books for personal financial success here.

How to Escape the Rat Race of Chasing Active Income

Most people are not ready to stop working for money, me included.

In the meantime, you can begin building cash for your portfolio. In one of my favorite money books The Richest Man in Babylon by George S. Clason, one of the characters, Bansir, seeks help from Arkad, who is the richest man in Babylon.

Arkad advises the man to pay himself first.

Each time he makes income, he should set aside 10% of that income.

That way, when an opportunity to invest comes his way, he will be ready.

Bansir follows Arkad’s advice and was able to invest in a business venture that provided him with passive income.

It is very difficult, if not impossible, to grow a profitable portfolio without income. Setting aside 10% of every dollar you earn will allow you to grow your investments consistently.

Can You Build Wealth Using Passive Income?

Passive Income is income that not based solely on your ongoing efforts.

It may be a recurring income stream from a one time job, like royalties for a singer, or recurring income from a business that you own.

You might write a book and earn a commission each time someone buys that book.

When you can stop trading hours for dollars and receive dollars even without giving up hours, you will have passive income.

Top 3 Ways to Generate Passive Income

1) Passive Income by Growing a Blog

Believe it or not, growing a blog is a way to generate passive income. This is one of my favorite ways because I created this stream of income right after college.
In order to do be a successful affiliate income generating blogger, you have to create content that converts readers into buyers. Or, you must simply put content in front of a buyer.

(First you must start a blog on WordPress. Here’s a tutorial I created that will take you through step-by-step.)

That content would contain an affiliate link. Affiliate income is one of my sources of passive income. (And I’m going to show you exactly how I do it. More details at the bottom of this post.)

To get approved for affiliate relationships, you have to make sure your site is properly set up. And in order to maximize your affiliate income, you have to approach sales in a certain way. It’s not complicated, but it does require some education. The learning curve is steep.

2) Passive Income by Using Dividends

Dividends can help you to make passive income. Some companies issue their stock with a dividend attached.

If you own the stock, they will pay you directly in cash, or additional shares, from the earnings that they make for that quarter or year.

If you have the right stocks you can also benefit from price appreciation.

Ready to start investing? Take this quiz and find your investing compatibility match.

The stock price and your overall portfolio will increase when the company does well. And even if the stock price declines, you will still receive the dividend as long as the company does not cancel it.

Some investors will not purchase a stock if it does not come with a dividend attached.

3) Passive Income from Teaching

When I say teaching, I don’t mean standing in front of a class. That would be considered active income. Instead, you should figure out what you’re good at then create a course on that topic. You can then sell that course over and over again. And each time you make a sale, you earn income.
When you are actively marketing your course it’s not considered passive income. But if you sell your course through a platform where a buyer can browse and find your class, then it’s considered passive income.

Most investors use a combination of passive income sources to diversify their risk.

It is highly risky to depend on the cash flow from a course, dividend paying stock, or blog only.

Building Wealth

So there you have it.

Passive Income and Active Income.

The two main ways to build wealth mean you’ll either be using active income or growing passive income.

Those who use active income to build wealth will find that there are simply not enough hours in a day to trade for the wealth that they want.

They will continue to spin their wheels in the rat race until they give up in frustration.

The smart investors that learn to use passive income to build wealth will see their net worth grow with less and less work on their part.

Building a profitable portfolio with passive income investments is the key to building wealth. That might be an income producing blog, a course that you’ve created, or a portfolio filled with dividend stocks.

That is why I recommend starting with your personal goals. What do you want your finances to look like?

In order to become a financial success, you have to invest in yourself and be willing to learn.

Now it’s your turn to choose.

Will you build wealth using passive income strategies?

Or will you stick with a job that requires active hours for you to earn?

If you’re determined to earn more money via passive income, then you’re in the right place. I’m going to show you exactly how to do it.

Register now to get on the waitlist for my next LIVE passive income class

Originally posted 2016-06-06 10:00:14.

Categories
Investing

How to Start Investing (Even If You’re a College Student!)

In my opinion college students are the best investors. They are constantly learning and not afraid to make mistakes. As you get a college education, you should be getting an education in building wealth. You don’t need tons of capital to start your investing journey: you just have to know how to do it. This article will focus on the most popular option for college investors: online investing If you are wondering how can a college student invest here are some tips to get you started.

How Can a College Student Invest Starting with Stocks?

When you first start investing you will most likely want to start with stocks. The reason most first time investors start with stocks is that they are easy to relate to and they are widely discussed. You can start up a conversation about stocks with almost anyone and they should be able to voice at least an opinion. While some believe that there are certain best stocks for college students, I believe a general education on how to invest is important.

Want to invest but not sure where to start? Take this Investing Compatibility Quiz to figure out your investing style.

Originally posted 2016-06-05 15:44:01.

Categories
Investing

How to Create an Automatic Investing Plan

This post is sponsored by Fidelity Investments. All thoughts and opinions are my own. Fidelity does not adopt, endorse or sponsor any other content on this website, including links to other third-party websites and is not responsible for any views expressed outside of this sponsored post.

Let’s face it, learning to invest can be scary. The thought of investing can often seem like giving away your money with no idea when that money will return. On the other extreme, it could feel exciting, like you are on the verge of earning a large payday. While it’s natural to be apprehensive when you’re just learning to invest, letting your emotions get the best of you could cause you to withdraw your money from the markets before you have a chance to earn anything. On the flip side, becoming overly-excited or confident could cause you to make irrational decisions as well. As a general rule, it’s best to leave emotions out of the equation when it comes to investing. One way to do it involves a strategy called automatic investing.

Automatic Investing Like an Intelligent Investor

A few years ago, I read a book and it has shaped the way that I invest ever since. In the book, the author Benjamin Graham, recommends a diligent, steady approach to investing. For example, income investors diligently consider future dividends when looking for dividend paying stocks. Choosing to automate your investment plan following a diligent, steady approach can help to remove emotions from your investment strategy, and help you become a more intelligent investor.

How To Invest on a Regular Schedule

Investing on a regular schedule makes the process of investing an automatic activity. As measured by the S&P 500, over the last ten years, the broad market index has returned 6.8% on an annual basis, including dividends. While past performance is no indicator of future results, and all investing involves risk of loss, this example can help paint the picture. An investor that chooses to buy and sell based on concern and excitement, might see investment returns different from the broad market index; especially since the market has seen some significant highs and lows over the last ten years. Let’s take a look at how a monthly deposit could change things.

Depositing on a Regular Basis

Depositing just $100 per month on a consistent basis is better than sporadic deposits. Here’s why. Automatic investing removes the human element. The easiest way to create a monthly deposit plan is to use the percentage system. With this system, you portion out your necessary expenses, rent, utilities, etc, and then you take a percentage of the remaining income for goals. If you have $500 per month remaining after your bills are covered, then a twenty percent investing goal would allow you to put $100 away each month for investing.

Take Advantage of Free Money

Your employer can also help you invest on a regular basis. If your employer offers a retirement plan such as a 401(k), check to determine if they also offer a matching contribution. A matching contribution works like this: when you choose to put away a portion of your salary into an employer sponsored 401(k) plan, the employer will choose to contribute as well. The “match” depends on the specifics of the plan. Some employers will contribute dollar for dollar while others may contribute 50 cents for each dollar you contribute. Then, check to see what funds are offered as options in that 401(k). Each time you receive a paycheck, your choice of contribution percentage is automatically deducted from your paycheck and allocated to the funds that you choose. And if your employer matches your contribution, then you are getting additional free money towards your retirement fund.

Emotions can cause you to make irrational decisions when it comes to money. But learning to invest without those emotions is possible. An automatic investment plan can help you begin building your confidence and a nest egg as well.

Learn more about MyMoney, a website created by Fidelity Investments to help you make sense of your personal finances. Fidelity Brokerage Services Member NYSE, SIPC.

Originally posted 2015-12-16 10:00:02.

Categories
Investing

How You Can Start Investing Now, Before the Next Year Starts

Even though it’s almost the end of the year, it’s never to late to start investing!
If you’d like to start investing this year, there are a few things to keep in mind. Depending on how involved you want to get, investing can take up a lot of time or very little time. It’s easy to start investing, especially if your company offers a 401(k). If you want to ‘go big’, you can get as involved in investing as you want. There’s plenty to read out there about investing.
Consider your age, too. The younger you are, the more aggressive you probably want to be when you start investing. People in their twenties and thirties have many years to let their portfolios grow and change. They can weather some of the typical market ups and downs that happen over decades.
If you want to start investing, here are ways you can get started now:

Contributing to Your 401(k)

Many employers offer some type of investment plan for their employees. Most offer a variation of the 401(k). Public school employees and some who work at non-profits may have 403(b) plans. They are similar to 401(k) plans. Either of these plans are great for people who want to start investing but don’t know how.
The best part about 401(k)s is that some employers offer matches! This means if you invest in your company’s 401(k), your employer will match your contribution up to a certain point. That’s free money!
Contribution limits to a 401(k) are high: you can save $18,000 in your 401(k). The federal government’s Thrift Savings Plan also falls under this contribution cap.
Even if you can’t afford to contribute the maximum to your 401(k) this year, consider investing enough to get your employer’s match. Not every employer offers this perk, so check with your Human Resources department to make sure it’s an option. If it isn’t, consider some of the additional investing resources below.
For the self-employed and freelancers out there, the IRS offers several investment and retirement options for you, too! Check out the Simplified Employee Pension (SEP) plan here, as well as other options for self-employed people to start investing.
Find your investing style with this investing compatibility quiz.

Start Investing in an IRA

Traditional IRAs and Roth IRAs are extremely popular investment vehicles, particularly for those whose companies don’t offer a 401(k) or match. IRA stands for Individual Retirement Account. IRAs are easier to max out, as the contribution limit is $5,500 per person.
The main difference between a Traditional and Roth IRA is when you’re taxed – and yes, you will be taxed. With a Traditional IRA, you don’t pay taxes up front, but you do pay taxes when you take out your money at 59 1/2 years old. Note: you don’t have to start withdrawing that early, but you must start withdrawing at age 70 1/2 or else you will face a penalty. One benefit to a Traditional IRA is that by contributing to it now, you reduce your taxable income immediately.
A Roth IRA, on the other hand, does not reduce your taxable income. You invest in a Roth IRA with after tax income. However, when you withdraw from your Roth IRA, at 59 1/2 years old or older, you won’t pay any taxes on the amounts you withdraw. If you expect to be in a higher tax bracket when you’re older, a Roth IRA makes sense. A Roth IRA also makes sense for those who owe little to no money at tax time and don’t need to reduce their taxable income now.
There are some limitations to investing in both a Traditional and Roth IRA. Visit the IRS website on IRAs to determine if they’re right for you.
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Start Investing in Your Health Savings Account

Health Savings Accounts (HSAs) are quite possibly my favorite investment vehicle. I recently got started investing in my HSA. It’s a great way for those who want to start investing to begin and not be overwhelmed.
In order to get an HSA, you must be enrolled in a high deductible health plan (HDHP). HDHPs do have higher deductibles than typical insurance plans, so it’s something to keep in mind if you’re considering an HSA. For example, depending on the type of HDHP offered by your employer or through self-employment, your deductible could be $1,500. This means you have to spend $1,500 out of your own pocket before your health insurance kicks in.
Some people have the funds to cover that deductible from their emergency savings. If, on the other hand, you wouldn’t be able to cover your deductible amount, you may want to reconsider an HDHP for now.
If you choose an HDHP plan with an HSA, you’ll quickly find out how useful and awesome Health Savings Accounts can be. With an HSA, you can pay for many medical expenses, found here, from your HSA. Contributions are also tax free, meaning they come from pre-tax income and reduce your taxable income.
The maximum you can contribute to your HSA, as a single person, is $3,350. If you have family coverage, you can contribute up to $6,650 per year. You can also invest your HSA contributions and take your HSA with you, no matter if you switch jobs or quit to start your own business. Your HSA, and its investment profits, are all yours!
As long as you spend your HSA funds on qualified medical expenses, you won’t be taxed, making this investment one of the best out there. Medical expenses continue to increase every year, and you’re likely to find your HSA will come in handy as you spend money on regular medical expenses.
With all of these options, you’re sure to find something that interests you to start investing now. You can contribute to all of these accounts right now, before 2016 even starts. If you don’t yet have an HSA account, you will have to wait to enroll in an HDHP, but you can plan for it until then!
Want to start investing now, but not sure where to start? Find your investing style with this investing compatibility quiz.

Originally posted 2015-12-09 10:00:21.

Categories
Investing

Simple Steps to Become a Millionaire

“I want to be a millionaire, so freaking bad.” You might have been thinking it, but Bruno Mars sang it first. Many people strive to become a millionaire. In fact, there is even a day dedicated to those people. This year Be a Millionaire Day is May 20th. On this day we answer the question, “Who wants to be a millionaire?” with a resounding shout, “Me! I do!” While it may seem difficult to save a million dollars, there are a few tips you can use today to make it to millionaire status sooner rather than later.

Steps to Become a Millionaire

Start a Savings Account

If you plan to reach the Millionaire’s Club by saving money, then you must first open a savings account. In order to accumulate one million dollars within 30 years, you will need to save around $750 per month at a 4% interest rate.

Use this calculator to determine your required savings rate.

Lately, interest rates have been pretty low on traditional savings accounts. Instead of simply shopping at your local bank, try an online bank. Then, look into a certificate of deposit. A certificate of deposit or CD is a way for your money to earn more. CD’s sometimes have higher rates than traditional savings accounts. A Discover Certificate of Deposit is great option with flexible terms from 3 months to 10 years and you can open your FDIC insured CD account with as little as $2,500.

Begin Investing

Let your money work for you. Investing your dollars gives each dollar a job and that job is to earn more money. When you invest, each dollar has the ability to earn a return. If you decide to invest by purchasing 100 shares of stock in a company, and those shares rise in value, your money just earned more money!

However, you have to be careful because if those shares drop in value, then so does your investment and you could lose money. Investing is not as safe as saving in an FDIC insured savings account. However, over the last ten years, investments in the broad market index, as measured by the S&P 500 have averaged 8.3% per year.

Mind the Gap

The gap separates a potential millionaire from a person that will never make it. What’s the gap? The gap is the difference between how much you earn and how much you spend. That unspent portion is available for saving and investing. Growing the gap will allow you to accelerate your millionaire status. How large should that gap be? Well that depends on how soon you want to become a millionaire. A larger gap means faster millionaire status.

“The amount of money you have has got nothing to do with what you earn… people earning a million dollars a year can have no money and… People earning $35,000 a year can be quite well off. It’s not what you earn, it’s what you spend.” -Paul Clitheroe

Here are a few examples.

Patrick and Jenny are 25 and both earn $50,000 per year. After taxes they each earn a take home pay of $3,000 per month.

Patrick keeps his expenses low and saves $1,500 per month or 50% of his take home pay.

Jenny enjoys shopping, dinners out, traveling, and attending concerts. She saves $300 per month or 10% of her take home pay.

In ten years, Patrick has saved a total of $220,876 with an interest rate of 4%. If he maintains the same saving rate he will become a millionaire by the time he is 55.

In the same ten years, Jenny has saved a $44,176 at a rate of 4%. If Jenny lives long enough, she will become a millionaire by the time she is 88.

Ultimately, becoming a millionaire is a simple process that requires diligence and persistence. Ready to become a millionaire? Open a savings account, begin investing, and create a budget that allows you to spend less and save more.

This post was created as part of the Discover partnership program.

Originally posted 2015-05-20 10:00:28.

Categories
Investing

What You Don’t Know About Scottrade

You may think you know all about the online discount broker Scottrade from the plethora of Scottrade review posts that are out there, but there’s always something you don’t know.

Don’t believe me?

Well, you don’t know what you don’t know. 😛

Inexpensive Trades for Young Adults

You might already know that Scottrade offers $7 trades online and advertises that you can open an account with just as little as $2,500 dollars.

But did you know that you can maintain an account with $2,499 dollars? Yes, with Scottrade there is no minimum balance and no fee on balances below 2,500 dollars.

So open an account and start your automatic deposits.

You’ll build it up to 2,500 dollars in no time.

  • iPhone, Android and Blackberry mobile trading
  • No transaction fee IRAs
  • No account maintenance fees
  • No inactivity fees
  • Watch lists
  • Real Time Streaming Quotes
  • Local Branches so you can talk to a human in person
  • Over 3,000 no transaction fee mutual funds

Referral Program

Did you know that you can earn free trades when you refer your friends?

Once you have opened an account with Scottrade, click on the “Refer Someone You Know” link to automatically send an email to a friend.

When they open an account you and your friend get three free trades.

No Transaction Fee Mutual Funds

Are you looking for a broker where you can trade mutual funds without paying a fee?

Scottrade offers over 3,100 mutual funds with no transaction fee. Not sure which mutual fund to choose?

Use their mutual fund screener to explore your choices, including load funds, no-load funds, no transaction fee funds (NTF) and more.

Gain Loss Tax Center

The tax center was put into place to help you when it is time to file your taxes.

When you sell your stocks, you will have a gain or a loss. The tax center helps you figure out your tax basis for the trade so you can file your taxes easily.

The drawback

Everything is not all stars and roses. Here is the one drawback to having a Scottrade account. They do not offer dividend reinvestment. Dividend reinvestment is when your dividends are automatically put back in to the stock you own. There is no trading fee to purchase these incremental shares. But unfortunately, Scottrade does not offer this. In my opinion, all of the good outweighs this one negative.

Update: 6/30/2013

Scottrade recently announced a major improvement in their services.

They now offer a Flexible Reinvestment Program.

In this program, you can use dividends to buy other stocks and exchange-traded funds commission free!

A lot of brokerage firms have dividend reinvestment programs for their clients, but Scottrade’s program takes it one step further. In a typical DRIP, dividend-paying equities can only be reinvested back into that equity.

As mentioned earlier, with Scottrade’s Flexible Reinvestment Program, dividends flow into a program balance, or pool.

You can then tap that pool to buy up to five securities – none of which have to be the securities that contributed the dividends – commission free.

Most stocks and ETFs are eligible in the program.

From Scottrade..

The added element of flexibility is something our clients were looking for, and it gives clients the choice to reinvest their dividends however they want.

AWESOMENESS

Ok, now we are down to the best part of becoming a Scottrade customer.

The knowledge base.

They have live local events so you can learn how to place a trade, how to get started with options and more. All of these events are taught by a licensed representative.

Here is what you can expect to see once you login to your account.

How to Open a Scottrade Account

  1. Open your Scottrade account online or by faxing in the paperwork.
  2. Fund your account via ACH, check, brokerage account or wire transfer.
  3. Print, sign, and mail the account agreement.
  4. Choose stocks, mutual funds, or other assets to purchase.

Originally posted 2015-05-05 10:00:26.