Top 10 Financial Hipster Tips
Financial Hipster Top 10 Tips:
Get paid interest, don’t pay it: Seems simple enough, but few people build a plan to move towards it. Most people are focused on what interest rates they are paying. What we should all strive for is being an investor who is focused on how much interest we earn. When you become a person who focuses more on the interest you receive while lowering the amount you pay your heading in the right direction. Eventually, your credit score won't matter because you don't need credit. A great way to build wealth is to not have to pay more for things than what they already cost, and invest the difference. As time goes by, the interest you are getting paid will compound and you'll be truly on a path to building wealth. When you pay interest to others, you're just helping them compound their returns.
Know where your money is going: Not the old budgeting bullet point again? Well, unfortunately it's here because it's true. Your savings rate is the greatest single indicator of your ability to build wealth. You could lose half of what you safe in investments and still be better off than the average American if you are good at saving money. It is crucial to live below your means and save somewhere between 5% and 20% or more if you can. If not, you'll be leaving your financial future up for grabs. Not to mention it just feels good to see your hard labor bear fruit. If you're interested in a couple applications that help track your money and know where it's going. I highly recommend using an aggregator like Mint or Personal Capital. I use both of these and they are awesome! Mint is especially good for budgeting and I recommend Personal Capital to keep track of your overall investment allocation and investment fees. I have found these to be the best online tools to understand where my money is going and to keep track of my net worth.
Put all your eggs in one basket, then move to another basket: I admit, this one is controversial. Financial advisors will always tell you to never put all your eggs in one basket. But I'd argue when done wisely, that almost anyone who gains significant wealth has does this. It's investing all your time and resources in your business. It's paying off your debt with vigor and no remorse. It's buying your house in cash which allows you to invest the rest of all that money in other things that matter more. It can be hedging a major bet in a single stock or company that you believe in. The most important thing to consider is risk and what you're willing to lose. Sometimes it's not only a safe bet, but a great strategy, to put almost all your eggs in a basket and then move to the next basket. If you don't put all your eggs in one basket by paying off your consumer debt for example, you're dragging out how long you'll have to worry about that debt. So go ahead dive all in on paying off debt or some other investment. Disclaimer: This assumes you always atleast invest in your 401k or other retirement plans to get a company match. That's free money on the table you don't want to leave behind.
Don’t get hung up on returns: When you buy good investments you never need to sell them. That should be the real goal beyond focusing on returns. When you buy good investments, good returns will come because you're asset will continue to grow. Think Bitcoin vs. Amazon stock. A few people may make a lot of money with Bitcoin, but more people will gain long term wealth with Amazon. Invest in good companies and you'll always win.
Chase your work dreams: From an early age we are told what we are suppose to do and how we're suppose to live. If you don't challenge that norm and fully chase your own work dreams than you’ll always be working to achieve someone else’s. Go achieve your dreams.
Minimize stuff, maximize your goals: You don't have to be a minimalist to achieve financial greatness, though for the majority of us it will help a great deal. One of my favorites quotes is everything you own takes something away from you. So make sure what you own is worth it.
You are your own charity: Nothing wrong with contributing to noble causes, but you can contribute in non-monetary ways if you aren't in a position to give. It's great to give to others but you can't help others if you can't help yourself first. It's like the oxygen mask on an airplane. We have to put our own mask on first before we can help others or we can't help anyone.
Live simple: Sometimes simple people are viewed as being simple minded. I totally disagree. I think the most altruistic thing you can do is learn to live simple. Learn to give and learn to provide for others. In the end, you'll get more than you'll ever receive.
Challenge the norm, if you want freedom you have to be different: Being different is weird and you will feel pressure to conform to the social norms. Fight that urge and never forget why you are doing what you're doing. Focus on your goals and dare to be different. It's the only way to get different results. That means needing less than others or making more than others. It's not only okay to be different, it's a necessity. If you're considered unique or different, you're probably doing something right.
Avoid big purchases and watch the small ones: You know you have to live somewhere, maybe a house. You know you need transportation. But watch the big purchases. I've seen time and time again people spending too much money on a car and/or a house but can't figure out how to retire or pay for their kids college. As for the small purchases, no need to obsess about it, but give yourself a certain amount of disposable income each month and stick to you. When you avoid the the unnecessary big purchases and watch the small ones, you'll be investing in what matters.