Where to Invest Your Money

Where to Invest Your Money

Saving money is your foundation to building wealth, but it does come with a caveat, you have to know what to do with it.  Well the easy answer is that you want to invest it so that money goes to work for you, rather than you going to work for your money.  This is referred to as passive income, which is income you receive from your investments.  The investments could be a business, product, patents, real estate, or stocks.  There are many different forms of investments.  So how do you get started investing?

So, let's talk about some ways to invest your money and gain financial freedom.  I think it’s important to first determine what type of investor are you?  Do you have the time and energy to learn about investing in businesses?  Do you want to buy real estate to invest in?  Or are you happy working a corporate career and investing enough along the way?  There isn't one choice that's better than the other, but they can lead to very different financial paths.  Whatever approach you feel the most comfortable with, it comes down to a few basic ways you can chose to invest your money:

  1. Buy or grow a business.  If you own a business, as long as the business is profitable and you don’t have to work in it, then you have passive income.  If you can't buy a business, you can build the business and live off its profits, or sell it later and invest those profits back into another business or into one of the next two options. 

  2. Save a big pile of money:  This is often the 401K, Roth IRA, and/or brokerage account option.  Once you have enough money built up, you can live off of interest and dividends alone.  This is often achieved by working in a career, building a lifestyle you want, and continuing to invest a certain percentage of your job income into investments along the way.  If you can save 25-50% of your income into investments using this approach it won't take as long as you'd think before you can walk away from your day job.  However, if you are saving only 5% to 10% it will likely take your entire working career before you're financial free.

  3. Real Estate investments: This is a version of the first option, buy enough real estate that it pays you back enough in income that you can live off of it.  I have met several people who use this as their only investment approach and though it still takes time, it's a great approach to achieving financial freedom.  Just keep in mind that this income won't be truly passive unless you hire out all the management duties.

  4. Pay off debt:  The first three options are ways to build wealth with the money you invest.  This option can be just as important as any of the three above.  You can build a lot of wealth by not having to pay interest and instead freeing up that extra cash to invest in one of the three options above.  When you pay off debt you get a return on your money in what you would have paid in interest.  For example paying off a $10,000 credit card bill at 15% interest is a return of $1,500. That's a hard return to beat, and you don't have to pay taxes on it!

How soon you achieve financial freedom will be based on your investment rate and the growth of those assets.  How you choose to invest in these assets can vary greatly.  You can choose to invest in a combination of all of them or focus on one of them.  There isn't one approach that works for everyone, but determine which strategy you feel most comfortable with and dive in. Any of them can and will get you closer to financial freedom.   Once you start investing the most important thing you can do is keep investing.  Then when you see profits start rolling in, keep reinvesting your earnings.  When you reinvest your profits you will put your wealth building into hyperdrive and you'll achieve your financial dreams exponentially sooner.

Work Like Your Parents - Live Like Your Grandparents

Work Like Your Parents - Live Like Your Grandparents

The Yin and Yang of Investing - To diversify or not to diversify

The Yin and Yang of Investing - To diversify or not to diversify