By Joe Firmin 3-Minute Read
How did you first learn about investing? Was it your piggie bank? College? Did Grandma buy you a share of Starbucks stock?
One of the things I do with my kids is they have 4 jars: GIVE, SAVE, SPEND and…. INVEST!
At some point in life, we realized that we not only need to save money for a certain purchase or for an emergency fund, but we also realized we want our money to be growing, actually working for us. So where to start?
OWN IT – MAN UP!
That’s the first step. Commit to it. You’re an adult, buckle down and make a plan. It’s your responsibility. Sorry to be blunt, but seriously – take it seriously. This is your life. If you have a spouse and kids – you owe it to them.
BEGIN WITH THE END IN MIND.
How many cars did you look at either online or at a lot before you selected the last car you purchased? Odds are you researched things from the sound system to the safety rating.
Do you want to “retire” in 5 years or 25 years? Are you diversified in hard assets and liquid assets? Do you want to be active in your investments or very passive? These and others are questions you should be asking about all types of investments that come your way. You could invest in stocks, bonds, mutual funds, gold, real estate syndications, turnkey rental properties, a small business, a startup, etc. Which is right for you?
WRITE ‘EM DOWN
This one is obvious, and you’ve likely heard it before – write down your goals… blah, blah blah – YES! Face slap – wake up! Do it.
It helps. If you haven’t done it before, it’s pretty freeing and sweet. If you need some guidance, Google – SMART goals, standing for – Specific, Measurable, Achievable, Relevant, Time-bound. There are lots of resources out there to help you with your goal setting. I’d like to hit more directly the investing part of this so you can use your goal-setting prowess and apply it to Investing.
Writing these down will give you your number… Ah yes, the magic number… which will be wrong. But it doesn’t matter, at least you have one and you can start working toward it. Life changes, but if you don’t know where you’re going, you won’t get there.
What if your goal is to retire early and quit your job? What if you love your job and want to grow your wealth in appreciating assets? It’s like I’ve told folks on my team at my W2 job – if you don’t know what your next role looks like and what you need to get prepared for it – how will you get there? Take the time and write ‘em down!
Instead of boiling the ocean here, let’s focus on 2 main ways to invest:
Cash Flow / Income
Long-term Appreciation / Growth
Wait! Where are stocks, bonds, gold, bitcoin?!?
Those are included, but at the end of the day, you’re either investing to generate income you can live off of or looking to grow your wealth. Right?
Cash Flow / Income
Basically – your investing creates cash each month that pays for your life. Your investments generate enough income that your lifestyle is paid for through your investments.
There are lots of ways to generate this type of income such as annuities or real estate. These types of investments can provide steady consistent returns. You can plan the cash flow to help you make decisions.
So if your goal was to quit your job and go be a missionary – then you know you need a certain amount of money to survive, pay debts, etc. and if you have consistent cash flow you can count on, you can plan towards your goal.
Long-term Appreciation / Growth
Switching gears – if your goal is to participate in the upside of real long-term wealth building and you don’t necessarily need the cash flow now, you can focus on investments that will appreciate or grow in value.
An example of this would be investing in a rental property that is in a high-growth market (think big city or coastal city), that for the past 100 years has only gone up dramatically in value. If you buy now, and hold the asset, in 20 years you’ve got an asset worth much more than when you paid for it. In the meantime, you’ve paid down the mortgage so the gap between the value and debt is nice and fat.
There are many real estate investors that will tell you only to invest for cash flow, some are very willing to take on higher risk for the potential promise of high appreciation.
So not convinced on one or the other, you want everything huh? Well good, me too. Yeah – Hybrids! But cooler, not the Prius ones…
You can absolutely invest for both income and appreciation. In real estate you purchase the property for cash flow and only buy it if it produces cash flow, but it is in a market that will appreciate. These are not as easy to find, but deals are found every day.
We like high-growth markets like Atlanta and Tampa Bay, but so do many other investors… everyone likes to have their cake and eat it too.
There’s nothing wrong with investing in one area or the other as it is good to have investments that produce income and others that are for appreciation, diversification, right?
Know your goals and get them straight. Once that’s done, you can focus on which investments will help you meet those goals the fastest (or slowest if you want, I guess).
Like my man Tony Robbins says, “Where focus goes, energy flows.”
Get your focus goggles on and you’ll be able to snap up the deal that fits your goals.
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