It’s time to start the best wealth-building strategy…today!
I spent most of my life either being broke or barely scraping by living paycheck to paycheck. Today, i have actual wealth, but I started way later in life than I should have. I’m about to teach you the best wealth-building strategy out there, and it’s a super simple concept and even simpler strategy.
This isn’t some get-rich-quick scheme, either. It’s what rich people do, and the sooner you start the better. So, I highly recommend you take this information and start today.
There’s a good chance that you’re hear because you want to stop being broke, but that’s a pretty low bar. Trust me, it’s a great bar to get over, but I know you can do a whole lot better than that. It’s time for you to learn the best way to build wealth, and it’s a lot easier than you thought.
Make your money work for you
That’s it! That’s the strategy. See you in the next post!
Alright, I’m kidding. Of course, I’m going to explain to you what this means and give you the basics of how to get started.
Far too many people just shove their money into a savings account, or worse, they just keep their money in their checking account, and it’s not doing a damn thing for them. Your money needs to be in a high yield savings account or invested.
Why? Because banks will pay you money to just have your money sitting there in a high yield savings account. Investing may sound complicated or even “risky”, but I’ll give you the basics and debunk the risky/gambling idea shortly.
Now, I’m going to give you a quote that I want you to tattoo onto your brain. It’s from none other than Albert Einstein:
"Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it."
What this means is that when you’re in debt and paying interest, you’re screwed. But those who understand how to make it work for them can start building wealth. The goal is to have as little debt as possible while taking advantage of compound interest with savings and investments.
Here’s how compound interest works:
To keep it simple, let’s say you have $100 and the bank pays you 10% interest per year on that $100. After the first year, you’ll now have $110 ($10 is 10% of the original $100). Well, the next year, you’re not making 10% on $100, you’re making 10% on $110. In the second year, you’ll make $11, so you’ll be at $121. The next year you make $12.10, so you’ll have $133.10. And so on and so on.
Just think about it as a snowball effect. As your money grows, you make more money off that money. Is it starting to make sense why rich people are so rich?
There’s two types of interest:
Interest you pay: Interest is a fee you pay when you borrow money. This goes for credit cards, car loans, home loans etc.
Interest you earn: This is money a bank pays you when you have a savings account or money you can earn by investing.
Interest can be your worst nightmare or your best friend. The principal of a loan is the initial amount you pull out, and to get out of debt, you have to pay off the principal and interest. If you aren’t careful, you’ll never pay off your principal. This is how people literally get stuck in debt forever. There are countless stories of people who have been paying off student loans for years and have barely made a dent in it just because they’ve only been paying their interest fees and compound interest is wrecking them.
Me, I was so broke that I got into the horrible habit of going to payday loan places, and one time, I even took out a title loan on my car. This is the worst thing you can do in your life, and it should be avoided at all costs. These services take advantage of broke, desperate people.
To put it into perspective, here’s a chart from LendingTree.com with the average credit card interest rates:
As you can see from the average column, these average rates range from 18.13% to 27.06%. According to InCharge.org, the average interest rate for a payday loan is 391% and can be higher than 600%. There are a lot of systems in our country designed to keep broke people broke, and you need to avoid the most predatory practices.
That’s all I’ll explain about payday loans for now, but I highly recommend you read the whole InCharge.org article about how payday loans work here.
How high yield savings accounts work
When it comes to the world of personal finance, I need you to be as skeptical as possible and ask the right questions. A lot of people are going to try to screw you over and take advantage of you to make a buck. And yes, you should even be skeptical of me. Your money is important.
The first question you should have asked is, “Why the hell would a bank pay me to have my money sit there?” Then, I would have said, “That’s an excellent question!”
Here’s why:
Aside from charging you overdraft fees and other stupid feese for using the bank, banks make most of their money off of lending people money. Banks do car loans, home loans, personal loans, and more. Banks don’t always have that kind of money on hand, so they lend out your money.
That sounds sketchy, but don’t worry. Most banks are FDIC insured, which means that if a bank royally screws up, the government will pay you back up to $250,000. This is extremely rare, but it’s what happens when the economy crashes because banks made really dumb, high-risk bets.
When you have your money in a savings account, the bank is paying you money so they can borrow it to lend it out to other people. They make their money by paying you a far lower interest rate than what they’re charging their customers…because capitalism.
“But Chris, I thought you said it’s a bad idea to have your money in a regular savings account.” Yeah. It is.
At the time of writing this, the average interest rate for a regular savings account is 0.46%. Let’s say you deposited $100 in your savings account and then added another $10 to it every month for the next 10 years. After 10 years, you’d make $32.42 from interest. That’s terrible.
Note: This is the Bankrate simple savings calculator. Use it and other calculators if you suck at math like me. There are loan calculators, credit card calculators, and everything else you can think of.
After a quick Google search for “best high yield savings accounts” and clicking the first link, I found a high yield savings account paying 5.25%. That’s 11x more than a regular savings account. If you deposited that same $100 and added $10 a month for 10 years, you’d make $430.29 just for having your money sit there.
Listen, I know you might be thinking, “Chris, $430 in 10 years isn’t a lot of money.” First off, it’s a lot more than nothing, so put your damn money in a high yield savings account. Second, I know what it’s like to be broke and have some person tell me I need to be putting money in my savings account while it feels like I need to hold onto every penny.
If there’s one thing you take away from this post, it’s that you need to start depositing whatever you can. Even if it’s as little as $10 a month.
Once you start making more money and budgeting better, you can start depositing more. Personally, I deposit $200 a month ($100 per paycheck). If I do that for 10 years, I’ll have made $3,701 in interest. That’s a whole ass vacation.
You can do different strategies for your high yield savings account, too. I actually emptied out my savings account last summer for my tattoo sleeve. I had to book the appointment almost a year out, so I started saving up in my high yield savings account, so my money made me money and it was basically a discount on the tattoo.
My girlfriend had $10,000 left over in cash from her student loans when she graduated. Because of the pause on student loans, she had over a year to start paying them back. I got her to put the money in a high yield savings account. She opened the account in July of 2022, and she’s made over $600 for letting it just sit there. That’s a whole monthly payment on the loan. It’s genius!
Which high yield savings account should you use? It’s up to you. I personally have a Capital One 360 Performance Savings account. At the time, it was one of the best out there. It’s currently paying 4.25% interest, so it’s not the most out there. I stick with it purely out of convenience because my car loan and credit cards are through Capital One. It makes managing my finances a lot easier.
It’s time to start investing
I’m going to give you a real brief overview of investing to get you started. Most people are way too intimidated by investing because they think it’s too complicated. Yes, it can get insanely complicated, but you can make a ton of money by using the simplest investment strategy that most smart people use. Well, smart people and people with a lot of anxiety.
The two main types of investments are stocks and bonds to know about:
Stocks: You own part of a company and you make money when they make money.
Government bonds: The lowest-risk investment out there because they’re backed by the government. They barely pay anything though.
The first thing you need to do is to open a brokerage account. The two best and easiest ones for everyday people like you and me are Charles Schwab and Vanguard in my opinion.
When the GameStop stock nonsense was going on, you probably heard a lot about the app Robinhood. Yes, it’s a very simple app to use to start investing, but I hate that company because they screwed over a lot of people. They also “gamify” buying stocks, which can make you do really dumb things, so I don’t recommend using apps like this at all.
My personal finance idol is Ramit Sethi, and he says, “Investing should be boring,” and I couldn’t agree more. Follow Ramit on Twitter and subscribe to his YouTube channel for a ton of great advice. In fact, his book I Will Teach You To Be Rich helped me more than anything when getting my money in order. He has a tough-love approach, but he’s the best.
Now, it’s time to debunk the idea that investing is risky.
The truth is that investments are only risky if you take bad advice and do high-risk investments.
Most investments are risky. When you invest in individual companies, it’s insanely risky. I spent months trying to learn how to pick the best companies, and I took the advice of “experts”. After all of that, I lost thousands of dollars. The reality is (and it’s been proven in endless studies) that “expert stock pickers” are no better than anyone else at picking individual stocks.
Crypto is the riskiest investment out there, and you should read my post about it if you haven’t yet.
The best (and safest) way to invest
All you need to do when you invest is to start investing in the S&P 500. That’s it.
Here’s some social proof: My son received a $15,000 inheritance 3 years ago at the height of the pandemic. I invested all of it in the S&P 500, and his account has made over $4,000. Not bad seeing as how the world was on fire.
The reason investing in individual companies is so risky is because you often aren’t diversified enough. If you put all your eggs in one basket and something goes wrong with that company, you lose all of your money. Think about how many companies over the years have just gone out of business when people thought they’d be around forever.
With the S&P 500, you’re fully diversified and holding stocks for the top 500 companies in the United States. In short, the only way you lose your money is if the United States economy crashes and never recovers.
I’m a major skeptic and pessimist, but I know that if the economy crashes and never recovers, it means we’re in an apocalyptic scenario and money is the last thing I need to worry about.
Something you may know about me or will eventually learn is that I’m not a fan of capitalism. One of the reasons is that the United States government will always bail out massive corporations while we’re fighting for scraps. Knowing this gives me more confidence in investing because the government won’t let these big companies fail.
So, it’s time for us to play the game too and make some money off of it.
Here’s just some of the S&P 500 companies, and you can see the full list here.
As you can see, when I took this screenshot, some of these stocks are making money today, and some are losing today. Since you have a small chunk of all of them, it balances out, but the S&P 500 as a whole always goes up over time.
Investing is not a short-term thing. This is long-term.
Look at this chart that dates back to the 80s. We’ve had numerous economic crashes since then, and it always recovers. It does this because it’s the top 500 companies, which means it’s always rotating. The ones that don’t survive drop out and are replaced by the new ones. So, again, unless our entire country collapses, it’ll always recover.
The only time investing in the S&P 500 is risky is if you’re old. Like, “I’m about to retire” old. Sometimes, it takes the S&P months or years to fully recover. But, let’s be honest, if you’re just starting to invest at 65, you need a lot more help.
I started investing when I was 36, and using this simple strategy that many of the smartest investors use, I’ve made thousands for myself and my son. On average, the S&P 500 makes 7% per year, but sometimes it’s 10% or more.
The other biggest benefit is that investing in the S&P 500 has the lowest fees. Yes, when you invest in stuff like this, the brokerage charges fees. That’s how they make their money. Since this is the simplest way to invest, it’s the lowest fees.
Using this strategy is also great if you have a 401(k) with your company. Rather than paying fees for them to pick my stocks, I just manage it myself and invest in the S&P 500 to save a ton of money. I did the math for my girlfriend, and by the time she’s 65, I’ll have saved her over $100,000 in fees by doing this.
How to invest in the S&P 500
To invest in stocks, you need to know the symbol (abbreviation) to invest in. For example, Microsoft is MSFT, Apple is AAPL, and Amazon is AMZN. For the S&P 500, it varies.
I have a Schwab account, and with them, the symbol is SWPPX. If you’re using Vanguard, theirs is VOO.
Not sure why I made a whole section for this, it’s pretty simple. But there you go. It may take a day or two to open a brokerage account and link your bank accounts and stuff, but you need to start investing today.
Automate your system
Now, the best thing you can do is to automate your system. I have it set up so each paycheck, it automatically moves money from my checking to my high yield savings account and automatically buys S&P 500 shares.
I’ll do a more in-depth piece on automatic your system at some point for those who need more help, but just automate it. If you have to think about it, you may not do it. Your money should always be working for you.
How much should you invest and save? There are a million suggestions out there for how much you should invest and save. I just use Ramit’s “conscious spending plan” strategy, and here’s how it’s broken down (I’ll go more in-depth on this at some point too):
I like his basic strategy because it leaves a lot for guilt-free spending, which a ton of people are worried about. Like Ramit, I believe you should be having some fun with your money and not just hoard it in your investments and savings. His allocation allows you to build wealth while also treating yourself.
Lastly, let’s talk about fear.
If you’re broke or have a major fear of being broke, you’re not alone. This is one of my biggest fears. I’m afraid that I’ll need money and won’t have access to it.
First off, fix your credit. If you have credit cards, you’ll feel far less stressed because you have access to emergency funds.
Second, it’s not super hard to just sell your investments or move money from your high yield savings account. When you sell your stocks, it takes maybe 1-2 business days depending on what time you put in the sell order if you have S&P 500 shares. I have a checking account with Schwab, so once the shares are sold, I can instantly access the money.
With a high yield savings account, it can sometimes take longer. My savings account takes 3-5 business days to move money to my external checking account. This is good though because it helps you avoid draining your savings for impulse purchases.
Trust me when I say that I’ve been in every financial emergency you can imagine, and most of them you can put off for a few days while you wait for your money. The only situation I can think of where that wouldn’t have worked was when I had a tire blowout during a road trip and needed a hotel for the night and a new tire. Rent and all sorts of other bills can typically get delayed by a week if you talk to them.
And that’s it! I thought this was going to be a lot shorter, but I want to make sure you have enough information to get you started while also understanding the importance of all of this.
If you have any questions, feel free to leave a comment or tag me on Twitter @bootmanmstz. Now, go start building wealth.
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