Typically I say “tips” are for the wait staff, but this collection of “tips” is the real deal. There’s nothing behind it. You know I have no agenda because I’m not licensed to sell anything. Hope it helps!
Tip #1 – Keep it simple. Don’t buy anything or invest in anything you don’t completely understand. Even if all your buddies are doing it. Unless you understand all elements of that product or service, just simply don’t do it. You can contact me for help with a non-bias explanation, but typically, if that’s needed it’s a red-flag that you shouldn’t purchase or enroll in whatever is in question.
Tip #2 – Create a Financial Plan. Whatever you do, DO NOT try to pick stocks, bonds or mutual funds on your own. The easiest and most effective thing you can do is buy a low-cost ETF (the IVV is what I buy) which mirrors the overall market. Buy a consistent amount of that security every month and let the laws of dollar-cost-averaging and dividend reinvestment do the heavy lifting. It does not matter how much you’re investing each month, this has proven to be the most consistent and highest-yielding strategy that exists. It’s also simple, hands-off and stress-free.
Tip #3 – Create an Estate Plan. Over 50% of people in the U.S. over the age of 55 do not even have a Will, much less an Estate plan. The numbers are even worse when compared to “all adults”. DO NOT be one of those people. It’s not too expensive to generate a complete Estate plan, which includes a Will, Guardianship provision, Advanced Healthcare Directive and family Trust. Do it. If you’re an adult, you need it, this isn’t optional. If you have kids or own a home, you need this done yesterday!
Tip #4 – Know your credit score. Your credit score could change every single day. There are a lot of variables that impact, effect or change your credit score. If you had a 700 score when you bought your house two years ago, that doesn’t mean anything today. Check your credit score every six months and see where you stand. DO NOT sign up for credit monitoring. They will use your participation in that product as permission to sell your information to companies that will then start marketing to you furiously filling up your mailbox. It will compromise your personal information and make you more likely to be a victim of identity theft. Check it yourself. No one cares more about your credit score than you do. Watch this video to learn about the Components of a Credit Score. Also, check out my Top 10 Credit Tips here.
Tip #5 – You probably need more insurance. Most people are drastically under-insured and therefore financially exposed. Not just for the assets they have but their future incomes as well. Here in California, it’s especially crazy what people get sued for and insurance is the cheapest law defense you will ever find. Don’t get me wrong, there are TONS of insurance products out there you DO NOT need. Here are some you do…
– Homeowners or Renters Insurance (cover everything you own including cash items)
– Auto Insurance (do NOT just get the state minimums, increase your deductible and increase your coverages dramatically. A good rule of thumb is 10 times the state minimums)
– Life Insurance (get as big of a benefit amount as they will give you)
– Long Term Care Insurance (get this as young in life as possible for the best deal)
– Health Insurance (there are so many different plans to choose from now it’s nauseating. Most likely, your wife will be picking the policy based on the OBGYN situation. Don’t argue.
– Umbrella Policy (if you’re a business owner, this is a no-brainer)
Tip #6 – Order of operations is important. Getting your financial life in order is a lot of work. If you do it in the right order, it’s easier and saves you money. This is why I created The Life Plan. Within this free document, you get a checklist of everything you need to do, the order you need to do it and who to call for help along the way. You can download it here for free.
Tip #7 – Tax planning can save you a bundle. Especially if you’re a business owner. I had no idea what a difference it could make until I did it myself. This is one of the last things I did in my financial life. Wish I had done it sooner. It would have saved me six-figures. No joke. I could have given $100k+ to charity or taken a round-the-world trip of a lifetime with that money. Don’t send any more than you’re legally obligated to Uncle Sam. If you’re a W-2 employee with a consistent annual wage and no commissions, there may not be much you can do, but you can definitely do something. Just generating a mortgage deduction isn’t enough. There’s more. Look into it and if your CPA says they can’t save you any more than they already are, let me know so I can connect you with a real pro that will guard your money like it’s their own.
Tip #8 – Avoid generating debt except…when buying a house or car. If you’re buying a car these days, interest rates are extremely low. On new cars, you can get 72 month financing for under 3% with “average” credit. Take that deal. You’ll pay just a couple grand in interest over 6 years. That’s worth it. With buying a home, you’re not likely going to be able to save enough to pay for a house in cash, so borrowing money is going to be necessary. Just remember to buy your first house very modestly. Buying too much house is financial suicide. You do need at least one credit card to maximize your credit score, but you shouldn’t carry a balance. Buy gas with it and immediately pay it off the same day. This will generate activity on the account and keep the reporting current on your credit report.
Tip #9 – Your mental and physical health are important to your wallet. If you are physically fit and mentally happy, your financial life will seem easy to navigate. If you’re out of shape and easily made angry all the time, then nothing in life will ever be fun including this. Take the time every day for some physical activity, even just a 30 min walk around the neighborhood in the mornings. For your mental health, I recommend regular silence. You could do this in conjunction with your work-outs or walks in the morning. Wear your headphones and listen to nothing. Use them as ear plugs. We are over-stimulated as a society and that over-stimulation creates turbulence in your consciousness. Giving 30 minutes a day to just be silent will help center your conscious self: no music, no TV, no radio, no videos, no internet, and ideally with your eyes closed. You will be blown away with your increased clarity and mental capacity.
Tip #10 – Buying a house is the cornerstone to a good retirement strategy. But be very careful about what I call “Rah-Rah Real Estate Agents”. These are the ones who say things like this “every day is a good day to buy or sell real estate”. Look, you do need to own real estate. Not because it’s a good investment, but because it’s a hedge against your living costs. You can read all about this strategy in an article I wrote for the San Diego Union Tribune here: Buying a Home is not an Investment, it’s a Hedge. That said, it doesn’t mean you need to buy a house TODAY. Take your time. This is a long-term move you’re about to make, so make it very wisely. If you don’t find what you’re looking for, be patient. Do not listen to anyone who uses FEAR to drive you toward buying a home. “Interest rates are going up soon” and “prices will be much higher this time next year” are typical things you will be told. Ignore it. Even if they’re right, that’s ok. You are not making a decision this big based on those “guesses” about the future. Make the decision to buy based on what’s important to YOU and what you can easily and comfortably afford. If you can’t afford the type of home you want yet, then save up until you can. As long as you’re saving money in your “buy a house” fund, then it’s ok to rent. Whatever you do, DO NOT make any rash, emotional decisions about real estate. It’s a good way to get yourself in to a bad situation.