Everyone alive has some form of financial adversity to overcome. Even the people born with a silver spoon (rich) have to learn how to maintain their wealth. Let’s review some of the financial challenges we can all face at some time; then, we can work on overcoming them.
Born poor. There is nothing we could have done to prevent this one. You are who you are. Hopefully, you have loving parents that can teach you to build relationships and work hard.
Lack of financial education. School doesn’t teach us about finances. Heck, I didn’t hear the words passive income until I was 40 years old.
College debt. They tell you that going to college is the only way to make good money in life. Yes, self-education is vital to building wealth. Read: Self-Education.
Consumer debt. They give us tons of credit cards, auto loans, home loans, and personal loans and give us no education on managing them. It’s all part of a bigger scheme.
Divorce. Ironically, most marriages end because of poor finances. Again, love is natural; marriage is not. Being married is a learned behavior.
Poor retirement planning. They tell us that saving 5% of our income will be enough for our retirement—that’s hogwash.
So what are we to do? Okay, so we are all in shitty situations; but, now is not the time to cry about them. Now is the time to overcome our financial adversity. The most crucial part of overcoming our financial environment is knowing that we are underwater.
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The truth is most people don’t understand that they are drowning in poor finances. Yes, even if they are debt-free, they don’t plan for the day when they will not have a paycheck. This day is called retirement, and it comes for all of us.
So how do you measure your financial situation? Let’s go down a quick checklist.
- Expenses. Do you make enough money to cover all your costs, debt, and nice-to-haves? Without using credit cards?
- Debt. Do you have consumer, auto, or student loans?
- Retirement. Do you save at least 10% into your 401k?
- Savings. Do you have at least $5,000 in savings?
- Investments. Do you invest in stocks or crypto? Even a little bit?
- Passive Income. Do you have multiple streams of income? Even a little bit?
How did you fare on the checklist? If you didn’t do so well, it’s all good. That’s why we can do this together. Trust me; I fell into the debt trap in my 20s and 30s as well. We live in a consumerist nation where getting into debt is encouraged.
So we now recognize that we can be doing better; that’s the first and most crucial step. Most people will go their entire lives thinking they are doing fine. Then they end up living on a $3,000/month fixed income throughout retirement. Nope, we can do much better.
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Breaking with conventional wisdom. This is where I break with conventional wisdom and say you should pay down debt WHILE learning to invest. Every financial guru will tell you to pay off all your debt before you start investing. Then they say save up six months’ worth of expenses in a high yield saving account. Finally, you can begin investing.
This advice is solid, except it could take 3-5 years to execute. All the while, the stock market is increasing, and you know nothing about investing. Learning to invest will change your life—especially if you invest for dividends.
When you buy assets that produce money, your mindset will change about how money works. You’ll build the perspective of an investor. Everything in life should be an investment. Buying cars “we want” is not necessary. These are liabilities that drain our resources and hinder our retirement.
However, if we want nice things, our investments should purchase them for us. Robert Kiyosaki puts it best in “Rich Dad’s Guide to Investing” when he says, “If I want to buy a new car, I buy an apartment building that pays me enough to cover the costs of the car.” Once he pays off the car, he still has the asset.
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The Investing Mindset. Money is all about investing, creating, and building assets. Just paying off debt and saving in a savings account is the exact analog, one-dimensional thinking we had in adolescence.
If you believe that submitting a resume, conducting an interview, and getting a job is the only way to earn income, then we have a lot of work to do together. Jobs are great, but they SHOULD NOT be your only source of income.
That’s why I say that learning to invest while paying off debt is the best recipe for long-term success. Let’s run through an example of how the process works with investing and paying off debt.
Debt-Investing example. Let’s say you have a total of $15,000 in auto and consumer debt. You consolidate all your debt into one loan for 12%. The payment is $334/month for five years. Most people would say that you could double your payments to pay off the loan much quicker.
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However, I would say to use the other $300 to save and invest. I would first save up $1,000 cash in my high yield saving account; then I would start investing in a brokerage account. Yes, a brokerage account allows you to access dividends immediately, unlike a retirement account.
So, that would give me $300/month over five years. You would have approximately $22,000 in your dividend growth portfolio (at 8% growth). More important, your dividends would be over $75/month.
When you finish paying off your loan, you could add in the other $334, and you would double your income. But that’s not the best part.
When you start investing, you form the mindset of an investor. You’ll start looking for ways to get more money into your dividend portfolio. You will want to rent rooms, rent your car, start an online business, create T-Shirts, start writing, buy a rental home, invest in crypto, start income investing, etc.
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You are willing to try new things because you understand the flow of money. If you can understand the velocity of money and how to achieve an infinite return, you’ll never be in debt again. You would have solved the mystery of cash flow. Few people ever understand the power of creation (of money).
Conclusion. If I piqued your interest, then it’s time to take a step. I have a ton of free resources. You can start with my book “Don’t Gamble with Retirement 5 (free pdf).” Then, you can check out the first books that I read on my mission to financial independence.
Money should be fun and exciting. Creating money from your mind (books, music, videos, art) is fantastic, but there are even more ways to make money passively. You can join my Facebook Group, where I post new content on passive income living every day! See you there.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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