Every good list Homework come up with an epic starting point. That is undoubtedly the case here today, so allow me to introduce what I believe should be the first investment on everyone’s financial wish list.
If you guessed it, let me know in the comments.
The Roth IRA was indeed my first choice investment and for very good reason. Let me share with you the power of this investment vehicle!
Important distinction: I use the word “vehicle” for a reason. A common misconception among those unfamiliar with retirement investing is that the Roth IRA East the investment. In fact, it is not. A good way to think about it is similar to buying groceries. The Roth IRA is your shopping cart and you need to choose which investment products you want to keep in your shopping cart! Simple, right?
I would hate for you to open a Roth IRA thinking you’ll wake up a millionaire one day to realize the money is stagnating. Believe it or not, I’ve heard stories about it.
The Roth IRA is an Individual Retirement Account (IRA). It’s funded with after-tax money, which means you’ve already paid Uncle Sam. Since you’ve been so kind to give him your hard-earned money upfront, he’ll allow your investments to grow generously, tax-sheltered, AND will allow you to access your funds, again, tax-sheltered!
After 59 1/2 years it’s… I know, I know. I can already hear you scream.
“59 and 1/2? It’s so old!
Yes, I agree that’s a relatively late age to access money without penalty, but ultimately it’s a retirement account. The reason to start investing so early (I just turned 22) is to take advantage of what Albert Einstein likes to call the eighth wonder of the world: compounding. Or in this case, compound interest. It’s one of my favorite concepts in the investment world and I think it will soon be yours too.
Let me show you something…
This is a compound interest calculator from my friends at Moneychimp.
You can see that if we start with $0 and contribute to the current maximum annual investment of $6,000, compounded over 40 years at an average rate of 8%, we end up with the princely sum of $1,678,686.24 . Not bad huh ?
This assumes that we start at 20 and stop at 60. Leave it for a few more years and that account value could easily exceed 3 million. That’s the beauty of baby formula!
The Roth IRA is an epic first investment and I’m so glad I jumped on board.
Now that we have checked the exchange box, we need dirty and dirty crypto tokens.
I’m kidding, I’m kidding. Microcap cryptocurrencies are not my thing.
However, I am a big believer in blockchain and believe that cryptocurrencies have an extremely bright future. I’m a fan of Bitcoin, Ethereum, and a few of their counterparts, but even those aren’t my saving grace in terms of financial security.
Right now, you can hold something called a stablecoin. These are cryptocurrencies that aim to retain the value of the dollar. The best part? You can earn crazy interest on them at places like Traveler. They will currently give you 9% on your USDC (my stablecoin of choice). 9%! Try asking your brick and mortar bank that and I think they’d slap you in the face.
These cryptocurrency brokers will even pay you interest on other coins like the popular Bitcoin and Ethereum. I love having crypto as an accessible money multiplier. It’s riskier than the traditional stock market, which is why I hold my stocks in my tax-sheltered retirement account. With crypto, I can grow my petty cash while I earn even more money to put into my financial system. It turned out to be a wonderful addition!
This is where we start the mental movies. I have not yet acquired any real estate so from now on I will highlight my future ambitions.
If I were to get into the real estate game, I would want to buy a multifamily home. It’s great because if you didn’t know, you can do something the FIRE community likes to call; house hack. House hacking consists of buying, for example, a duplex (two-family house) and living on one side while renting the other. The objective here is to offset the mortgage payment with the recurring rental income.
There’s a lot to consider here as the deal has to be good for it to work and you may need to work out a few numbers. I never said the most profitable listicle in personal finance history would be a cakewalk. If you can achieve this – which many people do – it may turn out to be one of your most valuable investments. Eventually, when you want to move out or the house is paid for, you can make rental income on both sides of the property and live lavishly with your money-making machine!
Many people don’t see a side hustle or personal business as an investment option. I often fall into this category myself, while most others also believe that an investment should be an exchange of money. For a business, you will most likely be investing money, but you will also be investing another more valuable resource: time. Investing time and money in a business isn’t a surefire way to financial success, but if you manage to create a successful empire, you’ll be way ahead of the pack.
That’s basically what I try to do with my online writing. Side hustles are great because they can be paired with a 9 to 5! That means double income and double cool points! If your secondary stampede is successful enough, you might even be able to stop that 9 to 5 and make your secondary stampede your primary stampede!
This is the fifth and final item on the most profitable list in the history of personal finance.
I saved the best for last and this one is quite captivating. I recently wrote an article on the family bankso if you want an in-depth review of its potency, check it out.
The basis of a family bank is a holding cell for your capital. It must, however, have certain key characteristics. I like to seek liquidity, security and a good rate of return. It would make me happy if I had all three. Luckily, you can experience these characteristics with a family bank. The heart of your bank is a whole life insurance policy. It needs to be structured properly by a professional, so it’s something you’ll need a little help with. Don’t worry, you’re still in control of your self-directed investments.
The insurance policy allows you to deposit funds on a schedule set by you, and it will experience a specified rate of return. The real power comes in the fine print, however. If you want to leverage this strategy to your advantage, you can take out loans on your contract and since you are the holder, you can repay yourself at any time! The best part? You don’t even borrow your own money. It’s technically from the insurance company and your account value will continue to earn that rate of return, doing its job. If you never repay the loan, it will be taken out of your death benefit, but that’s up to you (I would repay it for maximum benefit).
If you didn’t already know, this is essentially what your physical bank does with the money you deposit into your savings. Why not copy them and do the same? There are tons of benefits to this strategy and I’m only just beginning to realize them.
My goal in bringing this team of “financial avengers” together is to find the best “detention cells” for my money.
There are many things to consider when combining different investment vehicles such as diversification and risk potential. Everyone’s ideas and situations will be different, so it’s up to you how you would like to play the money game.
I believe simplicity is key, but I also have a good time over-complicating things by looking for sufficient returns. We can all dream of our future riches, but it’s also important to stay here and now.
After all, money is technically just paper and it shouldn’t dictate our entire lives. Keep a healthy personal finance philosophy and I believe you could live a wealthy and wise life.
Consider these investment options carefully and bring the ones you like with you. Dive head first into the minutia of their unique features and it may even take you somewhere else.
Investing is a very good thing to take and can have a major impact on our lives and those of our loved ones.
Now go ahead and invest!
**Note: This is not financial advice. Just my financial thoughts and interests.