I've watched my peers buy nice cars and houses.
I've lived like I make 1/5th of my salary.
I've said no to the things that I want so badly.
I've paid my debt in full.
Nobody ever said that delayed gratification would be fun. In fact, when I started my journey to paying off my student loans I was told it would be REALLY hard to watch everyone around me increase their “quality of life” with new cars, houses, and clothes while I dug myself out of the hole I had put myself in.
When I was paying off my debt I became extremely good at keeping the thoughts about the stuff I wasn't buying for myself suppressed in the back corner of my brain. I'll probably need therapy later because of it, but at least I'll be able to pay the medical bills in cash.
I was getting closer and closer to my goal of being debt free at a young age, and that was literally all that mattered to me (except for my fiancé, she reads this stuff). I'll admit it, I was obsessed with paying off my student loans…it's just how my mind works for better or for worse. I also realized that my friends who were passing me up had taken on crippling debt to get what they thought they were supposed to buy, and I didn't want to live my life that way.
The key is that I knew I was doing the right things financially, so everything seemed easy.
Now that I've started to build wealth instead of pay down debt, I am facing different challenges that are proving to be way more complicated and have bigger implications for the rest of my life than what I was doing with my student loans a year ago. I'm trying to figure out the BEST way to invest and grow the cash that I've put away, and I'm realizing that there isn't a clear answer or path to success. In short, I don't want to screw it up – that's not how I roll.
Before I go on, if you are reading this and thinking: “Oh great, some entitled kid complaining about having too much money.” – The back button is at the top left corner of your screen. I'm trying to have a conversation with the people who want to do what I'm doing.
As I've started a new path towards building wealth, I've realized that there are three important things to consider after you become debt free:
1. How wealthy do you want to be?
This is HUGE. It's pretty tough to hit a target that you can't see. You need to decide what level of wealth you want to achieve, and why you want to achieve that goal. I've seen a lot of bloggers and people on Twitter that want to retire early. That's cool. I'm a freak that actually likes working, and I think I would be bored if I wasn't creating something, helping people, learning, etc. Early retirement is not one of my goals.
I know I'm the one that is afflicted, so if you want to retire early…you're probably the normal one and should feel good about it. Just keep in mind that it takes a certain amount of money to retire early, or even be considered semi-wealthy or financially comfortable.
My financial goals are geared more towards items that I want like boats, houses and cars rather than financial freedom.
Some people would say that I'm shallow for thinking that way, but I don't care too much. These are my financial dreams, not theirs. What you want doesn't really matter anyways, but the fact that you need a certain amount of money to get those things does matter.
Once you decide what you want in your life, you will take more action towards making it happen.
Come up with a number that you'd like to see as your net worth. My number is so ridiculous that I don't even bring it up anymore. Everyone just tells me that it will never happen, so I tend to keep it to myself. All I know is that I'll invite the naysayers to come watch me wave at them from my yacht when I'm pulling out of the harbor someday.
2. Is your money in accounts that don't produce a great return?
I am THE guiltiest of anyone I know about this. The whole reason I'm writing this post is because I had a lightbulb moment the other day when I was figuring out my net worth and realized how dumb I am (the lightbulb was dim and flickered a lot).
My wife and I have been putting away cash for a while and had it earmarked for certain things like our wedding, honeymoon, real estate investments, and a house.
Unfortunately, a bunch of it is in freaking savings accounts that produce 0.000348% interest instead of a brokerage account or equities that would make our money work harder for us. And yes, that interest number is wrong, but I'll spend more in internet data costs trying to figure out the actual number than I will from the account itself.
Needless to say, I'll be moving my cash into something that makes more money than nothing from now on. I'm starting this month by investing my tax return and transferring my cash reserves into a Schwab brokerage account. I WILL leave our emergency fund in the savings account for quick access – that money is not to be invested. Period.
I'm sure I've missed out on some potential gains by making this “mistake” in the last year, but I'll make up for it by being extremely aggressive in my future investments.
3. Choose a path towards building wealth and stick to it.
This one is tough. There a ton of options when it comes to investing and building your wealth, and it can be daunting for young people like me. If you are still paying off debt, you will see what I'm talking about in the coming years/months.
I'll diversify a little bit for now, but at the end of the day I need to pick an investment strategy and become really good at it. I'll diversify in 20 years when I start working towards the next financial goal – protecting my assets from the government.
My goal for now is NOT to be safe or conservative. I don't have kids, debt, or even a mortgage to pay towards for that matter. I need to take risks now. I would be doing my future family a disservice if I didn't put everything on the line financially at this point in my life. At least…that's how I choose to look at it.
I have a sense of urgency to get to where I want to be, and it fuels my actions every day. I think you should do the same.
Question for you:
1)What steps are you taking towards building your wealth?