My previous POST talked about the 4 investment vehicles that parents can use to create a solid financial future for their kids. One of the things that's important to DH and I is the ability to create a legacy for our son. Part of that process involves assessing how we spend money and allocating it in areas that will help us win. I decided to lead the charge in securing a financial future for the family but particularly our son. As of today our 21 month old son has a net worth of $23,299.89. While that isn't a lot of money, about $20,151.98 has been put to work in aggressive investments and the remaining amount is in cash which will probably be put to work soon. I'd like to share how that money is invested but I think it's important to highlight how we started saving for him and our spending philosophy.

We received about $1,400 in cash gifts at the baby shower which was used to establish a bank account for him. We used gift cards to buy as much we could in the beginning and cash flowed everything else from our incomes. When LO (Little One) was about 3 months old, I liquidated my secret stash fund and deposited about $2,700 in his account and started contributing $100 every paycheck to his account. This continued for another 12 months. It's normal for many parents to want to buy the best of everything for their child. We received the big gifts like furniture and stroller/car seat but the latter was one of the most expensive options. I now regret that although DH doesn't. We try not to overspend on clothing, shoes and toys but we've definitely made a few silly purchases in the past. 

Since starting this financial journey, DH and I have changed our general spending philosophy and have set price parameters for many things. A big area of spending for parents are Kid Birthday Parties. DH and I wanted to do a grand 1st birthday party like most people do and  assumed a $1,200 budget was fair. I then thought about how I can create the most value for that $1,200 and decided instead to save it. When LO is 25, I think he'll agree that saving and eventually investing that money was a more worthwhile decision than spending it on a party he'll never remember. So we spent $75 on 2 cakes and other goodies and had 2 parties (one at daycare and one with family and friends) and took photos with the 4 generations of women on my side of the family. Yes, LO still has his Great-Grandma and Great Great-Grandma. I think those are the photos LO will cherish from his first birthday. I don't judge or criticize what other parents choose to do regarding their kid's birthdays, but as for us, his first few birthdays will be spent just like the first. 

I discovered a cool way to save small sums of money incrementally, based on our purchases. Qapital is an app that you link to your checking account and it will round up all debited transactions to the nearest $1 or $2 (Rounding Rules). If I choose the Round Up to Nearest $1 rule, and I make a purchase of $1.09, Qapital will withdraw $.91 from my account. If I choose the Round up to Nearest $2 rule and pay a bill for $201.49, Qapital will withdraw $1.51. DH loaded the app on his phone March of 2016, chose the Round up to $2 Rule and by the end of December had $550 in the account. We transferred out $500 to LO's savings account. Between January and today, DH has accumulated another $600 in his Qapital account. I'm a bit slower in accumulating money because I mostly use my credit card for cash back. I've only accumulated $224.62 in the last 12 months. I wouldn't suggest using Qapital as your main savings vehicle, since true saving is only done with great intention, but it is an excellent way to passively save.

529 PLAN
Over the Christmas break of 2015, I spent a tremendous amount of time researching 529 Plans and considered other state options but decided the state income deduction on our taxes was too good to pass up. I established LO's 529 account that same week right around him turning 5 months old. My previous post talks about the limited life of a 529 Plan (18 years to save for college) and I wanted as much investment gain as possible. Again, with investing, starting early is the key. Prior to opening the account, DH and I talked about skyrocketing costs of tuition and research indicates that college costs increase 7% annually. According to the College Board, the average cost of private college tuition is $33,480 for the current school year and doesn't include room and board. With these cost levels in mind, we agreed to contribute $500 monthly. I've since realized that once we're debt free, we'll need to increase this amount a bit because the cost of college will still outweigh the investment performance at the current contribution rate.

The first contribution was made January 2016 and I was very leery of investment losses so I selected the Moderate Growth Portfolio which is also a Conservative Age Based Option. This option has an allocation of 50% stock/50% bond. An Aged Based portfolio starts out with more risk and becomes more conservative as the child ages. After educating myself a bit about risk tolerance and investment time horizon, I switched out 60% of the assets to a Growth Stock Index Portfolio (75% Stock/25% Bond Allocation) and the other 40% in an Aggressive Portfolio which has 100% Stock allocation. I decided to move away from the Age Based option because I was willing to take more risk for greater growth wanted more control over re-balancing the portfolio as I see fit. In February after fulling understanding the importance of my investment horizon, I put 100% of the assets in the Aggressive Growth Portfolio. So LO's college money is heavily invested in 100% stock. I will re-balance as needed in the coming years to preserve as much of the principal and gain as possible. So far we've contributed $8,500 and have $1,072.93 in gains alone (gain was realized on $8,000, since contributions for May went in just a couple days ago).

In April of 2016, I came across a 5% savings account on balances of up to $5,000 and established an account. The idea of 5% interest on $5,000 seemed like a no brainer since there's no risk for the return. Unfortunately, Brinks changed the terms of the account 3 months later and only offers 5% interest on balances up to $1,000. So I withdrew $4,000 and left the $1,000 plus whatever interest I earned. Just a year later the account, now has $1100.29. A $100 isn't a lot but it's certainly more than the $40 interest payment my friend received on her bank balance of $115,000.

UGMA/Custodial Account
LO's savings account grew to about $9,500 and I grew tired of the bank giving almost nothing in interest. So in February 2017, I transferred all the money into an UGMA account I established with Vanguard and invested everything into a 100% stock fund. LO has 19 more years before he can ever touch the money, and my goal is to teach him small money lessons by age 10 so when he grows into adulthood he will continue on the same trajectory. I could've invested the money in my personal account but wanted to leverage the kiddie tax benefits.

Roth IRA
There was a period last year when I spent everyday I was heavily reading about investing and I came across a article that talked about how parents can use Roth IRAs to make their kids rids. The idea of creating wealth for a child from a young age really forced me to start thinking how I could get LO to have earned income. For babies the only option for earned income is baby modeling and I certainly don't have the time to attend casting calls in hopes he'll be the next big thing. For the last couple of months, I've been engaged in discussions with someone who owns a company that sells athletic gear and promotional products to use LO's photos on his website (for promotional items like coffee mugs, magnets, mouse pads etc) for a monthly cost of about $200. It looks like we'll have this deal solidified in the next month or two and I'll be free to set up a Roth IRA for him. I'm really excited about this opportunity.

The money that remains in his regular bank account was gifted to LO from Mr. Mindful Dollar when he cancelled a life insurance policy with cash value he had from a few years ago. The cash value was almost $2,300 and he gifted LO $2,000. We seek every opportunity to pad LO's bank account as much as we can. When we're debt free we'll consider where we can allocate more money to continue to build wealth for LO and change our family tree.

Have you started planning your child's financial future?







Adults have a plethora of things to consider when thinking about their finances - from budgeting, saving for retirement, personal investments and planning for a rainy day. An often overlooked category is planning for your child's future. Traditionally parents have always opened bank accounts and made regular deposits assuming this was the best way to prepare for their child's future. There are more sophisticated tax advantaged savings vehicles that offer more up side than a traditional savings account. Whether the plan is to save for the future college costs or to set up an investment to eventually pass down when they become an adult, knowing what your options are is the first step in creating a solid financial plan for your child.

An Education Savings Account (ESA) is a tax advantaged account that allows saving for the future costs of education, pending the funds are used for elementary, secondary or college education expenses. Funds are withdrawn without having to pay federal income taxes though you should double check at your state level if withdrawals are income tax free or income deductible. There are potential drawbacks with ESA's that might make this option less than suitable for your future planning goals. The maximum annual contribution to an ESA is $2,000 per beneficiary until they reach the age of 18, which may prove to be insufficient (even with tax free growth) to cover the cost of a 4 year college education. The other downside is the income restrictions which limits higher income earners from contributing. For single filers, your adjusted gross income must be less than $95,000 to make a full contribution although partial contributions are allowed if your income is between $95,000 and $110,000. If you're married, your adjusted income must be less than $190,000 for full contributions and between $190,000 and $220,000 to make partial contributions. What if you want to contribute more than $2,000 annually and you happen to make more than the income designations? Then a 529 Plan is your best option.

529 PLAN
A 529 plan is a educational savings plan designated by a state and operated in conjunction with a financial services company to help families save for future college costs. Most states offer 529 plans and the choice of college doesn't affect your ability to use the funds. You can invest in NY State's 529 plan and send your child to school in California. 529 Plans operate like your company 401K or IRA with mutual and bond funds from a list of investment options available within the plan.  Perhaps the greatest benefit of a 529 Plan is that the investment grows tax free and withdrawals for qualified expenses are tax free as well.  While contributions receive no deduction on federal taxes, you may be eligible for state income deductions. NY State allows married couples to deduct a maximum of $10,000 from state taxable income and up to $5,000 for single filers. Funds in a 529 can be used to cover the cost of tuition, books, room and board and other educational related expenses. While there is no set contribution limits for 529's, it's important to consider the gift tax rule. Any money given to another individual that exceeds $14,000 is subjected to gift tax of up to 40%. So if you have incredibly generous parents who want to gift your child money for college, each grandparent is allowed to give a maximum of $14,000 annually (for a total of $28,000 yearly) without the funds being subjected to taxes. The account owner maintains full control of all assets in a 529 account and decides how or when the money should be spent.

If you have more than 1 child, it might be best to establish only ONE 529 account since funds can be easily transferred to related beneficiary of without penalty. If you have 2 children to plan for and you set up 2 separate accounts, you run the risk of facing taxes and penalties if you liquidate the account in the event one of those children decide not to attend college. Non-qualified withdrawals are subject to federal income taxes on the earnings as well as a 10% penalty. It's important to set up these accounts after carefully considering all the scenarios to reduce the likelihood of facing unnecessary penalties. What if your child is smart enough land a scholarship? Not to worry. You'll qualify for the scholarship exception which allows a non-qualified withdrawal equal to the amount of the scholarship without incurring penalties. So if your child lands a scholarship that covers $20,000 annually for tuition, you're allowed to withdraw a total of $80,000 without incurring the 10% penalty but you'll still be on the hook for paying taxes on the earnings.

While there are limited investment options to choose from in a 529, you can choose an option that matches your risk profile. There are aged-based portfolios which are designed to offer greater growth during the child's younger years and get more conservative as the child gets older. There are also individual options to choose from. As with any type of investments, the sooner you start the more you can take advantage of compounding interest. Because the investment life of a 529 Plan is limited to 18 years, starting before their first birthday ensures you will get the full advantage of the account. I spoke with a friend recently who has 2 kids between the ages of 6 and 8 and inquired whether he had a 529 in place. When he responded no, it occurred to me that most parents are more concerned with providing for the immediate needs of their child and focus less on anticipating their future needs. With the cost of college increasing at an average of 7% yearly, my friend will probably go in debt trying to finance his kids' college education. The last thing you want to worry about as you're 10-15 years from your retirement is taking out loans to pay for college. Since we live in a culture of wanting to give our kids the best, it's important to take charge of securing their college future TODAY.

Prior to the inception of 529 Plans in 1996, a popular way to save for a kid's college education was via a custodial account or UGMA/UTMA (Uniformed Gift to Minor's Act/Uniform Transfer to Minor's Act). This account allows the parent to act as custodian while protecting the assets for a minor until they reach the age of majority which is usually 21 in most states. The custodian maintains full control how the money is invested but it's important to note that all assets in a custodial account BELONGS solely to the minor and shouldn't be withdrawn. Once money is transferred to the custodial account it becomes irrevocable, which means it cannot be returned to the person who made the deposit. Any withdrawals made before the minor becomes majority of age has to be for the direct benefit of the minor, although that can later become questionable and lead to potential lawsuits. It's important to seek legal counsel before withdrawing money from a custodial account. Since the funds in the account belong to a minor, the tax liability is shifted to the child and the government offers a small tax break on investment income called the "kiddie tax". The "kiddie" tax allows investment incomes up to $1,000 to go untaxed, while income between $1,000 and $2,000 is taxed at the child's rate and income exceeding $2,000 is taxed at the regular income tax rate of the adult who gifted the money.

A custodial account has a bit more flexibility than a 529 since there are a plethora of investment options to choose from and can be established through any investment company like Charles Schwab, Vanguard, Fidelity, etc. One downside of a custodial account is the potential impact it can have on financial aid since the assets belong to the minor. It's important to note that the assets in a UGMA/UTMA account isn't solely for educational purposes and the minor can use the money for any reason once they reach the age of majority. The maximum annual contribution is $13,000 and $26,000 for couples filing jointly. Any contributions above these limits will incur the gift tax. Although UGMA/UTMA accounts were originally used for college savings, it's certainly NOT the most optimal choice since there are no special benefits for spending money in these accounts on education. Regardless of how the beneficiary chooses to use the money, education or otherwise, they will be subject to income tax. With that in mind a 529 remains your best option for saving for college and an UGMA/UTMA is best used for creating additional investments for your kids.

When people hear IRA, the first that comes to mind is Retirement. While an IRA is most widely and commonly used as a tool to save for retirement you can actually set one up for your child. The stipulation with IRAs is having Earned Income. This is an EXCELLENT way to start building wealth for your children before they even become adults. Roth IRA's for kids can be set up with financial institutions (Vanguard, Fidelity) and the parent acts as the custodian and controls the account on behalf of the minor. Your child can enjoy the same benefits you enjoy with a ROTH but the golden opportunity is the ability to set one up year earlier than you did. You can read more about the benefits of a Roth IRA HEREThat means if your 14 year old mowed lawns in the neighborhood for the whole summer and made $1500, the entire amount can be deposited into an IRA. If your child isn't keen on the idea of using their summer income to invest for their golden years, you can match their earnings and deposit the money in the IRA on their behalf. Unlike an UTMA/UGMA account, money in an IRA has 0 effects on financial aid eligibility since the IRS doesn't it as assets. So if your kid has a job or you plan to pay them a reasonable amount of money to do work, setting up a Roth IRA for your child will yield results that are incalculable

While the idea of saving for retirement at 16 can sound a bit far fetch, this would be an excellent opportunity to get your kid excited about investing and help them understand the benefits of how starting early yields big rewards. Children can earn money babysitting, dog walking/sitting, mowing lawns, washing cars or even doing additional housework. If they're on the younger end, paying them for doing some of these tasks is worthwhile but the pay rate has to be reasonable. You can't pay a 10 year old $1,000 for 2 week's worth of dog walking. If you have a teenager who has a summer job, consider encouraging them to open and IRA and start investing. . Once the minor becomes an adult, they assume full ownership of the account and should be encouraged to make annual contributions throughout adulthood. If you own a small business, hiring your kid as a part-time employee provides additional benefits for both you and the kid. They can do basic work like shredding paper, filing or stuffing and stamping envelopes. And you can claim their income as a business expense. As long as the number of hours worked and pay is reasonable, the money can be deposited in a Roth. Be sure to double check with your accountant to learn more about the additional benefits of hiring your kid.

I can't stress enough....establishing a UGMA/UTMA or Roth IRA account provides a teachable moment. I firmly believe kids should be active participants in the planning process of their financial future. There's no benefit in giving a 21 year old a windfall of $50,000 if they don't know how the money was accumulated and how it can transform their future if they continue to invest. Teach them the basics of mutual fund investing, how market works and get them excited about the idea of watching $1,000 grow to $5,000. A really awesome benefit of owning a Roth IRA is that the owner doesn't have to withdraw funds while they're alive. That means if you set up an IRA for your child at 12 years old, and they apply the wisdom and knowledge you impart about managing money and investing, they can create other means of wealth. This will allow them to can pass down the money in the Roth to their children. Even if they have to use a portion of the Roth for retirement, there will be so much money accumulated over the course of 60 years that they will essentially be wealthy. And that is a great way to create generational wealth.


So there you have it....4 easy ways to create wealth for kids. For college savings, a 529 is a better option with its high contribution limits and tax free withdrawals, but the trick is starting early to get the full benefit. While saving for college won't make your kid rich, it will prevent you and them from going in debt which grossly drags on one's ability to create wealth. If you want to really want to help build long term wealth for your children, then an UGMA/UTMA and Roth IRA accounts are excellent considerations to get the process started. If you choose to establish either of these accounts, it's imperative to help the child develop good money habits from a young age so they can use it wisely when they get older or use it as a tool to build wealth throughout adulthood. After all, even if you never formally teach them the principles of budgeting, spending less than you earn and the critical impact of saving and investing, they're already receiving cues as they watch how you handle money now. Better to be intentional about your efforts to pass down smart money lessons so they can start winning from a young age.



Most of my previous posts highlighted the importance of budgeting, managing debt and investing to secure a better financial future. You're never too old or too young to secure your financial future. The sooner you start, the greater the results. Planning for the future takes on a whole new dimension when marriage and kids come in the picture. College planning, paying closer attention to health insurance benefits and the dreadful thought of a spouse dying forces you to build protection around your lives by way of life insurance. Several of my friends and I have recently or are currently going through the process of obtaining life insurance and seem to differ in our perspectives over the options that are available. I wanted to share my perspective about the 3 most popular life insurance options.

Whole life insurance is a form of permanent insurance that offers protection through the entire life time of the insured individual and creates a cash value that can be borrowed against in the event of an emergency or that can be taken upon surrendering the policy. Whole life requires the policy owner to pay a fixed monthly premium for the rest of their life, and upon death, the company will payout the face value of the policy (death benefit) to the beneficiary. It's important to note that the company is the sole determinant of the dividend rate payout which makes up your cash value.

If you've ever received quotes for Whole Life policies you'll know the premiums are incredibly high for relatively low coverage. Whole Life is a combination of 2 products: life insurance and an investment, indicating that you're protected with some growth. The cash value element is usually the point of attraction that convinces most people to purchase this product, for which you can borrow against at anytime. This is a supposed benefit, however any loans taken against the policy must be repaid with interest. If the loan isn't repaid, your death benefit will be reduced. If you had a $200,000 death benefit with $40,000 in cash value and you withdrew $20,000, your resulting death benefit would be $180,000.

So it must be smart to purchase a policy with cash values? According to, the annual rate of return on a whole life policy is about 3.5%, rendering this product a poor investment. If you read my post on How to Approach Investing then you're aware that inflation is about 3%, which means that the returns on the whole life are being undercut by inflation. I was quoted monthly premiums of about $200 for a $250,000 policy. If I purchased and kept this policy for 10 years and died in the 11th year, my beneficiary will ONLY receive the face value of the policy ($250,000), NOT the cash value that accumulated because that DIES with you. Essentially I would've paid north of $24,000 in those 10+ years and the payout is only $250,000. Simply put, Whole Life Policies are just an expensive form of insurance with a Savings account. If you think about the purpose of a savings account - do you really need a middleman telling you to repay yourself  after borrowing your own money with interest? NO THANK YOU!

One more thing to note about cash values....the first few years of a Whole Life policy yields no return because of fees and the cost of insurance and you start to see some positive returns around year 8. It will take a several more years after that for the returns to finally look somewhat promising. By the way, a portion of those fees happen to go to the person who sold you that policy and that money is not invested on your behalf. The company takes their profit, a portion goes into a pool to pay death benefits to those who die,  the salesman gets their percentage and the remaining goes into a conservative investment. You can invest your money YOURSELF.

Index Universal Life is similar to a regular whole life policy in that it's comprised of permanent life insurance and and a cash value account. The cash value portion is directly linked to the performance of the stock market. I was quoted $125 in monthly premiums for a $200,000 policy. Not as expensive as Whole Life, but again, I would be way under-insured than I'd like to be. The main selling point for an IUL is that in the event the stock market has a terrible year, you won't lose because there's a guaranteed payout of 0% to 3% payout. If the market has higher returns, you can experience gains as high as 13%.The high return would be part of their cap rate which is anywhere between 10% to 15%. It sounds nice to be getting a minimum guaranteed return, however this is just another fancy selling point to get you to fork over your cash. This begs the question, WHY WOULD I PAY AN INSURANCE COMPANY TO INVEST MY MONEY, TO THEN DETERMINE HOW MUCH RETURN TO PAY OUT? The cap rate poses a major issue because when index funds posted returns in excess of 30In 2013 , the insurance company would've only paid you a maximum of 15%. The other 15% gain is kept by the company to pay for the cost of the insurance and massive fees. This doesn't seem to pass the common sense test.

So what's the alternative?

Term life provides a level premium and a death benefit protection for a set period of time. This is usually a good fit for younger individuals or families who are concerned about replacing loss of income. Term insurance doesn't build any cash value and has no value upon expiration. Term life provides bargain-price protection that pays out a large sum to the surviving beneficiary upon death during the 20 to 30 year life of the policy.

 I'm currently waiting for approval for a 30 year term life policy for $1,000,000 that will cost me about $55 a month for the entire life of the policy. Once approved, this will replace the current policy I have that costs $45 monthly but has increasing premiums as I age. In the event I die before the policy expires, my beneficiary won't get $200,000 like the permanent insurance options discussed above, but he will get $1,000,000 CASH. Now that sounds more like it and I won't be financially burdened to pay this policy. 

The sales people selling Whole and IUL's, will tell you term isn't a good option because most people outlive their policy and there's no cash benefit. This is true but let's give that some context. I've had my car insured with Geico for 6 years now at about $170 a month which today totals over $12,000 paid in premiums thus far. I haven't had to file a claim yet. Should I call Geico and demand that they pay me back a portion of that money? NO. That's what insurance is for. Protection. If I got into an accident and severely hurt someone, Geico would pay them up to $250,000 in bodily harm damages not to mention the cost of repair to their vehicle. I certainly couldn't afford that out of pocket. So $12,000 over a 6 year period to have protection against the results of a potentially tragic accident is well worth it. Term Life works the same way.

It seems most sales people will argue that Whole Life is a great way to build wealth. Life Insurance isn't a vehicle meant to create wealth. It can jump start your beneficiary's future in the event you die prematurely. But since most people outlive their term policy, how can you build wealth? The Best and Only way to build wealth is to:

  • Live Below your Means
  • Reduce DEBT
  • INVEST Early

Paying insurance companies via a Whole Life or Indexed Universal Policy to build wealth can leave you and your family short changed in the event of death. If you implement all the personal finance principles I've highlighted in my previous posts, you will effectively create wealth. If I happen outlive my term life insurance, I can still pass down wealth to my son from the money that will be in my retirement accounts. 

If you're still not sold on Term and think permanent insurance is best, it might be because you don't have the discipline to "save" or the risk tolerance to invest. If you like the built in security of accumulated cash value even if the returns aren't great and don't mind paying the high cost to get it, then permanent insurance might be right for you. If you are risk averse and prefer "guarantees" and don't mind paying the high cost then permanent insurance might work for you. If you've been in your whole life policy for a while and like the cash value you see, then it might be worth keeping. It's always a good idea to explore all the options available but I'm confident that for all the reasons I mentioned, Term life will be the clear winner.

If you plan to be Financially Independent, buy Term Life and invest the difference so you can be wealthy enough to be self-insured against your death. 

Do you have your life insurance policy in place? Which option best suits your family's needs?







Planning for the future can be a daunting task but it's never too late or too early to start. I've talked about the importance of defining and identifying the steps to create Financial Freedom, the importance of Investing and Investment options for the average investor. Whether you're debt free or working on getting out of debt, planning for the future inevitably yields rewards that are incalculable. Now that personal finances have taken a front seat in my life, I pay closer attention to conversations I have with people to glean a better understanding of their perspective towards money and investing.

Some of the reactions I've heard from personal friends about investing was the driving force to starting this blog. I wanted to help educate the people around me to make smarter decisions so they can change their own money tree. I've heard friends say things like "I haven't started a college fund for my kids yet because 529's aren't FDIC insured" OR "I've been doing research on college planning and I think I'll be fine with a regular mutual fund vs a 529 plan" OR "I want to invest my money but I can't risk losing anything" OR "I want to save $150,000 before I feel comfortable with investing". I understand the general fear with investing because just about a year ago, I too was afraid of risking my hard earned dollars. I did some research and I learned a few things that helped me understand the right approach to investing. This article is dedicated to my friends and anyone else, who for one reason or another has allowed fear to sideline them. 

The first rule of thumb is to ALWAYS keep  about 6 months of expenses in cash reserves. Cash reserves are short term investments with low rates of return that are held in checking accounts, CD's, savings and money market accounts. This money should NEVER be invested.

What are you saving for? Retirement? A Kid's College Fund? A House? A 3 week vacation in Italy? Categorizing your short and long terms goals serve as a road map to making the best money decisions. Saving for a house or a vacation would fall under the short-term category while retirement and college are under the long-term category. The distinction between short and long term goals determine your Investment Time Horizon. Your time horizon is measured by the amount of time you have from today until your reach your savings goal. Short-term goals are those that are within 5 years of reach, intermediate goals are from 5-10 years out and long term goals are those that have a time horizon 10 years and greater.

DH and I don't have any short-term goals besides paying off debt. Our long term goals include college and retirement planning. We started our son's college fund when he was 5 months old and the time horizon for this investment is about 17 years. Our time horizon for retirement is another 20-25 years depending on when we decide to retire. If your goal is save and buy a house in the next 3-5 years, this would be considered a short time horizon, rendering investments in securities a NO GO because you simply wouldn't have enough time to recoup losses in the event of a market downturn.

Your investment time horizon dictates your Risk Tolerance, which is the level of market volatility you can tolerate. Risk tolerance is all about your emotional reaction to market swings. Are you more inclined to take on more risk for a more favorable outcome? Can you withstand losses without panicking? When the market crashed in 2009, people who were heavily invested in stocks saw declines as high as 50% in their portfolio. They panicked and reacted on emotion and sold, which effectively locked in their losses. This is a classic example of a portfolio that is misaligned with risk tolerance. As stated above, a friend of mine didn't start a college fund yet because she wants some type of guarantee on the money, which indicates a very low risk tolerance. 

Risk Capacity is the amount of risk you can "afford" to take on in order to meet your financial goals. If you're 30 years away from retirement and have a high risk tolerance (having mostly stock in your portfolio) then a market crash will not jeopardize your investment objectives because you're years away from having NEED for the funds. If you're 4 years away from retirement, your risk capacity will be low because you can't "afford" to lose much money and you would adjust your portfolio away from stocks to include safer investments. As it stands today, I have my emergency fund in place, retirement is at least 20-30 years away and I'm looking for high growth...therefore my risk tolerance and risk capacity are both high. If the market sinks tomorrow, I will make no changes to my investments except to hunker down and take advantage of low prices and buy more.

Your risk tolerance and risk capacity will determine your asset allocation, which is strategy geared towards balancing risk by distributing funds across a set of assets according to your goals, time horizon and risk tolerance. In other words, it's a collection of your investments across various asset classes. The 4 main asset classes are Stocks, Fixed Income or Bonds, Cash Equivalents, Real Estate or other tangible assets (Read more about these HERE). The average investor has at least 3 or all 4 of these elements in their portfolio. What varies from person to person is the % of each category in the portfolio. Within a portfolio an investor can be exposed to many different sectors like Retail, Health Care, Energy, Technology, Financials etc, if invested in a stock mutual fund. Mutual Funds provide broad sector diversification and limit your exposure to risk associated with one particular sector. 

A 30 year old investor with a high risk tolerance and risk capacity can easily have an asset allocation of 80% stocks and 20% bonds. Bonds are recommended because they offer protection when stocks are plunging. When the 30 year old advances in age to 55, they would probably want to re-balance their portfolio and shift to a more conservative allocation of 60% stock and 40% bonds. Your asset allocation is based solely on the level of risk you can tolerate and the length of time you have before needing that money.

For my friends who allow fear to continue to sideline them from investing, consider that too much CASH is a DRAG. In addition to investing for retirement, you should aim to invest all personal cash above your emergency fund. We've established above that emergency money should be kept in safe low risk accounts. Keeping any money above the designated amount for emergencies, is futile. Why? For every $10,000 you keep above what's needed in a money market account that returns 5% less than a long-term investment, you lose $500 every year it's kept there. 

We've all heard the term "inflation", which refers to the increasing cost of goods and services while the purchasing power of your money declines. Experts estimate the rate of inflation at about 3% annually. That means that what $1,000 can buy you today, will cost you roughly $1,060.90 by the end of 2018. Excess liquidity (large amounts of cash not invested) means time spent out of the market, which carries the high cost of inflation. Let's not forget that those excess funds are gaining about .01% interest in your local bank.

Let's sum up the takeaways:

  • Keep an emergency fund liquid in checking, savings or CD. Never invest this money
  • Identify your short and long term financial goals
  • Money for short-term goals should NOT be invested
  • Money for long term goals greater than 10 years SHOULD be invested
  • Know and understand your risk tolerance and risk capacity
  • AUTOMATE: If you've already met your short-term goals, set up automatic withdrawals from your brokerage account to buy more shares of your investments. Remember the key is to make excess dollars make more money for you.

Investing isn't only for retirement but everyone should consider having their personal savings working for them. If you want more information to determine your your risk tolerance, I suggest using Vanguard's Investor Questionnaire.


Are you ready to overcome your fear of investing? What's your general feeling with investing your personal savings? Drop me a comment below.



My last post HERE talked about the pitfalls of individual stock picking from my personal experience of investing in what I believed were winning stocks based on my dear friend Carl's suggestions. It wasn't that the stocks were bad picks, but I lacked the experience to be involved in such a risky game. I sat on the sidelines for years in between each stock market attempt, and wasted valuable time because I simply didn't know how to build a portfolio with diversified risk. I'd heard of Mutual Funds before but wasn't really focused on building wealth and only thought about making big gains by investing in individual stocks. Now that I'm focused on securing a future nest egg, I did some research on Mutual Funds and other investment options and here's what I learned:

A Mutual Fund is an investment vehicle that pools your money together with other investors to purchases securities like stocks and bonds. Mutual funds are a easy and cost-effective way for individuals who don't have a lot of money to invest and own a piece of the market. Investing in a mutual fund doesn't mean you own actual shares of the particular stocks, rather you own shares of the specific fund itself. Perhaps the greatest benefit of mutual funds is the diversification is provides, allowing investors to spread their risk. Rather than my previous experience of investing in individual stocks which is synonymous with the old adage of "having your eggs in one basket", mutual fund investments provide exposure to hundreds of stocks. If you're currently invested in a 401K or IRA, then chances are most of your assets are in mutual funds.

Mutual Funds are actively managed by a portfolio manager(s) and a team of analysts who together seek to pick investments that will ultimately outperform its benchmark (S&P 500). Their ultimate goal is to maximize your return. The fund charges a fee, referred to as the expense ratio, and is deducted from the funds total assets to pay salaries for the portfolio managers and analysts as well as other overhead costs involved with managing the fund. The expense ratio is charged against each individual investor's account. Average mutual fund expense ratios hovers around 1%. That means for every $1,000 you invest the fund will charge $10. Fees this high start to really chip away at your returns over time. What if you don't want to incur such high fees but want the benefit of diversification? That's where Index Funds come in.


John Bogle is known as the father of Index Funds, having introduced the first fund in 1970, and later became the founder of The Vanguard Group in 1975. Index funds are still mutual funds in that assets of many investors are pooled to purchase stocks, bonds and other securities. The main DIFFERENCE is that  an Index fund doesn't pay a portfolio manager or a team of analysts. Because index funds cut out the middlemen you incur a much smaller expense ratio (as low as .03%) for management of the fund. Index funds seek to track and mirror the performance of a market index like the Standard & Poor 500 (S&P 500) or the Russell 3000. Like the name suggests, the S&P is comprised of the 500 largest publicly traded companies in the US and similarly the Russell 3000 is a combination of the 3,000 largest publicly traded companies. Buying shares of an index fund that tracks either one of those indexes, will give you the growth in aggregate of all the companies represented in the fund.

Index fund investing is often referred to as passive investing because it's essentially a "set it and forget it" strategy. It's also an excellent long term wealth building strategy that provides broad diversification (depending on the index the fund tracks) that is aimed at maximizing your returns over time. Passive investing is all about a slow steady pace to creating wealth rather than aiming to make it big with one quick bet on a stock. It's synonymous with the "buy and hold" strategy surrounded by the idea that you'll make more positive gains over a longer period of time

If you feel you're ready to get on the road to building wealth, consider passive investing with Index funds. You can check out Vanguard, Fidelity, Charles Schwab and Blackrock for their low cost, no load mutual funds. (Load refers to transaction costs incurred to buy and sell shares in a fund). Always double check expense ratios before making a decision. It's not unusual to come across 2 index funds that track the same index but the kicker could be in the expense ratios. I recently did a over haul of fund selections in my 401k and I realized that I blindly followed the recommendations of an adviser and I was invested in funds with fees .46% - 1.15%. After revisiting my allocations, I switched to funds that range in fees from .05%-.09% that will ultimately help me meet my investment goals without swiping some of my cash in fees. Paying close attention to fees can save you hundreds of thousands of dollars over the life of your investments. When assessing what funds to invest in, it's important to look at their 10 year performance but equally important to note that a fund's past performance is not an indicator of future performance. If you follow a long term investment strategy, the goal is to experience the positive gains over a period of time. If you review the investment options in your company's 401K, chances are 75% of the offerings are mutual funds.


Bonds are a form of debt like an IOU except the bond purchaser acts like the bank. Entities like corporations, cities and governments issue bonds and promise to pay it back with interest payments, generating a regular stream of income. Local governments may issue bonds to build bridges, tunnels while the federal government sell bonds to finance their debt.

Most financial advisers would recommend allocating a portion of your portfolio to bonds.  Like stocks, you have the option of buying individual bonds or buy a bond mutual fund. For the average person, a bond fund would be the easiest option. Bond mutual funds are just like stock mutual funds where funds are pooled with other investors and an investment professional invests the money according to the investment goals of the fund. Similar to a stock mutual fund, a bond fund offers excellent diversification since there are hundreds or even thousands of individuals bonds included in the fund. Investing in bond funds is known to reduce the volatility in your portfolio that's associated with stock funds, and can produce the income for your portfolio unlike stock funds. Your risk tolerance will help determine what percent of your portfolio should be allocated to bonds. 


If you've ever had an interest in investing in estate but didn't have the capital to directly buy properties, you can actually add REIT's (Real Estate Investment Trust) to your portfolio. A REIT is a company that finances or owns income producing real estate. Similar to mutual funds, REITs allow investors to have ownership in real estate ventures without having to actually go out and buy property directly. REITs pay out a stream of income produced from the properties with high yield dividend payouts (minimum of 90% by law) to shareholders, making this type of investment incredibly attractive. Dividends can be reinvested which makes the power of compounding even more robust. There are 2 types of REITS: Equity REITs and Mortgage REITs. Equity REITs produce income from collection of rent and sale from properties. Mortgage REITs invest in mortgages from commercial and residential properties. REITs provide diverse exposure to real estate ventures including hospitals, apartment buildings, shopping malls, office buildings, hotels and warehouses. Before adding REITs to your portfolio, do your research to ensure it's the right fit for your investment goals and needs. Like any investment, there are risks to be considered.

Now that I've covered the basic investment options for the average investor, I'll highlight some of important factors worth considering before actually making a decision to invest in my next post.

Do you have any experience investing in mutual funds? If not, are you interested in starting your personal journey to building wealth? Leave me a comment below.


I had a friend in college who was a Finance major and he landed a banking job after we graduated. We lost touch for the first couple years after graduation, but reconnected on the train platform at Grand Central in the busy hustle and bustle of rush hour commuting one evening in 2007. Over the next few months we would spend everyday sharing a train ride home while we were jammed like sardines in a can. It was during these train rides, that Carl revealed his passionate obsession for stock trading. I would listen to him recount his major successes of investing $15,000 in a stock on Monday and by Friday he would execute a sell trade and walk away with $20,000. He would always recite, "There's no other place you can legally make this kind of gain except in the stock market". No matter how much he loved highlighting his victorious wins, Carl was careful to highlight the downsides of individual stocking trading, which as he would say "Left him without his Shirt". In other words, every trade didn't lead to successful money gains. On the contrary some trades were total blunders that left him at a loss so great, that he would probably die before he can claim all the losses on his taxes (The government allows you to carry losses forward up to a certain amount annually).

It was Carl's excitement for the wins that motivated me to take a stab at this stock trading thing. I wasn't hoping to get rich but I wanted a chance to tell a story of a successful money win just like Carl. He had a knack for buying stocks during earnings seasons (the period in which companies release quarterly performance info). If you think back to 2007, Research in Motion (the company that made Blackberry phones) dominated the cell phone space. Carl convinced me that this stock was a winner for that particular earnings season. So I established a brokerage account with Scottrade just in time to buy $5,000 worth of shares of Blackberry stock. After earnings were released I had a gain of $800 in 2 days. To say that I was riding a cloud was an understatement. I finally had a small story of success to share.


I started to lose all the gain within a couple weeks. Suddenly I couldn't focus on work, I couldn't sleep and I couldn't think. At that point all I wanted to do was protect my $5,000 investment. Eventually I got rid of the shares because I wasn't strong enough to handle the volatility of the market. It would take 8 more years before I would give stock trading another go around. This time it was on the heels of the much anticipated Alibaba IPO (Initial Price Offering). This experience would teach me that the talked about IPO price isn't the price regular investors get by the time the market opens. The IPO price was $68 and I bought in at $98 within a couple mins of the market opening. I had another success story on my hands because 2 months later had a $4,000 gain on my initial investment. Until earnings season approached and Alibaba posted less than expected earnings and the stock went south from $121 down below $90. Not only did I lose my gain but I lost some principal. Somewhere along the road while the stock was tanking, I bought Apple to hedge my losses. While Apply gained, Alibaba tanked. Eventually I sold both stocks and recovered my principal.

While I didn't lose much money in both cases, what I did lose was sleep and my general sense of calm. It's no fun being glued to your computer everyday watching the stock market do it's funny dance with your money tied in somewhere. These experiences taught me a few lessons that are critical to highlight:

INEXPERIENCE: In hindsight, I should've locked in the gains and sold my shares, making both plays good short-term moves if that was my strategy. However, I didn't really have a strategy because I didn't know what I was doing. First of all, both experiences in the stock market were based on the whimsical feeling of my dear friend Carl. I didn't do the research in company fundamentals nor did I check their balance sheet. I went in both times hoping to make a quick gain. I didn't educate myself about investing basics like knowing and understanding the importance of my risk profile, asset allocation, diversification nor did I even consider my investment time horizon. Simply put....I was INEXPERIENCED. If I had to give advice to anyone who wants to invest, I would urge them to know and understand what they're investing in. Don't put your money in investment vehicles you don't understand just because it may have worked for someone else.

RISK - Buying individual stocks is purely speculation, thus increasing your level of risk. In both cases I owned one stock at a time which means there's a chance I could lose all my money. According to a study by Longboard Asset Management which assessed stock performance from 1983-2006, 64% of stocks underperformed the Russell 3000 Index (a broad index of US stocks) and only 25% of stocks accounted for market gains. So the next time whimsical Carl has a good feeling about a stock, how would I know that that stock is a winner? I don't know, so I won't buy it. I'm not interested in the level of risk that keeps me up at night or unable to focus at work because I'm too busy watching the market do its funny dance with my money. There are other ways to invest in the market that will provide gains (albeit not quick), while minimizing overall risk.

MARKET EFFICIENCY:  I would later learn that holding individual stocks indicates that I expect the stock to outperform the market. Then I became familiar with a phrase called Efficient Market Hypothesis which is an investment theory that states that it's impossible to beat the market because stock market efficiency causes existing share prices to incorporate and include all relevant information. In other words, stocks trade at fair value and all investors have access to the same information making it impossible for anyone to beat the market. Carl's explanation for picking certain stocks often seemed magical and special, but he was just making good guesses that sometimes worked out and other times didn't.

I'm not merely suggesting that holding individual stock as part of an investment portfolio is the worst thing in the world but it should probably represent a small portion (maybe 4%) of your overall portfolio from purely a risk management perspective. In my case a single stock represented 100% of my portfolio which goes against the very basics of investing. In recent years Carl has called me at least 3x to invest in stocks he felt were winners. He called me when Tesla was $85, and had I listened I would've doubled my money when the stock hit $220. When the country was experiencing the Ebola scare a couple years ago, Carl called me and told me about the company that was manufacturing the protective gear that healthcare professionals were using for precautionary measures. Back then hospitals were ordering in bulk quantity. The stock was $14 that Tuesday night and by that Friday Carl had doubled his money. When oil prices were on a sharp decline, Carl was watching 2 oil ETF's (Exchange Traded Funds) that had an inverse relationship to each other. Carl made  a play in one of them that gave him a net gain of $28,000 in one week. I beat myself up when I think about these missed gains, but I was just too afraid. And if past experience means anything, I'm just not ready to handle the risk that comes with individual stock picking.

 In my next post, I'll talk about how to invest in the market to achieve diversification while spreading your overall risk to create the wealth my previous posts have referenced.

Have you experienced success and/or failures with individual stock picking? What's your current feeling on investing in the market?


The Federal government allows anyone with earned income to contribute up to a set amount of money annually in an IRA in addition to an employer sponsored retirement plan. The biggest mistake most people make is NOT contributing anything at all in their IRA accounts. In a recent TIAA-CREF survey, only 18% of Americans are actively contributing to an IRA. Each year you avoid making contributions results in a huge loss of retirement income that could've been benefiting from compounding interest. When you're young with many years ahead of for retirement, time is your greatest asset. With current contribution limits set at $5,500 for individuals up to age 50 and $6,500 for adults 50 and older, if you haven't yet established an IRA account the time is NOW. 


If you think your tax bracket will be lower in retirement, then it might be worthwhile to consider contributing to a Traditional IRA. Traditional IRAs allow you to make pre-tax contributions while your investment grows tax deferred, meaning you don't have to pay taxes on any gains until withdrawal, but you'll pay ordinary taxes in retirement on the contributions AND investment gains. Contributions are also deductible on your tax returns but are restricted based on income. If you decide to make contributions to a Traditional IRA talk to your accountant about your eligibility for potential deductions. There are also minimum required withdrawals that begin at age 70 1/2. Failing to meet these requirements can result in heavy taxation which can make this option less desirable.


The ROTH IRA is perhaps the most favored option of the 2 because of the tax free compounding benefit. A ROTH is funded with after tax dollars and the entire account is free of any income tax on withdrawals in retirement. That means Uncle Sam won't put  his crummy fingers on the contribution or the gains. That is a HUGE benefit that offers an opportunity for tax diversification in retirement. What if you've been diligently contributing to a Roth for 15 years and at age 50 you find yourself in a pinch and have no emergency fund? Although a ROTH is an investment account, it's also technically a savings vehicle since contributions can be withdrawn tax and penalty free at any time. Why? The key to remember here is that you've already paid taxes on the contributions. So the principal is yours free and clear. Things start to get hairy once you start touching investment gains, which is subjected to tax. There are instances in which withdrawals of earnings can be taken without incurring penalties (although still subjected to taxes), which makes ROTH IRAs more attractive than Traditional IRAs. If you've had a ROTH for more than 5 years, and you decide to purchase your first home, the First Time Home Buyer Clause allows you to withdraw a maximum of $10,000 towards your purchase. Funds can also be used for qualifying educational expenses. A deeper dive in the rules surrounding a withdrawal should be conducted depending on your particular situation. The general rule of thumb is withdrawals of any kind are highly discouraged before 59 1/2 to harness the full benefits of consistent contributions with time and compounding interest.


The Federal government designates income limits for Roth IRA contributions that are subjected to change yearly. For Traditional IRA's, regardless of your income level you can contribute any amount up to the IRS's annual maximum ($5500 up to age 50 and $6500 over age 50). However, there are income restrictions on the ability to deduct Traditional IRA contributions. Again, if you decide to go this route, your tax accountant can help guide you through the income limitations with deductions. The ROTH is undoubtedly the most popular option with tax free earnings and the flexibility it offers. However, NOT everyone is allowed to contribute to a ROTH. If you filed Single in 2016, your ability to contribute the maximum to a ROTH was capped at the adjusted gross income of $116,000. If you filed Married in 2016, full contribution was possible if your household adjusted gross income was less than $184,000. Beyond these limits, the IRS allows partial contributions within specific thresholds for each category. For single filers the threshold was $117,000-$132,000 and for married it was $184,000-$193,999. In essence, if you were single or married and your income exceeded $132,000 & $194,000 respectively, then you were NOT eligible to contribute directly to a ROTH IRA. If your income exceeds these limits, then the federal government considers you a high income earner.



High Income Earners  and wealthy individuals can still enjoy the benefits of tax free earnings by leveraging the BACK DOOR CONVERSION to a ROTH account. A back door ROTH allows you to skirt around the income limits by converting a Traditional IRA  into a ROTH IRA. The most optimal way is to contribute to a Traditional IRA with after tax dollars first, and then convert to a ROTH IRA. The sooner the conversion is done, the less chances of having a tax bill on potential gains. Although if you do have some gain, the tax bill is likely to be minimal.


I regretfully admit that neither I or Mr. Mindful Dollar ever opened an IRA in the past. Since I recently started taking a more serious approach to managing our finances, I was thrilled to learn that the IRS allows you to make 2016 contributions up to the deadline of April 18, 2017. Not wanting to lose another year of tax free retirement savings, I immediately sprung into action and established our IRA acounts and made contributions for 2016 and 2017.

Where can I establish an IRA?

There's a plethora of options to choose from to establish and fund your IRA. I personally set up our accounts with Vanguard not just because they invented index funds, but also because they're known for having the lowest fees in the industry and they also offer a selection of no-transaction-fee mutual funds and commission free ETFs. Vanguard's retirement funds have a $1,000 investment minimum so much isn't required to get started. There are other options that might be worth considering like TD Ameritrade, Fidelty, Charles Schwab and E*Trade. Do your research to see what account best suits your needs. See Nerd Wallet's full review for 2017's Top Picks for the best IRA account options.


Do you consistently contribute to a ROTH IRA year after year? If not, will you sign up TODAY and get on the road to planning for retirement? 


One of my favorite quotes by Albert Einstein says "Compound interest is the eighth wonder of the world. He who understands it earns it...he who doesn't...pays it".  

Compounding interest is blind to color, race and gender and it's the one element that exists in the universe that treats everyone equally. Time is your most valuable asset. You always hear people say "I wish I had more time" or "If only I could go back in time". If a person is on their deathbed and they had one wish, I imagine they would ask for more TIME. When you apply the power of Time to compounding interest, the results are truly immeasurable. Simply put, Time and Compounding interest are the most critical elements of investing.

Every dollar has the potential to become $10 some day, so why spend a dollar more than is needed? How can $1 become $10? That, ladies and gentlemen, is the snowball effect of compounding interest. With enough energy a tiny snowball eventually becomes a colossal snowball rolling downhill until it becomes an indomitable force. Wealth works in the same exact way. The money you invest today will grow at an exponential rate as it's rolling forward over time.

Compounding interest won't make you rich in a year. Ever heard the phrase, "Slow and steady wins the race"? The same can be applied to investing over time. The trick to making this work at a faster rate is reducing expenses and increase your savings rate. Steady investing over time will eventually make you a millionaire especially if you start when you're young. Critics of this notion will say it's easier to start your own business and become wealthy. And they're right. But until you land that viable business idea that will make you millions, invest as much as you can from earnings and start on the road to wealth.


High rates of spending on credit starts negates the inevitable force of compounding interest. Why? The average American who makes a purchase on credit almost never pays the balance in full at the end of the month and is subjected to high interest rates. The 2016 American Household Credit Card Debt Study revealed that the average American household owes $16,061 in credit card debt with an average interest rate of 15.07%. Meanwhile the total stock market returned about 12.68% for 2016 alone. So that means the average American paid debt at a higher interest rate than the total rate of return of the US stock market. What's worse? According to Bankrate's  Money Pulse survey, only 48% of American adults have money invested in stocks. The remaining 52% have $0 invested because they simply didn't have the money to invest. The debt problem doesn't just end there. In a recent study by Experian, the average car note now stands at $503 a month while the average length of the loan is 68 months. We've gotten very good at spending and incurring large amounts of debt that restricts our ability to invest money and take advantage of time compounding interest. The big problem is our decision patterns. We continuously make wrong money decisions by spending and that creates a giant snowball that gets so big it becomes uncontrollable. Why not make the decision to spend less and invest and create a snowball that creates wealth?


The ability to effectively harness the power of compounding interest requires a change in mindset about money, making the decision to invest and exhibiting discipline. Creating a budget, reducing spending, paying off debt will inevitably increase your savings rate. The simple act of diligently saving is the single most important mechanism that makes investing work. A consistent saver who makes the decision to invest will outperform an investor who doesn't consistently save. If you're a consistent saver over time but don't invest then you're at a gross loss.  I emphasize the word DECISION because I come across a lot of people who master frugality but fall short with making their money work for them. Instead they're comforted by large amounts of cash accumulated over time in a savings account, without regard of the effects of inflation. Most people don't invest because of risk aversion. They're afraid of seeing their $10,000 investment drop to $8,000. Fear has the power to control and distort our perspectives, leading to decisions that hinder our growth. Have you ever stayed in a relationship longer than you should have? Or maybe you stayed at a job longer than needed because you were afraid to try something new? You either make fear decisions or growth decisions. Your decision to invest is a GROWTH decision because the performance of the stock market is always more positive than negative over a period of time. Investing falls in the long term planning bucket because it's not a get rich quick plan.

Then there's the one element that most people lack in many areas of their life, especially with money....DISCIPLINE. Discipline is perhaps the single most important character trait that applies to good money management and investing. Lack of discipline is the primary reason for most financial problems and also accounts for poor investment returns over time. As I referenced above, investing should NOT be part of a short term growth plan. The money you invest are funds that aren't needed in the near future. If you plan on buying a house in the next 5 years, your down payment should be parked in a money market account. If you make the decision to start creating wealth, your investment horizon should involve a 10-20 year plan. The longer you invest, the greater the returns. Discipline becomes important when you avoid responding to big market dips or even a major crash. There's a saying I learned years ago when I got into sales, "Keep your knees bent". It just simply means to be flexible or expect the unexpected. If you had invested $50,000 in 2007 in a mutual fund that tracked the stock market, when the market crashed and bottomed out 2 years later your account balance would've probably been hovering around $23,000. Those who panicked and sold, effectively locked in their losses. Those who "kept their Knees Bent"  and kept the course would today have $80,000. The benefits of applying discipline and prudence to your investment strategy is the key to success.


Are you taking advantage of time and compounding interest? What steps can you take today to apply this concept to your personal finances and start building wealth? Would love your feedback so drop me a line below.