Here are the best financial moves everyone can make to eventually get rich and retire in style. The sooner you deploy these financial moves, the better because time is really one of your most valuable assets to building great wealth.
Those of you who invested in stocks, real estate, and many other asset classes since 2009 should be loving life. But don’t forget that good times seldom last forever.
Never forget the Armageddon days of the 1997 Asian Financial Crisis, the 2000 dotcom implosion, and the housing + financial meltdown that began in 2008. Those of you who haven’t been investing at all better get ready to deploy capital when a large correction occurs, or else inflation will eat your wealth alive.
The Best Financial Moves To Make
1) Review your asset allocation. Setting and forgetting it is not a good strategy if you want to stay properly diversified. For example, you might deploy a 50% equities, 50% bonds asset allocation. But if your equities climb 35% while your bonds decline 10%, and you want a 50/50 balance, you’re out of alignment because your portfolio is now 60% equities and 40% bonds.
Investors should rebalance at least twice a year, no matter how small the rebalance is. Taking the time to rebalance helps focus your attention on your investments so they don’t grow too far out of whack.
2) Review your income and spending. You’ll be surprised by how much you’ve spent compared to how much you think you’ve spent. Chances are high that you’re spending more than you realize, which is a detriment to your net worth building goal.
It’s the same idea as withdrawing money from an ATM machine and wondering where all the cash went a couple days later. Definitely tally up your total annual income and spending amounts. Then divide the figures by 12 to make the numbers more granular. Adjust your spending accordingly.
3) Declutter and donate to charity. Not only is donating good for people in need, you get to declutter your house and get a tax write-off up to $500 per donation without having to fill out a form to say where the item came from.
We all tend to accumulate a bunch of stuff over time. It feels absolutely fantastic to get rid of “excess inventory” so that people with low inventory can be helped. You can also donate other assets such as stocks, your car, and other valuable goods as well.
4) Update your resume. Now is the time to update your resume and make sure it’s the best looking document on your computer. You’ll be surprised by how much you’ve accomplished over the course of a year that you can add to your resume.
Make different versions of your resume for different types of industries or jobs you’re eying. End of January through June is peak job hunting season.
5) Keep you and your family safe. It’s important to make sure you’ve got the appropriate health care insurance for you and your loved ones. Medical costs consistently rank as one of the top reasons for bankruptcies in the United States.
I don’t care if you are worth $5 million liquid. Some random illness could wipe you out if you don’t have the appropriate health care. In addition to having the appropriate health insurance, please make sure your housing insurance, car insurance, and personal property insurance coverage are correct.
Finally, if you have lots of assets that go beyond what your housing and car insurance can cover, definitely get an umbrella policy. The linked article explains what an umbrella policy is and how much it may cost.
6) Review your will. Along the lines of keeping your loved ones safe, make sure you either have a will, or have an updated will if your financial circumstances have significantly changed.
You don’t want to inherit $50 million bucks, die, and then cause your entire immediate and extended family to start a civil war because they don’t know who is getting your millions. Money brings out people’s evil side, especially for those who’ve never had a lot of money. Do your descendants a favor and be organized.
7) Plan your taxes. Your taxes are likely your largest ongoing liability. Definitely don’t let the government tax you more than you save each year! Thankfully, there is tax reform in 2018 where income tax rates have come down.
Unfortunately, SALT deductions have been capped to $10,000, which is a punch in the gut for expensive coastal city residents. I personally sold my SF rental house in 2017 in anticipation of negative tax policies affecting the expensive real estate market and re-invested $500,000 of the proceeds in real estate crowdfunding to take advantage of cheaper valuations and higher net rental yields in the heartland.
8) Run your investment portfolios through a fee checker. Do you know why money managers are so rich? It’s because they charge a tremendous amount of fees. It’s frustrating when your employer only offers actively run mutual funds with high fees, but it’s still better to max out your pre-tax retirement accounts as much as possible.
At least once a year I run my investment portfolios through Personal Capital’s Retirement Fee Analyzer. Just link your investment accounts and click on the Investing tab on the top right and then click Retirement Fee Analyzer.
I’ve optimized my two portfolios so that my annual fee is estimated at only 0.18% compared to the benchmark of 0.5% due to my selection of ETFs, Index Funds, and specific stocks. The other cool feature is the Investment Checkup feature that shows your current vs. target allocation.
9) Invest in long term trends. There is a demographic shift by workers and employers towards the heartland of America because it’s much cheaper than coastal cities. With Google announcing $13 billion in heartland real estate expansion in 2019, you know other employers and employees will follow suite.
I recommend checking out real estate crowdfunding platform Fundrise to take advantage of this trend. Fundrise allows you to invest in eREITs or individual deals with as little as $500 – $1,000 to gain diversified real estate exposure. It’s free to sign up and explore. I’ve personally invested $810,000 in real estate crowdfunding since 2016.
Visualize Great Fortune
One of the things I advise everyone to do is visualize themselves 12 months from now in a more successful position. If you no longer want to do your craptastic job that requires no thinking, then visualize yourself doing something new and exciting with a different company.
If you no longer want to be in a dull relationship with a partner who takes you for granted, visualize yourself taking an amazing vacation with someone else. If you’re sick and tired of living paycheck to paycheck, visualize yourself rocking an enormous bank account due to the positive steps you’ve taken to create wealth.
Years will continue to go by quicker and quicker the older we get. Make the most out of each one.
About the Author: Sam worked in finance for 13 years. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. He spends time playing tennis, taking care of his family, and writing online to help others achieve financial freedom too.
Sam started Financial Samurai in 2009 and has grown it to be one of the largest independently owned personal finance sites in the world. You can sign up for his free private newsletter here.