Your money strength is key towards building great wealth. The stronger your money strength, the greater your chance of becoming a millionaire.
For years I worked hard for my money. I’d get into work before the sun came up and leave work after the sun set every day. The pressure to generate revenue was immense with some bosses relentlessly cracking the whip. Thank you sir, may I have another!
In the end, working hard was worth it due to the optionality I now have. Besides, it wasn’t like I was going into harms way to combat gorilla soldiers in Iraq. Those guys are the true hard workers, which is why the government needs to make sure every opportunity is given to our troops back home.
Nowadays, I’m still working hard for my money ironically, because I’ve reset to zero. My plan is to work as hard as possible to make as much money as possible while there’s still a pandemic. Once the world gets back to normal, I plan to then enjoy life more.
As a result, my money strength is strong! I need to make more money to take care of my family. And the only way to do so is to build more passive income streams.
Your Money Strength And Your Money
I only work hard now because I have the energy. One day, my mind will fade to the point where even if I wanted to work hard, I couldn’t. Saving money is EASY compared to making money work for you in this low interest rate environment.
Almost anybody can save 10% of their income if they really want to, but I guess less than 1% of the population can return a risk-free 10% every year. Bernie Madoff claimed to do so, and look where he is!
Here are some common asset classes to evaluate. Each asset class will be assigned a letter grade money strength.
1) Physical Real Estate. Money Strength Grade: A
Real estate is my favorite asset class to build wealth. Buying rental properties today takes advantage of rising rents and falling mortgage rates. Money is leveraged for a greater return, while the mortgage principal gets paid down. Hold long enough and I firmly believe most real estate investors will build tremendous wealth.
Here is an example of almost $400,000 after taxes in wealth creation after nine years. I firmly believe that real estate is going to see a nice multi-year upswing until the government decides to take away our mortgage interest deductions!
2) Real Estate Crowdsourcing. Money Strength Grade: A
I’m excited to invest in real estate crowdsourcing, where you can invest in real estate projects around the country for as little as $5,000. Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible.
If you don’t have the downpayment to buy a property, don’t want to deal with the hassle of managing real estate, or don’t want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today.
I like their performance track record and low volatility. It’s free to sign up and explore.
3) Dividend Income / Stock Market. Money Strength Grade: B+
Dividend yields are a function of profits and payout ratios. Given the volatility of the stock market, dividend income has also been somewhat volatile. Sure, it’s nice to get a 5% dividend yield, but not so nice if your stock is down 20%!
My stock portfolios are bias towards large cap, dividend paying stocks, along with real estate private equity funds. I wish volatility in the stock markets would decrease, but until it does, it’s important to stay on top of rebalancing and asset allocation. The stock market is now at all time highs in 2015. All of us are looking good who have exposure.
Personal Capital, the leading hybrid digital wealth advisor, is an excellent choice for those who want the lowest fees and can’t be bothered with actively managing their money themselves once they’ve gone through the discovery process. All you’ll be responsible for is methodically contributing to your investment account over time to build wealth.
In the long run, it is very hard to outperform any index, therefore, the key is to pay the lowest fees possible while being invested in the market.
4) CD Interest Income. Money Strength Grade: D
CD interest income is guaranteed for principal up to $250,000 for singles and $500,000 for couples. When 5-year and 7-year CDs yielded over 4%, they were reasonably attractive, risk-free investments.
Now with long-term CDs at only 2%, the value proposition is more difficult. Everybody should have some money in CDs as part of their diversification, but that portion of wealth should be declining. Take a look at my post on CD investment alternatives.
5) Money Markets. Money Strength Grade: D
The average money market account is 0.1%. That is tremendously pathetic. As a result, saving money in a money market account isn’t going to do anything to help you build wealth. All it will do is keep you liquid and prevent you from losing money.
7) Online income. Money Strength Grade: A
Online income didn’t really exist 20 years ago. For those of you who are able to effectively leverage the internet to generate income, the sky is the limit. When you’ve got a website that can’t get shut down during a pandemic, the money strength of online income is huge.
I’m enjoying the whole online adventure and being careful not to overdo things. Making a sustainable living online takes a lot of creativity as well as a lot of content. You can’t sit back and watch the dollars come in. But once you’ve started your own website, the sky is the limit due to its scaleability!
As you can see, not only can you make money directly from your site, you can also make money because of your site. I’ve been able to find many six figure consulting opportunities thanks to Financial Samurai. Learn how to start your own site in under 20 minutes with my step-by-step tutorial guide. You want to own your brand online.
Not a day goes by where I’m not thankful for starting my site in 2009. I never would have thought I could leave my job just 2.5 years later and be free!
8) Physical gold. Money Strength Grade: D
Physical gold is nice, but where are you going to put it? Gold prices have been steadily going up thanks to the Federal Reserver’s loose monetary policy which is crushing the US Dollar. Unfortunately, gold provides no yield, so it is pure speculation. You can buy a gold ETF in GLD.
9) Under Your Mattress. Money Strength Score: F-
There are plenty of folks who keep their hard earned savings either under their mattress, in the freezer, or buried in their back yard. You might laugh, but it’s true!
When banks were going under, it wasn’t unreasonable to just hoard physical cash, despite the FDIC guarantee. Just think what would happen if all electricity went away like in the show, Revolution?
There would be no record of any of your wealth and you could never get any of it back. We really are taking a leap of faith by electronically transferring our money to financial institutions.
Saving Money Is Easy, Investing Is What Matters More
If you think creating significant passive income is easy, you haven’t been trying. It takes a tremendous amount of time to build up a large enough nut to create enough money to twiddle your thumbs in the hot tub all day.
Why do you think people who sell businesses for millions, who win lotteries, or who depend on just one income stream fade down the road?
Their money strength is weak because of little effort to maximize returns with the nut they had. Everybody needs a savings buffer and a passive income buffer to increase their chances for financial independence. It’s not easy, but you should try!
Improve Your Money Strength Now!
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Now, I can just log into Personal Capital to see how my stock accounts are doing, whether I have too much invested in real estate, and how my net worth growth is progressing. I can also see how much I’m spending and earning every month to make sure I’m within budget. Personal Capital takes less than one minute to sign up and is helping me build wealth for the long run for free.
Real Estate Money Strength
In my opinion, real estate has great money strength. Real estate is a core asset class that has proven to build long-term wealth for Americans. Real estate is a tangible asset that provides utility and a steady stream of income if you own rental properties. Further, real estate is less volatile.
Given interest rates have come way down, the value of rental income has gone way up. The reason why is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not reflected this reality yet, hence the opportunity.
Take a look at my two favorite real estate crowdfunding platforms.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.
I’ve personally invested $810,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000.
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