Your Money Strength: How Hard Is Your Money Working For You?

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!

How is your money strength? Graphic by Colleen Kong Savage

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.

Fundrise historical annual performance

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. 

Money Strength - Historical Fed Funds Rate

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!

Making money online - A very strong money strength
A real income statement example from a blogger

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!

Track Your Net Worth Easily For Free. Get a handle on your finances by signing up with Empower. They are a free online financial tools platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to manage my finances.

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.

Retirement Planning Calculator
Personal Capital's Retirement Planning Calculator. Click to see how you're doing

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. 

Invest In Private Growth Companies

Finally, consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment. 

Check out the Innovation Fund, which invests in the following five sectors:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. In addition, you can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

For more nuanced personal finance content, join 50,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. I help people get rich and live the lifestyles they want. 

35 thoughts on “Your Money Strength: How Hard Is Your Money Working For You?”

  1. It just takes time Ristlin. You’ve got your whole life to make money. One wrong move can crush your finances, so spend a good amount of time researching before buying a home for sure!

  2. JT, ever look into high dividend players like AGNC (15%/yr) or SDRL (9%/yr) just to mention a few?
    Primarily using those 2 I’ve managed to hit gains of 23%+ for each of the past 2 years in one facet of my overall portfolio (that is outside of my 401k).
    I don’t own either of them currently, but when my buy price gets hit I will.

  3. Stu McLaren

    Great post Sam – love how you broke things down.

    With that said, any recommendations for something similar in Canada for

    I called but unfortunately Canadians can’t invest there :(

  4. JT, per your comment on real estate, younger folks have THE MOST time. You just need to build the but first for the downpayment. I used my equity wins from 22-25 to buy my first place. Just got to do due diligence before you buy what may be the biggest purchase of your life.

  5. RichUncle EL

    I think getting in the real estate game is a good bet for the future. The rates right now cannot be beat, and if you buy for just investment purposes in a tax advantageous area you will eventually hold a nice chunk of cash flow after the mortgage is paid off. This is the next investment area I want to be in so that I can retire like Sam and Joe.

  6. Sam, totally agree making your money work is really hard. I think that is why people who retire very young vastly underestimate the amount needed to throw off the “close to risk free” income you need. My conservative approach is the rule of multiplying you annual nut (pretax)needed times 33…statistically you’ve got a 99% chance then of not outliving your money. For young people who have been successful enough and socked away tons of cash to consider retiring early its a tough # to hit, but I really doubt that people who retire early with 10-20 times their annual nut in savings will make it without major lifestyle adjustments. That is of course they’ve done a great job of setting up reliable passive income streams. Alot of time these “passive incomes” somehow end up being intrinsically tied to work or the reason you were able to save so much money in the first place.

    1. Multiplying your annual gross expenses by 33 to get your nut works. Now imagine having 33x your annual nut, and having that annual nut provide sustainable passive income, and work on a hobby like what I’m doing online so you don’t have to even touch the cash flow from the nut! A buffer for yor buffer if you will.

      It becomes almost like a game. You’re playing with houses money at this point.

      Curious to know your situation now if you’d like to share.

      1. I hear you about the buffer for the buffer, I’m early 40’s with about 45-50 times my idea annual nut saved right now with a “somewhat” passive income of approx. $400k/year outside of my normal income. I enjoy what I do so I’m lucky right now…I think I would get bored pretty quickly if I did something different. In regards to your developing passive income streams I define those as investments that are 100% on autopilot requiring no interaction, time, or stress. The key I believe is doing something you enjoy (which it seems you do), then making money really isn’t work. We all just need to make sure we enjoy life along the way!

        1. Nice! 400K is great passive income a year! Let’s say you got a 4% return, can you share with us how you got to the ~$10 million nut? Or is it other income streams not based off such a large nut? I’ve always believed there is A LOT more money out there than people know, and you’re a great example.

          Is there a time when you plan to spend it?

        2. I left a very large company and risked my life savings and partnered with a few people to build a small existing company into a nicely profitable medium sized company. It takes years of hard work, but once you turn the corner it is all worth it. My advice to people is “it usually takes 15 years to make an overnight success”. I have no intention of spending the principle, and still get a kick out of my day job, so right now it all gets plowed back into new investments(and a few toys)…I do my best though to have alot of fun along the way! Yes there is a ton of money out there, what I worry about is people feeling a little disenfranchised with the war on the rich and not be willing to take the risks and go out and do what I did. There are about 80 more families at our business that have nice $70-$120k jobs now because of greedy capitalists. Now I imagine guys/gals in similar situations as me feel more responsibility to the employees than they have the desire for more $.

  7. I like how you graded each of the asset classes. I have exposure to pretty much everything except for physical gold and money under my mattress. I’ve been trying to diversify more this year as a large majority of my money has been in CDs for a long time and the returns just aren’t that great anymore.

  8. I think P2P lending is probably a B-. The return is nice now because the economy is improving, but we have another recession, the default rate would go through the roof. The income is nice, but it’s risky too.
    I’ll give myself a B overall. Most of our net worth are in real estate and stocks at this time. I’ll buy more bonds and CD once the interest rate improves.

    1. What I like about P2P is that people still made money during the 2009-2010 crash. Not much, but they didn’t lose 50%!

      I think the economy will only continue to improve so I’m

  9. With real estate, things have taken such a hit in some places, that with significantly lower prices and very low rates, there are some real long-term values out there. Especially in some very popular areas – as they say, location, location, location. Plus, unless you’re in Dubai making islands, it’s not like you can make more land and more prime locations.

    I do think that the mortgage interest deduction might be in the 4th quarter of its game, and just might sunset at some point sooner than some folks think.

    1. I can’t imagine the mortgage interest deduction going away, HOWEVER, the majority of those benefitting from the deduction reside in California, New York…. Which are actually blue states. So, nope. Not going away.

  10. Sorry to front run you there Jeremy! But, good you wrote your post and are listing all the ways you could be making money work for you. It’s all about planning ahead and optimizing what we can!

  11. I always factor that I’ll use websites/mobile ads/premium mobile apps to help fund a savings, P2P lending and some of the other things. I notice that it is a lot of hard work, but I love doing what I am doing for alternative incomes-low wage sucks a lot, especially when you are not earning enough to pay bills. Finding and reviewing other incomes is something that I like about reading your blog-since you can state your opinion quite well.

  12. Over time, I invested (heavily) in income property, businesses (restaurant, catering & consulting), stocks, bonds, vacation property (Mammoth, CA), collectibles, commodities,antiques and art. I view the last four as really non investments because I probably will never sell, but they increase in value anyway. By far, income property or real estate was my best investment (A+). Besides my current home I still own a 60% interest in real estate in probably the best area of the country. My stock market investments have kept pace with the indices, but I always felt I was at the mercy of the market (B). My various businesses had their ups and downs. The highs were wonderful and many of the lows were due to outside influences. Taco Bell and McDonald’s started a price war in the 80’s which are still going on that had a material effect on margins. As an independent businessman, you cannot escape from the market place (B). Last, I owned a condo in a ski area (Mammoth) with two friends for 10 years. We were able to go there for a ski vacation 1-2 weeks a year. We broke even including all the non rental times which is pretty good (B).

    1. You’re lucky you broke even on the condo in Mammoth. Vacation ski properties are generally not good investments. I know, b/c I have one!

      Where do you own property as you mentioned you own in the best area in the country. Are you talking San Francisco? B/c that is #1!

  13. Dude, money under your mattress gets an F-. Inflation is running at least 3%, which means your cash is actually losing value. You need to be getting 3% to break even at least.

  14. I’m just a couple years out of college so my money has very specific goals. My retirement accounts continue to accumulate money and I continue to save to pay down my girlfriend’s student loans once we get married. After that we’ll probably invest more heavily for retirement and some in a taxable investment account. I also want to try Peer to Peer lending at some point.

  15. Larry@DividendIncomeInvesting


    Lots of good information here. I prefer the ease of dividend investing over almost everything else. A portfolio of 50 stocks or so, especially the dividend champion type, isn’t that hard to manage and has many advantages over other types of investment:

    Monitoring is easy with most information being public and easily available.

    Fees are low. If you buy individual stocks and hold them in a fee free account, the only expense is the commission for buying and selling. And taxes.

    Investments are liquid in most cases and can be sold without too much difficulty.

    Easier to value with prices, earnings, and dividend yields available.

    Easy to diversify across different sectors, and geographic regions.

    Of course, there are times when you are at the whim of the markets and your portfolio can fluctuate greatly. But, as long as the fundamentals are solid, that may be a good time to add to your core holdings.

    I also think that some allocation to income producing rental real estate is prudent for many investors along with the dividend stocks.


  16. How do you calculate your online income? Do you ”pay” yourself a salary for every hour spent on your sites, and any extra after costs is passive income?
    If you have a basic blog with hosting, costs are $100 per year at most, so making $500 yearly income would give you an A based on real estate or P2P calculations. If you factor your time say at $20 per hour, 20 hours a week, it is much harder to make $1600 and up per month just to offset your time cost.

    1. It’s a tough one to answer. I try and “work” around four hours a day. I THOROUGHLY enjoy what I’m doing online, and I hope the quality of my posts reflect my passion for writing online.

      I WISH I could assign a ridiculously HIGH value to my time, so I can pay no income taxes since I’ll have no profits. Ah hah! Something to think about.

  17. Grayson @ Debt Roundup

    I have been trying to figure out better ways to diversify my money and make it work for me. I wanted to get into Prosper lending, but it makes me wary. I don’t have a money market because they are worthless now and I am looking for another CD to deposit some cash in.

    1. I was wary for the first 7 years, but they’ve finally tightened up the industry and now have hundreds of millions of loans outstanding. I think it’s an excellent alternative and I’ve written about the various loans by credit score and borrower rating you can check out.

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