I’m now financially independent. I didn’t get this way overnight, nor did I do it by selling books or advice. I did it the same way you can: one paycheck at a time over many years.
One of my young staffers recently asked if I could condense everything I’ve learned into 10 simple ideas that would serve as a guide to those starting out, starting over, or maybe beginning to realize they’re not where they’d like to be. While certainly a challenge, it’s a worthy one. So here goes: the 10 commandments of achieving financial independence and being happier while you do it.
1. Live like you’re going to die tomorrow, but invest like you’re going to live forever
The ease of making money in stocks, real estate, or other risk-based assets is inversely proportional to your time horizon. In other words, making money over long periods of time is easy – making money overnight is the flip of a coin.
Money is like a tree: Plant it properly, care for it occasionally, but not obsessively, then wait.
Stare at a newly planted tree for 24 hours and you’ll be convinced it’s not growing. Fixate on your investments the same way, and you could miss out on a game-changer.
The biggest winner in my IRA is Apple. I don’t remember exactly when I bought it, but I’m guessing it was in 2002 or 2003. My split adjusted price is around $1/share: As I write this, Apple’s trading at around $126/share. Had I been listening to CNBC or some other outlet promoting constant trading, I almost certainly wouldn’t still own it.
The lesson? Enjoy your life to the fullest every day – live like you’re going to die tomorrow. But since you’re probably not going to die tomorrow, plant part of your money in quality stocks, real estate or other investments; then hold onto them. Don’t ignore your investments entirely – sometimes fundamental things change indicating it’s time to move on – but don’t act rashly. Patience pays.
2. Listen to your own voice above all others
My job as a consumer reporter has included listening to countless sad stories about nice people being separated from their money by people who weren’t so nice. While these stories run the gamut from real estate deals to working from home, they all start the same way: with a promise of something that seems too good to be true.
And they all end the same way: It was to good to be true.
If someone promises they can make you 3,000 percent in the stock market, they’re either a fool for sharing that information or a liar. Why would you send money to either one? When you hear someone promising a simple solution to a complex problem, stop listening to them and start listening to your own inner voice. You know there’s no pill that’s going to make you skinny. You know the government’s not handing out free money for your small business. You know you can’t buy a house for $300. Stop listening to infomercials and start listening to yourself.
3. Covet bad economic times
Wealth is realized when the economy is booming, but that’s not when it’s created. Wealth is created when times are bad, unemployment is high, problems are massive, everybody’s freaking out, and there’s nothing but economic misery on the horizon.
Would you rather buy a house for $400,000, or $200,000? Would you rather invest in stocks when the Dow is at 12,000 or 7,000?