Here’s what you’ll learn in today’s newsletter:
How rich Americans live, spend, & invest
How to invest your available money
The power of locking in fixed income
The Surprising Secrets of America’s Wealthy
“If your goal is to become financially secure, you’ll likely attain it… But if your motive is to make money to spend money on the good life,… you’re never going to make it.”
“Mr. Allan”, Interviewed in The Millionaire Next Door
Maintain a Budget or Spending Plan
The majority of American millionaires know the answer to this question:
Do you know how much your family spends each year for food, clothing, and shelter?
Live Below Your Means
Being frugal doesn’t mean you can’t spend money on things you enjoy. It means that you plan carefully to avoid waste.
Save Your Money
The average affluent person saves at least 15% of their earned income. Not only do they consistently save this amount, they also take their savings from their income first.
Invest Your Money
The average millionaire invests 15-20% of their income each year, but some millionaires that Stanley interviewed invested as much as 40% of their income.
When you live below your means, you unlock more money to invest.
Stanley also found that the average millionaire makes their own investment decisions, and they do so through passive investments that they “rarely sell.”
Financial Independence Over Social Status
Financial independence is a number that you can quantify. You can figure out exactly how much you need to save and invest to earn that number. Social status, however, is fleeting and largely unachievable.
Together with RocketMoney
Above, I shared that most millionaires in the U.S. know the answer to this question:
“Do you know how much you spend on clothes, food, and shelter each year?”
Do you know the answer?
With RocketMoney, you could figure this out in about 5 minutes.
I use RocketMoney to track my net worth, spending, and subscriptions all in one easy-to-use dashboard.
Easily track your finances with RocketMoney – sign up for free below.
The best articles I’ve read this week.
Reality Catches Up
Morgan Housel discusses having things we don’t deserve, which leads to severe psychological costs. WeWork was overvalued at $47B and now feels like a failure at $3.5B. Some made big money from selling subprime mortgages, but when the bubble burst, their earnings returned to normal but felt much worse.
Dollar Cost Averaging vs. Lump Sum Investing
Nick Maggiulli makes the case that lump sum investing (investing all of your available money at once) tends to outperform dollar cost averaging (investing all of your available money over time). Nick’s example refers to someone with a chunk of money they’re looking to invest. He’s not referring to using newly available income to make recurring investments (like a 401k).
10 Years of A Wealth of Common Sense
Ben Carlson reflects on ten years of writing. He talks about what he saw after the 2008 financial crisis, his top two takeaways from reading investing books, and his frustration with those who intentionally complicate the finance world.
☀️☕️ Join The MoneyFitt Morning | A quick & easy daily on what’s important in investing & business, with a topical Explainer. Catered to those wishing to understand the world around them. Subscribe here.
Matt Paulson, Founder of Marketbeat, Startup & Real Estate Investor, and Philanthropist
Matt is the Founder of Marketbeat, General Partner at Homegrown Capital, and General Partner at Creston Capital Holdings.
He’s also a really nice guy who I have a lot of fun bantering with on Twitter.
Matt is a unicorn interviewee because he’s had financial success through his business, startup investing, and commercial real estate investing.
Beyond the business and financial accolades, he’s a role model to me because he uses his money to improve other people’s lives through community projects and philanthropy.
Matt was kind enough to jump on a call with me a few weeks back and share some wisdom.
Here are my two favorite questions from the interview:
Cole: You’ve successfully invested across multiple asset classes (your business, start-up investing, and commercial real estate). What two or three will you be focused on in the next ten years?
Matt: Locking in some fixed-income investments like CDs and bonds at 5% guaranteed for 5-7 years. I think that’s really compelling.
Cole: If you could give your 25-year-old self one piece of advice about managing money, what would it be?
Matt: If you have a business and you’re successful with it, you should probably take less investment risk than most everyone else. You want to do more real estate, more fixed income, more S&P 500 index funds, and less of this stuff that’s high-risk, high-reward [tech stocks/crypto].
Thanks for reading! Enjoy the rest of your week.
New here? Check these out:
Disclaimer: This newsletter is strictly informational. It is not investment advice, tax advice, financial advice, or a solicitation to buy/sell any assets. Please do your own research. You’re an adult, and you’re responsible for your own decisions. This newsletter may contain affiliate links, meaning I get a commission if you decide to make a purchase through my links (at no cost to you).