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#1 Biggest Money Weakness?

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Travdad
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#1 Biggest Money Weakness?  Reply with quote  

New user here and curious what everyone's #1 biggest weakness is when it comes to money?

My wife and I are excellent savers, have been reasonably successful at the whole "corporate career" game and are investing our savings efficiently (passively) through various types of accounts,....

BUT, we realize our #1 weakness is generating income outside our salaries. Be it by utilizing our human capital or financial capital, at the end of the day, this is our biggest weakness.

Looking to hear what others have to say...and any suggestions would be greatly, greatly appreciated!
Post Tue Jul 19, 2016 5:08 pm
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oldguy
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quote:
My wife and I are excellent savers, have been reasonably successful at the whole "corporate career" game and are investing our savings efficiently (passively) through various types of accounts,....
BUT, we realize our #1 weakness is generating income outside our salaries.


Not sure what you mean by "weakness", DW & I became wealthy by doing what you are describing.
In fact, I've noticed over the past few decades that there is an urban legend among the 'young' that "working for the Man" is a dead end and that a business start-up is the only way to wealth. In my experience, the opposite is true, ie, 85% of the 'start-ups' fail, end up with bk and a $50k cc bill. And the 'corp career' couples are multi-millionaires. When I go to our retiree luncheons, there are a lot of multi-M's around the table.

But it depends on your ages, etc - if you are 60 you can't become instantly wealthy - and if you are 30, a MM status is an easy task.
Post Tue Jul 19, 2016 6:11 pm
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Travdad
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Oldguy (seems odd typing that), good questions/points.

To clarify a bit, our weakness is being able to generate income via multiple revenue streams. Which is not to say having corporate america jobs is a weakness at all. Quite the contrary.

I don't mind my job, nor does my wife, but one thing that keeps eating at us is the vast majority of our income is reliant upon our jobs. Yes, we have 12 months of living expenses saved in our emergency fund, but we'd like to develop multiple streams of income so that if one, or both, of us lost our jobs, we would still have some cushion before relying entirely upon our savings.

Does that help clarify my #1 weakness?

Oldguy, based on your experience and success, if you look back to say, your mid-30's (my current age) was there anything that sticks out as your biggest money weakness? Or maybe not a weakness, but challenge?
Post Tue Jul 19, 2016 6:46 pm
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oldguy
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quote:
but one thing that keeps eating at us is the vast majority of our income is reliant upon our jobs. Yes, we have 12 months of living expenses saved in our emergency fund, but we'd like to develop multiple streams of income so that if one, or both, of us lost our jobs, we would still have some cushion before relying entirely upon our savings.


First, don't build an EF to finance loss of income stream, that is way too much money to take off-line. Eg, $50,000 in savings would be $1,150,000 in 30 yrs if it was invested at 11% - that alone could be a big part of your retirement fund. We cap our EF at about $5000, that meets most ;real' needs - ie, a washer/dryer, a fridge, an auto trans for your car, a medical issue, etc.
Instead, if you ever have extended job losses, pull from your investment funds, it's an emergency.

Risk. Study risk management, risk mitigation, probable outcome equations, monte carlo simulations. You will learn that the public buys way too much insurance - extended warranties on appliances, life insurance, etc. And they build a huge EF for every eventuality - 9 out of 10 will never happen - so you need to plan for only 1 or 2.

Much of the generational fear of risk has to do with the cookie cutter plans that financial planners
sell - 20% 'down' on a house, a 6 month EF, etc. Consider the end-game, if the entire public follows the cookie cutter plan, then the probable outcome converges on 'mediocre'. And that effect is observable over the past 40 years or so - each middle class family hits age 65 with a paid-for house, 2 paid-for cars, and maybe $250k in a 401k. Ie, few millionaires, compared to 50 yrs ago. Yet is has never been easier in the US to be a multi-millionaire.

Eg, simply put $10k/y into an 11%/y fund for 30 yrs = $2,200,000. ( If you want $4.4M factor it to $20,000/y). Put some in a posttax fund (401k), some in a pretax (roth), and some in a taxable fund (accessible).


quote:
if you look back to say, your mid-30's (my current age) was there anything that sticks out as your biggest money weakness? Or maybe not a weakness, but challenge?


One thing, as a 20 and 30 yr old, I studied the stock market and the various methods to trade, ie 'time the market' - buy low, sell high. Leverage my purchases, shorts, options, margins, etc. Eventually it occurred to me that all of the published theory (100s of books, this was before computers) was ultimately based on history - repetitive chart patterns,, statistical extrapolation, elliot wave theory, yada.
However, the 'real' stock market is based on what happens tonight, not on yesterdays moves. Nor does it matter. You don't buy low, sell high - you buy incrementally, accumulate, and never sell. It was liberating to grasp that - price doesn't matter, simply buy and accumulate for 30 yrs.
Post Tue Jul 19, 2016 10:58 pm
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Travdad
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You don't buy low, sell high - you buy incrementally, accumulate, and never sell. It was liberating to grasp that - price doesn't matter, simply buy and accumulate for 30 yrs.
quote:


Thanks Oldguy! Really like the "you buy incrementally"
Post Wed Jul 20, 2016 5:38 pm
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oldguy
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quote:
but we'd like to develop multiple streams of income so that if one, or both, of us lost our jobs, we would still have some cushion before relying entirely upon our savings.


And to reiterate - the thing that you call a weakness may very well be your best feature. A pair of solid W2 jobs is one of the best ways to wealth. The steady uninterrupted income stream trumps a large sporadic income (such as commissioned sales, union trades/strikes) because the power of compounding is never interrupted. Eg, teachers often think of themselves as 'low pay' - but a pair of teachers at $45k each, can put away a steady $10k/yr and build $2.2M over 30 yrs.
Post Wed Jul 20, 2016 6:55 pm
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