One of the biggest myths in the world as it relates to investing is to “start early”. The fact is, by starting too early, an individual can drastically hinder their wealth potential. I grew up being taught to save for a rainy day and for emergencies. I believe you should not invest unless you have at least $50,000. When I was old enough to invest I was taught “start early” and to invest monthly by “dollar cost averaging” into Wall Street financial products. These mistakes are killing your wealth potential and here is why.
You don’t understand where you’re putting your money. People who follow the start early advice are almost always doing it for experience. They are essentially practicing on their money. Whether it be $50/mo into a mutual fund or buying a 4 plex on a subsidized loan. The thought process is to take a smaller amount of money and put it into an investment so that an individual can experiment with the investment and gain confidence. Not only is this backwards, but you’re breaking my #1 rule for investing. Never invest in something you don’t understand. By starting early so you can learn, you’re admitting you don’t understand the investment which means your money should not go near it.
Early investors don’t have the discipline to build real wealth. Wealth comes from earning lots of income, saving 40% or more of it, and then investing it wisely. Someone investing $100/mo into a 401k or investing $20,000 into government subsidized real estate is looking for a short cut. That’s the bottom line. It isn’t repeatable and it will not build wealth. Why do I say you need $50,000? Because by definition, if you don’t have that much or more in the bank, you lack financial intelligence, financial discipline, or both. Somebody who cannot earn enough money and then follow it with the discipline to save $50,000 will just be a broke person who owns an investment account. We have plenty of those already.
You don’t have enough money to lose. This is my counter argument to the start early school of thought. By waiting until you have real money, you will actually feel like you have something to lose. This will cause you to be a lot more careful and picky when selecting your investments. You remember all of the things you said “no” to in order to save that $50,000. You also remember all of the hours and energy you put in to working to earn that money. When scouting investments you will not want to put that money just anywhere. It’s a lot harder to make a bad $50,000-$100,000 decision than it is to make a bad $100 or $15,000 decision. You make those all the time. But when you have some real money, you’ll be afraid not to lose it and that will make you a better investor.
Baby money makes more baby money. Okay let’s say you do put $100/mo into a mutual fund. That $100 at 6% will generate $6/mo. $6 will not do anything significant for you. “But what about real estate?” Okay lets do the math. You put $15,000 into a 4-plex. You’ll make around $600/mo in Cash Flow Before Taxes. In exchange for that, you must live in one of the units, you’re the janitor, the bill collector, the handyman, the customer service rep, the landscaper, the plow & shoveling service, the collection agency, and anything else that comes up. That’s what a landlord does. I know much easier ways to get a $600/mo job that don’t cost $15,000. The bottom line is that at that level the return just isn’t there.
You’re invalidating yourself as your best investment. What does it say when someone is literally willing to buy 4 sides and a door or even give money to strangers rather than taking that same money and investing it into themselves? It means the individual does not value themselves and lacks confidence in creating wealth. They’re hoping an inanimate object or a group of strangers can do it for them. You are your best investment. Until you have $50,000 in the bank you should only invest in your ability to produce the kind of income needed to save $50,000. That means you must be able to earn approximately $142,857 to save $50,000 of it. If you don’t know how to do earn $150k, that is why you must investment in yourself so you can get the skills.
Financial advisors, realtors, insurance agents, mortgage brokers, and financial pundits make money by convincing you it is a good idea to invest in their products. They aren’t responsible for the risks or for your losses. I’m usually the one who ends up going in and cleaning up after the messes caused by people investing too little, too soon. If you want to invest real money and learn how to accumulate that money click here and schedule a strategy call with me.
Own Your Potential,
Jerry Fetta believes everyone has the God-given right to own their potential. Most of us don’t because we spend 40 hours per week serving the 40 year to life sentence, trading our precious time for worthless paper called money.
We live on an economic planet and time and money do need to be exchanged. But it doesn’t need to be your time or your money. Jerry teaches his clients to secure income producing assets that make the time and money exchange for you so you can buy your freedom back and live a life of abundance and prosperity. To get there we must know how to make money, how to keep it, and how to multiply it.
Jerry provides coaching, education, accountability, and community to help you build wealth. Join the Wealth DynamX coaching program, get educated on Wealth DynamX University, and begin networking with the Wealth DynamX Mastermind Group today.