Welcome to the first question and answer session on the blog! We provide subscribers a link whereby they can send in their most pressing questions and see them answered right here on the blog. This will be a regular blog feature going forward and hopefully the information below helps answer a question you’ve always wanted to ask, but didn’t know where to go for the answer. Without further delay, here are the first round of subscriber questions and my answers:
I struggle with putting away funds for retirement. I know I should, but it’s hard when I need the cash now for bills and things. I want to be prepared for retirement, so how much of my paycheck should I realistically put into my 401(k)?
Good question. As much as you can. In other words, commit to making the maximum contribution allowed. I know it may hurt a little, as you adjust to less take home pay, but know this – there’s no better time than right now to start saving for your future. Life goes by fast and “someday” often turns into “never”. Besides, it’s free money (employer matching) and it grows tax free . I don’t know of any other investment vehicle that provides both of those advantages. Always pay yourself first. You’ll be glad you did.
Can you tell me what you think the stock market will do this year?
I have no idea. I don’t make predictions. I subscribe to the philosophy put forward by Warren Buffett, that stock market predictions tell more about the predictor than the prediction. If you want an example of this, tune into any of the financial market programs and track the predictions of a dozen or so “experts” and see how they turn out after 30-90 days. You’ll be surprised at how often they are wrong. It’s completely impossible to coalesce the behavior of hundreds of thousands of stock market participants in a given day/week/year into some form of a prediction.
I have a comfortable living and my salary puts me in the high income tax bracket, but I’m not financially free. I get the feeling from reading your blog that you think someone needs to be financially free to be successful. Is this true?
No, not at all. Everyone defines success differently. For instance, wealth accumulation and increased free time from being financially free are just a few ways that people can define success. I define success this way – Being the best version of my self possible by setting goals that stretch me and then achieving them by doing my very best. I believe a person is a success when they’re doing all that they are capable of, and only you would know if that’s true for you. I think doing less than you’re capable of is planting the seeds for later regret in life. I’ve achieved a degree of financial success, and I am now looking to become successful in another way, by making a social impact.
What is your best advice to someone facing tough financial times?
Keep your eye on the prize and filter everything through this question – “Is what I’m doing right now moving me closer or further away from my goal of being financially free?” It helps to have a strong emotional reason why you’re doing what you are doing, otherwise you’ll get distracted and discouraged. When the “why” is big enough, the “how” will appear. Hang in there and grind through it. Best wishes to you.
What keeps you awake at night about our economy?
Literally nothing. I sleep like a baby. I built my life so that I would not be kept awake with worry about the future. I think that peace of mind is one of the most important benefits of achieving financial freedom. Lack of money causes more stress in people’s lives than just about anything else. To me, it always made sense to do whatever is necessary to avoid the common money problems that afflict so many people and keep them up at night.
I just graduated from college and I’m starting my own success journey. What do you see is the biggest mistake people make as they reach for success?
Congratulations! I believe that failing to get crystal clear on a future vision of themselves and not making plans that align with that vision, is the biggest mistake people make. Not knowing what you’re aiming for–and how to get there–resembles taking a road trip without a destination and a map. You arrive someplace, but probably not where you hoped. Rarely do people just randomly fall into success. It’s a result of planning and work.
Will the Fed raise rates this year?
I have no idea. But if they do, it will certainly be the financial news of the day. Interest rates do matter, but I don’t really follow macro events that closely. Also, a little bit of inflation (from rising interest rates) is not necessarily a bad thing for the economy or businesses, as it generally means those businesses with pricing power can raise prices and it is also generally tied to an improving employment picture.
I’m curious to know what are your personal success habits?
Very simple, I read a lot and follow a system of convictions that help guide me with my decision making. By read a lot, I mean I read all the time! There isn’t a day that goes by that I’m not reading for several hours. This keeps my mind sharp and humble, as we are never too old or too smart to learn more. Also, I use a set of written credos that serve as a sounding board to make sure I stick to my plans and stay true to what is important to me.
Do you have a specific stock picking system and if so, is that something you would be willing to share on your blog?
If by system you mean sophisticated spreadsheets and formulas, the answer is no. I basically follow the value investing ideas made popular by Warren Buffett. Put simply, I do what he does – invest in quality companies whose business I understand (a limited group), that are trading at a significant discount to their intrinsic value. When I see that happening I buy massive amounts of their stock and sit on it for a long time. Value investing takes a lot of patience as most of the time, you’re doing absolutely nothing! I’ll be talking more about investing in future blog posts.
I’m living paycheck to paycheck and finding it impossible to save any money right now. Do you have any advice on how I can get ahead?
I don’t know your personal situation, but you have to make more money and reduce your expenses. I know that sounds like simple advice, but most money problems can be cured with simple steps. Notice, I didn’t say easy steps, I said simple steps. Working more hours or taking a second job may not sound like fun right now, but that’s what you’ll need to do in order to break the cycle of living paycheck to paycheck. Also, get ruthless on your expenses. Find ways to save $25 each month at first, then $50 and then $100. Before long, you will have built the habit of saving. Remember, how much you save at first is not that important. Building the habit of saving is what is important. If you can only save $1 a month, then save that dollar!
I read a lot of blogs about success and they mention things like persistence, motivation and setting goals as the keys to success. In your experience, what do you think is the #1 driver of success?
I get asked this question a lot. It varies from one person to another but one thing that all successful people have in common is this – they believe with every fiber of their being that they can realize success and then they go and claim it — sooner or later, one way or another, through thick and then, they make it theirs. They also develop the ability to manage nagging doubts that creep into their thoughts and they remain optimistic in the midst of disappointments and setbacks. Put simply, they never quit until they’ve reached their goal.
I hope these questions and answers have been helpful. If you’d like to submit a question for a future Q&A post, subscribe to the blog and we’ll send you a link where you can submit your questions.
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Be free. Nothing else is worth it.