Finally getting into the meat of the course with “Investing For The Future,” which continues in week 11 as well. I know quite a bit about investing already but interested to see how this breaks down the basics.
Table of Contents
Seek Learning
The lesson started with pondering and discussing learning and how it creates opportunity. The world will often pay you what it thinks you are worth so it’s important to consider that when going to school or considering various careers. More education sometimes isn’t enough, as the cost can be prohibitive even once a degree is obtained.
We completed an activity about creating a life mission and thinking ahead 5 years to try and visualize where we will be. Some things I wrote down were “Landlord,” “more serious blogger,” and half FI. An important component of the life mission was defining a why. My why has a lot to do with service and having more family time. Finally we wrote down what skills, knowledge or experience we need to get there. It definitely helped me prioritize and we then started outlining some goals that align with our Life Mission. I’ll have to post my finished version sometime.
Sometimes to accomplish our goals, we need mentors. We are really interested in real estate but don’t have much experience. We definitely need to start going to Meetups and getting connected with potential mentors.
Save Money
When it comes to investing for the future, it all starts with saving. There has to be a gap between income and expenses. I do think it’s often important to have a bit of an emergency fund as a prerequisite, which the lesson states as well. We usually keep 2 months expenses in our checking account at all times, but the rest we keep in a Roth IRA and Worthy Bonds. This might be more aggressive than some would like, but it works for us.
Once you have your emergency fund designated and working, keep saving. This will be the money that you can go on to invest for your future.
Consider Home Ownership
While I don’t think a home is necessarily an investment, it is sometimes less expensive and better than renting. Many people aspire to own homes, and I tend to think of it as a forced savings account with about a 3% interest rate. Before deciding to buy, consider the pros and cons. If you are going to be moving soon, it is likely better to continue renting. There are many costs with home ownership and it’s not usually something people plan for. When you rent, the landlord fixes all the problems (hopefully), but that’s not the case when you have your own place.
When deciding to buy a home there are some boxes you want to check:
- Are you free from consumer debt?
- Do you have a 3-6 month emergency fund?
- Am I living on a budget and do I know how much I can comfortably afford?
- Have I saved enough for a down payment?
- Is my employment stable?
- Do I plan to own for at least 5-7 years?
- Can I afford other associated costs like insurance, taxes, and maintenance?
To avoid being house poor, try to keep your monthly payment less than 25% of your monthly income. Banks will often qualify you for enough of a mortgage that it might be around 50% of your gross pay, but this is something to be avoided. You will be house poor and unable to save or invest much outside of your normal monthly mortgage payment.
It’s a good rule of thumb to plan for 1% of the home’s value to be spent in maintenance each year.
Depending on your tolerance for risk, you might want to consider a 15 year mortgage, which will cost much less in interest, and pay off the home in half the time. 30 year mortgages are the norm and what I get, but it’s not hard to pay them down in 15 years or less. It gives you more flexibility should you fall on hard times by having a smaller monthly payment. Most people with 30 year mortgages will not pay it like a 15 year despite best intentions. Know yourself and try to make the best decision for your family. When done right, home ownership can be a way to invest for your future.
Invest For The Future With Education
Education is how we invest in ourselves. Often additional training or education comes at a cost, but that is not always the case with MOOCs available. Some companies even provide subscriptions like Pluralsight or Lynda, or access to other training on or off site. See what your employer offers and consider taking advantage of that. I even came across Smartly recently and they offer a free MBA to qualified candidates.
Working in IT, things can move quick and it’s important to keep up with the latest technology and trends. More and more jobs are at risk of getting disrupted with AI and other technological advancements. Amazon is even spending X amount to retrain a third of their workforce. This might not be the case if the labor market wasn’t so tight. It is troubling to see a record high amount of open jobs out there but not enough qualified candidates. Some companies like Google are even forgoing degrees for those with experience or skill.
However you invest in yourself, consider your options and try to avoid debt to the extent you are able. I will be looking into some certifications that I think my employer may be able to help with.
Conclusion
Investing is really the main thing that will ensure you have enough assets to retire. Many people think they can’t afford to invest, but in reality, you can’t afford not to. There might be sacrifices that need to be made to continue to pay off debt, increase income, or lower expenses, but you don’t want to get to age 60 with nothing to show for it. I will have more posts upcoming about my investing philosophy and strategy. It doesn’t have to be complicated. How do you invest for the future?
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