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Carl DeBard

HowMoneyWorks Educator

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The Rule of 72 Explained

August 30, 2022

The Rule of 72 Explained

In our book HowMoneyWorks: Stop Being a Sucker, we introduce the Rule of 72, a mental math shortcut for estimating the effect of any growth rate—from quick financial calculations to population estimates.

This formula is especially useful for financial estimates and understanding the nature of compound interest. Rates of return may not be the easiest subject for consumers since it isn’t taught in schools, but this simple rule can help show the significance of a percentage point here or time horizon there.

Here’s the formula: 72 ÷ Interest Rate = Years to Double. If you know the interest rate (or rate of appreciation) or the time in years, dividing 72 by that number will give you a good approximation of the unknown number.

When will your money double?*

72 ÷ 1% = 72 years to double

72 ÷ 3% = 24 years to double

72 ÷ 6% = 12 years to double

72 ÷ 9% = 8 years to double

72 ÷ 12% = 6 years to double

Here’s an example: If you’re receiving a 9% rate of return, just divide 72 by 9. The result is 8. That means your money will double in approximately 8 years. Maybe that’s not fast enough for you and you prefer your money to double every 5 years. Then simply divide 72 by 5. The result is 14.4. Now you know you need a 14.4% return to achieve your goal.

This rule, long known to accountants and bankers, provides a close idea of the time needed for capital to double.

If you think that a difference of 1% or 2% is insignificant—think again! You seriously underestimate the power of compound interest. If one account appreciates at 9% and another at 12%, the Rule of 72 tells you that the first will take 8 years to double while the second will need only six years. This formula is also useful for understanding the nature of compound interest.

Examples:*

  • At 6% interest, your money takes 72 ÷ 6 = 12 years to double.
  • To double your money in 10 years, you need an interest rate of 72 ÷ 10, or 7.2%.
  • If inflation grows at 3% a year, the prices of things will double in 72 ÷ 3, or 24, years. If inflation slips to 2%, it will double in 36 years. If inflation increases to 4%, prices double in 18 years.
  • If college tuition increases at 5% per year (which is faster than inflation), tuition costs will double in 72 ÷ 5, or about 14.4, years.
  • If you pay 17% interest on your credit cards, the amount you owe will double in only 72 ÷ 17, or 4.2, years!

The Rule of 72 shows that a “small” 1% change can make a big difference over time. That small difference could mean buying the house you want, sending your kids to the college they choose, retiring when you wish, leaving your children the legacy they deserve, or settling for… something less. Doing the math with the Rule of 72 can give you critical insight to hit your goals down the road by shifting your strategy accordingly.

By the way, the Rule of 72 applies to any type of percentage, including something like population. Can you see why a population growth rate of 2% vs. 3% could be a huge problem for planning? Instead of needing to double your capacity in 36 years, you only have 24. Twelve years were shaved off your schedule with one percentage point faster growth.

The Rule of 72 was originally discovered by Italian mathematician Bartolomeo de Pacioli (1446-1517). Referring to compound interest, Professor Albert Einstein (1879-1955) is quoted as saying: “It’s the greatest mathematical discovery of all time.” He called it the 8th Wonder of the World—it works for you or against you. Make sure you put this shortcut to work the next time you consider an interest rate. When you save, it works for you. When you borrow, it works against you!

— Tom Mathews

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  • The Rule of 72 is a mathematical concept that approximates the number of years it will take to double the principal at a constant rate of return compounded over time. All figures are for illustrative purposes only, and do not reflect the performance risks, fees, expenses or taxes associated with an actual investment. If these costs were reflected, the amounts shown would be lower and the time to double would be longer. The rate of return of investments fluctuates over time and, as a result, the actual time it will take an investment to double in value cannot be predicted with any certainty. Investing entails risk, including possible loss of principal. Results are rounded for illustrative purposes. Actual results in each case are slightly higher or lower.

Your Money Is Worth More Now Than Ever

August 23, 2022

Your Money Is Worth More Now Than Ever

Your money is worth more now than ever.

The rich know that. They’ve conducted the surveys and done the market research to figure out how to convince you to fork over as much of your cash as possible right now while it’s at its maximum potential.

But… why?

Besides inflation, why is your money any different today than it will be tomorrow? It comes down to a simple concept that has the power to change your life. Allow me to explain.

Let’s pretend inflation didn’t exist and that your money today will have the exact same buying power as it will in the future. Someone offers you $100 either today or in 5 years. Obviously, it would be nice to have the money now. But, technically speaking, it wouldn’t really make a difference when you got the cash. In our inflation-free imaginary world, that money could get you the exact same amount of stuff today as it would at any point in the future.

Or would it?

What if you took that $100 payment and put it to work? You put it in a place with 8% interest that compounds annually. At the end of a year that initial $100 will have earned you $8, bringing your total to $108. The next year you earn 8% of $108, bringing your total to $116.64. After 5 years, your $100 will have grown into $146.93. That’s nearly a 50% increase!

In other words, your money has more time to grow today than it will tomorrow. It has more earning potential right now than in 10 years or in 5 years or even in a week! This simple but powerful truth is called the Time Value Of Money.

So what does that mean for you? What’s the bottom line?

It means TODAY is the time to put your money to work.

The clock is ticking. The earning power of your paycheck is slowly ebbing away. The time to stop being a sucker and start building your future is right now!

To learn more about the Time Value of Money, refer to the chapter by the same name in our book, “HowMoneyWorks, Stop Being a Sucker.” Don’t have a copy of the book? Contact me to get one—TODAY!

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This is a hypothetical scenario for illustration purposes only and does not represent an actual investment in any product. Actual investments can fluctuate in value and there is no assurance that these results can or will be achieved. It does not include performance risks, expenses, fees or taxes associated with any actual investment, which would lower results. Rate of return is an assumed constant nominal rate, compounded annually. It is unlikely that any one rate of return will be sustained over time. Investing entails risk, including possible loss of principal.

Is Your Cash Flowing?

August 2, 2022

Is Your Cash Flowing?

How much cash do you have left at the end of the month after you’ve covered the essentials AND treated yourself? (I’m guessing not much.)

Wish your paycheck went a little further? You’re not alone—not by a long shot. Most Americans are living paycheck-to-paycheck and saving little to nothing. So how do you increase your cash flow so you can stop living in the Sucker Cycle and start saving and investing more?

In the book, HowMoneyWorks, Stop Being a Sucker, we attack this challenge head on in Milestone 5 of the 7 Money Milestones.

Here are a few tips to get your cash flowing towards your future…

Redirect your cash flow

There are a million little things that siphon away your paycheck. Credit card debt, monthly subscriptions, and your fast food habit all chip away at your income. This “death by a thousand cuts” is a foolish spending cycle that prevents you—and countless other suckers—from creating an emergency fund, protecting your income, and building wealth for the future.

That’s why it’s so important to make and maintain a budget. It’s like a map of where your cash is going. Once you have that knowledge, you can figure out where you need to dial down your spending and start redirecting your cash. Don’t get too detailed. You don’t need to get overwhelmed by spreadsheets. Try creating a one-page list of expenses, freeing up as much cash as possible. Take your budget to your financial professional and discuss how best to use this available cash.

Open up new income streams

Budgeting and cutting back on spending might not be enough. Life throws plenty of unexpected (and expensive) problems at us that might not have a budgeting solution. You may need to look for new income streams to maintain the lifestyle you want while also saving for the future.

You’d be surprised by how many possibilities there are to create additional income streams—many of which offer the chance to make money from home. Maybe now is the time to discover that your favorite hobby or area of interest is actually a way to earn some cash. That could look like a side hustle or weekend gig, but you might find that your skills and ideas are full-time business opportunities just waiting to happen! Research which of your ideas and skills are in demand, figure out how much time and effort it will take to get started, and decide how much time you’re willing to commit. (It could be easier than you think!)

Increasing your cash flow can open up a whole new world of opportunities. That extra money you have from cutting back on takeout and streaming services could be how you fuel the power of compound interest and finally start saving for retirement. That several hundred dollars you bring in from teaching guitar lessons each month could be how you pay off your credit cards and free up even more cash. There’s no doubt your options can really open up once your cash starts flowing!

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Home Price vs. Interest Rate: Which Is More Important?

Home Price vs. Interest Rate: Which Is More Important?

Millennials, this one’s for you—a low interest rate DOES NOT balance out a high home price.

Millennials face a dilemma—pay greater home prices now but at lower interest, or hope that interest rates increase in the future which historically has lowered home prices.

Some Millennials are choosing to face the housing market head on, while others are waiting things out.

So which camp is “right”? And, if you’re a Millennial, which camp should you join?

The answer: None of the above. The real question is—and has always been—can you actually afford to own a home?

Let’s do the math…

Suppose you live in a fantasy where the housing market is semi-normal somewhere in the world. You have two potential homes in the running—one in the suburbs, the other in the city.

The suburban home costs $300,000 with a 30-year mortgage at a rate of 6%.

The city home costs $500,000 with a 30-year mortgage at a rate of 2%.

One Sucker sees a lower interest rate and ignores the price tag, while another Sucker sees the lower price tag and ignores the higher interest rate. Both think they’re getting an historic deal.

But get this—the monthly payment will be almost identical for either house.

The wealthy realize that high prices and high interest rates have the same result—you pay more for your home, and the bank profits.

Instead, the wealthy ask themselves questions like…

Can I afford my monthly payment?

Have I saved enough for an adequate down payment?

Will I have enough left for furniture and repairs?

Have I factored in the cost of property taxes and HOA fees?

The takeaway? The wealthy don’t lose sight of what matters most—their cash flow. Just because interest rates are lower doesn’t mean you’ll be able to make the monthly payments.

Do your homework.

Use a mortgage calculator.

Research your potential new neighborhood for any HOA fees or other costs you might incur.

Figure out how much you can afford to spend on monthly payments as a part of your overall budget.

Meet with your licensed and qualified financial professional to talk about your overall financial picture and how your new home will fit in with your current situation and your retirement strategy.

It’ll save you heartache—and maybe some money—in the long run.

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Market performance is based on many factors and cannot be predicted. This article is for informational purposes only and is not intended to promote any certain products, plans, or strategies for saving and/or investing that may be available to you. Any examples used in this article are hypothetical. Before investing or enacting a savings or retirement strategy, seek the advice of a licensed and qualified financial professional, accountant, real estate agent, and/or tax expert to discuss your options.

4 Simple Steps to Streamline Your Housing Budget

May 10, 2022

4 Simple Steps to Streamline Your Housing Budget

Decreasing your housing budget may mean more money in your pocket.

That’s because housing is the single largest expense for most Americans.¹ Reducing mortgage payments or rent by even a fraction can free up substantial cash flow.

The best part? You don’t have to move into a shack to make it happen. Here are a few strategies to increase cash flow by decreasing your housing costs.

Choose the suburbs over the city. On average, suburbanites save $9,000 per year on housing and child care when compared to city-dwellers.² By and large, the money you may save on the cost of living in the suburbs can outweigh the added transportation expenses. It’s not a shift for everyone, but relocating further from the city might make sense financially, at least for the short-term.

Rent until you’re ready. It’s worth considering leasing a house or apartment until you’re financially positioned to buy a house. Even if a mortgage payment seems cheaper on paper than renting, ownership can come loaded with unforeseen expenses. Flooded basement? That’s on you. Broken furnace? Also on you. Renting isn’t necessarily a permanent long-term strategy, but it beats potentially going into debt covering surprise repairs that are beyond your budget.

Find a reliable roommate. Sharing the cost of housing can free up a significant portion of your cash flow, especially in expensive cities. In New York City, for instance, having a roommate can save you up to $15,500 every year.³ Just be sure you take on a roommate that doesn’t flake out when rent is due.

Rent out a room. If you’re a homeowner with room to spare, consider leasing space to a trusted friend. The extra income can offset the cost of mortgage payments and result in more cash flow going toward saving, investing, or even paying off the house faster.

Contact me if you’re interested in learning more about how budgeting fits into an overarching financial strategy. We can review your income and expenses and make a game plan for how you can stop spending like a sucker and start saving like the wealthy.

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¹ “American Spending Habits in 2020,” Lexington Law, Jan 6, 2020, https://www.lexingtonlaw.com/blog/credit-cards/american-spending-habits.html

² “City vs. Suburbs: Where is Better to Live?,” The Perspective, 2020, https://www.theperspective.com/debates/city-vs-suburbs/

³ “What a Roommate Saves You in 50 U.S. Cities – 2020 Edition,” Nadia Ahmad, SmartAsset, May 11, 2020, https://smartasset.com/checking-account/what-a-roommate-saves-you-in-50-us-cities-2020

Will Your Savings Become Wealth?

Will Your Savings Become Wealth?

Not sure if you’re on track to become wealthy? The Rule of 72 can help!

The Rule of 72 is a simple mental math shortcut that estimates how long it could take your money to double. This is what it looks like…

72 ÷ interest rate = years to double

It’s simple, it’s easy, and it might change your life.

Here’s how…

Let’s say you’re done living paycheck-to-paycheck and you’re ready to build wealth. You’ve downloaded a budgeting app, and you’ve set aside $150 each month to save. Look at you! That’s a massive step towards building wealth.

But now you face a dilemma—where should you stash that money each month?

Your checking account? A savings account? Retirement accounts? NFTs? Each person you ask has a different opinion, fully backed with anecdotal evidence.

But have no fear! Enter the Rule of 72. It’s your gleaming sword that can slash through false perceptions and help you conquer your savings goals.

Let’s say for the time being, you’ve kept some money in a “high-interest” savings account earning .5%. How quickly will that account double your money?

Simple—plug that interest rate into the Rule of 72, and you get…

72 ÷ .5 = 144 years to double…

That’s right—your money will take 144 years to double with your current savings strategy. Yikes! That’s enough time to move from steam power to SpaceX.

But that’s not all—that interest rate leaves you helpless to inflation, which as of the writing of this article is about 3.25%.1 Luckily, you can use the Rule of 72 to discover when inflation will double the cost of living. Just replace the interest rate with the rate of inflation, and you get…

72 ÷ 3.25 = 22 years

Think of it like this—in 144 years, your money would double once. But the cost of living would double 6 times. Without the Rule of 72 to reveal this truth, your savings strategy might erode your wealth instead of increasing it!

But suppose you found an account with a 6% interest rate. Plug that into the Rule of 72, and you get a very different result…

72 ÷ 6 = 12 years

Over a 45 year career, your money would double roughly 3 times. The cost of living would only double twice. So your wealth would be above the rising tide of inflation.

The Rule of 72 isn’t a guarantee of success. After all, past performance can never guarantee future results. But the Rule of 72 can estimate if your savings are on track to become wealth, or if you’re heading towards financial disaster. Use it often, and discuss your findings with a financial professional.

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¹ “United States Inflation Rate: Stats,” Trading Economics, https://tradingeconomics.com/united-states/inflation-cpi#:~:text=Inflation%20Rate%20in%20the%20United,percent%20in%20June%20of%201921.


Divide 72 by an annual rate of return to calculate approximately how many years it takes for money to double. Understand that most investments generate fluctuating returns, so the period in which an investment can double cannot be determined with certainty. Keep in mind that this is just a mathematical concept. The hypothetical examples do not reflect any taxes, expenses, or fees associated with any specific investment. If these costs were reflected the amounts shown would be lower and thetime to double would be longer. Investing involves risk including the potential loss of principal.

Gen Z Is Being Lied to About Money

January 25, 2022

Gen Z Is Being Lied to About Money

Gen Z, you’ve been lied to about money.

Social media is swarming with financial predators feeding you falsehoods about how to build wealth.

That tech-bro influencer hyping the “next big crypto” that made him “wealthy”? He’s running a pump and dump scam. You buy in, the value surges. He cashes out, the value plummets. You lose everything you invested.

The 18 year old with the Ferrari earning $10,000 per month using business secrets he’ll show you FOR FREE? He’s actually selling “courses” that give you nothing, but line his pockets.

The “investing wizard” who turned $100 into $1,000,000 using specialized secret algorithms that he’s willing to share—again, FOR FREE—at his upcoming seminar? He gambled on risky startups and got lucky. Now he needs your money to feed his addiction.

Each of these bottom-feeders scratch an itch that Gen Z deeply feels. Who doesn’t want to build wealth quickly? Who doesn’t want a better life for themselves and their family?

And if you’ve never been taught how money works, you might just believe their promises. They sure sound better than the bleak realities of stagnant wages and debt that Gen Z has watched Millennials suffer through.

It’s why 41% of Gen Z investors turn to TikTok for financial advice.¹ Traditional schools and institutions have failed them, and they’re desperate to learn how money works, regardless of the source.

But until they’re financially literate, they’re susceptible to schemers, frauds, and charlatans. That means more wealth lost to false online gurus, cryptocurrency roller coasters, student loans, and more.

You need to learn how money works today. Not tomorrow. Not next week. Today.

It’s the only way you’ll develop the savvy needed to see through scams and recognize real wealth building opportunities.

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¹ “Meme mania pushed Gen Z into the stock market - and now they’re learning investing fundamentals from TikTok and Instagram,” Natasha Dailey, Market Insider, Jun 15, 2021, https://markets.businessinsider.com/news/stocks/meme-mania-gen-z-pours-into-stocks-tiktok-instagram-advice-2021-6-1030524123

Let’s Talk About Money

June 16, 2021

Let’s Talk About Money

Women earn 82 cents for every $1 earned by a man.¹

As women, we take time away from our careers to care for children, parents, and partners. Interruptions like these can significantly impact a woman’s chance for promotion, ability to earn higher income levels, and—for some women—vesting in full retirement benefits.²

The COVID-19 crisis has made it even harder for women. Without childcare, mothers of young children have had to reduce their work hours 4-5 times as much as fathers, widening the gender gap in work hours. It may seem small or even temporary now, but it heralds a big step backward in the progress women have made in gender equality at work. Fathers—on the other hand, who continued to work full hours during the pandemic, will likely benefit from upcoming promotions and raises over the next couple of years.³

Talk About Money If we want change, we need to start having open conversations about money. We should talk with our friends and co-workers about money over lunch. We should talk to our families and our kids about money at dinner. We have to talk about the things we’re concerned about, and stop keeping silent because we’re embarrassed, guilty, or ashamed. Have you thought about these questions:

  • Can I make more money?
  • How do I stop living paycheck to paycheck?
  • What’s the best way to reduce my debt?
  • Do I have enough money to retire?

As women, we’re comfortable talking about anything and everything with our friends—except for money. It’s that one boundary we rarely cross. The majority of women would rather talk about their own death before they’ll talk about money.⁴ When women start asking questions and talking openly about things that are important to us, the world changes. There is power in our words and intentions.

Save More Money From a financial perspective, women say their biggest regret is not investing enough money. We hold back because we don’t feel like we know enough.⁵ Banish the doubts and do 2 things. First, start your journey to learn how money works. It’s not as complicated as you may think. Focus on the basics like the power of compound interest, the time value of money, and the Rule of 72.

Second, develop the habit of setting aside money every day or every week. This can be money from your current discretionary income. If you don’t think you have any extra income, then find it by reducing your expenses or create it with an increase in your income. Skip the latte, bag your lunch, or cut out something extra in your day or week. Without taking into account any potential growth from investing, the chart below shows how saving a little bit every day can add up over time.

Savings Amount Per Day Total In A Month Total In A Year
$1 $5 $10
$30 $150 $300
$365 $1,825 $3,650

The Next Normal Doesn’t Have to be the Old Normal We may not see equal pay or equal wealth in 50 or 100 years or more. The traditional workplace is outdated. We can’t expect the Next Normal to be any different from the Old Normal unless we each take steps to bring about change for ourselves. It all starts with bringing our concerns into the light with real questions and open conversations.

— Kim Scouller

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The Wealthy Love Suckers—And It Should Make You Very, Very Angry

June 7, 2021

The Wealthy Love Suckers—And It Should Make You Very, Very Angry

Do the wealthy know ways to make money that are unknown to everyone else? You better believe it!

John D. Rockefeller, one of early America’s richest tycoons, once said, “I have ways of making money that you know nothing of.” How does that make you feel? Shouldn’t everyone know the best ways to make money and create a prosperous future?

But the fact remains. There are wealth-building principles that are common knowledge to the wealthy but are largely unknown by the majority of the population.

So why is the average citizen in the dark?

How money works is simply not taught in schools. Only 21 states in the U.S. teach at least one high school class in financial education. ¹ Interestingly, all 50 states teach a class on sex ed. So the one thing you can learn on your own, they teach. And the one thing you’ll never learn on your own, they don’t. Go figure.

Actually, it does figure.

Think about it. If the financial industry were to educate consumers about money savviness, people might stop socking away so much of it in low-interest savings accounts that earn less than a 1% rate of return. And before you leave the branch do they offer you a brochure on financial concepts to help you get out of debt, avoid money missteps, and start saving like the wealthy?

Pfff—yeah right!

No. It’s like, if you’re dumb enough to open a low-interest savings account and take the free lollipop (it’s like their sucker litmus test), then they’ll try to sell you a car loan at 6% interest. ²

What a deal. You earn less than 1%—they earn 6%. It’s like a lose-lose for you, but you still thank them on the way out.

But they don’t stop there.

With your new car loan monthly payment, you might run low on cash from time-to-time. But thanks to partnerships with credit card companies, the bank can also offer you a shiny new charge card—but “just for emergencies.”

Do they make it clear how much they charge for late fees before they sell you on the benefits and points you can earn? No, that’s what the back of the brochure is for—as far away from the exciting offer as legally allowed. And you can bet it’s the same customer who opened the savings account and took the car loan who never flips the brochure over. They can always count on a customer with a sucker in their mouth to help drive their profits from late fees.

Hard to fathom there are that many suckers? It’s true…

With an overall outstanding balance of $6,354, the average American has 3.1 credit cards. Americans—a population of 328 million people—have over 1.5 billion credit cards and a credit card debt of $815 billion. 67% of all Americans have a credit card. ³

The financial industry thrives on customers who are stuck in the “Sucker Cycle” of foolish spending. While consumers are binging on Netflix, shipping on Amazon, and ordering from DoorDash, institutions are quietly leveraging the power of compound interest to make their customers’ money work for themselves. While consumers live paycheck-to-paycheck, financial institutions and shrewd businesses build profits sucker-to-sucker.

For most people, earning (and spending) a paycheck is the extent of their experience. But the wealthy know the real deal. To become financially independent, you must know the concepts and strategies to save, protect, and grow your money.

Did this article make you mad? Hopefully, it did.

So what do you do about it? You stop taking the sucker and you stop being the sucker. You learn how to take control of spending, protecting, saving, and investing your money. How? You do it by reading the book, “HowMoneyWorks, Stop Being a Sucker.” It will only take about an hour.

Don’t have a copy? Contact me and I’ll help you get one.

Use that anger to fuel action. Read the book. Then reach out to me and say, “Now that I know the ways of making money Rockefeller spoke of, I’m ready to chart my own course to financial independence.” We have a clear action plan for you to follow called “The 7 Money Milestones.” I’ll help you check off each one.

Let’s do it together.

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¹ National Financial Educators Council, “Financial Literacy Statistics,” [https://financialeducatorscouncil.org/financial-literacy-statistics/]

² Claudia Assis, “New-car loans hit highest interest rates in a decade,” MarketWatch, April 2, 2019, [https://marketwatch.com/story/new-car-loans-hit-highest-interest-rates-in-a-decade-2019-04-02]

³ Joe Resendiz, “Credit Card Usage and Ownership Statistics (2019 Report),” ValuePenguin, [https://www.valuepenguin.com/credit-cards/statistics/usage-and-ownership]

Is Diversification for Dummies?

April 30, 2021

Is Diversification for Dummies?

Do some digging, and you’ll find mixed opinions about diversification, especially among the wealthy.

Billionaire investor Mark Cuban said diversification is “for idiots.”¹ Warren Buffett claimed diversification is really just a “protection against ignorance” for novice investors.² Dozens of articles across the web reach the same conclusion—diversification can be an unnecessary precaution.

There IS a kernel of truth in their opinion… If you’re in that special class of billionaire investors.

Both Mark Cuban and Warren Buffett made fortunes by investing. And every investment they make is based on careful research, expert advice, and decades of experience. They have little need for diversification because their moves are calculated. To them, diversification would be like putting training wheels on a motorcycle—an unnecessary precaution for a fast and powerful machine.

But what if you’re still in first gear on the road to wealth?

Diversification can serve as a useful safeguard—your personal financial training wheels. Diversifying investments across multiple assets with varying degrees of risk can help soften the impact of losses within your portfolio. In other words, putting your eggs in more than one basket can help compensate for lack of expertise.

Are you leveraging the strategy of diversification? How diversified is your portfolio?

Contact a licensed and qualified financial professional ASAP and start planting the seeds of your future wealth.

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¹ “Robinhood and Reddit: A timeline of two apps tormenting Wall Street,” David Ingram and Jason Abbruzzese, CNBC, Jan. 28, 2021, https://www.nbcnews.com/tech/tech-news/robinhood-reddit-timeline-two-apps-tormenting-wall-street-n1256080

² “Horizontal diversification in action,” Winnie Makena, The Standard, Apr 28, 2021, https://www.standardmedia.co.ke/business/article/2001411132/horizontal-diversification-in-action

The Middle Class Saves…The Rich Invest

October 7, 2020

The Middle Class Saves…The Rich Invest

Saving money is a good habit, but a bad strategy.

That’s why the rich focus on investing. While the masses are getting .09% interest on their passbook savings account,(1) the rich are pursuing returns of 5% or more on the same money. That means with a $10,000 investment paying .09% interest, the saver pockets a whopping $9 per year. That same $10,000 investment paying 5% interest yields a $500 return.

Wealthy people know that a little strategy goes a long way, and when it comes to money, that could make the difference between a comfortable and miserable retirement. The good news is that you don’t have to have a PhD in finance to become a competent investor; you simply have to know how money works. While the masses may be buying used luxury cars, second homes, and living beyond their means, the rich are more inclined to create assets that leverage the power of compound interest and other people’s time—such as retirement accounts that yield interest, part-time businesses, and property. The rich put their money to work, while the masses simply go to work.

The secret to better investing is maximizing returns while managing risk. The rich rarely get greedy, and usually settle for reasonable returns with minimal risk. They generally don’t expose their financial future to the wild swings of the market. They know that the enemy of the investor is losing money, so they lean more towards calculated risks where returns are respectable and losses are not likely. It’s the old professional baseball strategy: Forget about hitting home runs and just get on base. Sure, it’s not as sexy as knocking the ball out of the park or being able to brag to your friends that you made a 50% return, but it reduces your exposure while simultaneously providing you with the potential to become incrementally wealthier every day.

Start by learning the Rule of 72, the Time Value of Money, and the concept of Wealth Equivalency. Next, learn how to protect your family from the fallout of premature death while building cash value you can eventually withdraw tax-advantaged. Lastly, learn how to leverage long-term care insurance for pennies on the dollar by adding it as a low cost rider on a life insurance contract. More people go broke from medical issues than any other reason.(2) These basic strategies will start you on your way to financial success.

Our book, How Money Works: Stop Being a Sucker, will take you through the 7 Money Milestones. Study these milestones and contact your financial professional to put the proper strategies in place. If you take action, you can alleviate any worries about your financial future. It’s that powerful of a process. Once you’ve implemented these strategies, you can focus on the other things that really matter in your life. Give yourself the gift of financial security. You deserve it.

— Steve Siebold

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