How to stop procrastinating in 5 steps

So…you’re reading an article about how to stop procrastinating instead of doing what you’re supposed to be doing.

That’s okay. I’m not going to lecture you to finish your goals and I definitely won’t act like I haven’t been there before.

What I am going to do is show you the EXACT steps you can take to demolish procrastination.

They are:

• Step 1: Be brutally honest about your priorities
• Step 2: Stop feeling guilty
• Step 3: Change how you describe yourself
• Step 4: Build systems to accomplish goals
• Step 5: Reward yourself for your work

Let’s not waste any more time and jump into it.

How to stop procrastinating in 5 steps

Step 1: Be brutally honest about your priorities

How often has someone asked you to do something and you told them, “I don’t have enough time for that right now.”

For example:

FRIEND: Hey, do you want to check out that new bar tonight?

YOU: Sorry, I’m super busy tonight. Maybe some other time. (Proceed to stay at home, binge-watching Netflix all night.)

Another example:

FRIEND: I’m going to take that improv class you said you were interested in. Want to join?

YOU: Ugh sorry, I don’t have enough time right now.

We LOVE using “time” as an excuse because it’s easy. Who is going to accuse you of having too much time on your hands? Nobody.

When we make this excuse, however, we only cheat ourselves.

Instead, it’s better to be honest with yourself and others and say, “I appreciate the offer, but that’s just not a priority for me right now.” Doing this forces you to confront the lies you often tell yourself — and helps you recognize what is important to you … and what isn’t.

Plus, who would you admire more? The person who says, “I don’t have enough time” and doesn’t show up to anything, or the person who tells you, “I appreciate the offer but that’s just not one of my priorities right now”?

OF COURSE it’s the person who is honest with you.

Once you start recognizing what is NOT a priority, you’ll start recognizing things that ARE.

ACTION STEP: Be honest and evaluate your priorities.

To help you evaluate what is a priority for you, I highly recommend what I call an “honesty bath.”

To do this, keep track of the goals you make for this month. Record them with a Word doc, pen and paper, Excel, whatever. Then put them in a drawer and set a calendar alert for the last day of the month.

At the end of the month, go through the list and see which ones you actually accomplished and which ones you didn’t get to. Then decide whether you’re going to:

• Delete
• Defer
• Do it

If you say that you’re going to wake up every day at 7 a.m., but every morning just slap the snooze button until it’s 8 a.m…you’re NOT going to wake up at 7 a.m.

Delete.

If you claim you’re going to make your bed every morning, but have a huge project at work and haven’t worked on it in the last three weeks, guess what? You’re NOT going to make your bed every morning while you have this crazy project.

Defer.

Are you actually headed to the gym 3x/week like you said you would? Keep DOING IT.

This takes a lot of self-awareness because you have to be ruthlessly honest about your strengths and weaknesses. But by looking at your past behavior, you can drastically change your future behavior for the better.

The best part? It stops that low-level anxiety we all get from a having bunch of goals bounce around in our head. Once you make the decision, you can live guilt-free and use your energy to commit to things you’ll actually do — which brings us to…

Step 2: Stop feeling guilty

It’s interesting how people fall into the paradox of guilt — and don’t even realize it’s happening.

How often have you talked to a friend about working out, saving money, or studying for school, and heard them say something like, “Yeah, I know I really should be doing that but…” followed by some lame excuse as to why they’re procrastinating on something important?

“I know I really should be doing that” is just code for “I’m not going to do that at all.”

It’s the same with people in credit card debt — many don’t even know how much debt they have! They’d rather avoid their statements and bury their head in the sand than face the reality of how much they owe.

Why does this happen? Guilt. Plain and simple. It’s the reason why we brush things off with meaningless excuses and run away from the actual issue.

If you truly want to stop procrastinating and become a productivity machine, you need to hold yourself accountable.

ACTION STEP: Don’t run away from your guilt.

When you do feel guilty, take these four steps to address it.

Step 1: Acknowledge the guilt.

When you realize that you feel guilty about something you’re putting off — like not hitting the gym or saving up for retirement — I want you to just take a moment and acknowledge the feeling. Recognize your guilt and ask yourself what is making you feel guilty. That leads us to…

Step 2: Use the “five whys” technique.

This technique comes from a Japanese industrialist named Sakichi Toyoda. He developed the method to find solutions at the root of recurring issues related to his manufacturing plant and helped blow up his company into a household name — you might have heard of it: Toyota Motors.

At the heart of the technique is the question “why?” The idea is that most all problems can be solved by asking “why” five times — sometimes even less — and getting to the root issue.

Say you feel guilty because you’ve been meaning to open an investment account but haven’t. You can utilize the technique like this:

Why do I feel guilty?

Because I haven’t opened an investment account.

Why haven’t I opened an investment account?

Because I don’t even know where to start.

Why is that?

Because I bought an investment book years ago and haven’t read it yet.

Why haven’t I read it?

Because it’s in a box in my basement underneath the Christmas decorations.

See what happened? In less than five whys, we figured out how to begin solving this HUGE issue with just one step: taking the time to find a book. Now this person knows the first step to getting started with his investments.

Step 3: Write it all down.

Take everything from steps one and two and write it all down — your guilt, each of the whys you asked, and how you can solve everything. This will help you get a clear understanding of how your mind works when it comes to guilt and problem-solving.

It will also give you a good place to go back to when you decide to finally solve the problem — which brings us to…

Step 4: Take action…tomorrow.

That’s right — this is Ramit-approved procrastination. Once you write everything down, I want you to step back and give it some space.

You want to know how to stop procrastinating? It’s not by trying to do everything at once.

Because we’re HUMANS — and as humans we are naturally cognitive misers and have limited willpower.

Just doing the five whys and investigating your guilt takes a lot — so just pick it up later when you’re fresh and ready to take action. I suggest setting aside some time in a day or two so you don’t keep pushing it off.

The next time you find yourself saying something like “I’ll get to it later,” stop and evaluate why.

Maybe it’s not a priority for you right now. Maybe you just don’t want to do it. Both of these thoughts are perfectly fine. You’ll save everyone a lot of time and effort by recognizing and acting on what’s really going on.

NOTE: This system comes from our course Success Triggers. To find more proven systems that can help you build winning habits, follow this link.

Step 3: Change how you describe yourself

It’s amazing how often we shoot ourselves in the foot before we can even get started.

This happens when we say things like, “I can’t do that because I’m an XYZ-type person.”

Here’s a good example: A while back, a friend of mine was talking about a book, and he told me, “I can’t buy that book because I’m just a cheap Asian.” 

I actually got sharp with him. My friend didn’t realize that the way he described himself became a self-fulfilling prophecy.

And I’m guilty of it too! Back when I looked like this…

…I used to tell people, “I can’t get bigger because I’m just a skinny Indian dude.”

And guess what? That became my reality for YEARS.

If, instead, I said, “I don’t eat right and work out enough” then this…

…could have been my reality much sooner.

ACTION STEP: Reframe the way you talk about yourself.

Quit hiding behind BS-descriptions of yourself as reasons for why you don’t do things.

That includes things like:

• “I can’t make friends because I’m an introvert.”
• “I’m always going to be out of shape because I’m lazy.”
• “I’m a (insert BS Myers-Briggs–type or zodiac sign here). That’s why I can’t follow orders.”

Instead, focus on building systems that can help you accomplish your goals — which brings us to…

Step 4: Build systems to accomplish goals

I always get questions along the lines of “How do I find motivation?”

Two examples:

A few insights from these questions:

1. Motivation is undependable. Waiting for motivation to fall from the sky so you can accomplish your goals is a good way to never get anything done. Why? Because THAT WON’T HAPPEN. You can’t wait for your “muse” or “inspiration” to strike.
2. You need to build the right systems instead. If you asked either of the above people, “What are your steps to accomplish those goals?” they would have no idea how to answer you. That’s because it’s hard. It’s not as appealing as waiting for motivation to strike. However, it’s a better approach.

So instead of waiting to be “motivated,” take your goal and ask yourself, “What does it take to accomplish my goal?”

And I’m not talking about high-level things like “determination” or “teamwork” or whatever else you find on motivational posters. I’m talking about concrete steps to get there. That will help you develop a solid system for accomplishing your goals.

ACTION STEP: Break down your goal into smaller steps.

Let’s take a look at a bad goal and compare it with a good one.

BAD GOAL: “I want to get fit.”

This goal is TERRIBLE. How many million Americans have told themselves this and gotten nowhere? This is because it’s vague. There’s no concrete action to it. There’s not even a way to know when you’ve accomplished the goal.

Now let’s take a look at a better way to approach it.

GOOD GOAL: “I want to eat three healthy meals a week and go to the gym two times a week for 15 minutes.”

LOVE IT. Notice how I’m focused on the process first by starting off small with three healthy meals a week. Also, it’s only 15 minutes at the gym. ANYONE can do that.

Over time, you can scale upwards. Maybe start eating a healthy meal every day. Start hitting the gym a little bit longer each time you go. Before you know it, your waistline is smaller and you have some muscles to show for it.

Do this with your own goals. Maybe you want to get a new job? Start by applying for one job a week. Maybe you want a scholarship for school? Start by simply checking out a scholarship book at a library. These small steps will lead to BIG results.

And when you’re making these systems, I suggest putting it all on a Google Calendar.

I do this with ALL of my goals.

Look at this one item:

This is a random to-do that I would normally put in the back of my head… and it would never get done. Instead, I added it to my calendar so it always gets done.

If it’s not on my calendar, IT DOESN’T EXIST.

Step 5: Reward yourself for your work

Did you know that eating more chocolate can actually help you exercise more?

Seriously.

According to habit expert Charles Duhigg, rewarding yourself after a job well done can help create powerful shifts in your mindset.

And he would know. He literally wrote the book on the subject with The Power of Habit (one of my favorite books on behavior). Something like eating chocolate at the end of a workout, for example, is a simple way to ignite the reward centers in your brain and cement the good feelings that are required for a habit to take root.

A while back, I was able to sit down with Charles and talk to him about the importance rewards play in helping habits stick.

Check out that conversation below.

ACTION STEP: Ask yourself, “What habit do I want to start?” and “What will I do to reward myself for taking action?”

Here are a few suggestions to get you started:

• Every 25 minutes of deep work you do, give yourself a five-minute break to do whatever you want (aka the Pomodoro Technique).
• After you hit a savings goal for the month, buy yourself something you want like a pair of shoes or a video game.
• After you cook a healthy meal, take in a few episodes of that Netflix show you’ve been meaning to check out.

The reward can be anything you want — as long as you genuinely enjoy it.

The truth of procrastinating

If you want to truly stop procrastinating, you have to come to terms with two truths of productivity:

• Truth #1: We all have the same amount of time in the day — so STOP BLAMING TIME (or your lack thereof). It doesn’t matter if you’re Bill Gates or a busy parent. You just need to learn how to manage your time better (more on that later).
• Truth #2: You don’t have to be an emotionless robot in order to stop procrastinating. Focus and time management are about mindsets and simple — yet powerful — shifts in how you approach your to-dos.  

By adopting the right mindsets, you can create habits that stick instead of struggling to get the simplest of tasks done.

That’s why I put together the very best material on setting goals, creating habits that stick, riding motivational waves, and getting back on track if you ever fall off.

If you’re ready to stop making excuses, break out of that rut, and make a major change in your life, this free guide is for you.

Take a look at what’s inside:

• How to wake up productive and get more done by noon than most people do all day (covered in Part 2)
• “If I wasn’t so lazy, I’d ____.” I’ll teach you how to keep accomplishing goals even when you “don’t feel like it” (covered in Part 3)
• Ever spent a busy day filled with distractions — answering emails and putting out fires — and walked away feeling like you finished nothing? I’ll show you how to stay laser-focused on tasks and eliminate distractions (covered in Part 6)

This guide includes HD videos, downloadable worksheets, lessons from the world’s leading experts on behavioral change, and much, much more.

So check it out. Try out the techniques. And enjoy the results you get for the rest of your life.

How to stop procrastinating in 5 steps is a post from: I Will Teach You To Be Rich.

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How to invest like a couch potato

I want to tell you the story of two people: Andrew and Mary.

Both are 21, fresh out of college, and have the same jobs in the same industry.

When it comes to investing, though, Mary decides to start putting money into a diversified portfolio of mutual funds. It’s not a lot at first, but over time she puts more money into her funds as she earns more.

Andrew, on the other hand, buys a few individual stocks after watching The Wolf of Wall Street — but sells them as soon as prices dip a little.

Occasionally, he puts away an arbitrary amount of money in a savings account and doesn’t seriously start investing until he’s in his 50s.

Fast forward 40-ish years. The two are now closing in on retirement age. However, their financial situation couldn’t look more different.

Mary is well off. She has a sizeable nest egg due to her decision to invest when she was 21, and doesn’t have to worry about money when she decides to retire soon.

Andrew didn’t start investing until long after Mary started. As a result, he has to consider forgoing retirement while he saves up enough money. This makes him a crotchety old man and he spends his days shouting at children and small animals who venture onto his lawn.

Okay, that’s a little dramatic — but there’s something to learn here. On paper, Andrew and Mary seemed to be on the same path. Same age. Same education level. Same job. So what was the difference between them that set them on completely separate financial situations?

Simple: Mary was a couch potato.

What’s couch potato investing?

I love index funds.

I love them so much I’m going to name my firstborn son “Index Fund Sethi” and his mother will hate me. And one of the best ways I’ve found to leverage index funds is by building a lazy portfolio.

I’ve talked about them before, but to recap, a lazy portfolio is a diversified portfolio of low-cost index funds that allows you to be hands-off with your investing. That means no active trading, no checking your stocks every day, and no paying some hedge fund manager (who won’t beat the market anyway) to handle your money.

Couch potato investing simply refers to investing in a lazy portfolio — more specifically, a specific lazy portfolio “recipe.”

These “recipes” are formulas for different combinations of funds and bonds that investors can base their portfolios on.

For example, last week we talked about a lazy portfolio recipe from Taylor Larimore. His portfolio suggests you split up your asset allocation so it’s 42% U.S. stocks, 18% international stocks, and 40% bonds.

As a result, your portfolio would look like this:

However, the couch potato portfolio is actually simpler. Here’s why:

Scott Burns’ Couch Potato Investing Strategy

Personal finance writer and co-founder of AssetBuilder.com Scott Burns developed the Couch Potato Investing Strategy in 1991 as an alternative for his readers, who were paying money managers to handle their investments.

The recipe is INCREDIBLY simple:

• 50% in total stock market fund (like S&P 500)
• 50% in total bond market fund (a fund made of many different bonds)

And voila! You have your couch potato investing portfolio.

Burns also suggests these two funds that correlate with those asset classes:

• Vanguard Index 500 Fund (VFINX)
• Vanguard Total Bond Market Index Fund (VBMFX)

Really complex. I know.

Of course, you don’t have to stick to the above fund recommendations. Most brokers such as Schwab and T. Rowe Price offer comparable funds such as Schwab’s S&P 500 Index Fund (SWPPX) and T. Rowe Price’s Equity Index 500 Fund (PREIX).

Burns also suggests you utilize strategic asset allocation and rebalance your portfolio each year so that you always have an even split of bonds and stocks.

“This doesn’t look diversified at all!” you may be saying. “There are only two funds in this portfolio.”

This is the beauty of index funds like the S&P 500 — they ARE diversified because they invest in 500 different companies. This means they’re much less volatile.

Sure, you’re going to see returns come in slowly. But if you keep your cash in the market over time, history shows that you’re VERY likely to make money.

How likely? Over 40 years, the Couch Potato Investing Portfolio earned an average of 9.78% annually — a number the vast majority of money managers fail to beat.

“I want my own couch potato portfolio! How do I start?”

Luckily, there are a TON of reputable brokers out there who can help you start investing.

Unluckily, there are a TON of shady brokers who are only out there to take your money.

Luckily, I have a list of awesome, trusted brokers you can reach out to today to get your own couch potato portfolio.

My suggestions:

• Vanguard (This is the one I use)
  • Phone #: 877-662-7447
• T. Rowe Price
  • Phone #: 800-225-5132
• TIAA
  • Phone #: 800-842-2252
• Charles Schwab
  • Phone #: 800-435-4000

Signing up is ludicrously easy too:

• Step 1: Go to the website for the brokerage of your choice.
• Step 2: Click on the “Open an account” button. Each of the above websites has one.
• Step 3: Start an application for an “Individual brokerage account.”
• Step 4: Enter information about yourself — name, address, birth date, employer info, social security.
• Step 5: Set up an initial deposit by entering in your bank information. Some brokers require you to make a minimum deposit, so use a separate bank account in order to deposit money into the brokerage account.
• Step 6: Wait. The initial transfer will take anywhere from 3 to 7 days to complete. After that, you’ll get a notification via email or phone call telling you you’re ready to invest.
• Step 7: Log in to your brokerage account and start investing 50% in total stock market fund and 50% in total bond market fund. If you want to follow Scott Burns’ recommendations, purchase these funds: VFINX and VBMFX.

NOTE: The wording and order of the steps will vary from broker to broker but the steps are essentially the same.

You’re also going to want to make sure you have your social security number, employer address, and bank info like account number and routing number available when you sign up, as they’ll come in handy during the application process.

The application process can be as quick as 15 minutes. In the same time it would take to watch this handsome weirdo give a talk on how much to charge your customers, you could set up a new brokerage account and start investing in your future.

If you have any questions about funds or trading, call up the numbers provided above. They’ll connect you with a fiduciary who works for the bank in order to give you the best advice and guidance they can.

Automate your investing from your couch

Let’s take this couch potato concept even further and automate your finances so you don’t have to worry about sending money into your portfolio each month.

If you want to find out more about how to automate your finances, check out my 12-minute video explaining it here:

If you’re relatively new to investing, I’m so happy you’re here. Simply by doing your research, you’re already ahead of 99.99% of people out there when it comes to planning for your financial future.

That’s why I want to offer you The Ultimate Guide to Personal Finance.

In it, you’ll learn how to:

• Master your 401k: Take advantage of free money offered to you by your company…and get rich while doing it.
• Manage Roth IRAs: Start saving for retirement in a worthwhile long-term investment account.
• Spend the money you have — guilt-free: By leveraging the systems in this book, you’ll learn exactly how you’ll be able to save money to spend without the guilt.

Enter your info below and get on your way to living a Rich Life today.

How to invest like a couch potato is a post from: I Will Teach You To Be Rich.

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14 Books You Must Read To Get An MBA Education At Home

In 2015, I graduated with an MBA in Finance. My course program consisted of 20 classes on Accounting, Marketing, Human Resources, Finance (of course!) and some other things I’ve already forgotten. With tuition and the cost of books ringing in at $25,000 per year, I paid about $50,000 out of pocket for MBA. While $50,000 can hardly be considered “cheap”, it is a bargain as far as most MBAs go. But there is one way to get a business education for even less: a good book collection. I’ve been a voracious reader ever since I was a child, often burning through as many as 50 books per year. Throughout university, I read novels and non-fiction on top of what was assigned to my classes. I felt like reading always enhanced my education, and that was true through my masters degree as well. This list and its categories and contents are […]

The post 14 Books You Must Read To Get An MBA Education At Home appeared first on Money After Graduation.

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All about tactical asset allocation

Last week, I wrote about strategic asset allocation.

That’s when you maintain a fixed allocation percentage for your asset classes and rebalance those assets every year. It’s the set-it-and-forget-it approach to your portfolio.

Today, I want to talk to you about its more rebellious sibling: tactical asset allocation.

Tactical asset allocation is the practice of actively managing your portfolio and changing the amount you hold in each asset class based on how the market is performing.

To get a better understanding, let’s take a deeper look at how exactly asset allocation works and why tactical asset allocation might be a good fit for you.

What is asset allocation?

You can allocate these investments into “asset classes.” The major ones are:

• Stocks. Otherwise known as equities. When you own a company’s stock, you own part of that company.
• Bonds. These are like IOUs that you get from banks. You’re lending them money in exchange for interest over a fixed amount of time.
• Cash. This includes physical money and the money that you have in your checking and savings accounts.

In short, asset allocation is just a fancy way of describing where you put your money. When you set up a strategic asset allocation plan, you decide on a goal of how much money you want to have in each asset class.

Confused? Don’t be. It’s a seemingly complex term. Sometimes I use the phrase “asset allocation” at cocktail parties to sound smart. The host, whose party I am crashing, usually looks at me, surprised, and asks me one question: “How did you get in here?” But is soon so charmed by my weirdness that I’m allowed to stay.

Aside from a phrase I use to alienate people, asset allocation is also an investing method based on a 1991 study by researchers Gary P. Brinson, Brian D. Singer, and Gilbert L. Beebower. They discovered that 91.5% of the results from long-term portfolio performance in pension plans came from the investments that were allocated.

How tactical asset allocation works

Tactical asset allocation also requires you to set up a fixed goal percentage for each of your asset classes (e.g., stocks, bonds, cash) and keep those asset classes within that goal over many years. And if you stopped there, it would be “strategic asset allocation.”

But tactical asset allocation requires you to constantly adjust your holdings in the short term.

Let’s take a look at an example:

Imagine you’re a 30-year-old who has her portfolio set up as such:

• Stocks: 70%
• Bonds: 20%
• Cash: 10%

This is your base strategic asset allocation, or the ratio you want to keep your portfolio balanced for many years.

However, you recently found evidence that suggests that your stocks might see even more returns in the next year. So you rebalance your portfolio to take advantage of it:

• Stocks: 80%
• Bonds: 15%
• Cash: 5%

If your research is correct, you’ll see even more returns since you’re investing more in your stocks.

Eventually, you’re going to want to rebalance the portfolio when the market reverts back to its original performance to keep in line with your goals. This is a short-term strategy used to complement your strategic asset allocation.

So that’s how tactical asset allocation works…but is it right for you?

Who is tactical asset allocation good for?

Tactical asset allocation might be appealing if you:

• Don’t mind the risk. By responding to the market in the short term, you might find that your investments don’t perform well at all. If that happens, you’ll lose money.
• Are disciplined. Tactical asset allocation is building off of your long-term goals. That means once your short-term investments have or haven’t paid off, you need to revert back to your original strategic asset allocation.
• Want a more active role in your investments. Maybe you just want to be more hands-on with your investments. Maybe long-term investing is a little too boring for you (pro tip: It can never be “too boring”). In that case, tactical asset allocation gives you some of both worlds.

However, long-time IWT readers know that I don’t suggest you try and time the market.

Why? Simple: You’re probably going to get it wrong.

A 2017 study by the Center for Retirement Research at Boston College found that people who diverged from their target date fund investments in order to try to time the market underperformed those who just left their funds alone.

And here’s another one: The CXO Advisory Group, a firm of financial consultants with over 20 years’ experience, collected data from 2005 to 2012 and discovered that pundits and other market forecasters were only right roughly 48% of the time.

What does this all mean? You can’t predict market — at least in the short term.

The long term is another story.

Check out my favorite graph in the whole world.

Only the coolest people have favorite graphs.

Though there might be changes in the short term, the market trends up over a long period of time.

This fact should drive your investment decisions. Not the pundits telling you that XYZ stock is performing really well or your hunch that a certain industry is going to explode.

That’s why I suggest you invest a diversified portfolio of low-cost index funds and leave your assets alone.

However, even with strategic asset allocation, you’re going to have to rebalance once a year or so to prevent one asset from getting too large or small. (This protects you from being vulnerable to the ups and downs of a specific asset class.)

Often times though, people simply don’t rebalance their portfolios. The reason is twofold:

1. People want more $$$. Why the heck would you take money out of one asset class that is performing really well and put it in one that isn’t performing nearly as well?
2. People are lazy. Rebalancing portfolios isn’t exactly on top of everyone’s list of things they really want to do. So we put it off or just forget to do it altogether.

So how can you get the benefit of asset allocation without the constant maintenance? Choose funds that do the rebalancing for you.

Automate your portfolio with target date funds

I wrote about this in my article on strategic asset allocation, but it’s worth mentioning again: Target date funds (or lifecycle funds) are great funds for people who don’t want to worry about rebalancing their portfolio every year.

They work by diversifying your investments for you based on your age. And as you get older, target date funds automatically adjust your asset allocation for you.

Let’s look at an example:

If you plan to retire in about 30 years, a good target date fund for you might be the Vanguard Target Retirement 2050 Fund (VFIFX). The 2050 represents the year in which you’ll likely retire.

Since 2050 is still a ways away, this fund will contain more risky investment such as stocks. However, as it gets closer and closer to 2050 the fund will automatically adjust to contain safer investments such as bonds because you’re getting closer to retirement age.

These funds aren’t for everyone though. You might have a different level of risk or different goals.  

However, they are designed for people who don’t want to mess around with rebalancing their portfolio at all. For you, the ease of use that comes with lifecycle funds might outweigh the loss of returns.

One thing you should note: Most lifecycle funds need between $1,000 to $3,000 to buy into them. If you don’t have that kind of money, don’t worry. I have something for you at the end that can help you get there.

To recap: No matter how motivated you are about investing right now, you will find other things more urgent and important later. We are all cognitive misers with limited cognition and willpower. Investing in a target date fund lets you compensate for your natural weaknesses and biases by automating complex asset allocation decisions.

For a more in-depth explanation, check out my video all about lifecycle funds.

Master your personal finances

Asset allocation isn’t hard.  

What IS hard is getting started — which is why I’m happy you’re here.

If you’re interested in tactical asset allocation, chances are you already have a good idea of how you want to approach your investments.

However, if you want to earn MORE money so you can invest even more, I have something for you:

The Ultimate Guide to Making Money

I’ve included my best strategies to:

• Create multiple income streams so you always have a consistent source of revenue.
• Start your own business and escape the 9-to-5 for good.
• Increase your income by thousands of dollars a year through side hustles like freelancing.

Download a FREE copy of the Ultimate Guide today by entering your name and email below and start earning more for your investments today.

All about tactical asset allocation is a post from: I Will Teach You To Be Rich.

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How I got $100,000 in college scholarships

If you want to offset the cost of college, there’s no better way to do it than by getting scholarships.

And it doesn’t matter where you come from or even if you weren’t a “good” student. ANYONE can get scholarships as long as they have the right systems.

I know — because I built a system that helped me earn six figures in scholarships to go to Stanford.

That’s why I want to share the exact system I used to earn six figures in scholarships for college today.

How to get scholarships in 3 steps

Step 1: Adopt an application mindset

Step 2: Find the scholarships that will earn thousands

Step 3: Apply to ALL the scholarships

Step 1: Adopt a scholarship application mindset

One thing I’ve noticed is that a lot of people just hope they get “a scholarship” for college.

Instead of hoping you get one scholarship, you need to reframe it to “I hope I get a LOT of scholarships.”

This is a mindset of abundance — and it’s incredibly important when you start applying for different scholarships.

Which means two things:

1. Instead of hoping you get a huge scholarship or full ride, you need to apply to as many as possible. After all, $500 here and $1,000 there can really add up.
2. Don’t get discouraged if you don’t get one you apply for. Scholarships are a numbers game, and many have only a handful of applicants.

Use every resource at your disposal — apply to any and all relevant scholarships you can find. Once you cast a wide net, you increase your chances of getting more money for school IMMENSELY.

Step 2: Find the scholarships that will earn thousands

If you’re a high school student, you have a lot of scholarship resources available to you. They can be broken up into five areas:

1. High school career centers
2. Library and bookstore
3. Scholarship search sites
4. Ethnic organizations
5. Friends and family

With these resources, you’ll be able to earn thousands of dollars in scholarship money. Here’s how:

High school career centers

First, go to your high school career center. If your high school doesn’t have a career center, your school’s counselor can help you with this too.

Most high school career centers keep an updated list of scholarships sorted by date. Go through this list and make note of every single scholarship that applies to you. You should literally be writing down the information for each one — you’ll need it when you actually start the application process.

Do this in a Google or Excel spreadsheet. When recording, I suggest you write down the scholarship name, the amount it’s worth, a due date, and whether or not you’ve applied yet.

When you put it together, here’s what it might look like:

Scholarship name	What it’s worth	Due date	Applied
IWT Scholarship	$2,500	05/16	Yes

Of course, you can be as detailed as you want with your spreadsheet and include things like GPA requirements and whether or not you need an essay.

Once you’ve exhausted your school’s list of scholarships, call up other high schools and ask them if you can go in and talk to them about what scholarships might apply to you.

That’s right. I want you to call up other high schools in your city to see what scholarships they have. They’ll actually LOVE this because no high schooler ever goes out of their way to get scholarships.

If you show just a little bit of initiative in your educational future, they’ll be more than happy to help you out. Do the exact same thing you did with your school’s scholarship resources and record all the ones relevant to you.

When I was in high school, I ended up applying for 60 scholarships from my high school’s career center — and earned thousands for college in the process.

Library and bookstores

Once you’re finished exhausting all of the scholarships from your high school, head to a bookstore or library and pick up the latest copy of an annual scholarship book.

These books are comprehensive catalogs of grants and scholarships you can earn as a high school student. They’re FANTASTIC resources if you’re looking to find cash for college.

Here’s a list of a few good scholarship books to look for:

1. The Ultimate Scholarship Book 2017 by Gen Tanabe and Kelly Tanabe ($19.71)
2. Scholarship Handbook 2017 by The College Board ($22.51)
3. Scholarships, Grants & Prizes 2017 by Peterson’s ($24.09)

I’ve included the Amazon links here so you can check them out — but I highly suggest purchasing these at your local bookstore so you can get started ASAP!

Once you get the book, do what you did with your high school’s scholarship resources and make note of all the scholarships you’d like to apply for.

Scholarship search sites

Once you’ve looked at all the scholarships you can through the aforementioned resources, you can turn to different search engines and websites that can help you find scholarships.

Many of them even include features that allow you to search for specific criteria like:

• School-specific scholarships
• Amount of money earned
• GPA requirements
• Essay requirements

You can set up email alerts so that you are automatically notified when the sites find scholarships that fit your specific needs too.

Here are a few suggestions for great sites to help you look for scholarships:

• Fastweb.com
• Scholarships.com
• Chegg.com

Ethnic organizations

Ethnic organizations of all stripes tend to offer scholarships. These can help you earn hundreds — if not thousands — in scholarship money.

Many of these are ethnicity-based, meaning that you’ll have to be a certain race or background in order to qualify for the scholarship.

A few suggestions:

• Asian & Pacific Islander American Scholarship Fund
• The United Negro College Fund
• The Hispanic Scholarship Fund
• Irish ancestry scholarships
• German ancestry scholarships

Of course, simply fitting the racial criteria for ethnicity-based scholarships isn’t enough. You’re going to have to knock the application out of the park (more on that later).

Friends and family

Talk to your friends, parents, and parents’ friends to see if they know of any scholarships.

There are a lot of companies that offer college scholarships — companies that the people you know work at. So ask around! Some of the best scholarships come from some of the most unexpected places.

When I was applying for scholarships, my sister was working at Kaiser — which offered a college scholarship to relatives of Kaiser employees.

My mom is a teacher and she knew about a scholarship offered through the California Teachers Union.

These are scholarships barely anyone applies to because many high schoolers simply don’t know to ask about them. So when you DO find out about one, you automatically have an advantage over everyone else.

If you feel odd about it, know that every person wants to help out a high schooler. They won’t think it’s “weird.” In fact, they’ll find it admirable.

Which brings us to my favorite part…

Step 3: Apply to ALL the scholarships 

Okay, so now you have your (hopefully) large list of possible scholarships to apply to. It’s time to apply to ALL of them.

This might seem like an incredibly daunting task. After all, these applications generally require you to do two things:

1. Send a letter of recommendation
2. Write an essay (or a few short ones)

However, there’s an easier way to go about the process that doesn’t involve writing 60+ unique essays.

Don’t get me wrong: Each application is going to take time and a bit of nuance in order to create a compelling case for you that’ll have the reader clamoring to give you the scholarship money.

But you can make the process a lot more effective and simple if you just look at the letters of recommendations and essays.

Get letters of recommendations

Most high school students are afraid to ask for letters of recommendations. It’s a little bit awkward to ask a teacher or other trusted adult to write a glowing recommendation for you.

HOWEVER, if you were a good student and established a good relationship with your teachers, they’ll be more than happy to help you out with your letter of recommendation. Most students never do this so they’d be happy to help.

You’re going to want to approach it the same way I approach asking for a testimonial: politely and with the majority of the work done already.

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When you reach out to your teacher for a letter of recommendation, you’ll want to give them several things:

• A broad view of what you want them to highlight
• 2-3 key points they should touch on (maybe it’s something specific to the scholarship?)
• Your resume so they have a reference to your accomplishments

If you provide them practically everything they need, they’ll be more than happy to give you an awesome letter of recommendation. In fact, many teachers will just ask you to write a draft that they can edit and sign.

Write a college application essay that stands out

When it comes to writing an amazing scholarship essay, I’ve developed a highly complex intricate process of algorithms and systems that you need to follow EXACTLY if you want your writing to soar.

The steps are:

1. Figure out what most students will write about
2. Write something else

…and that’s it.

Why does this work? Most scholarship essays bore judges to tears.

Put yourself in the shoes of the person who will be reading your application — they’re going to be reading hundreds, maybe even THOUSANDS of these a day. And the fact of the matter is 99.99999% of the applications they read will be almost exactly the same.

Oh, you got good grades? You were in a bunch of extracurriculars? That mission trip you took to Honduras junior year was “life-changing”?

Get in line. What’s particularly unique about any of those things? Not a whole lot.

And if you fall into the same formula as everyone else, I guarantee you your application won’t get a second glance.

However, if you subvert the expectations of the scholarship judge, you’ll grab and hold onto their attention — allowing you to properly make your case.

To do that, you need to follow the aforementioned two steps.

First: Figure out what other students will write about

You’re sitting down at your laptop, the scholarship essay prompt is in front of you, and you’re ready to dive in.

Before you write a single word…STOP!

Think about the other people applying for the exact same scholarship — what are THEY going to be writing about?

What’s the easy answer to the prompt…and how can you subvert that?

Back when I was applying, I had one essay prompt that asked, “If you could have dinner with anyone, living or dead, who would it be and why?”

Classic prompt. So I started thinking.

Nelson Mandela? Meh…that would be the “logical” choice. And to be honest, dinner with Mandela wouldn’t be the most exciting thing for a 17-year-old kid.

Maybe President Clinton? That’d be cool for bragging rights…but what would we talk about?

Given this prompt, I could have just written some BS about Mandela or the President but I would have sounded like every other person applying for the scholarship. Plus, I didn’t really want to meet them.

It’s almost like the people applying forget that it’s a competition. Would a coach say to his players, “Okay guys, we’re playing against every team in our division next week, so we’re just going to do the same plays over and over”?

No. So why would you want to do that too?

So when it came to who I wanted to have dinner with, I decided to go with my gut and pick someone different: Chris Rock.

Which leads me to the next step…

Next: Write something unique instead

When you take a step back and consider the common answers to the prompt, you’ll be able to come up with an answer that will subvert the judge’s expectations and keep their attention.

In my case, while other students wrote about historical figures, I chose Chris Rock, the famous comedian.

My essay went on to argue that though he’s perceived simply as a comedian, he’s actually a highly astute social commentator. His jokes revealed the things we want to say but won’t articulate — because we’re afraid to.

I even deconstructed one of his jokes and went into an in-depth analysis of why it was an examination of the racial attitudes our society holds.

And it worked.

My approach was offbeat — yet professional. When looking for the unique angles, you shouldn’t make it offensive or inappropriate. Instead, aim to make it deep, personal, and a little bit against the grain.

To show you what I mean, here are a few common essay prompts — as well as the boring responses judges will typically see AND an example of a good answer.

Question 1
“Is it fair that professional athletes earn millions of dollars?”

Typical boring answer: “No way! We should be paying that money to teachers and firefighters. Athletes are just playing a game.”

What’s wrong with it? You could find this opinion in the “Letters to the Editor” section of any newspaper. It doesn’t matter if the answer is right — it plays everything safe and is BORING.

Better answer: “Salaries aren’t decided by fairness. They’re decided by supply and demand. LeBron James is a millionaire because millions of fans pay to see him perform. Besides, if the athletes weren’t getting the money, the owners would. Those are the only two options.”

Question 2
“Which major world problem would you solve if you could only pick one?”

Typical boring answer: “I would end world hunger. Every man, woman, and child deserves this basic requirement of human life.”

What’s wrong with it? The reader makes no human connection to you. Why on earth would they want to read more?

Better answer: “My life changed forever when I spoke at my best friend’s funeral. Standing there under the storm clouds, I felt a personal duty to make sure no one sees suicide as their only way out.”

Question 3
“Respond to this statement: America’s middle class is in trouble.”

Typical boring response: “The middle class is America’s heartbeat. We need to put big corporations in their place to make room at the table for everyone.”

What’s wrong with it? This is such a cliche answer, the judge won’t help but roll their eyes. Reading an answer like this will have them mentally checking out before you can say, “Full-ride scholarship.”

Better answer: “Classes aren’t fixed groups of people. Most of us move in and out of different classes throughout our lives. In fact, many people who were in the middle class twenty years ago are in the upper class today.”

These answers practically grab you by the lapels and COMMAND attention. They stand out like a lighthouse in the ocean of boring applicants.

This is the difference between following the crowd and hoping for the best versus thinking strategically and winning the game.

Key things to remember to get any scholarship

Before you jump into the system above, there are a few things to keep in mind when you’re applying:

• After you write the essay, get at LEAST two other people to proofread it for you. You might think your first draft is perfect — but chances are it’s not. Plan to go through a few drafts before you land on the one you’ll be submitting.
• Barely anyone applies to the majority of these scholarships — so you’ll already have a huge advantage by applying at all. The Craigslist Penis Effect is strong with scholarship applications. Leverage that knowledge.
• Some scholarships require you to interview — so you need to prepare. Remember to prep for it by practicing interviews a LOT. That means doing them in front of a mirror, having your friend run through questions with you, and reading up on interview strategies. Here are a few great resources from IWT that’ll help you:
  • 3 tips to dominate your interview
  • Unexpected tips to prepare you for your interview
  • How to craft the perfect answers to interview questions

Check out my video on how you can crush your interview below:

What to do AFTER I get the scholarships?

Once you get your first scholarship, CONGRATS!!!

You’re now ahead of a vast majority of your peers when it comes to paying for your education — but it shouldn’t end there.

If you want to truly prepare yourself for college, I’ve created a video series where I break down the truths that no one tells you about it.

Check it out below.

When it comes to scholarships or even school in general, you don’t have to be the smartest person in the room — you just have to do the work.

If you’ve read all this, try doing just one step today. Not tomorrow, not after you finish that physics quiz, but TODAY.

Take someone out to lunch. Send an email to that professor you admire. Ask someone a question. It doesn’t have to be perfect, it just has to be today.

It’s easy to take the “safe” route. It’s much tougher to build your own confidence to do things differently — let alone at all.

But if you’re willing to take that first step, I want to help you.

Join my free email list to learn my secrets to earning more, learning, and finding a passion that’ll earn you money forever.

How I got $100,000 in college scholarships is a post from: I Will Teach You To Be Rich.

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#money #finance #investing #becomerich

We messed up. An apology from Ramit

I want to apologize for yesterday’s email.

If you’re subscribed to I Will Teach You To Be Rich, you received this email yesterday.

I see a lot of things wrong in that email.

• “Guaranteed to beat.” (no, nothing is guaranteed in investing)
• “People have always been stupid.” (why is this even here?)
• “Made-up money that only exists on the internet” (all currency is made up…so what?)

Why did we send such an inflammatory email? One that doesn’t even represent what I really think about Bitcoin?

I want to explain how this happened, my actual views on Bitcoin, and finally what we’re doing about this.

First, my comments on yesterday’s email.

1. It was unnecessarily dismissive of Bitcoin, which has had a major impact on money, technology, and culture in the last few years.
2. It was over-sensationalistic and clickbait-y.
3. It didn’t sound like us.
4. It had nothing to do with the post it was linking to.
5. It was not aligned with my view on Bitcoin.

In a world of hype, I believe in cutting the B.S. and being honest with you, and this email failed.

That No-B.S. view is why I don’t allow anyone with credit card debt to join our flagship courses, which costs us millions of dollars a year. One of our core values is “No B.S.” (it’s why that phrase is even on the cover of my NYT best-selling book). So when we’re guilty of it, we need to recognize it and apologize publicly. Yesterday’s email was B.S. We messed up. And we 100% deserve the heat from it.

Plus the tons of responses on Twitter (you can see them using this search).

It’s no wonder that when we sent an email like yesterday’s, people were mad. I don’t blame them.

How this email went out

We have a team of dozens of people at IWT. While IWT started with just me writing, now we have teams of engineers, product developers, and writers. My goal is to share my views with our team, and together, we share them with the world. I do everything I can to empower my staff to create great material. We talk often about our company values, the ways we can push our students to think bigger, and the fun approaches we can use to help our readers live their Rich Lives.

In an effort to push the envelope, we got aggressive and got away from the things that made us who we are. We tried to take a hot topic (Bitcoin) to get you to click on a not-as-hot topic (lazy portfolios). There was no reason to do that. It didn’t add to anyone’s understanding of either topic. We should have led with quality and creativity and let the quality of the blog post stand on its own. We don’t need to resort to clickbait tricks.

Here’s a note from our Editor in Chief. But as CEO, it’s ultimately my responsibility.

Whenever a friend and I have a disagreement, we sit down and hash it out over some buffalo wings. So let’s clear the air. I’m going to share my thoughts on Bitcoin. You might agree or disagree, but you deserve to hear it straight.

A few starting points:

• Money is a small, but important part of a Rich Life. I believe money is important, but there’s more to a Rich Life than a big bank account. I share this because money is important — but that’s not the sole thing that guides me, or our readers.
• Investing is one of the most powerful ways to grow your assets. I’m no stranger to investing — I’ve invested millions of dollars, and I believe in investing your money and investing in your intellectual capital through books, training, conferences, and more.
• Here’s where I invest my money. I invest primarily in passive investments — index funds — and I have a few individual stocks and angel investments. This is exactly what I recommend in my book on personal finance. I could make millions of dollars recommending terrible investments to my readers with fat commission fees…but I will never do that.

“Do you believe in Bitcoin technology?”

• Yes, I believe in Bitcoin technology. We only have to look at the major impact Bitcoin has had to know that the technology is real. Beyond that, I don’t have a strong opinion on the tech. I have strong beliefs about Bitcoin as an investment — but as for the technology, I respect the technical innovations that are happening in fintech as a result of Bitcoin.
• I’m critical of Bitcoin when viewed through the lens of asset allocation and personal finance. When I talk about Bitcoin, I’m not evaluating it as a technology. (See my above comment.) I’m critical of it when I see people investing all their money into Bitcoin.

“Do you believe Bitcoin is a good investment?”

• Maybe. Undoubtedly, it’s beat all other asset classes in the last two years. However, I’m personally not investing in Bitcoin.

“So what is your problem with Bitcoin?”

• Nothing, if you treat it as an investment in your portfolio. If anyone wants to invest 5% or 10% of their portfolio, great! In my personal finance book, I specifically encourage people to set their portfolios up, and if they want to invest a small percentage in fun investments, go for it.
• But when people put all their money in one investment, that’s not investing — that’s speculation. 
• The language around Bitcoin is filled with hype and handwavy arguments. As the price of Bitcoin gets higher and higher, the language used to talk about it becomes increasingly frantic and frenetic. The fundamentals of the investment (which nobody understands) become cloudier and focused purely on the price. If you look at Bitcoin investment communities, a huge percentage of the comments are simply people encouraging others to “HODL” (the community’s word for “HODLing” onto crypto for the long term) and get other people to buy more. There’s little recognition of how Bitcoin fits into an overall portfolio.
• Your asset allocation matters more than any individual investment. This core investing concept is something I rarely see in the Bitcoin community, along with the core investing concept of risk. (Note: I’m using the term “risk” as the technical investment definition, not just “Can I withstand this going down 30% for a few days?”) Nobody needs to talk about asset allocation while the price of a single investment is skyrocketing…until it isn’t. I’ve had people call me “old man” and “Luddite” for not putting my entire portfolio into Bitcoin. That’s not sound portfolio strategy. There’s a reason why every sophisticated investor understands the power of diversification and asset allocation.

“But Bitcoin has beat everything else.”

• True. But higher prices create lots of accidental geniuses. The higher the price goes, the more people think they’re geniuses. It’s easy to handwave against all arguments and simply say, “LOL! Look how much money I’ve made!” That sort of argument can seem like a mic drop. Until it stops working. When I’ve asked some Bitcoin investors how they think about their overall portfolio, diversification, asset allocation, a few have had good answers. Most have no answer at all. They simply say, “Dude, look how much money I’ve made.” Again, that’s not investing. That’s speculation. History has shown that long-term investing is more than picking one investment, no matter how high it goes.

“Are you just bitter that you missed out?”

• No, I’m intentional about my investments. I’m not bitter that I “missed out” on Bitcoin as an investment (nor should you ever invest based on “missing out”). Again, if you’re investing 5-10% of your portfolio in speculative or fun investments, great.
• I don’t mind if you disagree with me. I’ve taken heat for my views on real estate before. Same for my negotiation techniques. But millions of people read them, many used them, and we had vigorous debates. I don’t mind if you disagree with me, but we should have an honest discussion, not use cheap tricks and insults (like our above email). Investing is fun but it’s also serious, and it involves a lot of nuances. I want to have that kind of discussion with you.

So, to sum up:

1. I’m sorry for yesterday’s email and I take responsibility for it. In 13 years, this is the second apology note I’ve written. That email didn’t reflect my views or our values as a company.
2. We’re making internal changes to ensure that all of our material reflects our values. I know you have a lot of choices, and you read our material because you want to know surprising, counterintuitive, but data-backed methods to living a Rich Life. We’ve written about personal finance, business, psychology, careers, and more. And we’re going to keep at it.
3. Thank you for trusting me and our team with your attention. We’ve got much more coming your way.

-Ramit

P.S. Now it’s time for me to stop talking and start listening. I’d love to hear from you. Do you agree? Disagree? I’m leaving comments open for the next week and I want to hear what you’d like to tell me about Bitcoin. What should I be paying attention to? How has Bitcoin changed the way you think about investing? Please let me know.

We messed up. An apology from Ramit is a post from: I Will Teach You To Be Rich.

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#money #finance #investing #becomerich

All about strategic asset allocation

I hope you’re ready. We’re about to discuss one of the hottest, most exciting investment topics out there.

No, I’m not talking about putting your money in Tesla.

And I’m not even talking about how awesome Bitcoin is (mostly because I’m not an annoying bro dude).

I’m talking about something even MORE exciting:

Strategic asset allocation

Strategic asset allocation is the practice of setting a goal for each of your asset classes (e.g., stocks, bonds, cash), and rebalancing it every year as you realize earnings on your investments.

 This is a great tactic if you want to:

• Focus on long-term financial goals
• Enjoy a hands-off approach to your portfolio — and not wring your hands over how the market is performing
• Reduce your risk as an investor

Think of your investment portfolio as a garden: If you want your zucchini to be only 15% of your garden, and they start growing like crazy and take over 30%, you’ll want to rebalance by either cutting the zucchini back, or getting a bigger backyard so the zucchini is back to covering only 15%.

I know, I know. I should start I Will Teach You To Garden.

You’ll want to rebalance your portfolio every 12 to 18 months to ensure you’re getting the most out of your investments.

Let’s take a look at a non-gardening example:

Imagine you’re a 24-year-old who just opened up a brokerage account with $3,000. If you want to employ strategic asset allocation, you’ll want to set certain percentages you’ll want in each asset class based on your goals.

Since you’re young and have many years before retirement, you might be more willing to take risks with your portfolio. Considering this, you decide to be aggressive and put your money in 80% stocks ($2,400) and 20% bonds ($600).

A year later, you discover that your stocks accrued 20% from your initial investment, while your bonds have earned you just 2%. This leaves your assets at 82% stocks ($2,880) and 18% bonds ($612).

Now your assets are “unbalanced” in accordance with the goals you set for them and it’s time to rebalance them.

In order to stay in line with your strategic asset allocation strategy, you’ll need to take 2% or about $57.60 out of your stocks and into your bonds. That’ll leave your portfolio nice and balanced at 80% stock and 20% bonds once more.

Of course, your goals will change over time. As you get older, you’ll find that you might want to be more conservative with your investments, and you can change your asset allocation percentage so they fit your needs.

Why does this strategy work? Two reasons:

1. No constant trading. That means you can just purchase your lifecycle funds (more on that in a bit) and let them ride the market for a year. There’s no constantly trading, worrying about BS commission costs, or dealing with hedge fund managers who’ll just lose your money anyway.
2. Easy accommodation of your goals. If you find that you want to change how much you allocate in each asset class as the years go by, you can do that and it’ll be fine. These are your finances after all, and you get to decide what to do with them.

THAT’S strategic asset allocation.

How do I employ strategic asset allocation?

People always email me questions like, “Ramit, I have $XX,XXX. How should I invest it??” And, frankly, I can’t tell you that. Because it depends on your answer to a few specific questions…  

“When do I need the money?”

If you need your money sooner (between two and three years from today), you might consider investing in a conservative portfolio. That’s because the market can be incredibly volatile in the short term.

On the other side of the coin, you might want to invest more aggressively if you’re saving money for retirement (assuming retirement is 10+ years away). Over a long period of time, the market trends upwards.

Check out this graph that’s tattooed on my back I love it so much.

I have to update the tattoo every year. It gets painful.

This is how the S&P 500 has performed since 1950. Notice how even in the down years, the market bounces back.

Because of this, your risk is mitigated over a long period of time. You can pick nearly any 15-year window on this chart and end up ahead. But if you invest for short term, you will need to invest more conservatively (if you pick a 3-year window, your odds get worse).

“What’s my risk tolerance?”

So now that you know what your timeline looks like, ask yourself: Am I actually comfortable with risk?

If you are comfortable with it, how much risk are you willing to take?

If the market took a 20% nosedive tomorrow, would you be okay with that? Or would you be scrambling to cut your losses?

I used to teach a class on personal finance and during one of the sessions, I drew a picture of a rapidly falling fund. Then I asked, “What should I do?”

Inevitably, a good chunk of the class did their best Wall Street stockbroker impression and yelled, “Sell! Sell! Sell!”

So now I want to ask: What would YOU do?

• Sell immediately and cut your losses
  
  or
• Hold onto the fund

Well, knowing how the S&P 500 has trended for over half a century now, you should know the answer: If you’re young, hold onto the fund.

That’s why, if you’re in your twenties, you should be comfortable investing more in riskier investments (e.g., stocks) rather than safe ones (e.g., bonds).

If you’re older, your risk tolerance is likely going to be lower. As such, you’ll want to reconfigure your asset allocation so you’re investing in safer investments such as bonds as opposed to riskier ones like stocks.

“What are my goals?”

Your investment choices depend not only on your timeline and risk tolerance, but also your goals.

Are you saving up for a car that you want in two years?

Or are you planning on paying for a wedding in five?

Maybe you want to just make sure that you have a nice little nest egg for retirement 30 years from now.

No matter what your goals, recognizing what they are will help you determine how to approach your strategic asset allocation because they’ll help you answer the above two questions.

Why don’t people rebalance their portfolio?

So now you know that rebalancing your allocations to stay in line with your goals is important…so why is it that I still find older people with 90% stocks AND college grads with 50% bonds?

The main reason people don’t maintain a reasonable asset allocation is because of human psychology. As humans, we fall victim to simple psychological biases.

Even when you have charts like this with great suggestions:

…people will still fail to rebalance their assets over time.

After all, why would you want to take your money out of one asset class that performed well over the year and put it into one that might have disappointed you?

The trick to addressing these psychological biases: Automation. More specifically through a target-date fund (aka lifecycle fund).

Lifecycle funds: An easy way to invest

This is one of my favorite investments of all time, because they are:

• Automated
• Easy enough for anyone to get started
• Safe ways to earn money through investments

These funds automatically diversify your investments for you based on how old you are. So instead of actively rebalancing your stocks every year, this fund automatically does it for you.

As you get older and retire, for example, your lifecycle fund will automatically change to a more conservative asset allocation so you don’t have to worry about any drops in your retirement account.

Lifecycle funds can also be described as “funds within funds” (Yo dawg…) or collections made up of other funds.

For example, a single lifecycle fund might include large-cap, mid-cap, and international funds (all of which include their own stock selection). This sounds complicated but it actually makes everything very easy for you as you only have to own one lifecycle fund and the rest is taken care of for you.

That said, lifecycle funds aren’t for everyone. After all, they only factor in one variable: age. Everyone has different investment goals, and these funds aren’t tailored to your individual situation.

However, they are designed for people who don’t want to mess around with rebalancing their portfolio at all. For you, the ease of use that comes with lifecycle funds might outweigh the loss of returns.

One thing you should note: Most lifecycle funds require between $1,000 and $3,000 to buy. If you don’t have that kind of money, don’t worry. Check out my article on how to make money fast to help you get there.

For a more in-depth explanation, check out my video all about lifecycle funds, which was clearly filmed many lifecycles ago.

Master your personal finances

Though lifecycle funds are an easy way to approach your investments, you might want to be more hands-on when it comes to your asset allocation — and that’s okay! It’s YOUR personal finances, which means these are your decisions to make.

No matter what you choose to do, you want to make sure that you have a solid foundation in place for your finances, which is why I have something for you: The Ultimate Guide to Personal Finances.

In it, you’ll learn how to:

• Master your 401k: Take advantage of free money offered to you by your company…and get rich while doing it.
• Manage Roth IRAs: Start saving for retirement in a worthwhile long-term investment account.
• Automate your expenses: Take advantage of the wonderful magic of automation and make investing pain-free.

Enter your info below and get on your way to living a Rich Life today.

All about strategic asset allocation is a post from: I Will Teach You To Be Rich.

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#money #finance #investing #becomerich

An introduction to micro investing: 3 ways to get started

Investing can be incredibly intimidating to beginners. The subject is fraught with questions like:

“What stocks should I invest in?”

“How do I invest for retirement?”

“What the hell is a mutual fund anyway?”

And while there are many ways to approach your investments, technology has allowed people to streamline the process and take just a little bit of the headache away from it (*cough* like automating your finances *cough*).

Enter: micro investing. At its core, micro investing is investing small amounts of money into a portfolio. (For example, taking the change left over from a purchase and automatically placing it into a savings account.) This is typically done through an app that automates the entire process for you.

Today, I want to take a look at why these apps can be effective ways to save and share three you can download to get started.

What are micro investing apps?

Micro investing apps invest small amounts of money by connecting your debit card, credit card, or bank account to the app. In doing so, they bypass the fees you get when dealing with brokerage firms, allowing you to invest small amounts of money without breaking the bank.

Though the way the apps work varies, they usually use the money you spend on purchases to invest. Whenever you make a purchase with those cards or bank account, the app automatically rounds your purchase up to the nearest dollar and invests the difference for you.

For example, if you go out for dinner and end up spending $17.85, the app will round the purchase up to $18 and invest the $0.15 difference into a portfolio for you.

These are incredibly small amounts of money — less than a dollar — which might lead some of you to think this isn’t even worth pursuing (aka a latte win). However, if you invest early with any amount, that’s still a Big Win. Why? It’s also a habit that anyone can do that barely takes any work. You simply set it up once, and it pays off for years.

HOWEVER, micro investing should NOT be the foundation of your investment strategy. It’s more of the cherry on top. This is a good way to build upon things like putting money consistently into your Roth IRA and 401k (more on those later). Micro investing shouldn’t be the ONLY thing you do.

With that, I suggest three micro investing apps to help you get started today. They are:

1. Acorns
2. Stash Invest
3. Robinhood

Micro investing app #1: Acorns, the app for college students and beginners

Where to find it: Website, iOS, and Android

Fee: $1/month if your account is <$5,000, and 0.25% if your account is >$5,000

Account minimum: $0 to open, $5 to invest in portfolios

Acorns allows you to connect your debit or credit card to the app, and “rounds up” your purchase automatically. This rounded up money is then sent to a diversified portfolio of exchange-traded funds, or ETFs (a collection of various stocks in a specific industry or category), which vary depending on your aversion to risk.

The app also gives you a suggestion for portfolios based on questions it asks you when you sign up (age, income, financial goals, etc). For example, if you’re a young, twentysomething, it’s probably going to suggest you go with their more aggressive portfolio as opposed to a conservative one since you’re young and can take more risks.

In all, they offer five portfolio options:

1. Conservative. Big focus on corporate and government bonds, as those present less of a risk.
2. Moderately conservative. 60% of the portfolio is made up of bonds but you get a little bit more stocks as well.
3. Moderate. Even mix of stocks and bonds.
4. Moderately aggressive. Bigger focus on large company stocks with just 20% of the portfolio placed in government and corporate bonds.
5. Aggressive. 80% of this portfolio is made up of various stocks while just 20% is bonds.

You’re going to have to put up $5 to start investing in these portfolios. So despite it costing nothing to open the account, you’re still going to have to put up a little bit of money to invest with Acorns.

Though the asset allocation varies from portfolio to portfolio, the specific funds your money gets invested in are as follows:

• Corporate bonds: iShares iBoxx$ Investment Grade Corporate Bond ETF (LQD)
• Government bonds: iShares 1-3 Year Treasury Bond ETF (SHY)
• Large company stocks: Vanguard S&P 500 ETF (VOO)
• Small company stocks: Vanguard Small-Cap ETF (VB)
• Emerging markets: Vanguard FTSE Emerging Markets ETF (VWO)
• Real estate: Vanguard REIT ETF (VNQ)

The app is also primarily targeted at younger investors (it’s actually free for four years if you sign up with a .edu email address), and presents a good “dip your toes in investments” option for college students who are nervous about getting started.

Bottom line: It’s a simple, straight-forward app that’s just right for any college student looking to get involved in investing but doesn’t want to put a lot into it right away.

Micro investing app #2: Stash Invest, the app for hands-on beginners

Where to find it: Website, iOS, and Android

Fee: $1/month if your account is <$5,000, and 0.25% if your account is >$5,000

Account minimum: $5

Stash works much in the same way Acorns does by leveraging your purchases to invest small amounts into a portfolio of ETFs. However, it offers a few interesting features that give investors a bit more variety in where they put their money.

Rather than having only five choices to put your money, Stash gives you the opportunity to invest in more purposeful funds.

These funds are divided up into three categories:

1. I Believe. These funds help you invest your money in companies that champion social and environmental causes. For example, you can invest your money in a fund they call “Combat Carbon,” which puts your money in a fund with companies with “relatively small carbon footprints.” (iShares MSCI ACWI Low Carbon Target ETF)
2. I Want. These funds are crafted with your financial goals in mind. If you find yourself risk averse, you can invest in their “Conservative Mix” fund (iShare Core Conservative Allocation ETF). On the other side of the coin, you can invest in their “Aggressive Mix” fund (iShare Core Growth Allocation ETF) if you want to invest more…well, aggressively.
3. I Like. These funds help you invest in the companies that you simply admire. Do you like tech innovators? Invest in their “American Innovators” fund (Vanguard Information Technology ETF). Love shopping? Check out their “Retail Therapy” fund (SPDR S&P Retail ETF).

You can mix and match your funds to create a portfolio that suits your goals. It’s a little bit more hands-on in terms of asset allocation than Acorns, but if you’re the type of person who likes to be more involved in what you’re investing in but still likes using your purchases to invest, then Stash is perfect for you.

It’s important to note that you’ll be investing in index funds — which means your investments will be relatively safe. Take a look at the graph below.

Does that look like a crazy volatile investment to you? No. Which is why you shouldn’t worry about these investments tanking in the long run.

Bottom line: Stash is great for beginners who want to dip their toes into the world of picking and choosing their own funds without having to make a huge commitment.

Micro investing app #3: Robinhood, the app for experienced investors

Where to find it: iOS and Android

Fee: $0

Account minimum: $0

You know what Jared Leto, Snoop Lion Dogg, and Nas have in common? Aside from the ludicrous amounts of wealth and fame they’ve amassed, the three have all invested in Robinhood — a stock trading app that bypasses big bank brokers like Fidelity or E*TRADE and allows you to purchase funds directly (without the costs!).

You’ll be able to buy and trade a wide variety of stock and fund options without having to pay some “money manager” a fee. It’s great for people who love to be more hands-on with their portfolio, asset options, and where their money goes.

You can also automate money to go into your portfolio on a weekly, monthly, bi-monthly, and quarterly basis (remember: automation is king).

However, this app doesn’t work the same way as Stash or Acorns. Instead of investing money through your purchases, Robinhood requires that you transfer funds directly into the app in order to invest it. So rather than taking your extra purchase money, Robinhood requires you automatically wire money from your bank account each month. I suggest starting with $5.

It’s more hands-on than the other two, but you’ll still be able to save money by avoiding the fees that come with normal brokers while automating small amounts into the app.

Bottom line: This app is a solid choice for more experienced investors who want to be more hands-on with their portfolio.  

The best investments tools at your disposal

Remember: Micro investing is not a good foundation for your investments.

It can be a good way to supplement your investments, especially when you automate the process and don’t have to think about it. But you don’t want it to be the only way you invest.

Instead, I suggest that you put money into two retirement accounts that’ll help you save for the future:

1. 401k. This is essentially free money from your employer. With each pay period, you put part of your pre-tax pay into this account. Typically, your company will match you 1:1 up to a certain percentage of your paycheck. By leveraging your pre-tax contributions with compounding interest, you get a powerful combination.
2. Roth IRA. This is the best deal for long-term investing. This account utilizes after-tax earnings to help you save long term for retirement. You put this already taxed income into funds and don’t pay a single cent when you withdraw it.

Both these accounts have different restrictions on how much you can invest per year and the types of funds you can invest within them. For more information on them, check out my resources below for them:

• 4 keys to early retirement
• How do retirement accounts work?
• Should you contribute to your 401k without an employer match?

How to find money for micro investing

If you’re worried you don’t even have enough money to spend on lunch today let alone investing in a diversified portfolio, don’t worry because I have something for you: A FREE chapter of my New York Times bestselling book I Will Teach You To Be Rich.

In this chapter, I lay out my Conscious Spending Plan system. This is a system that allows you to know exactly how much you can spend each and every month, so you’re not constantly wondering how much you have.

This will help you invest and spend guilt-free every day.

Enter your information below now to receive the free PDF today.

An introduction to micro investing: 3 ways to get started is a post from: I Will Teach You To Be Rich.

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#money #finance #investing #becomerich