3 common buyer’s remorse purchases (and how to avoid them)

So you spent a small pile of money on something you THOUGHT you wanted — only to realize later you could have gone without it.

Congrats! You have buyer’s remorse. It’s not fun BUT there are ways to prevent it. I want to show you how.

• What is buyer’s remorse?
  • Big purchase #1: Buying a house
  • Big purchase #2: Buying a car
  • Big purchase #3: Getting a degree
• How do I prevent buyer’s remorse?
• What if I have buyer’s remorse now?
  • Cooling-Off Rule
  • Credit card protection
  • A La Carte Method
• Earn more money for any purchase

What is buyer’s remorse?

Buyer’s remorse is the feeling of regret you get after making a purchase.

Having devoted my life to helping people with personal finance and development, the subject fascinates me to no end. Why do people make purchases that they regret?

So a while back, I posed the question to my followers on Twitter. After reading through all of the responses, I’ve found that buyer’s remorse typically happens after BIG purchases. The most common are:

1. Buying a house
2. Buying a car
3. Getting a degree

That’s why I want to go through each of these purchases with you and show you exactly how you can avoid buyer’s remorse for them. Later, I’ll also show you what to do if you’ve already made a purchase you regret.

Big purchase #1: Buying a house

Aside from things like marriage or having kids, buying a house is the biggest decision an average person will make.

And yet, I’m amazed at how lightly people approach it when they’ll obsess over things like cutting out lattes to save money.

They’ll rush into it without much research or considerations to the alternatives … why? Simple: It’s an invisible script — a guiding belief so deeply ingrained in society and culture that we don’t even realize it’s there.

When the truth is you probably don’t need to buy a house. Don’t believe me? Here are some of the biggest myths surrounding real estate:

• “I’m throwing away my money if I keep renting!” WRONG. People who say things like this don’t take into account the “phantom costs” of owning a home. Those are things like home maintenance and repairs, property taxes, insurance, HOA fees, and utilities that fall on YOUR shoulders to address when you own. Home values may also not rise enough to give you the equity you expect.
• “I can take advantage of the tax savings!” This doesn’t even make any sense. Even if you deduct a good amount of your mortgage interest from your taxes, you’d be deducting money you’d ordinarily never spend.
• “Real estate is a great investment.” False. Yale economist and Nobel laureate Robert Shiller discovered that from 1890 to 1990, the return on residential real estate was about zero after inflation.

You might have been told that you need to buy a house after college or when you get married. The reality is there isn’t a right time that’s good for everyone. There might never be a time for you — and that’s okay.

If you think you really DO want to buy a house though, make sure you check out my articles on how to buy a house and real estate investing myths to make sure you’re making the right decision.

Big purchase #2: Buying a car

One of the biggest reasons buying a car can turn into a HUGE case of buyer’s remorse: People don’t buy for the long haul.

Instead, they get caught up in things like how flashy the car will be and how good it looks. They treat a car as a status symbol rather than a way to get from point A to point B.

If you want to buy a car you need to prioritize getting a reliable car that you’ll be able to drive for at least a decade.

Cars are a long-term purchase. They cost a lot of money. That’s why you’re going to want to get one that lasts a while, since it’s only going to get worse and less valuable over time.

If you want even more information on buying a car, be sure to check out my best articles on the topic below:

• Find out how much car you can afford
• Should you buy a used or a new car?
• The best time of year to buy a car

Also be sure to check out this video where I show you how to buy a car the Ramit way.

Big purchase #3: Getting a degree

Ah college. The time for questionable decisions, all-nighters with unhealthy amounts of energy drinks, and dorm roommates with weird hobbies.

That’s me in 2002 at Stanford — looking suave as usual

It’s also a time where people find themselves with a massive financial albatross known as student loan debt. In fact, the average college graduate leaves school with about $37,000 in debt. It’s even more than that for post-graduate education.

These numbers can seem insurmountable. BUT there’s hope. There’s actually a system to help you pay off your debt painlessly.

How? Pay more each month.

This might seem counterintuitive, but it’s true. Student loans are huge amounts spread over a long period of time. So you can save significant amounts of time AND money by paying off a little each month.

Imagine you have a $10,000 student loan at a 6.8% interest rate with a 10-year repayment period. If you go with the standard monthly payment, you’ll pay around $115 a month. But look at how much you’ll save in interest if you just pay $100 more each month:

MONTHLY PAYMENTS	TOTAL INTEREST PAID	YOU SAVE
$115	$3,810	$0
$215	$1,640	$2,170
$315	$1,056	$2,754
$415	$728	$3,082

From the chart above, if you pay just $100 more a month, you could save $2,170 on your student loans and shave time off of your student loans.

For more insights on paying off your student loans, be sure to check out my video addressing a reader question about just that.

Of course, you can prevent buyer’s remorse for college if you don’t have to pay for it. That’s what I did when I developed a system that helped me earn more than $100,000 in scholarships for Stanford.

How do I prevent buyer’s remorse?

As the adage goes, prevention is better than the cure. And there’s a great solution for if you want to prevent buyer’s remorse: Only spend money on things that you love — and forget the rest.

This is also known as a Conscious Spending Plan, and it can help you save money for the things you love and live your Rich Life.

I have a friend who leverages this to great effect by spending over $21,000 a year partying and going out.

I can already hear some of you screaming from here … but it’s true. Let’s say he goes out just four times a week to dinners and clubs and spends $100 each night (conservative estimate for my friend). That’s $400 a week!

At first glance, this can seem ridiculous. However, what you don’t realize is he makes a healthy six-figure salary. He’s also invested a lot into his 401k and his diversified portfolio of investments.

So say he makes $210,000 a year net. That means his going-out money accounts for about 10% of his income — which is totally reasonable.

If he has the money, and going out makes him happy, why shouldn’t he be able to spend money on it?

That’s the same framework you can use when you create your own Conscious Spending Plan.

Setting up your system is simple too. It’s all about:

1. Automating your finances
2. Knowing where your money goes so you’re in complete control of the situation

Automating your finances allows your system to work for you and passively do the right thing instead of you constantly wondering if you have enough money to spend. Or, getting your credit card bill each month, shrugging, and saying to yourself, “Yeah, I guess I spent that much.”

And it’s simple: at the beginning of the month, when you receive your paycheck, the money is immediately sent to where it needs to go through automatic systems that you have set up already.

Some spending recommendations for your system:

• 50%-60% fixed costs: This includes things like utilities, rent, internet, and debt.
• 10% investments: This includes your Roth IRA and 401k plan.
• 5%-10% savings: This is money that goes towards things like vacations, weddings, home down payments, and unexpected expenses.
• 20-35% guilt-free spending: Fun money! Spend this on anything you want from nice dinners to movies.

Why automatic?

Because as humans we have incredibly limited willpower. It’s so limited in fact that it can render things like paying bills and putting money away in your savings each month a very difficult task.

Automating your finances subverts this by allowing you to save money without ever having to do it yourself.

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

What if I have buyer’s remorse now?

If you bought something and find yourself in the unforgiving throes of buyer’s remorse, that’s okay. There are a few ways you can tackle this:

Cooling-Off Rule

Did you know that the government actually has a law that can help you return items you’re not happy with?

It’s called the “Cooling-Off Rule” and it “gives you a three-day right to cancel a sale made at your home, workplace, or dormitory, or at a seller’s temporary location, like a hotel or motel room, convention center, fairground or restaurant” (according to the Federal Trade Commission).

When you make a purchase during one of the above instances, make sure that your seller gives you a cancellation form for as well as a receipt. That way if you wind up with buyer’s remorse, you can send them the cancellation form within three days.

After which, the seller has 10 days to refund your money.

Of course, this rule is pretty specific and doesn’t apply to big purchases like homes and cars. However, it can come in handy in the above situations.

If Uncle Sam can’t help you out though, you might be able to turn to your own personal credit card army to help you.

Credit card protection

Credit cards get a bad rep — and for good reason. However, if you’re a responsible credit card owner, there are a ton of hidden benefits and perks you can leverage.

One of the best benefits: Credit card protection.

When you make a purchase that you’re not happy with, your credit card will fight for you in order to help get your money back.

For example, I canceled my cell phone plan a while back and got charged a $160 “early cancellation fee” — which was weird because I had already negotiated out of a cancellation fee when I signed the contract.

So I called the customer service rep for the phone company, informed them of this, and they said they wouldn’t charge me … but they did it anyway.

That’s when I decided to call my credit card company and tell them I wanted to dispute the charge. Guess what happened?

Two weeks later, the complaint was resolved in my favor.

Moral of the story: Your credit card company is on your side when it comes to disputes. In fact, the credit card company fights the merchant for you.

A La Carte Method

This is a GREAT method to save money on services for which you have a subscription, like:

• Netflix
• Gym memberships
• Spotify
• Amazon Prime
• Magazines

A conservative estimate shows that we spend over $1,800/year on subscriptions alone.

The convenience is undeniable BUT this is a case where the convenience also works against you.

Take a gym membership for example. Maybe you haven’t been to the gym in a while. So you feel guilty that you’ve been paying money for an expensive membership every month but you still keep the membership because that’s easier than saying you don’t actually use it.

Read that again. It’s the key to cutting your spending through your subscription items you’re probably not getting very much value out of.

Which is why I suggest the A La Carte Method.

The basic idea of this system is to cancel all your discretionary subscriptions — magazines, Spotify, Netflix — and buy what you need a la carte.

• Instead of paying for a ton of movies and shows you’ll never watch on Netflix, buy only the shows you want to watch on Amazon or iTunes for $1.99
• Buy a day pass for the gym each time you go (around $5 – $10)
• Buy songs as you want from Amazon or iTunes for $0.99 each

This FORCES you to be conscious with your spending. By utilizing the same principles that make automating your finances great, you will have to actively think about each charge you make when it comes to buying a song or TV show.

If after about two months, you find yourself spending enough money on these items to justify the subscription, by all means pick it up again. If not, then you’ve saved yourself from some major buyer’s regret.

Earn more money for any purchase

The best antidote to making any purchase without regret is having the money to spend.

That’s why I created something for you that I think you’ll really like: The Ultimate Guide to Making Money. 

In it, 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.

3 common buyer’s remorse purchases (and how to avoid them) is a post from: I Will Teach You To Be Rich.

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The inexact science of how Top Performers make everything look easy

There’s an Italian concept called “sprezzatura,” which means “a certain nonchalance, so as to … make whatever one does or says appear to be without effort.”

It’s basically making everything look effortless.

Think about the people in college who would walk into an exam saying, “Ugh! I barely studied for this!” then get a 94%. That’s the idea.

For example:

• Super fit person: “Oh, I just try to watch what I eat and take a walk every day”
• Person with amazing skin: “I just drink lots of water!”
• Person with well-behaved kids: “I just try to spend time with them”

Growing up, I would see these successful people and wonder how they did it. But if you asked them, they would give you these frustratingly vague responses. It seemed like they were just naturally lucky.

In reality, I learned that’s not true.

Every successful person has a repertoire of secret habits they’ve honed over years of practice. They’ll rarely tell you what the habits are, though. (What’s most incredible is that lots of times,  they don’t even realize their own habits!)

My dream was to understand these secret habits.

And my first challenge was cracking the code of sprezzatura — the idea that being the best is just an accident.

In Italy, they applied sprezzatura to fashion. Look at the photos here and notice the “studied carelessness” of the unbuttoned collar, the crooked tie bar, the flipped sleeve (more on men’s sprezzatura style).

In America, we apply this concept everywhere because we want success to seem effortless, nonchalant, casual. Over time, I’ve come to appreciate this. But I also believe this concept of effortless success is destructive. If you look at someone and they give you an offhand answer (“I just watch what I eat!”), it makes success seem like it’s just due to genetics or pure luck.

The reality is that Top Performers practice a carefully coordinated set of secret habits that they rarely talk about.

I’ll show you three examples here.

Celebrities who go on talk shows know exactly what they’re going to say
THE MYTH: Celebrities are naturally charming and come up with amazing stories for late-night talk shows.

THE REALITY: Comedian Martin Short is widely regarded as one of the best talk show guests ever. Here’s what he does before he goes on a talk show.

“What I do for a typical talk-show appearance, and I’m not exaggerating, is I’ll send in something like 18 pages ahead of time,” Short said, adding that he then spends at least ninety minutes speaking with a show’s producer, cutting down his proposed material and shaping it into a conversation he’ll have with the host. What looks almost like an organic chat on TV is really a tightly choreographed two-man bit, with Short doing, as he puts it, “an impersonation of myself being relaxed.”

How “clueless” Facebook mastered optics
THE MYTH: Facebook is a company of nerds who only know about computers.

THE REALITY: They are a massive corporation that knows how PR and optics work.

The truth behind celebrity fitness
THE MYTH: Celebrities are just “naturally” fit.

THE REALITY: They follow incredibly rigorous programs for fitness, nutrition, sleep, and skin care. But the way they talk about it, you would never know.

Read any fitness article and you’ll find mouthwatering photos of eggs and fruit and comments like “I never deprive myself.” The amount of mental machinations in obscuring the effort that celebrities put into fitness (especially women’s fitness) is unreal. And it’s actually completely rational — because if they actually talked about what it truly takes to look like that, people would hate them.

Here’s an example called “The surprisingly normal diet Gal Gadot ate to become Wonder Woman.”

Surprisingly normal! Hmm…

The first photo is a beautiful photo of eggs and fruit. Looks delicious! I could do that!

Then salmon and kale! Yum!

Avocado toast is up next! I love it!

And of course, water. Lots of water.

But wait. What’s this buried way, way down the article?

“Before filming, Gal Gadot spent six hours a day in the gym.”

Oh…

Luckily, there’s a way for the average American to look like Gal. The article says, “InStyle recommends ‘do[ing] 30 seconds of push-ups followed by a 30-second plank hold’ four times every day in order to get Gadot’s guns.”

Right. 30-sec planks and you’ll get her arms.

You know it’s not true. I know it’s not true. But after collectively hearing more and more celebrities lie about their fitness routines, we all start to share a collective wink and move on with our day. After a while, the wink goes away and transforms to the belief that “they” can somehow magically do it … but we can’t.

In reality, if you see a Top Performer — someone with an incredible body, someone who has a profitable business, someone who oozes charm — they have a set of secret habits and skills they’ve honed over time (here’s an example of a model’s Sunday routine).

Most of us didn’t have the benefit of growing up surrounded by Olympic athletes, people with six-figure jobs, or world travelers. So we miss out on learning about these things until it’s too late.

And even when we do learn about these secret habits, we don’t want to do them. (Do you REALLY want to count your macros? Or spend months doing customer research?)

At the core, this is what my team and I try to do every day: uncover the subtle, not-so-obvious habits and actions that make someone a Top Performer and share them with you. And along the way, introduce you to the other weird people, like you, who want to do the same thing.

That’s why we write about invisible scripts, how to talk to anyone, how to build habits that stick, and even social skills — we want to help you close the gap with all of the Martin Shorts and Gal Gadots of the world who have decades of experience and an army of helpers.

If you’re curious, I wrote more on the secret habits of Top Performers here.

I’m glad you’re along for the ride.

The inexact science of how Top Performers make everything look easy is a post from: I Will Teach You To Be Rich.

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7 helpful posts from /r/personalfinance

One of my favorite things to read is /r/personalfinance.

Here are seven of my favorite posts from the sub — and what YOU can learn from them.

7 valuable Reddit personal finance posts

1. “Paying rent isn’t throwing away money.”

If I ever go bald, know it’s because I tore my hair out every time I heard people say this.

From the /r/personalfinance thread:

While it is true that when you buy a home a portion of your monthly mortgage payment will be going to principal, and therefore you are paying yourself in some ways, however, the cost of home ownership is significant. Some of the lesser known costs include the lack of flexibility, stress, the risk of home price declines, home maintenance, real estate taxes, and HOA fees.

These are also known as phantom costs — the expenses you don’t normally consider when you buy a house.

OP also offers a great mental reframing of rent, saying, “As human beings, there are several things we need to survive, including food and shelter. Paying money for rent is no more a ‘waste’ of money than paying for food is.”

For more, be sure to check out my article on real estate investing myths and my post on how to buy a house.

2. “Your parents took decades to furnish their house.”

It’s easy to look at someone successful and compare yourselves to them. You start feeling like you aren’t doing enough to reach your own goals and might try to rush things to achieve their level of success.

In reality, the most successful people devoted a lot of time and energy into getting to where they are — and you should do the same.

That’s what’s at the heart of this thread about the importance of patience when it comes to your goals:

If you’re just starting out, remember that it took your parents decades to collect all the furniture, decorations, appliances, etc you are used to having around. It’s easy to forget this because you started remembering things a long while after they started out together, so it feels like that’s how a house should always be.

It’s impossible for most people starting out to get to that level of settled in without burying themselves in debt. So relax, take your time, and embrace the emptiness! You’ll enjoy the house much more if you’re not worried about how to pay for everything all the time.

So whether you’re saving for your wedding or trying to get out of debt, know that these things take time and that’s okay. Once you stop worrying about trying to accomplish your goals quickly, you can focus your mental energy on the things you can control to accomplish your goals.

3. “I found out a coworker with the same job is making twice as much as me.”

A fascinating story about a research assistant who finds out she’s being paid MUCH less than a coworker who joined six months after she got the job.

When she raised the issue to management, her boss tried pulling some corporate trickery that’s common with bad companies:

One week later she called me into her office. She absolutely berated me for thinking I could move into the coordinator position for which I was already doing the work, and complained about my work performance. Last month I had an evaluation, and received very high praise for my performance, and there has not ever been complaints about my performance in the past. All in all, I assume she was making excuses not to increase my pay.

Eventually, she was able to find a job at another place that offered her more than she was currently earning — which led to a bidding war between her old boss and her new employer (aka the best position you could possibly be in as a job seeker).

A few lessons for job seekers from this post:

• Negotiate mercilessly. OP could have just shrugged her shoulders and kept quiet when she found out she could be earning more — BUT she didn’t. She addressed the issue and now has two different companies vying for her work. That’s why it’s always in your best interest to negotiate your salary even if you think you’re earning enough.
• Adopt an abundance mindset. It’s easy to take any job offer that comes your way — especially when money’s tight. OP had two job offers and knew that if one didn’t work out, the other would be there for her. This is also known as an abundance mentality, and it can be a powerful mental shift for the way you approach finances.
• Know your worth. The first step to any salary negotiation is knowing how much you’re worth. While websites like Glassdoor or PayScale can help you get a good sense of this, talking to people in your field about their earnings can give you a sense of what you should be making (like OP did). So don’t be afraid to ask. Top Performers do all they can to know what they’re worth.

Be sure to check out my article on how to negotiate your salary and the Briefcase Technique for more.

4. What to do when a loved one dies.

When tragedy strikes, you find yourself asking questions you’ve never even considered before. This /r/personalfinance thread tries to answer one of those questions: How do I handle my finances when someone I love dies?

While the post deals with money accounts and estate issues beautifully, it also goes into the more lesser known parts of dealing with death, like where to get an urn:

The funeral home won’t tell you this, but you don’t have to buy things like urns and whatnot from them. I chose to, because the prospect of receiving a plastic baggie with my husband’s ashes that I would have to deal with was horrifying. A friend bought an urn for his father’s ashes on Amazon. There are options that are cheaper than the funeral home, but I chose to pay the obscene markup so that I wouldn’t have to deal with the logistics.

Overall, it’s a great read for anyone — even if you haven’t suffered any personal tragedies. It’s an excellent perspective on life, death, and where our finances fit in between it all.

5. “We decided not to buy a bearded dragon.”

For some, a Rich Life means a new car, ordering appetizers at restaurants, or paying off their debt. For others, it’s a desert lizard chilling out in a reptile aquarium in their living room.

Or at least that’s what one Reddit user thought when he got ready to buy a bearded dragon for his son’s birthday. When he ran the numbers though, he realized that the investment he’d be making into the pet would be much more than he bargained for.

[We] learned it needs expensive UV bulbs that last about 6 months and are about $40 each. Also the electricity cost the run this heat 24 hours can be a drain on the electric bill.

Also the beardie needs to go to the vet every 6 months for a checkup. And finally, food. They have a very diverse diet and can eat up to $15 per week in foods. So I did a total cost analysis for a beardie that lives 12 years and it turned out to be a whopping $10,000.

This is a great example of figuring out what fits into your Rich Life. I’m a big believer in spending on the things you truly love and ignoring the rest. So if you believe that a bearded dragon will help you live your Rich Life, by all means buy that lizard!

However, if you find that the benefits of caring for a reptile native to sweltering deserts for a decade aren’t worth the money and energy, don’t worry about it. Your Rich Life is what YOU make of it.

Also LOL at this robotically cold statement from a commenter: “It’s about ROI on the pet. Dogs are more fulfilling companions than a lizard. At least that’s the case with OP.”

6. What to do when you lose everything in a fire.

Sometimes we do all we can to prevent disaster — but it ends up happening anyway. Case in point: Losing everything you own in a fire like this OP.

One former insurance worker offered their incredibly insightful advice on how the insurance company is going to approach the situation and what OP should do to get the most out of his claims.

The biggest takeaway: Use the truth to your advantage. The commenter then used an example of how one guy used his situation to net him a five-figure insurance claim.

I remember one specific customer … he had some old, piece of shit projector (from mid-late 90s) that could stream an equally piece of shit consumer camcorder. Worth like $5 at a scrap yard. It had some oddball fucking resolution it could record at, though — and the guy strongly insisted that we replace with “Like Kind and Quality” (trigger words). Ended up being a $65k replacement, because the only camera on the market happened to be a high-end professional video camera (as in, for shooting actual movies). $65-goddam-thousand-dollars because he knew that loophole, and researched his shit.

This goes to illustrate a big point when it comes to anything insurance related: Do your research. Once you know the rules of the game you’re playing (whether it be taxes, insurance, or salary negotiations), the better positioned you are to win.

7. Explain it like I’m 18/22/30/40.

These threads are the perfect place to start if you’re completely new to the world of personal finance (aside from IWT of course).  

These guides break down important themes for your personal finance journey at different stages of your life. They are:

• ELI18. For when you’re out of the house for the first time and wouldn’t recognize a 401k if it walked up to you and slapped the fidget spinner out of your hand. Great advice on topics like opening bank accounts, applying for a credit card, and even finding a roommate.
• ELI22. So you’ve graduated college and are out in the “real world.” Scary right? This post makes it a little less scary by providing a solid introduction to taxes, contributing to retirement, and paying off your student loans.
• ELI30. When you’re 30, a whole new crop of financial questions start coming up. How do I handle money when I get married? How do I buy a house? I have a dog … that’s like taking care of a baby right? This comprehensive post helps answer a few of those questions.
• ELI40. The name of the game at 40 and beyond is retirement — rather, it’s making sure your investments are best positioned for when you retire. This post is a great primer on planning for the future and beyond.

Why I LOVE /r/PersonalFinance

You probably wouldn’t say anything if a friend or coworker tells you about a money decision you don’t agree with (racking up credit card debt, buying a house with little income, etc.). But if you saw the same issues on Reddit personal finance, you’d let the world know exactly how you feel about their issues and what you’d do instead.

It’s this level of honesty that helps us see how people really use money — and how to use it yourself.

Whether you’re in your forties planning out your retirement or you’re still in high school trying to figure out what to do with your paycheck, I’m glad you’re here.

I want to give you something that can help you take your personal finances to the next level:

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.

7 helpful posts from /r/personalfinance is a post from: I Will Teach You To Be Rich.

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The Best Books to Gift a New Grad

It’s that time of year again! Someone close to you is finishing school. Whether wrapping up an undergraduate, graduate, or professional degree (or even high school!), someone in your life is graduating. A good book is a great graduation gift, but what are the best books to gift a new grad? One of the favorite books people love to gift new grads is also the most useless: Oh, The Places You’ll Go! by Dr. Seuss. I understand the sentimental value, but there’s a good chance your new grad is grappling with tens of thousands of dollars of student loan debt and no idea how to make their dreams a reality. RELATED: The 14 Books You Must Read to Get an MBA Education At Home The world outside the university campus can be difficult to navigate. Thankfully, there are a few great guides available. The Best Books to Gift a New Grad Adulting: […]

The post The Best Books to Gift a New Grad appeared first on Money After Graduation.

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How to identify invisible scripts that control our lives

There’s an old joke:

Two fish are swimming in a pond when an older fish starts swimming the other way towards them. When the older fish passes them, he nods and says, “Good morning! How’s the water?” The two fish swim for a while before one of them looks to the other and asks, “What the hell is water?”

Invisible scripts.

Invisible scripts are truths so ubiquitous and deeply embedded in society that we don’t even realize they’re guiding our attitudes and behavior. Like water to a fish, they surround us even if we don’t know it.

This is a topic that doesn’t get discussed often. Mostly because invisible scripts are revealing. And the things they reveal might be some tough pills to swallow.

But, c’mon, this is IWT. We’re going to talk about them.

Invisible scripts and how to find them

Can you think of a belief you have that’s pre-written by your societal values?

For example, in Indian culture, parents will sacrifice virtually everything for their child to succeed. I remember watching a Bollywood movie with my mom (because I’m a great son) and watching a scene where the poor parents give their only air conditioning unit to their son while he studies.

In the movie, young Indian men put aside their “passions” for a stable job, which they can use to support their families. They have little interaction with women before marriage. Anything non-engineering/medical is looked down upon.

We all nod at this saying, “Ah yes, those passionless Indian automatons.” That is until we look at ourselves in the mirror.

Think about some of the biggest ones you might have heard:

• You need to go to college to be successful.
• After college, you need to get married, buy a house, and raise a nuclear family with 2.5 kids and a dog.
• You need to find a 9-to-5 job and grind away in an office until it’s time to retire.

See what I mean? They’re called “invisible scripts” for a reason — and if you don’t realize they’re there or ignore them, they become traps ensnaring you into something you didn’t necessarily even want to do just because you thought you had to.

They’re usually so subtle they’ll pass through your mind completely undetected — all the while influencing what you think, say, and do. That’s what makes them so dangerous.

And invisible scripts don’t have to be “negative” or “false” either. In fact, there are some that you might really believe in even after realizing that they’re invisible scripts.

That’s okay as long as you realize any invisible script you adopt has the power to shape your life tremendously — especially when it comes to money. Over time, certain negative scripts become traps, and their power to hold you back increases significantly.

After years of research, and hundreds of thousands of data points from talking to readers like you, I’ve discovered four specific invisible scripts that most frequently hold us back from a Rich Life. I want to show you them now and give you strategies for destroying them one-by-one.

Invisible script #1: “I don’t have any money so I can’t go to college.”

A while back, I started watching the show “Friday Night Lights.” As someone who hates sports, doesn’t even know what sports season it is, and STILL doesn’t understand how football is scored, I am impressed with myself for watching this show.

Anyway, it depicts a small Texas town and its love of football. True to form, I ignore the football parts and focus on analyzing the meta-messages. I know, I am really fun at parties.

“Friday Night Lights” explained a lot of things that have puzzled me about American culture. For example, in one episode, the dad spends his daughter’s college money, prompting her to say, “Now I can’t go to college!”

I was confused. Huh? You don’t have money saved, so you can’t afford college? What?

Unfortunately, this is what most Americans believe: That if you don’t have money, you can’t go to college. This belief is reflected in our culture (TV shows), our educational system (high school counselors), and even our businesses (banks that promote 529s with fear tactics).

Of course, it’s simply not true. If you don’t have money, you can still go to college if you know where to look.

SOLUTION: Apply for scholarships, loans, and grants.

My family didn’t have a lot of money when I grew up, and I went to one of the top universities in the country via scholarships (how I won $100,000+ of scholarships). But even if I hadn’t done that, there were still MANY options:

• Student loans (no, they are not uniformly evil, despite what everybody says)
• Grants
• Work-study/part-time job, etc.

In fact, the cultural script of “No money = no college” is even more absurd when you actually know how college admissions and financial aid work. If you are poor — but you’re skilled enough to get admissions — most top universities will pay for your entire education. This is why you should apply to the best universities you can, regardless of money.

Yet “Friday Night Lights” reflects our cultural values, which are so deep-seated that we don’t even blink. No money = no college. Of course!

But that’s just an assumption — like so many of the invisible scripts that guide our lives.

Invisible script #2: “I need to ‘figure things out’ before I decide to earn more money.”

We think more information alone will change everything.

It’s human nature. Think about the people in your life (it could be you!) who obsessively research a product before buying it, or read thousands of articles on a hobby before picking it up … but never get to it because they’re so overwhelmed by information.

This is also called “paralysis by analysis.” And we even hear this invisible script from professors and so-called experts. “Give people information so they can make the right decision.”

We internalize the idea that information alone will help us make a change. So we start saying things like, “I need to do some research” or “I need to figure some things out before I start …”

The truth is if we wait on information alone we never take action to accomplish our goals. We already know what we need to do. Do you think that an overweight person doesn’t know they need to eat less and work out more? Do you think someone in debt doesn’t know they need to stop overspending?

When consuming more information doesn’t work, we shift our attention to new learning tactics. But there’s one thing we forget: By focusing on tactics, we’re still doing the same things we have been doing all this time.

What are we missing?

SOLUTION: Get out of “research mode” and take action.

The belief that we need more information prevents us from taking action and learning from real and painful mistakes.

As we get older, we stop exposing ourselves to areas like this where we might fail. Instead, we read blog after blog about the topic to give ourselves the feeling that we’re doing something.

So how do you finally get off the sidelines and take action?

I like to use a technique Jeff Bezos, CEO of Amazon, uses: Regret-Minimization Framework.

Whenever you come upon a task or a goal you want to accomplish, ask yourself, “Will I regret not trying this when I’m 80 years old?”

Top Performers know success isn’t just about tactics or more information. They don’t lean on the same “mental crutches” most people use. And neither should you.

Invisible script #3: “I don’t have a business idea.”

One of the best ways to increase your earning power is to start a side hustle. In my course, Earn1K, I’ve taught thousands of students how to successfully create a side income stream that brings in at least $1,000 per month (and often much more).

Still, one of the most common invisible scripts people fall into is “I don’t have a business idea.”

Usually, this psychological barrier comes in one of several varieties:

• “I have no idea what skills I have that people would pay for.”
• “I have lots of great ideas, but I’m not sure how to even start turning them into money.”
• “Every idea that I think of has already been done somewhere else. I need something ‘original.’”
• “I start idea after idea, but I never follow through. What should I do to stick with one idea?”

If you’ve ever tried to start a side business, then ran into one of these traps, you’re not alone. But how do you overcome them?

SOLUTION: Ask yourself the three questions.

There are three questions you can ask yourself that’ll give you great ideas for side hustles once you answer them.

They are:

1. What knowledge have I acquired? Major in Spanish? Great at woodworking? Are you an accomplished guitarist? People will pay you money for you to teach them those skills too.
2. What do I do on a Saturday morning? Great question to see what you’re passionate about. We all have things we love to do on Saturday mornings before everyone else is awake. Are you at the gym training? Reading dating advice blogs? Working on your car? These are all viable side hustles!
3. What challenges have I overcome? You can actually turn your most vulnerable and painful moments into a great freelancing gig. Did you struggle to lose weight for years before figuring out how to get in shape? Are you an introvert who’s learned to overcome shyness to be more sociable? Find an answer to this question and you’ll find a profitable idea.

Try answering those questions and come up with 15-20 answers. Once you do, you’ll have 15-20 side hustle ideas you can start today.

If you’re still struggling, below are my best resources on side hustles:

• How to find the best side hustle ideas
• How to earn extra money on the side
• How to make money online

Invisible script #4: “I’ll never get a raise/find a job in this economy!”

Ever since the 2008 housing crisis, it seems like the media is always telling us that we should feel lucky to have any job at all. And if you don’t have one, well you’re S.O.L.

Most of us accept this. We believe that companies don’t have money to give us a job or a raise. We believe that even asking for something like that will have you laughed out of a manager’s office.

And many fall prey to this for two reasons:

• It’s easier. If we accept that there’s a force out of our control (i.e., the economy) dictating whether or not we get a raise or a job, we feel much less pressure to put in the effort of making more money. We cocoon ourselves in it, hoping that we’ll somehow emerge on the other side as some kind of money-making butterfly — when that’s not the case.
• It appeals to the lowest common denominator. The mass media produces fear for the lowest common denominator. I don’t give a damn about them. I’m not writing this for people who are okay with their 3% cost-of-living raise and shuffle back to their cubicles, thankful they have a job at all.

The truth is there’s a lot companies don’t want you to know.

SOLUTION: Put yourself in the company’s shoes.

I’ve been on both sides of the negotiating table many times. I’ve negotiated my compensation as an employee and consultant, and I’ve had my staff negotiate against me.

Let me share the biggest insight from having those two very different perspectives: $5,000 means less to a company than it means to you.

Let’s assume your current salary is $60,000. That means your company is paying around $100,000 “fully loaded,” when they include taxes, health insurance, benefits, furniture, and everything else. And that’s just for junior people!

If your company employs 10+ people, they’re likely doing at least seven figures in revenue — often many, many times that. $5,000 is nothing to a large, medium, or even small company! They do not want to lose you over a few thousand dollars. That’s pocket change to them.

Companies spend an average of approximately $6,000 recruiting new college graduates. As you get more and more senior, that number increases. Factor in training and onboarding, and your company has already spent well over $10,000 just in hiring you.

Keeping their business running is far more important than counting pennies to them — and for most companies, that’s exactly what $5K or $10K is equivalent to.

Curious about the exact words to use when asking for a raise? Watch this video where I reveal the exact, word-for-word script.

Invisible scripts prevent us from earning more

Do you see the invisible scripts that guide our lives?

Here are some others:

• “I should follow my passions”
• “I should hook up with a lot of people before I settle down”
• “I work hard, so I deserve this nice apartment”
• “My kids should take care of themselves after they graduate from college”

Each of these scripts is so deeply embedded in our culture that we don’t realize they’re there. They prevent us from doing the things we love and living our Rich Life.

I’m not going to let that happen to you. To help, my team and I have worked on something for you:

The Ultimate Guide to Making Money

In it, 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 today. 

How to identify invisible scripts that control our lives is a post from: I Will Teach You To Be Rich.

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Find out how much car you can afford with 20/40/10 rule

Knowing how much car you can afford is the first step to buying one.

Also, water is wet.

If you’re confused about how much you should spend, don’t worry. Just use this rule-of-thumb: Spend no more than 10% of your gross monthly income on your car expenses. That includes things like the car payment, interest, insurance, and even gas.

Of course, the 10% rule isn’t exactly a one-size-fits-all solution. That’s why I want to take a deeper look at buying a car — and show you tactics to get the most out of your car negotiations.

• 20/4/10 rule for how much car you can afford
• A different look at buying a car
• Dos and Don’ts of car purchases
• How to buy the car you want with conscious spending
• Earn more money for your dream car

Find how much car you can afford with 20/4/10

I love financial back-of-the-napkin tricks. They can help you roughly answer hairy finance questions quickly so you don’t slave over calculations and waste time.

The 20/4/10 is a good example of one. It can help you get solid starting numbers to help your car buying decisions.

Here’s how it works:

• 20% down payment on the car.

• 4-year car loan or less.

• 10% or less of your gross monthly income goes towards car expenses including gas, insurance, DMV fees, repairs, parking/speeding tickets, and interest payments.

Imagine you want to purchase a new car for $30,000 and you earn roughly $50,000 a year. That means you need to put at most a down payment of $6,000 (20% of the cost) and spend no more than $417 a month (10% of your income) on expenses for it.

A different look at buying a car

It’s funny. People make a huge effort to save on things like clothes and eating out — but when it comes to BIG purchases like buying a house or a car, they make awful decisions and erase any savings they’ve made.

How many times have you seen someone sink a bunch of money into a flashy luxury car with with a bunch of unnecessary additions … only for them to end up trying to sell it with a few years?

What they fail to take into consideration is TIME. More specifically, how long you plan to keep the car before you sell it. It doesn’t matter how good of a deal you get on a new car. If you sell it after just a few years of owning it, you’ve lost money.

That’s why it’s important that you pick a reliable car, maintain it, and drive it for as long as humanly possible. It’s only when you finish paying off the car that the real savings start.

Also, by taking good care of your car over the long-term, you save even MORE money on it — and you’ll have a great car. And there are a few solid indicators to what makes a good car:

• Reliability. When I bought my car, above all, I wanted one that wouldn’t break down. I have enough stuff going on in my life, and I want to avoid repair issues that cost time and money as much as possible. Because this was a high priority, I was willing to pay more for it.

• A car you love. Long time readers know I’m a big fan of conscious spending (more on this later). For me, I knew I’d be driving the car for a long time, so I wanted to pick one I really enjoyed driving.

• Resale value. One of my friends bought a $20,000 luxury car, drove it for about seven years, and then sold it for 50% of the price. That means she got a fantastic deal.

• Insurance. The insurance rates for a new and used car can be pretty different. Even if they’re only slightly different (say, $50/month), that can add up over the years.

• Fuel efficiency. Gas prices seem to always be in a state of flux. Consider a fuel-efficient, or even hybrid, car. Gas mileage is an important factor in determining the long-term value of a car.

• Down payment. This is crucial. If you don’t have much money for the down payment, look to getting a used car. If you put down $0, your interest rate will be much higher. Don’t do this.
• Interest rate. The interest rate on your car loan depends on your credit score. That’s why you want to make sure your credit score is in top shape when you finally apply for the loan.

If you truly want to get the best deal out of your car purchase, you’re going to have to negotiate IWT style.

How to negotiate the price of your car

Negotiate mercilessly with dealers. And if you’re not willing to negotiate, learn how to.

I’ve never seen as many people make bad purchasing decisions as when they’re in a car dealer’s office. If you’re NOT there to play hardball, dealers are going to see that and take advantage of you. It’s their job to do that. And they have years of practice before you ever walk in the door.

Luckily, you have one powerful chip in your stack: the dealer’s quotas.

The best time to buy a car is in December. That’s the month when dealers all over the country are desperate to hit their annual quotas.

This gives you an advantage when you come in to negotiate a car in that month.

Here’s another tip: Have the dealers fight over you.

When I decided to get a car in my last year in college, I contacted over a dozen dealerships, told them exactly what kind of car I wanted, and said I’d go with the lowest price offered to me.

And guess what? The offers came in like an AVALANCHE. I remember brewing up a cup of tea, and watching my fax machine (Don’t make fun — this was a while ago!) light up as different car dealerships tried to convince me to buy from them. It resulted in a bidding war that led to me landing a car $2,000 under invoice.

Try that technique out for yourself. Also make sure you practice and study up for the negotiation. Here are some of my best resources about that:

• How to negotiate better than 99% of people

• The best time of year to buy a car

• Cost vs Value: Should you buy a new or a used car?

Also be sure to check out my video on buying a car below.

The dos and don’ts of buying a car

When you start your car buying journey, be sure to keep in mind my four dos and don’ts about buying a car:

DO buy for the long haul

A lot of people want to prioritize how a car looks over anything else. What color is it going to be? Two-door or four? Can a spoiler be too big?

Never.

But you should really prioritize getting a good, reliable car that you’ll be able to drive around for at least 10 years.

Why? Cars are a long-term investment. This isn’t like a pair of shoes you’re going to wear for a year or two before getting a new pair. A car costs a HUGE amount of money. You’re going to want to get one that lasts a why since it’s only going to get worse and less valuable over time.

Here’s a complicated graph explaining this.

DO find deals for graduates

Plenty of dealerships have great programs for recent grads looking for new cars. These often come in the form of rebates or specialty financing.

Two ways to find these deals:

• Google it. This should really be the first step to anything. Do a simple Google search for recent-graduate car incentive program. Actually, I’ll just do it for you. You’ll also want to specify your city to see your local deals.
• Ask the dealer. When you’re negotiating with your dealership, be sure to ask them what they offer in the way of new graduate car incentives.

DON’T think you need a used car

Buying used isn’t the only way to save money on a car. Over the long term, a new car might actually end up saving you money if you:

1. Pick the right new car
2. Negotiate a low price
3. Drive it for a long time

I’d rather you get a new car that’s reliable than purchasing a used car that’ll break down sooner.

DON’T break from your budget

Set a realistic goal budget for your car and don’t go over it. Other expenses will come up — maybe car related, maybe not. You don’t want to end up struggling because you can’t afford your monthly car payment.

You don’t have to worry about stretching, though, if you have one thing in place: A Conscious Spending Plan.

How to save money for a car

You can make sure you have even more money to get the car of your dreams by implementing a Conscious Spending Plan.

The typical way people look at saving money for a big purchase like a car typically goes like this:

• Step 1: Stop purchasing the things we love like lattes to save money.

• Step 2: Spend money anyway on other things.

• Step 3: Go back to buying lattes.
• Step 4: Feel bad. Repeat first step.

That’s where the Conscious Spending Plan comes in. This is the exact same system my friend has used to spend five grand a year on shoes.

I can feel your eye-rolling judgement through the computer screen now. How can anyone in their right mind spend so much on shoes each year?

Well consider this:

1. She makes a healthy salary.
2. She doesn’t spend much on other things.
3. She has a system in place that allows her to know exactly how much she can spend each month.

But most importantly: She just LOVES shoes.

And her system allows her to buy 10 to 15 pairs of shoes each month — each of them costing around $300 – $500 a pair.

After investing in her 401k and paying off her fixed monthly payments like rent and utilities, why wouldn’t she use her money to buy the things she loves?

You can use the same system to buy a car. Imagine being able to walk into the dealer and driving off the lot in the car of your dreams, resting easy in the fact that you were able to pay for it.

That’s why I want to offer you a free chapter of my New York Times best-selling book I Will Teach You To Be Rich.

In it, you’ll find the exact system you can use that’ll help you both earn more money and start saving for an awesome car.

Enter your information below and get the chapter for free today.

Find out how much car you can afford with 20/40/10 rule is a post from: I Will Teach You To Be Rich.

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How to Save a Down payment For a House

When it comes to buying your first home, the first thing many people focus on is saving their downpayment. While this is not the largest financial burden of ownership, it is the first big hurdle you need to clear. Figuring out how to save a down payment can be challenging. Before we jump into it, I want to point out that renting is totally cool. It will often even give you more money in the end than buying. However, there are a lot of non-financial considerations that make home ownership a goal for many. There’s nothing wrong with that either. Whether you choose to rent or buy is entirely up to you! RELATED: Should You Rent or Buy? If you are leaning towards buying over renting, you’re going to need to figure out how to save a down payment. Here’s why and how to do so. How much do you […]

The post How to Save a Down payment For a House appeared first on Money After Graduation.

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Why New Year’s resolutions fail

New Year’s resolutions are kind of like a drunk uncle. You know you shouldn’t take him too seriously … but you can’t help but laugh and play along when he comes around once a year.

It’s become popular for people to make fun of New Year’s resolutions (they never work!) in an almost gleeful way (why don’t these fake January people get out of my gym??), but few people understand WHY these resolutions don’t work.

The reason is simple: They’re too broad.

When we have a goal like “I want to get healthy,” we set ourselves up for failure because we don’t know where to start.

I know because I used to do the same thing. Back when I was first growing my business, I was in the middle of writing my book and just feeling overwhelmed.

One of my friends asked me, “What’s your number one goal?”

I told him, “I want to be a best-seller, but I also want to generate $X million in revenue and I want to do this publicity and blah blah blah —” He cut me off and said, “Cut the BS. What’s your number one goal?”

Again, I hedged. But he pushed me and forced me to get crisp. Finally, I said, “I want this book to be a New York Times best-seller.”

There it was. We hate giving ourselves constraints because it feels limiting. It feels like we’re giving something up, and that’s exactly what it felt like in that moment.

However, it’s also freeing at the same time. Once I actually said that I wanted to become a New York Times bestselling author out loud, it became crystal clear what I needed to do in order to achieve my goal. I focused all of my attention on those things.

If you want to become successful — in any area of your life — you have to have that kind of focus.

I want to show you how to set goals that’ll give you focus. At IWT, we have THOUSANDS of students who have had their lives changed because we showed them how to set good goals. We know the exact systems to do this and now we want to show you how.

Why New Year’s resolutions fail

A while back, I asked some of my students how they felt after claiming they were going to do something … and then NOT doing it.

I wasn’t surprised at all. While researching one of my courses, I discovered that we would rather continue doing something that doesn’t work than try something new that COULD work — but also could fail. In other words, we’d rather KNOW we’ll fail in a familiar way than fail in a new way.

That sounds insane … but think back to your resolutions from last January. Did you follow through? Do you even remember what they were? Yet how many of us were tempted to make more resolutions this year?

Three more examples:

SAVING ON POINTLESS EXPENDITURES: This is why you see people constantly trying to cut back on lattes or other pointless savings goals … and when it fails, they resolve to “try harder” next time. Code words: “I did all the right things … and look how it turned out.”

WORKING OUT INCORRECTLY: This is also why you see people who’ve been working out for years but don’t really show any visible changes. It’s scary for them to admit that perhaps they’ve been working out wrong for years — and that while it makes them feel “good,” they are not getting the results they want. Code words: “I’m not the kind of person who can lose that kind of weight” or “Lift weights? I’m a girl. I don’t want to get huge!”

SENDING OUT 100+ RESUMES: We have people who send out 100 resumes, then complain about the economy. They never understand that there’s an entire game being played around them, and Top Performers are snatching the best jobs away before average candidates ever see them. Code words: “The Baby Boomers and immigrants stole my jobs … I guess I just need to send out another 50 resumes and wait and see.”

So yes, we want to change, but don’t know HOW to do it. So we do what’s easy, and what the media tells us to do: Make a New Year’s resolution!

Here’s why New Year’s resolutions fail:

• They’re unspecific. We say “I want to get healthy this year” but when faced with the birthday parties in March, the overtime in June, and the family vacation in August, that goal falls by the wayside.
• They’re unrealistic. “I want to go the gym 5x/week.” Really? You averaged twice a month last year. Setting unrealistic, highly aspirational goals is a quick way to guilt and failure.
• They’re based on willpower, not systems. We say, “I want to walk more” instead of parking our car 10 minutes away. We say, “I want to stop messing around and go to sleep earlier” instead of testing different ways of falling asleep (like leaving our laptop in the other room, unplugging our TV, quietly covering our partner’s face with a pillow, etc.). Hey, it’s a test.

But here’s the most haunting part of all: Failing at our resolutions has implications. We start to distrust ourselves. If you’ve set the same resolutions for 5 years, and you never follow through, what makes you think you’ll be different this year?

And yet every year, we set yet another one (because that’s all we know), saying things like, “Ok, this year I’m going to buckle down” and “I’m gonna get serious about ____ this time,” but as we say it, in the back of our heads we KNOW we’re not actually going to do it.

Having a goal isn’t enough. We need a plan and a system.

Enter the SMART Objective.

SMART Objectives: The cure to inferior goals

The SMART goal is the be-all, end-all solution to vague goals that get you nowhere.

SMART stands for specific, measurable, attainable, relevant, and time-oriented. And with each element in SMART objectives, you’re going to want to ask yourself a set of questions that’ll help you develop a winning goal.

• Specific. What will my goal achieve? What is the precise outcome I’m looking for?
• Measurable. How will I know when I’ve accomplished the goal? What does success look like?
• Attainable. Are there resources I need to achieve the goal? What are those resources? (e.g., gym membership, bank account, new clothes, etc.)
• Relevant. Why am I doing this? Do I really WANT to do this? Is it a priority in my life right now?
• Time-oriented. What is the deadline? Will I know in a few weeks if I’m on the right track?

Let me show you the difference between SMART and BAD goals:

I asked some students to share their goals for the week:

These seem like good goals, but they are actually terrible.

Then I gave them some feedback, and they got much better after that.

These new goals work because they employ the SMART Objective. Here, let’s break one down:

You can see how being specific, being realistic, and using systems can help you actually achieve your goals.

If you want to improve your health or find a job that pays you 25% more, hope and willpower aren’t going to cut it. Just like they didn’t cut it last year. Or the year before.

You need a system. Let’s practice building that today.

TO DO TODAY:

I want you to set a SMART Objective for something you want to accomplish THIS WEEK — and then I want you to do it.

You can start by turning a crappy goal you already have into a good one. Here are some more examples of this:

BAD GOAL: I want to be fit.

SMART GOAL: I’m going to run for 15 minutes a day for the next 3 months.

###

BAD GOAL: I want an internship that’s rewarding.

SMART GOAL: I want to intern at an independent publishing house focused on fiction in San Francisco this summer.

###

BAD GOAL: I want to be rich.

SMART GOAL: I’m going to invest 5% of my paycheck into a low-cost, diversified index fund every single month.

###

Do you see the difference between the SMART goals and the bad, vague ones? When you get specific, you know exactly what you want and the measure by which you can achieve it.

Become a Top Performer

To be a Top Performer, you need to be able to set successful goals and establish good habits.

After all, successful people don’t just stew in their guilt. They systematically attack it and identify winning habits to avoid it in the future.

That’s why my team and I created the Ultimate Guide to Habits. In it you’ll learn:

• How to set goals — the RIGHT way. Most people don’t know how to set good goals. They just think of something they want and then start “trying” to make it happen. When they don’t get what they want, they’re left wondering what went wrong. I’ll teach you the best way to set and reach your goals.
• Creating a functional habit loop. Have you ever wondered why it’s so tough to make little changes in your life? And why some people seem to be able to do it with ease? I’ll teach you a simple system that makes forming and keeping new habits effortless.
• How to make any habit last forever. Most are often left wondering, “Why did I lose my motivation?” I’ll teach you why relying on motivation is a loser’s game — and what to do if you ever get off track.

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Why New Year’s resolutions fail is a post from: I Will Teach You To Be Rich.

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Roth IRA vs CD: Which investment is best for you?

I got a great question from a reader named Sherene a while back asking about which was better: Roth IRAs vs CDs? She wrote:

“I am a recent college graduate and I want to put the little money I have saved (approx $3,000) into something that will give me good returns over the years. Would you suggest I get CDs or a Roth IRA?”

My answer: They’re not mutually exclusive. Roth IRAs are a type of investment account and CDs are simply a type of investment. You can have both!

A quick overview of each:

1. CD: These are a type of investment known as time deposits. This means you essentially loan money to a bank for a set period of time and when that time is done, they’ll give you your money back plus interest. This makes them very low risk.
2. Roth IRA: This is an investment account with significant tax advantages. It allows you to invest in funds of your choosing and accumulate money for retirement age.

Whether or not you choose to invest in CDs all depends on what your goals are. Let’s take a look at the two investments and how you can get started with them should you choose.

• Roth IRA: An account everyone should have
• CDs: What the heck are they?
• IRAs vs CDs: Choose both!
• Diversification and YOU
• Make the smartest investment today

Roth IRA: An account EVERYONE should have

The Roth IRA is one of the best investments you can make as a young person. It’s simply the best deal I’ve found for long-term investing.

It works a lot like a 401k, which leverages pre-tax dollars to invest and you pay income tax when you withdraw the money at retirement.

Unlike a 401k though, a Roth IRA uses your after-tax money to invest, giving you an even better deal.

Here’s how it works: When you make money every year, you have to pay taxes on it. With a Roth, you take this after-tax money, invest it, and pay no taxes on any gains when you withdraw it. That means you can put already taxed income into bonds, index funds, or whatever else into the account, allowing it to accrue compounded interest over time.

If Roth IRAs had been around in 1970 and you’d invested $10,000 in Southwest Airlines, you’d only have had to pay taxes on the principal amount. When you withdrew the money 30 years later, you wouldn’t have to pay any taxes on it…

…which is good because that $10,000 would have turned into $10 MILLION.

That’s why Sherene’s greatest advantage is time. If the market dips slightly, Sherene has nothing to worry about because she knows it will, in the greatest likelihood, bounce back.

The S&P 500 since 1950.

To recap: You pay taxes on the initial amount, but not the earnings. And over many years, that is a stunningly good deal.

How to open a Roth IRA account

If Sherene (or you) wants to open up a Roth IRA, she’ll need to open up a brokerage account. There are plenty of great ones out there with fantastic customer service and fiduciaries ready to guide and answer any questions you might have about your investments.

Other factors you want to consider when looking at brokers:

• Minimum investment fees. Some brokers require you to invest a minimum amount in order to open and hold an account. This can be a deal breaker for many.
• Investment options. All brokers differ in what they’ll offer in the way of investments. Some have funds that perform better than others.
• Transaction fees. A few brokers charge you a transaction fee in order to put money in an investment.

A few brokers I suggest: Charles Schwab, Vanguard, and E*TRADE.

Not only do those three provide a great customer support line, but they also have small or no minimum investment fees and are known for their great stock options.

How much can I invest?

Currently, there’s a yearly maximum investment of $5,500 to a Roth. However, this amount changes often, so be sure to check out the IRS contribution limits page to keep updated.

Once your account is set up, your money will just be sitting there. You need to do things then:

1. First, set up an automatic payment plan (which we’ll explain how to do later) so you’re automatically depositing money into your Roth account.
2. Second, decide where to invest the money in your Roth account; technically you can invest in stocks, index funds, mutual funds, whatever. But I suggest investing your money in a low-cost, diversified portfolio that includes index funds, such as the S&P 500. The S&P 500 averages a return of 10% and is managed with barely any fees.

For more, read my introductory article on stocks and bonds to gain a better understanding of your options. I also created a two-minute video that’ll show you exactly how to choose a Roth IRA. Check it out below.

When can I take my money out?

Like your 401k, you’re expected to treat this as a long-term investment vehicle. You are penalized if you withdraw your earnings before you’re 59 ½ years old.

You can, however, withdraw your principal, or the amount you actually invested from your pocket, at any time, penalty-free (most people don’t know this).

There are also exceptions for down payments on a home, funding education for you/partner/children/grandchildren, and some other emergency reasons.

But it’s still a fantastic investment to make — especially when you do it early. After all, the sooner you can invest, the more money your investment will accrue.

To quickly recap:

• Roth IRA = Investment account
• CD = A thing you can invest in

But should you put money in CDs at all?

CDs: What the heck are they?

A CD, or certificate of deposit, is a low-risk financial investment offered by banks. If you invest in a CD, you loan money to a bank for a fixed time known as a term length (typically anywhere between three months to five years). In this time, you can’t withdraw your investment without being penalized. However, you are accruing money at a fixed rate.

Your interest rate on a CD varies depending on the length you agree to keep your money in the bank (the longer you keep it there, the more money you earn). But you are all but assured that money when the term length is up.

Another reason why they’re so risk-free: CDs are typically insured by the FDIC up to $250,000. That means if you put $100,000 into a CD and accrued $5,000 in interest, your $105,000 would be insured if your bank fails.

That makes CDs an incredibly safe investment.

Who should invest in them?

Older people typically invest in CDs due to their aversion to risk. However, there are several factors to consider if you’re wondering if you should invest in a CD:

• Length of investment. Can you part with the money during the full term length?
• How aggressive you want to be. Do you have more wiggle room to invest in riskier funds or do you just want to play it safe?
• Inflation. As of writing this, the inflation rate sits at 2.2%. That percentage is also on the high end for most annual percentage yields for CDs, which are typically anywhere between 1% to 2% for a 5-year bond. This means you could actually lose money when you factor in inflation with CDs.

CDs are a safe investment. If you value security and peace of mind over taking a few more risks for potentially higher gains, you might just want to put your money to work in a CD. Also, bonds like CDs can be used for short-term goals such as buying a house or putting more money into your emergency fund.

Getting the most out of your CDs through laddering

To optimize your CDs, it’s a good idea to build a CD ladder — no carpentry skills required.

The idea is simple: Open several CDs with different term lengths. Everytime the term length is finished, you can either reinvest the money or take it out of the CD.  

Let’s take a look at an example: Imagine you have $10,000. To build your ladder, you invest four ways: three-month, six-month, nine-month, and one-year CDs with $2,500 in each. As the term for each CD goes up, you can reinvest your earnings in a new one-year CD or just liquidate the money.

This gives you access to the principal every three months along with interest. Doing this provides you with a low-risk investment that provides a higher return rate than if you just kept it as liquid cash. It also keeps your money relatively accessible.

IRAs vs CDs: How to choose both

If saving for retirement via an extremely low-risk asset sounds appealing, you can invest in a CD IRA.

And it’s exactly what it sounds like: A CD within an IRA. They work like any other investment in it as well. You simply go to your broker where you have your Roth or traditional IRA and purchase a CD as part of your portfolio.

These are great for very conservative investors. So if you’re older and just want to make sure your money is best positioned for when you need it, a CD IRA is the way to go.

If you’re younger though, I wouldn’t suggest investing this way. When your CD is in an IRA, your money is essentially shut off to you in two ways:

1. Penalties for when you withdraw money from your Roth IRA too early.
2. The CD’s term length.

So if you’re not close to retiring and can still sustain the risk, I suggest you invest more aggressively in stocks.

Diversification and YOU

A 1991 study discovered that 91.5% of the results from long-term portfolio performance came from how the investments were allocated. This means that asset allocation is CRUCIAL to how your portfolio performs.

Here’s what my portfolio looks like:

If you bought all different kinds of stocks or stock funds, you’d be diversified — but still only in stocks. That’s like being the hottest person in Friendship, Wisconsin. It’s better than not being hot, but not going to get you cast in the next season of “The Bachelor.”

It is important to diversify within stocks, but it’s even more important to allocate across the different asset classes, the major ones being:

• Stocks and mutual funds (“equities”). When you own a company’s stock, you own part of that company. These are generally considered to be “riskier” because they can grow or shrink quickly. You can diversify that risk by owning mutual funds, which are essentially baskets of stocks.
• 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. These are generally considered “safer” because they have a fixed (if modest) rate of return.
• Cash. This includes liquid money and the money that you have in your checking and savings accounts.

Investing in only one category is dangerous over the long term. This is where the all-important concept of asset allocation comes into play.

Remember it like this: Diversification is D for going deep into a category (e.g., stocks have large-cap stocks, mid-cap stocks, small-cap stocks, and international stocks).

Asset allocation is A for going across all categories (e.g., stocks, bonds, and cash).

When determining where to allocate your assets, one of the most important considerations is the returns each category offers. Of course, based on the different types of investments you make, you can expect different returns. Higher risk generally equals higher potential for reward.

The fact that performance varies so much in every asset class means two things:

1. If you’re investing to make money fast, you’re probably going to lose. This is because you have no idea what will happen in the near future. Anyone who tells you they do is lying.
2. You should own a variety of assets in your portfolio. If you put all your money in U.S. small-cap stocks and they don’t perform well for a decade, that would really suck. Instead, if you owned small-cap, large-cap, with a variety of bonds, you’re more insured against one investment dragging you down.

You don’t want to keep all your investments in one basket. Keep your asset allocation in check by buying different types of stocks and funds to have a balanced portfolio — and then further diversifying in each of those asset classes.

For more information, check out my article on diversified portfolios.

Make the smartest investment today

There’s no one-size-fits-all solution.

Some people are going to have a diversified portfolio of index funds and never touch it. Others might want to put more money into the market and more actively handle their funds. There’s no right or wrong answer to how you do things. The choice is up to you.

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Roth IRA vs CD: Which investment is best for you? is a post from: I Will Teach You To Be Rich.

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