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Commentary: Last part of keys to money mastery

Commentary: Last part of keys to money mastery
April 26
10:02 2018

April is coming to close, soon National Financial Literacy Month will be in our rear view mirror, but hopefully this series has provided you with sustainable ideas that can help you discover how to manage money and build wealth. My final installment will delve into the myriad of ways that you can unlock the power of money.

Money has a natural ability to grow and expand, but just as you carefully nurture plants through growth, your money requires a healthy environment. However, there are many structural barriers that you must conquer before you can turn your money loose to multiply.

For example, you will need to accept personal responsibility for making good choices with your money, develop a clear plan, and you must shake off any debt vampires that may be sucking the power out of your money – everything I’ve shared throughout April must be the focus before you can put your money to work.

If you happen to be at a point in your financial health where you have completed those items, then you’re in a highly coveted position of being ready to flex your financial strength. When you invest your discretionary income or in other words the money left over after you pay the most important monthly bills, then your money will actually start to work for you and generate wealth.

So if you’re unclear how to invest your money, here are some ideas to get you started:

1. Ignore hot trends – your brother, cousin, and neighbor will all give you advice on where to invest your money. Unless their name happens to be Warren Buffet, then you can save time and money by ignoring them. Not to mention resist the urge to jump on the bandwagon of the latest and hottest asset class. Years ago everyone was buying public shares in technology start-ups, then gold, now crypto currency – all proved to be highly volatile investments that can wipe out an amateur investor’s portfolio. Do your own research.

2. Focus on the future – establish clear goals for why you want to build wealth. Whether it’s paying for college, buying a home, starting a new business, or retiring; goals keep us mentally focused on future outcomes. Long-term goals will also help you not to panic when your investments experience short-term losses because you are more focused on the big picture. Likewise large short-term profits must not entice you to over load your investment in one category or another. Diversification is good for the long haul.

3. Leverage dollar cost averaging – an investment technique of buying a fixed dollar amount of a particular stock on a regular schedule, regardless of the current share price. You will automatically build a larger investment position over time because you will gain more shares when prices are low. Great strategy for smaller investors just getting started.

4. Buy bonds – many investors simply focus on stocks, which are perfect for a growth oriented investment strategy. Bonds, on the other hand, generate consistent income for your portfolio, but at lower and safer investment returns. Appropriate solution for older investors.

5. Invest in Real Estate – this asset class is highly illiquid and not as transparent as stocks and bonds. Publicly traded securities are required to provide a wide range of financial disclosures to aid investors with vetting the opportunity. However, real estate is mostly local and requires unique market insight for an investor to make a decision. These barriers combined with the asset class being capital intensive often prevent average investors from considering these opportunities. But real estate happens to provide investors with the best of both worlds – the asset delivers growth and income to a portfolio.

6. Start your Own Business – one of the most powerful ways to build wealth is to start your own business. It takes great courage to move from investing in other people’s dreams to investing in your own. Not to mention the process is a highly risky, but it also is one of the most rewarding. Building a successful enterprise that operates even when you’re not there is truly an effective way to put your money to work. Entrepreneurship builds generational wealth.

Education is the great equalizer and that’s why financial literacy is critically important to the success of any individual. You may not have the best job or be the savviest investor, but through continuous education you can learn how to manage money and build wealth. Make your financial health a top priority.

Contact me directly with any questions, comments, and ideas. Good luck!

Algenon Cash is a nationally recognized speaker and the managing director of Wharton Gladden & Company, an investment banking firm. Reach him at acash@nullalgenoncash.com

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