Updated: Apr 27, 2021
Healthy living and being stress-free in part can relate to feeling financially successful and/or having financial freedom. A friend of mine shared a video with me on what is considered being successful in some countries and for the most part, it is being a doctor or perhaps a lawyer, and what I took from the video is what has been applied to my life for years via someone who most would look at like someone who may not be a very a smart woman because of her inability to speak or write in English as well as lack of further education.
To me, financial success did not mean being a doctor or lawyer. I know many in those roles that are currently in extreme debt. It means not living paycheck to paycheck, having multiple streams of income, and your income to debt ratio allowing you to have less debt and more income. I was taught early on to save and invest before spending. My mom always had an emergency fund in case of death, mainly in fear that she would need to bury my sister. We were in poverty and, she did work multiple jobs but, unlike me, she did not speak the English language and did not hold a GED or high school degree from the USA, let alone a driver's license. That same woman would turn $5 into $20 magically within seconds. I never understood how she did it because although we were struggling, she made sure we had the bills paid, clothing, food, and toys maybe, not brand-new ones but, we had imagination and knew what to do with it them.
My mom participated in this money pot lot with her family. The game was called “el san”. The San is a community savings system that is based on the contributions by quotas of those who are part of the community usually family members or close friends. These contributions are voluntary but based on a commitment that each member must fulfill in a specified period. For example, if we have five members participating and the set amount is $1000, each member would put $200 each month, and every month someone would get $1000. It was a way for each person to help each other out. I learned about it because she would give me the money to count and showed me where she would hide it in case of an emergency. If you think about this in a larger scheme it is very similar to the stock market. You would invest a certain amount and wait for growth or, another way to look at it is if you do a credit-building loan where you would report that you took $1000 to all three credit bureaus and each month pay it to the bank until they give you $1000.
I was lucky enough to learn how to handle finance by watching my mom and, I took personal finance as an elective in my freshman and sophomore of high school in Clifton high. I was taught how to use excel for budgeting but, I was never taught how to build credit. and my mom seemed completely against it. I remember going to a college fair where they had financial aid resources as well as bank companies ready to talk to students about the options they have. I decided to check what my credit score was to my surprise I was told I did not have bad credit, but I had no credit; I was confused. For some odd reason, I assumed I would have a score, and based on what I put on my name and how I paid for the items my score can go up or down. I was partially right but not very educated in what it meant to have credit and how to get it.
I started to apply for financial aid to support continuing my education and was discouraged by many, telling me not to open any credit cards. My first car a Mitsubishi 2001 was a gift my mother got me that she paid for in cash. It was only $2000. I later found myself a single mom looking to invest in property. I was around my early twenties, but I would get denied because I had no credit and no education as to what I was doing. I started doing research and applied for condo-style apartments where I can buy a property by paying rent but still was not eager to open any credit cards. I decided to get a used car for 12,000 via bank so that I can build credit using car property assets. I started to consider credit building and understanding what investments were. I took a first-time homeowner course, investment property classes, and stock market teaching workshops. The first thing I realized all these had in common was the difference between an investment asset and a liability investment.
So, what is an asset, and what is considered a liability? An asset is having something of value. Most business people will talk to you about a two-family home being an asset because you can live for free while your tenants pay your mortgage. One thing you need to keep in mind is the condition of the home and the people you are renting to because it can easily be a liability instead. Liability is the total opposite of something beneficial. Most people will discourage first-time homeowners from getting a one-family home right away because that can turn into a liability especially if you cannot keep up with the mortgage or if you go into a pricey home. I went the condo route first to grow equity and to give myself room for possible failure. If you are knowledgeable, I would say go for it but find a newer home, a new construction home or buy the land and build up. Do not buy an older home unless you are ok with investing money and time. A new roof is at least $20,000 you will end up living paycheck to paycheck. A newer home will allow you time while it increases in value based on the location and increases your equity which, helps you when refinancing for an even lower rate while you continue to build trust with the banks. If you can get a building with several apartments, you can build yourself a property monopoly. Keep in mind when investing in property add your cost correctly this includes mortgage, property tax (might not be included in the mortgage), property insurance, outside home expense, water, heat, electricity rather solar or not, and personal bills.
Around my mid to late twenties, I had already paid off my student loans. I was connecting with several real estate agents and, I met one that hounded me on getting at least two credit cards with only a 30% usage to increase my chances of getting a loan with a low-interest rate. I was sold on the idea of understanding how to use credit and getting money back. One benefit I saw right away was the banks constantly increasing the available credit. My score increased within a month by a little over 100 points.
The stock market can be a more risky but fun investment option. I use several apps, but my favorite so far is Robinhood. The way the stock market work is somewhat of thinking like a business person. You would buy a stock based on rather you think it will increase in value. I often tell people to make obvious investments such as Apple, Amazon, or Netflix and forget about it for a little bit. You can trade it out if you feel you might lose money, but it often goes up and down. Do not consume yourself in the stock market because if you invest large amounts and lose it, that can destroy a person to the point of suicide. It is an investment tool with somewhat of a gambling perspective because you do not know what will happen. I am more of an international investment advocate especially, with more people using tools such as Air B&B vs hotels or resorts while they vacation. It is a wise idea to invest in property in places like the Dominican Republic where tourism is huge, and people want to be among the locals.
Below are some tips and resources I recommend.
1. Get a mint account at mint.com – It is a one-stop-shop for savings, bills, investments, and spending. I love this because I sometimes file 1099 as a schedule c business.
2. Get 1 or 2 credit cards with a low-interest rate and no annual fee. Keep both between 10% - 30% usage.
3. Get a small installment loan via credit union bank which, reports to all three credit bureaus.
4. Use credit sites such as Myfico.com or Experian.com to monitor credit.
5. Speak with someone and have things in writing when disputing items for your credit reports.
6. Get a Savings account such as FNBO Direct.
7. If employed, match your retirement plan based on what percentage your employer contributes to.
8. 1099 folks who file taxes file always as a schedule C business.
9. Take workshops, classes, and training for home buying, investments, and financial success.
10. Use strategy when seeking financial freedom: Save 70%, Invest 20% Spend 10% does not need to be this exact percentage but something similar.
11. Seek for having multiple streams of income. You can have a full-time job and work as a contractor providing certain services.
12. Make your children authorized users on your credit cards to start building credit and teach them how to use it. (With this, I also say create them a savings account at birth – Set them up for success).