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If you stick to the idea of using your own earned income to invest with, you will hit that wall.
I found it was much easier to invest using OPM [Other People's Money].
As a servicemember my earned income has never been much. It was enough to buy a Tri-plex property and get 2 renters. We had enough rental income to pay the mortgage, insurance, taxes, and upkeep. Then at our next duty station we bought a Five-plex to live in. At the following duty station we got another Tri-plex. Then at the duty station after that we got a Four-plex.
The most we ever paid at closing to purchase any of these properties was $6,000.
The real 'trick' to building equity was to make monthly principal-only payments.
If you calculate your Net Worth every year, with standard mortgage payments your equity grows very slowly. But if you can put $200/month against the principal, you will see that your Net Worth grows at a much faster pace.
(1) Sure, like there is an ocean of OPM lying around...
(2) Beats the pants off calculating your net worth every year, with standard rent payments your equity grows at the rate of ugatz.
no time frame stands alone when it comes to investing . folks always say the 1980's was the greatest time to be invested .
yeah , it was but don't forget things have a way of working out where you never really benefit from it .
the time frame leading up to the great bull market was terrible . we had inflation eating us alive , dead markets and a crippled bond market so very few of us had any money invested .
not only that but 401k's didn't even exist .
so here comes the greatest bull market in history and few of us had any money to take advantage so basically we started from dollar 1 .
by the time we got to 2000 and managed to get any money saved BOOM . that money hit a brick well and for the last 15 years that older money barely beat out inflation .
new money did very well but what ever you accumulated from the 1980's saw only about an average of a 2% real return on it the last almost 17 years .
if i fell a sleep back in 2000 after looking at my existing balance and woke up today and looked again , that balance would be so far below my expectations over those 17 years i would be like what the heck happened to my projected growth .
where you stand when your fuel tanks are full is where the markets will have the greatest effect .
right now a mere 7% drop which is not much wipes out 9 years of maxing out my 401k at catch up .
those just coming on board with their 401k's may not even see a months worth of dollars in damage
so the point is over the 30-40 years we have in the accumulation stage things seem to level out like water eventually and no matter how we start out or how markets end up we seem to be in a tight range at the end of the day .
And I put some money in every month just in case, but I'm not going to expect 6% of my average middle class salary to turn into a million bucks when I'm 50.
i didn't expect it either , but despite the crashes , recessions and black swans what little money i did manage to save early on and eventually maxing out my 401k after the kids were out grew over the decades to that million . i started saving as a teenager . while it took me until age 50 to hit that first million , having money to invest in bigger real estate deals had us tripling it in about 13 years with the bulk of the taxes on the real estate already taken out and paid . .
but we did not own a house the last 15 years except for a 5 year stint with a 2nd home . so any money we did not tie up in a home was available to us for investing in much more lucrative deals . that let us enter some deals we would have been locked out of had we had the money tied up in a house .
i could never afford nor would i have taken equity loans for the open ended ventures we did so that liquidity we had was a big plus . .
Last edited by mathjak107; 10-08-2016 at 08:54 AM..
You've just paid the rent or the mortgage, the utilities, the car insurance, bought some gas (not enough to get you to work for the whole month) and some food (not enough to see you through the month), and you have $4 left in cash. And you need clothes, a haircut, shoes for the kids, etc, etc
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That's your first mistake friend. You are trying to pay yourself last, instead of first. Always, always pay yourself (savings/invest) FIRST!!!!!......
I predict that anyone who pays for their clothing, haircuts, and shoes for the kids before they pay for their mortgage (or rent) and gas to get to work is going to run into some difficulties in their life caused by poor budgeting.
If there isn't enough money to pay all the expenses, there are two options: increase income or reduce expenses.
Your SS check doesn't take into consideration cost of living differences throughout the US.
My SS is worth nearly 50% more in the state I moved to compared to the state I came from.
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