- I've made such a huge mistake with how I've invested
my money up until this point.
Oh my goodness, what happened?
I hopped on YouTube one day 30 years ago
and I watched a video by this guy named Jarrad.
I remember him specifically so well
because he wouldn't shut up about his name being spelled
with an A, and something about Hulk Smash-ing
that thumbs up button in all of his videos.
He also kept calling his viewers Money Nerds
like it was some sort of term of endearment.
(affected voice) Ugh, I was so offended and so triggered.
(normal voice) But this Jarrad bro on YouTube
kept telling me how I should be trying to invest
an outrageous amount of money, like 40 and 50% of my income,
no matter how old I was.
(affected voice) Oh my gosh, but you didn't do it, did you?
(normal voice) Well get this, so I did exactly what he said
and now I have a ton of money through the growth
of all of my investments.
I mean, way more than most people.
I almost feel like I invested too much.
It stinks because I can't turn back time
and invest less now.
Said no one ever.
I've never met a person who told me that they invested
too much for their future, and that this pile of money
that they have now, ugh, it's such a burden.
This is a special one because I'm gonna spend
the whole time going through how to invest your money
this year, so that you become one of those
"poor little millionaires who accidentally"
invested way too much money for the future.
Hey Money Nerds, I'm Jarrad with an A,
and on this channel, we talk about all things
p-p-personal finance, investing,
and we try to have some fun in the process.
The first way to invest your money this year
is to, wait for it, actually invest your money.
Whoa, whoa, whoa, everybody settle down.
Go find your safe spaces, because I know
it's kind of insane to say that.
I hate hearing people say that they're holding onto cash
instead of investing, because they claim that the market
is too high and they're waiting for stocks
to, of course, go on sale, just like everybody else.
Yes, the market is at all time highs,
but it's also been at all time highs many, many times
over the past 30 years.
So should you not have invested
at any of those points in the past?
The problem is that no one knows
when it's actually gonna go down,
and it's funny because the people who say this
don't even have a number in mind
for what they would consider an amount
that makes it technically on sale.
They just parrot what everyone else says and they say,
(affected voice) "Oh, I'm just gonna hold onto all my cash
"and wait so I can buy so much
"when it's at its lowest point."
(normal voice) Well, what its lowest point?
100 points down, 200 points down,
1000 points down, 5000 points down?
You don't even know.
Even if they did, I bet they'd get cold feet
once it hit that "sale amount" because the natural
human thought is that it can always go lower.
Here's a tip for you: if you don't need the money
for 10 or 20+ years, then who really cares what it does
within a 24 hour period, a one year period,
or even a five year period?
It is a moot point that is losing you money.
I'm gonna do a quick public call out/shaming
of one of my best friends, his name is Deke,
because he fell victim to this all last year
and I've had the pleasure of getting a chance
to utter the words to him, "I told you so".
He had $6000 to max out his Roth IRA
at the beginning of 2019.
Now, I told him to deposit the money into his account
and invest it immediately.
He didn't do that at that point in time.
About once a month, throughout the rest of the year,
I said, "Deke, invest your money today.
"Deke, invest your money today."
And he didn't.
Fast forward to today, and he missed out
on the almost 30% gains we saw in 2019,
and now, he is kicking himself.
And even worse, he's still not investing
because now his baseline for what the price should be
is what it was back in the beginning of 2019.
There's a very small chance that he's going to see prices
drop back down to the levels that they were in early 2019.
But if he doesn't, when he finally decides to invest,
he's gonna feel like he's losing money
because he's naturally going to be comparing
all of those future prices
to that one point in time in early 2019.
He kinda psychologically screwed himself over.
Psychologists call this Loss Aversion,
and it causes people like my buddy Deke
to not invest at all.
It's where a person would rather not take a risk at all
if there's a chance that they'll possibly fail.
The American economist Richard Thaler once said that
more people make mistakes by not investing at all
than investing poorly.
The best way to avoid the trap Deke fell into
is to do what I do with investing.
Have a plan you set up ahead of time to automate
the whole decision making process for you.
Every month, I have $500 automatically transferred
from my bank account to my Roth IRA and N1 Finance
to be invested without having to do anything.
Being able to automate investing
is one of the main reasons that I highly recommend
N1 Finance for long-term investing.
If you wanna check them out, then I have a link
in the description to open up an account with them.
We need to take a second to pay homage
to the YouTube algorithm by Hulk Smash-ing
that thumbs up button.
Next, you need to start investing in a Roth IRA right meow.
I know there's a very low likelihood
that many of you are actually investing in one,
because as of 2017, only about one third of households
owned an individual retirement account.
Doing the math, that's only about 33% of you watching this.
We seriously cannot be friends if you don't have an IRA.
Everyone should have one of these for the sheer fact
that the money you invest will grow tax free for-e-ver.
That means that the government
can't get their grubby little fingers on that money
when they decide to increase tax rates in the future.
Side note, I can't see into the future
so I have no idea if they'll increase or not.
But if I was a betting man, which I'm not,
then I would guess that they definitely will.
Besides the fact that you can start withdrawing
your Roth money at the age of 59 and a half,
you can also withdraw any of your contributions
at any time without paying taxes or penalties.
To be clear, I don't think you should,
and this isn't something that I would ever
think about doing, but it's still an option
if you happen to get trampled by a herd of giraffes
and need money to clean off the hoof - hoof, hoof?
Hoof marks from your body.
T-t-today Jarrad, spit it out!
I will not stop talking about the importance of investing
in a Roth IRA until all of my subscribers have done this,
so go open one immediately after this video
so we can finally make our friendship Facebook official.
Or Instagram official because I just,
I wanna be friends with you!
So please open one up.
As I said before, I personally use N1 Finance
for my Roth IRA, but do not feel obligated to use them.
As long as you just start investing,
then honestly that is all that I care about.
In the comments below, let me know what your investment
of choice is for this year.
The next way to invest your money this year
is to pay a little extra towards your mortgage every month.
This never crossed my mind as something I would ever do
until a couple of months ago.
One of my buddies JJ, who is another YouTuber here
and makes personal finance and investing videos,
suddenly got laid off from his job.
Now he has a wife, a son and a baby on the way
that relies on him bringing in money every single month.
After he lost his job, he and his wife decided
that they wanted to pay off their mortgage early
to make them feel a lot more comfortable financially.
If I recall correctly, before this,
I don't think he was interested in paying it down early.
But after this life-changing event, he decided
that the peace of mind was way more important
than any higher return that he could get
by putting that extra money into something else.
For me, I still don't plan on paying off my mortgage early
for a couple reasons.
Number one, I have the luxury of a very low monthly payment
because when I bought the house that I live in,
I chose to spend below my means so I wasn't a slave
to those monthly payments.
I just don't buy things to impress people like you.
Now don't get me wrong, I like ya,
but I could care less what you think
about the home that I live in.
To me, all it is is a place that I eat,
a place that I sleep, a place that I work
and a place that I poop.
Other than that, it's just a pile of concrete and wood.
What do they always say?
"Home is where the heart is"?
(laughs)
It's so stupid.
Number two, no one else really relies on me at this point,
other than my dog Molly, and if it came down to,
"Hey, we have money for food and only one of us can eat",
she would definitely be eating first.
Now if I had a family, then I might possibly
change my tune completely.
But I can't say for sure unless I was in that situation.
But as long as I stick to my first rule
of buying a house below my means,
specifically well below my means,
then it still wouldn't matter whether or not
someone relied on my income.
The third reason that I have zero interest
in paying down my mortgage early is that,
if I did lose my job, then I have a large enough
emergency fund to get me by,
and I also have income back-up plans.
I've really thought about this and heck, I could go
serve tables at a restaurant and live the exact same
lifestyle that I'm living right now.
I mean, I did it for like, 16 years,
so I am not afraid to go back to that work if I need to.
Even though the numbers don't work out
when it comes to being able to get a higher return
by investing in something other than your mortgage pay down,
there's still nothing wrong with choosing this route.
The point of doing things with your money
is to make you feel comfortable at some point in the future.
If this does that for you, then don't apologize for it
and just do it.
To recap, paying down your mortgage early
has two main benefits.
The first return comes from
the money you're saving on interest.
No, it is usually not a super high amount,
since the rates are usually lower,
but it's still something.
And the second is an investment into your peace of mind
for the future.
Look around you for a minute.
Unless you're in a home that you actually own,
someone else owns the building that you're sitting in
right meow, and if they did it correctly,
they're profiting from it every single month.
I would say to start investing in real estate
or start moving towards investing in real estate
within the next couple of years.
If it were up to my buddy Bryce, who makes YouTube videos
where he talks about real estate investing,
then he would tell you to do it within the next six months.
Mind you, I have yet to invest in real estate,
and he has about 12 doors at this point,
so you might want to shoot for his six month suggestion.
But my plan is to invest in my first property in 2020,
so I'll get there, don't worry, Bryce.
Investing in something outside of the stock market
is a good way to diversify your investments
and overall net worth, and that's because home prices
and rental rates are not directly tied to the stock market,
so they will react completely differently from each other.
Physical real estate is one of those tried and true
wealth building machines that are very stable,
and just for the record, your personal residence
is not an investment.
That's because if you didn't run the numbers
like you were buying an investment from the beginning,
then you shouldn't consider it an investment.
You might've, I will say, lucked out
and it appreciated in value, but it's still
your personal residence period.
I've noticed that there's two main reasons
that most people don't invest in real estate.
The first is because it takes a large sum of capital
to purchase your first property,
and the second is basically just the general
lack of knowledge in the overall process.
In regards to learning the process,
there are a ton of resources out there,
like my buddy Bryce who talks about real estate investing
on his YouTube channel.
Link to check him out is in the description.
Now there's also a ton of books and courses
and even real estate investor meetups all over the country
to help you out with this type of thing.
If you are someone who is interested
in real estate investing but doesn't have any interest
in directly owning or managing the property,
then there's always crowd funded
real estate investing platforms out there.
You can do the same type of thing.
Now, I personally recommend and personally use Fundrise.
I just released a video about them a couple of weeks ago
that I'll link up down in the description.
Now, just to be transparent, there are some other
real estate investing platforms out there,
but after doing a deep dive, I would avoid all of them
at all costs and use Fundrise.
Forbes had an article about why real estate builds wealth
more consistently than other asset classes.
Each point individually makes it appealing,
but just like my favorite childhood show, Voltron,
when you start putting the pieces together,
you create an unstoppable, wealth building robot
that cannot be destroyed.
Shout out to Voltron, I loved that show.
Here are some of the ways
that it builds wealth more consistently.
First, cash flow.
That would consist of money you receive from tenants
after expenses were paid.
Number two, appreciation.
That's of course when the home increases in value
over time, due to market conditions.
Now this kind of thing is usually out of your control,
but it's still good for you if it happens.
Number three, depreciation.
This is usually a bad thing because it's associated
with cores going down in value.
But it's not a bad thing when it comes to being able
to write taxes off for your business expenses.
And remember, investing in real estate is a business,
so you could be able to use it to your advantage.
Number four is leverage.
Now some people think that this is a four letter curse word
but not real estate investors.
This is where you can purchase a large investment property
and only have to put down five to 20% of actual cash
to earn a return from the cash flow.
If you took out a $200000 mortgage, put $10000 down
and you earned $200 of cash flow every month,
then you'd have a 24% return on the actual $10000 in cash
that you invested.
Yeah, when I'm investing in the stock market,
I'm only expecting about a 7% return,
so a 24% return blows my mind.
Number five is loan pay down.
Tenants are paying down the mortgage for you
every single month while you're sitting back
on the beach double-fisting your skinny girl cosmopolitans
with little slices of fruit on the side of the glass
with no cares in the world.
Number six, forced equity.
This is when you purchase a property below market value,
do some upgrades like a kitchen upgrade
that maybe costs you, let's say $5000 out of pocket,
but increases the value of the home by $10000.
You just done did something smart
and forced additional equity in that property.
Spend $5000 on the upgrade
and get a $5000 return automatically.
I put together some videos here to your left
that would be perfect for you to watch next.
In the comments below,
let me know your investment of choice for this year.
In the description of this video, I have more resources
and playlists to help you out
with all of your personal finance and investing needs,
including the free investing platform guide
that I put together for you.
I'll see you in the next one, friends, adios!