3 Critical Factors for Your Investing This Year

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Although the S&P 500 is still up almost 10% year to date, it’s dropped roughly 5.7% in the last month.

So as we approach 2019’s halfway mark, you might be feeling like things are turning a bit and it might not be another “sit back and relax” kind of year… one where things just keep going up on autopilot.

Well, here’s how I look at it…

What Can You Control?

As investors, we should always remember that we CAN’T control the markets, the Fed, geopolitics, or other big-picture forces affecting our portfolios.

At the same time, we CAN control what expectations we have as well as the strategies we use to get where we want to be.

It really boils down to balancing a few important factors:

#1. TIME HORIZON

#2. RATE OF RETURN

#3. RISK UNDERTAKEN

Each of these elements needs to be combined in a way that makes sense for YOU.

For example, if you don’t mind waiting a long time for your wealth to really grow, you can easily get lower, steadier rates of return without taking on lots of risk.

Investing in quality dividend stocks – which I’ve been consistently recommending for two decades now – is a perfect example of this type of balance.

When the Dow jumps 30% in a year, your portfolio still surges in value.

When the market dips or goes sideways, your dividend payments keep flowing into the portfolio or buying you additional shares.

And ultimately, over a decade or two, your nest egg will likely end up having increased something like 10% a year on average.

Buying and Holding Assets

The same can be said for buying and holding other assets for the long-term – whether it’s real estate or precious metals.

In contrast, someone who wants better, faster returns is naturally going to have to take on a little more risk to get it… but even in this market, doing so is not impossible.

One way is targeting various shorter-term moves in various stocks and exchange-traded funds (ETFs).

In fact, you can even use ETFs to target moves in plenty of areas beyond stocks and related investments.

For example, there are widely-known ETFs targeting gold, silver, oil, and other commodities.

There are also ETFs and exchange-traded notes (ETNs) that are designed to rise when stock sectors, indexes, or various commodities fall in value… even some that produce two or three times the moves!

Again, you should expect some losers when you follow a more active approach… but the overall result can still give you a more rapid compounding effect even in choppy markets.

And if shorter-term gains of 5% or 12% still aren’t enough? Then you can simply slide the risk scale a bit further out and use greater amounts of leverage!

Using Leverage Isn’t Always a Bad Idea

Contrary to popular belief, using leverage isn’t always a bad thing nor does it even have to involve borrowed money.

For example, some of the funds I just mentioned use a limited amount of leverage to amplify moves in their underlying benchmarks.

Similarly, buying options to speculate on various up and down moves can do the same thing with even more dramaticeffects… while still never exposing you to unlimited risk like short selling, futures trading, or other leveraged approaches do.

And as I’ve proven over and over again, selling options can also help investors get extra investment income while actually LOWERING their portfolio’s overall risk in many cases!

As the market is dropping, selling put options on companies you wouldn’t mind owning is a terrific way to collect upfront payments while possibly getting you into the type of solid long-term investments I mentioned a moment ago.

Likewise, if you sell some covered calls against stocks you already own, you simply stand to collect extra income on top of any regular dividends you’re already earning.

And as long as you write contracts that have higher strike prices than your entry prices, the worst thing that happens is you book some additional capital gains. 

Bottom Line

Even if the major markets keep falling from here… or bouncing up and down without really going anywhere for the rest of the year… there’s no reason to get frustrated or sit on the sidelines.

You have plenty of ways to continue building your wealth whether you want to stay very conservative… get very aggressive… or split the difference with a more active approach like option selling.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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What to Do if You Are Forced into Early Retirement

This post What to Do if You Are Forced into Early Retirement appeared first on Daily Reckoning.

Will you still be working by age 70?

It’s a fair question.

According to a recent survey by the Employee Benefit Research Institute, nearly one-third of workers predicted they’d be working until age 70 or older, and only 10% expected to retire before 60.

The reality is only 7% of the retirees surveyed worked until at least 70, and more than one third quit work before age 60.

And this wasn’t a fluke scenario either. Corporate downsizing, health problems and other unexpected events have led to more than 50% of U.S. workers, over the age of 50, having to retire earlier than expected.

We tend to think we’re going to work up to, or longer than, traditional retirement age, but it’s not usually the case. In fact, more often than not, older U.S. workers are pushed out of their jobs before their planned retirement date.

Since this is the reality we live in today, I think everyone should have an emergency retirement plan. If you find yourself out of a job unexpectedly, here are some steps you can take to deal with the prospect of early retirement:

Don’t Panic

Being let go or having to take an early retirement package is not always easy to stomach. Your pride might get in the way of your best judgement so don’t make any quick decisions with your money.

Instead, give yourself a few days to collect your thoughts on what just happened.

Review Your Finances

After you’ve taken some time to reflect, start reviewing your finances. Most likely you were planning to continue adding money into your company’s 401(k) or other retirement accounts. Those contributions are likely going to end, so the question becomes: Do you have enough saved to retire?

You can use the 4 percent rule to estimate how much you can safely take out of your retirement accounts. But also be sure to include Social Security and any pension benefits you might have coming your way.

If the numbers look good, then you can safely retire without worry. But if not, you may need to consider part-time work or drastically changing your lifestyle.

Consider Part-time Work Or Consulting

The likelihood of you matching the job you just lost is low, so don’t feel bad about taking a lower paying job or one with less status. Every dollar you earn is one less you’ll have to pull from savings and investments.

Plus, some part-time jobs even offer benefits. Costco and Starbucks, for instance, give part-time staff health insurance and 401(k) plans with company match.

You can also explore the idea of consulting or trying something outside your field of work. Look at early retirement as an opportunity to try something new.

Lower Your Expenses

While you’re on the hunt for new employment, it’s best to tighten up your budget. Searching for work as you get older becomes more difficult and the process can take longer than when you’re young.

Have a look at your monthly expenses and determine which ones are eating up the majority of your household income. For most, housing and transportation will be the biggest culprits.

If you’re single or your spouse is unemployed, you may need to consider some drastic cuts, like selling your house and relocating somewhere more affordable, or selling one of your vehicles to lower expenses like insurance, gas, and maintenance.

File for Unemployment Benefits

If you get laid off, you’re likely eligible for unemployment. You’ve paid into the system all your working life, there’s no shame in taking the benefits now that you actually need them.

You will have to prove that you’re actively looking for re-employment so make sure you follow the necessary steps. And, if you have no income, you might also be eligible for other benefits like food stamps, job training or employment counseling.

Lastly, if you were forced to retire early because of illness, you may also be eligible for disability benefits.

Find New Health Insurance

If you lost your job tomorrow, you can stay on your former employer’s health insurance plan up to 18 months, but you’ll likely have to pay the full cost.

Rather than pay more than you have to, consider applying for new health insurance right away. Since your income will be lower now, you can qualify for subsidies or for Medicaid. These options will most likely be cheaper than the COBRA offered by your employer.

Be Smart About Social Security

If you’re eligible for Social Security benefits, you can start to take them as early as age 62. But, if you do, your monthly benefits will be permanently reduced.

You could lose as much as 30 percent, according to the Social Security Administration, if you collect at 62 rather than waiting until your “normal” retirement age.

What’s more, you can earn “delayed retirement credits” if you postpone your benefits past normal retirement age. Do some research to make sure you’re collecting as much as you possibly can.

Pursue Hobbies

It can be hard adjusting to a life that’s not built around work. So channel your energy into new projects and hobbies that are equally fulfilling.

If you’ve always wanted to spend more time woodworking or gardening, now is the time to do it. And who knows, you might even develop a hobby that will pay you back. A lot of retirees have found ways to make some extra cash buying and selling old antiques, tools, and other usable or collectible items online.

Having to retire early is not always a bad thing. You might get a significant buyout package or you might realize you were ready to retire all along.

Just be prepared for anything and you’ll lessen the shock if the day comes.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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7 Steps to Maximize Profits on eBay

This post 7 Steps to Maximize Profits on eBay appeared first on Daily Reckoning.

Selling on eBay can be a lucrative side hustle if you you know what you’re doing.

eBay makes it easy for just about anyone to start buying and selling items for auction online. And, I’m sure you’ve heard the success stories of people making $1,000 – $2,000 or more per month selling on the platform.

Is that really possible? If so, what are these sellers doing differently?

It turns out there are some strategies to getting the highest price for your old baseball card collection or those pair of designer jeans that no longer fit.

Here are the five things you need to maximize your profits as a seller on eBay:

  1. Good quality photos
  2. A persuasive item description
  3. The right timing
  4. The right price
  5. Low shipping costs

I’ll go into more detail on all these in a second but first let’s review how selling on eBay actually works.

How to Start Selling on Ebay in Under an Hour

Step 1: Sign Up for an Ebay Account

Go to the website and click sign up. Follow the sign-up process — it should take you less than 2 minutes to complete.

Step 2: Find Something to Sell

Look in your garage, closets, attic, basement and bedrooms. You’re bound to find something you no longer use or want to get rid of.

Even things that are broken can sell well on eBay because buyers that know how to fix it will scoop it up. So don’t discount broken laptops, old TVs, typewriters etc.

Step 3: Research the Price of Your Item

Go to Google Shopping and type in the search bar your item. Use somewhat generic keywords like “[Brand] leather purse”.

You should be able to get a rough average of what that item is selling for brand new or used on the market today. Use these prices as a guide to price your own listing.

Step 4: Market Your Item

Remember those tips I mentioned above?

First, you want to take good quality photos of your product.

Take different angles on a neutral background and make sure you have at least one photo that shows the size of your product relative to something else (like a $1 bill or your hand).

Next, you need to write a persuasive description.

Use the bit of market research you did in step 3 to guide your efforts.

Figure out what makes your product different and unique to the other products selling on the market today.

Does your product have a different color? Is it a special edition? Try to find something that distinguishes your product from the rest and call it out.

Also, your title is very important so make sure you write one that grabs the buyer’s attention and uses the same keywords people would use to search for your item. Look at other product descriptions that have bids and try to copy what they’re doing.

Step 5: List Your Item on eBay

This should take less than 5 minutes.

Use the photos you’ve taken and the description you just finished writing to list your item on eBay. Follow the steps outlined on the platform. Next, you’ll choose between your options for shipping and pricing.

To begin, choose the “free shipping” option. This will attract more buyers to your listing and you can simply build the estimated shipping cost into your price.

Once you get comfortable on the platform, you can explore alternative shipping options and play around with pricing and costs.

Step 6: Time Your Listing

Timing is everything. Your goal is to get the most amount of exposure in a short window. When you’re ready to list, I recommend listing on a Thursday and running a 10-day auction.

This way you get to take full advantage of two weekend’s worth of shoppers looking at your listing. You don’t want your auction to run for too long because then there’s no urgency to bid.

Step 7: Fulfill Your Order

Once you successfully sell your item, you need to fulfill the order by packing and shipping your product as soon as possible to the highest bidder. You want to ship items promptly to ensure your seller rating stays high.

Buyers will look at your seller rating and judge your reliability to deliver when they consider bidding on products you list in the future.

You also need to make sure you package whatever you’re selling well. You don’t want your item to arrive damaged.

Just be mindful of packaging costs. If the item is a piece of clothing, you can typically get away with a bubble-wrapped envelope.

More breakable pieces should be boxed and stuffed with packing material so they don’t break. Use your best discretion when packing but always keep costs in mind.

Lastly, be respectful and always provide excellent customer support. Some buyers will contact you with special requests like wanting to package multiple items in one shipment. Try to be flexible but also realistic in your approach.

Selling on eBay is a good opportunity for anyone to make a little extra cash on the side. The investment is low and you can start selling in less than an hour. If your sales grow quickly, you can even sign up for an eBay storefront to scale your side hustle even further.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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Your 5 Retirement Options

This post Your 5 Retirement Options appeared first on Daily Reckoning.

It turns out retirement is a relatively new concept. Consider these numbers from The Evolution of Retirement by Dora L. Costa:

  • In 1880, over 75% of men over 64 remained in the workforce.
  • By 1900, that number had dropped to about 65%.
  • By 1950, just 47% of men over 64 continued to work.
  • By 1998, fewer than 20% of men over 64 were in the labor force.

You see, retirement wasn’t always considered desirable. In the 1800s, “mandatory retirement” caused a lot of resentment among older workers and there was a backlash against it.

People wanted to keep working. Work was proof of vitality and productivity. It gave men a sense of purpose and most families needed the money.

However as big corporations grew, they pushed for a younger workforce. Rising wages, private pensions, and social security lead to a flip in the perception of retirement to something more desirable.

In the 1980s, the mandatory retirement policies adopted by law, both officially and unofficially, started to be deemed discriminatory and were abolished.

Today things are even more complex. There are several ways you can retire and each path has its own timeline. Here are the five types of retirement you’ll find in our current economy.

Traditional Retirement

Tell me if this sounds familiar: Get a good job, work hard for forty or fifty years, and then retire around age sixty to enjoy the last decade or two of your life.

During the 20th century, this was considered the standard model of work in the United States. Your retirement was funded through a combination of company pension, personal savings, and government aid.

But by the ‘70s and ‘80s, standards of living had risen enough that some people began to challenge this traditional model. They thought, ‘Why am I waiting until the end to enjoy life?’ There must be a better way.

Early Retirement

This “better way” was early retirement. After running the numbers, employees figured out if you worked hard to increase your income while keeping costs low, you could save enough to stop working at age 50, or 45, even sometimes 40.

What best determines whether or not you can retire early is your saving rate. Traditional retirement requires a saving rate of 10-20%. Early retirement requires you to save nearly half your income — or more.

The more you save and invest, the faster your money can reach what’s called the crossover point — where your income from investments are enough to support your spending. Traditional and early retirement both lead to permanent retirement. But, if you enjoy working, you may want to consider these other three types of retirement.

Temporary Retirement

One of the first books to explore alternative retirement options was Paul Terhorst’s 1988 book, titled Cashing in on the American Dream. Terhorst was an advocate for early retirement, but he also saw another type of retirement, called temporary retirement.

Here’s how he explains it:

We used to work and then retire. [I suggest] you work, then retire, then consider going back to work. Under this plan you devote your middle years to yourself and your family. During those years your mental and physical powers reach their height. You can explore, grow, and invest your time in what’s most important to you. You can enjoy your children while they’re still at home. Later, after you’ve lived the best years for yourself, you can go back to work if you want to. The choice will be up to you.

If you were to follow Terhorst’s plan, you’d go to work for 10-15 years, then take time off to pursue passions and spend time with your family until your money runs out and you have to go back to work.

A lot of early retirees have trouble finding affordable, quality health coverage. One key advantage to temporary retirement is when you return to the workforce later in life, you’ll likely have access to better health insurance.

Semi-Retirement

Temporary retirement was popularized by Bob Clyatt in his 2005 book, Work Less, Live More. What is the difference between semi- and temporary retirement?

Here’s Clyatt:

Semi-retirement is about finding work-life balance. For some, that means continuing with their previous career, but in some sort of reduced capacity. For others, it could mean changing jobs completely to something that pays poorly but offers a sense of satisfaction. And for others, semi-retirement could simply mean supplementing investment income with a carefree job at the local coffee shop or fabric store.

The main advantage to semi-retirement is you get out of the rat race earlier. Even if you’re still working, you have more choices about the kind of work you do. Most people choose jobs or side gigs that are less stressful and more fulfilling.

And because you’ve saved enough that your financial needs aren’t as great, you have the freedom to choose work that pays a bit less.

Mini Retirements

The fifth type of retirement I want to cover is from Tim Ferriss’ 2007 book, The 4-Hour Workweek. Ferriss asks, “Why not take the usual 20-30-year retirement and redistribute it throughout life instead of saving it all for the end?”

With this model, you work on and off as your savings permit. For instance, you might work for five years and then take two years off. You repeat this process over and over again. Hence why they’re called “mini retirements.”

The advantages of taking sabbaticals like this is you get to enjoy retirement and work at every age. The disadvantage is you never amass a lot of savings because you’re constantly spending what you make every few years.

This type of retirement is more geared toward the entrepreneur-type or anyone interested in following an unconventional career path.

Which Type of Retirement Is Right for You?

As you can see, there’s no one right way to retire.

All of the above options offer some advantages and disadvantages. It’s up to you to decide what type of retirement best suits your interests, values, health, and savings.

The good thing is you have lots of options.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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The 1 Budget Change to Make You Rich 

This post The 1 Budget Change to Make You Rich  appeared first on Daily Reckoning.

Even more than our education, our habits reflect our lives. Habits are very easy to develop and very hard to break, and once they’re developed, they control our behavior—sometimes in ways that we don’t even recognize. Often these bad habits lead to other bad habits. It’s a vicious cycle.

For instance, many people want to be in shape. In fact, we’re only a few weeks away from that time of year when people start making resolutions to go to the gym and get fit. Emboldened, they go sign up for a membership and begin working out. Soon they realize that working out is hard and that it hurts.

That’s when the bad habits they’ve developed over the years creep in. They start hitting the snooze button. “Just ten more minutes and then I’ll get up and go to the gym,” they say.

Then ten minutes turns into an hour. “I’m running late for work! I can’t go this morning, but I’ll go at lunch,” they say.

At lunch, a friend wants to go get hot wings. “I’ll skip just this once,” they say. And so on. Before long, they’ve canceled the gym membership, and they’re back to their old unhealthy ways.

You can’t afford not to take action when it comes to your finances. And as I write today’s letter, a colleague of mine is gearing up for the biggest interview of his life. He’s going to show you exactly how you can break your bad money habits at 1pm EST today. And has blueprint to follow is not nearly as difficult as sticking to your workout plan.

When It Comes to Money, Most People Have Bad Habits

Many people I talk to want to be rich. They even read my books and understand what it would take for them to reach their financial goals.

But they lack the discipline to become rich. They may come to a seminar and leave excited about, and committed to, building their asset column and financial education, only to have their bad financial habits derail them.

For instance, they may want to set aside money for investing every month, but then they see a sale on some shiny new object they’ve wanted for a while.

“I’ll start investing next month,” they say. “I need to get this now so that I’ll save money.” Then, when the next month rolls around, they realize that they’ve gone out to eat a little too much and that they won’t have any money left over after paying their bills.

“I have to pay my bills,” they reason. “I’ll start investing next month.” Then another month comes and they’re in the same predicament. “I should adjust my budget,” they think.

But then they remember their favorite TV show is on. “I’ll do it tomorrow.” Before long, they give up on their goal of investing and let their bad habits win.

Rich Dad said that the rich had a very simple way of breaking bad money-habits. “The poor pay themselves last, and that is why they’re poor,” he said. “But the rich pay themselves first, and that is why they’re rich.”

The Difference Between Rich Dad’s Budget and Yours

Rich dad’s budget was different than most people’s because he treated his asset column as an expense—and his most important expense. Every month, no matter what, he put money aside for his investments, even if he didn’t have enough money for his other bills. As a young man, I didn’t quite understand.

“Are you saying you don’t pay your bills?” I asked.

“Of course not,” said rich dad. “I firmly believe in paying my bills on time. I just pay myself first…before I even pay the government.”

“What if you don’t have enough money?” I asked.

“I still pay myself first,” said rich dad.

“But don’t they come after you?”

“Yes,” said rich dad. “That’s why I always find a way to pay.”

How Budgeting Motivates the Rich

For rich dad, paying himself first motivated him to work harder and smarter to make sure to pay his bills and creditors. He used the fear of not being able to pay his bills, sometimes a situation created by paying himself first, to motivate him to make more money.

He worked extra jobs, started companies, traded in the stock market—anything he could to make sure he met his obligations. After paying himself first, he used the pressure from creditors to form good money habits.

“If I’d paid myself last,” said rich dad. “I would have felt no pressure…but I’d also be broke.”

Kim and I put rich dad’s advice into practice early in our marriage. We found that, just as he had promised, we learned to get motivated to find creative ways to make money. In the process, we learned more about ourselves and how to make money out of thin air.

What Does it Take to Get Rich?

Anyone who says that money isn’t important obviously has not been without it for very long.

The year 1985 was the longest and hardest of my life. Kim and I were homeless; we were unemployed, had little-to-nothing left in our savings, our credit cards were maxed out, and we were living in an old, brown Toyota.

After three weeks of that, a friend found out about our financial situation and invited us to stay in a basement room. We stayed there for over nine months.

During those times, Kim and I often fought and argued. Fear, hunger, and uncertainty has a way of shortening our emotional fuse, and we usually end up fighting with the one we love the most. Yet, love held us together through those hard times.

Get a Job?

We kept our financial woes quiet for the most part, but when a friend or family member found out about our struggles, the first question they always asked was, “Why don’t you get a job?”

At first, we attempted to explain ourselves, but it didn’t do much good. To someone who values a job, it’s difficult to explain why you might not want one. We had a few odd jobs here and there, but those were only to keep us fed and gas in the tank.

At the time, the idea of a safe, secure paycheck was certainly tempting. But we didn’t want safety and security. We wanted to be completely independent in the financial aspect of our lives.

By 1989, we were millionaires.

By 1994, we were in a position to never work another day in our lives.

No Money, No Problem

I often hear people say, “It takes money to make money.” This is not true. For Kim and me to go from homeless in 1985 to millionaires in 1989, and then to independence, money-wise, in 1994, it didn’t take money. We had no money when we started, and we were deeply in debt.

It also didn’t take a formal education. I have a degree, and I can tell you that achieving independence financially had nothing to do with what I learned in college.

I didn’t find much demand for my skills in calculus, spherical trigonometry, chemistry, physics, French, and English literature in the real world.

What Does It Take to Get Rich?

I’m often asked, “If it doesn’t take money to make money and schools don’t teach you how to become independent, money-wise, then what does it take?”

My answer: It takes a dream, a lot of determination, a willingness to learn quickly, the ability to use your God-given assets properly, and to understand how money works and can work for you.

All of the qualities necessary for getting rich, start with financial education—a type of education that you can’t get in a traditional school.

My financial education started with my rich dad, my best friend’s dad, and continues today through books, seminars, learned lessons, and mentors. From all these sources, I learned about cash flow, debt, business and investing, taxes, and more—and how to use each to make myself rich.

If you want to be rich, I can’t stress the importance of starting your financial education today. Take some classes, read a book, attend a seminar, and find a great coach.

It’s the most important investment you can make.

Regards,

Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

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