FINANCIAL ADVISOR REVEALS: How You Should Invest $1000

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This is the affluent entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an athlete entrepreneur.

All right, so you got five hundred dollars, maybe a thousand bucks, fifteen hundred dollars, that all of a sudden you got it in your hands. What do you do with it? Where should you put it first? What. How do you get it working for you? What are the things that actually matter? And how does it get you onto the path to financial freedom? Well, in this video, we're gonna. We're gonna nail that down. Let's. Let's jump in. I'm gonna jump to my iPad. I'm gonna kind of make this a checklist for you so you start to understand where I would look at this. And here's the interesting thing. The very first thing that I want you to do with the money, it's nothing. You heard me right? Nothing. So the first thing is do nothing. And here's why that this is important, because the tendency is when you get money in your hand, that was unexpected. It could be a tax refund. It could be, you know, something you got for your birthday, anniversary, something. You know, it just. It was unexpected. All of a sudden it's burn a hole. All of a sudden your emotions are going. All of a sudden you're thinking, I'm going to go get that. That. That pair of shoes. I'm going to go get that new iPhone. I'm going to go get something. And so here's what I tell people to do when they come into a windfall or a large sum of money that's unusual. I want you to put it away in a High yield savings account. Out of sight, out of sight. I want to remove the whole purpose of this is to remove the temptation to go spend it. You know, you're on your phone and every time you go on Instagram, every time you go on social media, you're seeing ads, you're seeing things and there's that temptation. You're thinking, I got that money in my op, in my checking account, my checking out, my checking out, I can go buy it. So what I want to do is first I want to remove all temptations. So the very first thing is I'm not going to put it in the check, I'm putting in a High Yield savings account. Out of sight, out of mind. So that's number one. Number two, the second thing that, that you want to really maybe get clear on because that's going to inform everything else is really what's the purpose for the money? This is really about why. It's really about the why behind, behind what you're doing. Here's what mean by this. You may sit back and say I want to have wealth, I want to have financial freedom, I want to be worth a million dollars, I want to be worth $10 million, I want to be worth a hundred million. It doesn't matter what the number is, it's arbitrary. The real question is why? Because money, whatever you got, it's, it's a result, not a purpose. And it's the purpose and it's the why that's going to carry you through the journey. Because if this is your first 500, it's your first 5, 5000, 1000, 1500. If it's your first, it's the first step in a journey to financial freedom. And that journey to financial freedom isn't going to be a straight line. And if you're not attached to a goal that is pulling you forward, when you get a dip, when you have a problem, when you have a challenge, when you lose a job or something like that happens, that sets you back financially, you may not continue on that journey. So when you start down this path, one of the most important things to do is to truly define the why. When I'm working with my elite clients, my one on one clients, my group clients, or even in the affluence blueprint, even in my upcoming book we talk about about it too is, is that it's really important for us to know exactly why we're moving towards the financial destination that we're looking for. So now that we get the purpose, now we understand the why then here's the other thing that something I want you to consider is don't wait until you have money. Because here's the thing, I hear this all the time. Well, when I make more or when I get more, then I'll start down that road to financial freedom. Then I'll start investing. Then I'll start putting money away towards my, my retirement, my 401k, my IRAs and all that stuff. Here's, here's what I know. If you aren't doing it now, you won't do it. Then the fact is, is that we shouldn't wait for $1000 to land on our LAP. We shouldn't wait for a 500 land in LAP. We shouldn't wait FOR, for 1500 to land our lap. It should be every dollar that lands in our lap has a specific, a specific job. And some of that is going to be investing towards the future. So if, if truly wealth creation is about your behaviors, your choices, your decisions, your and, and your habits, then we need to develop those, those habits, those behaviors early on so it's less about how much you have and more about what you do. And so the other thing that I would tell you to do is, is if you're watching this, if you're listening to this and, and you don't have that thousand dollars, we'll talk about that. But if you don't have that thousand dollars, it doesn't mean that you have to wait. I want you to get in the game now. I want you to. If all you have is $10. Let's start with $10. Let's start with$10. Okay, so now, so we know our purpose, we know our why, we know that we're going to get in the game no matter where we're at. The next piece is this. Okay, the next piece is this. And that's number four. Is, is really understand what you don't understand. And what I mean by this is this, is that we don't get educated in this. No one tells us about money. No one teaches about money. It's not in school. We don't talk about it at home. I mean, most people don't talk about. I grew up in a household that we didn't talk about money. It was impolite to talk about money. So we're not getting an education in it. We're not learning it, we're not understanding it. And so where are we supposed to learn about it so we can do the right things with our money, so we can be good stewards. Of it so we can build the wealth so we can be on that path to financial freedom. Well, first things first. You're here. That's the first step. But that's what I mean by understanding what you don't understand. One of the key rules in investing that we have for all our clients and for myself, is we never invest in anything we don't understand. So it's your time to start getting educated. It's your time before you start putting money out into investments. Take the time to invest in yourself first. It could be just a book. When my book comes out, it will be a book. It could be a course, it could be a mentor. It could be, it could be anything. It could be watching the videos like my, my show and, and all that. The point is, is that I need you to start to understand where the gaps are in your knowledge. Because then once you understand the gaps in your knowledge when it comes to investing, when it comes to money management, when it comes to wealth, when it comes to the money stories that are going on in your head, you can do the next piece. And that next piece is to skill up. Great. I've now I identified the gaps. I now know that there's certain things I don't know. I don't, maybe I don't know about, you know, how to look at an index fund or I don't know what portfolio allocation means or risk profile means. Maybe I don't know those things. It's okay. I didn't either. The thing is that, that then we just got to go get educated. Then we have to get and learn it and really start to skill up. So we are at a place where we're equipped to handle what comes next. Okay, so now I think that you have the foundation. Having the money in the hand isn't enough to start investing, to do it right.

So even before the money's in the hand, I want you to start looking at these other ones. We're understanding what your, your purpose is, what the why is understanding what you don't understand. What is it that that is, is really important? What is it that is the gap in your knowledge and all of that stuff and scope. Now we start to do something with the money. Now we turn around and we follow something that I call the wealth priority ladder. And I've, I've done a more detailed breakdown of this in another video, but I want to walk you through, through a piece of it here because of that amount, because the very first thing that I want everyone to do is, is to fund something that we call their comfort fund. Okay. And this one, this is really about making sure that you have the ability to sustain yourself if something unexpected and all of a sudden happens. This is not an emergency fund. This is simply a break the glass, I got a real problem right now type of thing. It, what we typically say is I want this to be fifteen hundred dollars or one month's expenses. And the whole purpose of this is to give you the comfort that you don't have to go into debt if the transmission breaks. There are statistics out there that show that, that more than half of the people could not sustain themselves without going into debt if they had an unexpected expense of a thousand bucks. I don't want that for you. So if this is your first thousand, this may be where it goes into a comfort fund to make sure that you're good. Now where that will be placed, typically we tell them to put it all in a high yield cash account, you know, at least earn something on it. Right now, at the time that we're filming this, it's five to five and a half percent. But point being is that then you know, if something happens, deductibles for medical, if you have an unplanned medical or something like that. Like that. It's already covered. It's already covered. Now we can go to the next piece. And the next piece I want you to look at two things with it. And the two things that I want you to look at is first, do you have destructive debt? And I want you to also look at building what we call a peace of mind fund. Okay? A peace of mind fund. And this other people will call this an emergency fund. What I want you to do is I want you to try and do these together. Now let's talk about destructive debt. For destructive debt is that debt that is used for consumerism, for consumption. I'm buying stuff that isn't going to bring me additional wealth, that isn't going to increase my cash flow, that isn't going to create assets to, to live on. So it is stuff. It's big screen TVs, it's technology, it's luxury vehicles. It's stuff. And the problem with it is if you're putting it on credit cards or financing it, that means that you can't afford it today, which means you're borrowing from the future to pay for a lifestyle you can't afford today. And I know that that's tough, but, and I get that we all kind of look at things and, and say, well, other people are doing it but you know, as my mom used to say, if other people jumped off the cliff, would you follow? Here's the thing, this is about you building your life your way. The smart thing to do is this. Let's get you out of destructive debt. Anything that's going to erode your net worth. Destructive debt is high interest debt for consumption. Okay. Productive debt is, is debt. It's low interest debt or debt that is buying assets that are going to create more cash flow or more wealth rental properties and things like that. So there's two kinds of debt. We're talking about destructive debt and high interest debt here. Now the same time, I want you to build a peace of mind fund, which is what most people will call an emergency fund. Now some people will say three to six months. I think that you need nine to 18 months, I think you need more. I, let's call it 12 months on average. And what I want you to do is if you're, if you have that money, I want you to split it so you're doing both at the same time. Portion to go to pay down the destructive debt and a portion to go to build that, that piece of mind fund. Now how you allocate it is on you. It depends on how quickly you want to get out of debt and how high the interest rates are. You know, I'm not giving you the math behind that. That's, that's becomes a choice because it'll get you out. Now there's a way to, to calculate this. I actually have a tool that we can get to you. It's totally free. If you just go to melabraham.com forward/, no debt, we'll get it to you and you can put all your debt in there. It'll schedule the payments. You can see which is the one that you want to pay first and do all of that stuff to make it easy for you to kind of navigate and then just follow the payment plan. At the same time. I want you to put money into a peace of mind fund because I want to get nine to 18 months there, put it in a high yield savings account. Once we have the debt and, or the savings account funded, we can then go to the next step. Now we can then actually start investing in my book. And so this is where we go in, we say, all right, now we can start investing because we know that we're going to be in place with, without debt and we're going to be building that peace of mind fund. When it comes to investing, depending on your age or stage Depending on your circumstances, we try to push our clients to have 20 to 25% of their income going into some sort of investment. The first place to do this though is to really start to make sure that you're getting all the free money that you possibly can. Okay, here's what I mean by that. If you are part of an employer that has a 401k where they are matching, you want to make as much contribution to get 100% of the match. It's free money. If they're going to match dollar for dollar, the first 4% and you have $4,000 that you put in or you put $10,000 in or whatever.

If they, they're going to match the 4,000 you put in, that's an extra 4,000 you got. Point being is that's 100% return. If I came into your house and started dropping $100 bills on the floor, would you all pick it up? My guess is you would. So when your employer is dropping hundred dollar bills on the floor and all you got to do pick it up is put another hundred dollar on top of it from you and now you got 200. Why are we leaving them? So at the very beginning, at the very start, the first thing to do is to put it in a situation where you are maximizing the match from your employer. Then we can start to look at other investments like a Roth IRA qualify because then we get long term tax, you know, tax benefits because that grows completely tax free. Once the money's in, then we can maximize the 401k on the, on the way back in. So here's how I would look at this. I would, if I'm investing, I would break it down this way and I would, I would start with the 401k match first. I would mat get the maximum of the 401k match first. If you have an employee stock purchase plan and East ESPP where you're able to bias buy the company's stock at a discount. My wife has one of these. You might be able to buy the stock for 10 to 15% discount. Well, that's 10 for 10 to 15%, especially if it's fully liquid money in your pocket because you're buying at a discount. So I'm going to max that. I'm going to max that. Now I'm going to go to a Roth IRA if I qualify because there's income limits we need to be aware of and I can max that. Now currently it's 7,000 bucks a year. Once I max the Roth if that, if I'm eligible for it now I come back to the 401k to match that. And, and so now all of a sudden, you can get in here. Now what I'm getting at is this should be 20 to 25% of your income going in here. Then at that point, I would say that you're fully funding your financial future. You're fully funding your investment plan. When you're putting 20, 25% away, if you're putting 10% away, then we, we slowly need to move ourselves up to that 20 to 25%. Once we move from the 401k match. There's some other things that we do that I break down in another video. But it's, it's really important for us to start to look at things through a process and a priority that works and this works. So let me recap for a moment. When you first get the money, do nothing, put it aside, Strip away the emotions and the temptation to use it. Second is make sure that you get clear on your purpose and your why for building wealth and that path to financial freedom. Number three, don't wait till you have a bunch of money in your hand to start making these decisions. Get yourself in the game with as little as you as. As you can, but as soon as you can. Okay, and then, then now you take a look and say, well, if I want to invest in the stock market, if I want to invest in real estate, if I want to invest in something, start to look at what the gaps are, understand what you don't understand.

Understand what you don't understand next. Now skill up, fill those gaps, fill those voids. So now when you decide to make the investments, you are making investments in things that you fully understand. Okay, now we turn around. We say, great, let me give me a comfort fund. 1500 dollars or one month's expenses. Once I've got that funded, now I can take whatever's left, start putting it into, into making sure that I've obliterated my destructive debt and built my peace of mind fund. Nine to 18 months, call it 12 on average. We want to get that peace of mind fund in place. We want destructive debt out of place. And now we go into the investing. Start with the match. 401k, if it's available, get all the free money as you can. You can get the ESPP if it, if it applies, then go to a Roth IRA, then max your 401k, and then we can talk about what you do after that. But here's the deal. Here's what I've seen. I've decades as a financial advisor, as a consultant, as someone who's valued businesses, bought and sold businesses, helped entrepreneurs build not only their businesses but their wealth. What I've seen is people will wait too long to get in the game. So hopefully that this video you'll get a chance to realize that you can get in the game with $5, $10, $100. You don't have to wait for that first thousand, but if you have that first thousand, let's put it to work for you. The right way to put you on the path to sustainable wealth and financial freedom. All right, I hope that you found this of value and if you have questions or anything, hit me up, let me know until I get a chance to see you on the path to financial freedom. As I always say, always, always strive live a life that lives you Cheers. Thank you for listening to the Affluent Entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent Entrepreneur Facebook group now by going to melabraham.com group and I'll see you there.

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