Wealth Building Secrets for Those in the 9-5 Rat Race

BY: - 23 Aug '17 | Money

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Have you become a sucker for the American Dream? You know that quaint little myth which implores you to find a good job, work hard, and live life well in your nice home in the suburbs.

The unfortunate reality is that a 9 to 5 job will never allow you to bask in the afterglow of financial freedom. In many cases, a JOB stands for Just Over Broke. Simply ask the 127 million working Americans who often struggle to make ends meet.

Nearly half of all Americans are living paycheck to paycheck.
66 million Americans do not have the savings to cover even a small financial emergency.
69% percent of Americans have less than $1000 in savings.
American households with credit card debt owe, on average, more than $16,000 in such debt.
About 50% of American families do not have a single cent set aside for retirement.

Clearly, grinding away at a job is not working for everyone. With so many struggling just to make ends meet, it’s no wonder few people get rich working a 9 to 5.

Unfortunately, you’ll never save your way to wealth either. That’s probably why you’ve never heard of the coupon millionaire. Forgoing your favorite Starbucks latte won’t make you millions.

So if you’ll never get rich working at your 9 to 5 job or get rich by cutting coupons, why do I often stress maximizing earnings at work and living frugally as pathways to financial freedom? Why do I encourage you to become indispensable on the job; to do what ever you must to garner the raises you deserve, and obtain the skills crucial for higher paying positions? Why do I stress frugality? Why is it so important downsize the cable bill, trim your phone bill, and renegotiate your car insurance?

To understand why, you must first appreciate the most important wealth building formula of all time:

Income – Expenses = Capital (seed money) left over to invest in wealth building assets.

Your trajectory out of the rat race begins when you realize that it is capital (seed money) invested in wealth building assets that truly propels you to financial freedom. This is how the wealth game is played.

The more raises you earn or promotions you garner at work the higher your income grows, ultimately resulting in more seed money left over for investing. Reduce your expenses by frugally cutting your living and entertainment expenses, and you also create more seed capital to invest in wealth building assets.

Your job and frugal living will not make you rich, but they are the means for creating the seed money which you can use to truly build wealth.

What do you invest in once you have accumulated your seed capital? Consider these wealth building assets:

Stocks – Warren Buffet, one of the wealthiest investors in the world, suggests that you invest in simple low risk index funds, which over time will help make you financially independent.

Real Estate – Our population is always growing, but the amount of land in the US remains a constant. That’s why fortunes are made through real estate.

Bonds – Corporations, cities, states and the US government all borrow money. When you lend them money in the form of bonds, you’re the one earning interest and smiling all the way to the bank.

Intellectual property – Use your seed money to build your own app, create your own software, write your own book, or create your own website that will continue to earn you passive income in the future.

Businesses and Side Hustles – Everyone has a talent, expertise, or experience that people are willing to pay to gain access to. Find your talent or expertise, and then use your seed money to get your business or side-hustle off the ground.

The vast majority of Americans toil at their jobs on financial treadmills going nowhere fast. You don’t have to be one of them. Understand that financial freedom is gained by spending less than you earn and investing the difference (seed money) into wealth building assets. Work to earn more on the job and cut down your expenses through frugality and you’ll create even more seed money to fuel your wealth building.

BMWK, how can you earn your piece of the American dream?

About the author

Alonzo Peters wrote 296 articles on this blog.

Alonzo Peters is founder of MochaMoney.com, a personal finance website dedicated to helping Black America achieve financial independence.

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Building Wealth Through Real Estate: Hacks, Tricks, and Tips

BY: - 1 Sep '17 | Money

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Last week we revealed the formula for true wealth formation:

Income – Expenses = Capital (seed money) left over to invest in wealth building assets.

Unfortunately, too many of us believe that investing in our primary residence is the surest path to wealth creation. Now don’t get me wrong. I am a strong advocate of home ownership. But owning a home is about having a place over your head. Your home, however, is not a good wealth building investment.

Consider this for instance: Adjusting for inflation, from 1900 to 2000, the average rate of appreciation for a home in the US was only 0.2%. As Wharton professor Todd Sinai explains in an interview with Business Insider, “Housing is a consumption decision, not an investment decision.” There are more efficient ways to build wealth with your housing dollars.

Hack

Build wealth through equity house hacking

Perhaps you’re just not into being a landlord, despite the economic benefits. You can still squeeze wealth out of your housing dollars. Consider equity house hacking. This strategy involves purchasing a home that either needs some fixing up or one you can easily add value to (adding a garage, turning a part of the home into an additional bedroom, improving the landscaping, etc).

The key is that the home must be livable so that you can reside in it while making improvements. When the improvements are done you’ve created instant equity which you can tap into by flipping the home. Alternatively, you can simply enjoy the home you’ve improved knowing that you’ve increased its value.

Tricks

Convert living space into rental space

One of my favorite shows is HGTV’s Income Property in which homeowners are provided help turning unused space into money making rentals. A basement transforms into a two bedroom rental. A garage blossoms into a one bedroom income suite. Not only does converting existing space into rental property create cash flow, it also adds immediate value to the existing home.

There are more efficient ways to build wealth with your housing dollars.

Play it smart through duplex living

My brother recently had his heart set on a beautiful five bedroom single family home with a large yard. But after running the numbers he realized that the wiser financial decision was to purchase a nearby duplex. He plans to live in one unit while a tenant lives in the other.

After all is said and down my brother will end up paying around $275 a month to live in a $250,000 piece of property. All the while his tenant pays for the lion’s share of the duplex’s mortgage, property tax, and insurance by way of rent. After living this way for four or five years my brother will be in a much better position to purchase the house of his dreams, while still owning an income producing rental property.

Tip

Increase wealth through rental property.

After purchasing a modest home, consider purchasing rental property. There are four principle advantages of real estate investing.

You create immediate cashflow: If you do your homework and pay attention to your numbers, you’ll earn a profit on your rental every month because your tenant’s monthly rent should exceed your monthly rental expenses (mortgage, property taxes, maintenance, etc). This extra cash flows directly into your pockets.

Click Here to Download a FREE Copy of the BMWK Generational Wealth Pledge for Black Families!

Your renter pays down your mortgage. Each month someone else pays down the mortgage on your rental property as you simple sit back and cash the checks.

You earn tax benefits that put more money in your pocket. Landlords are simply entitled to a slew of tax deductions unavailable to the rest of us. These include tax deductions for interest, depreciation, repairs, travel, home office expenses, contractor expenses, insurance, as well as legal and professional fees.

Your rental property will appreciate: Like primary residences, your rental property will appreciate in value. But remember, as with a primary residence this may not be the source of a significant portion of your rental wealth, rather it is often icing on the cake.

Your housing costs represent one of your biggest expenses, but the money most people spend on their homes will seldom create extraordinary wealth. Yet, if you’re willing to be a little untraditional, and play your cards right, you can turn your housing dollars into new wealth building income streams.

BMWK, do you have other untraditional ways to build wealth through real estate?

About the author

Alonzo Peters wrote 296 articles on this blog.

Alonzo Peters is founder of MochaMoney.com, a personal finance website dedicated to helping Black America achieve financial independence.

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