36: Investing the Rich Habits Way | Rich Habits Podcast

Intro

In this episode of the Rich Habits Podcast, we dive into the world of investing and learn three simple steps to invest the right way, the Rich Habits way. From creating a budget to automating investments, we explore practical strategies to build wealth and achieve financial freedom. Join us as we uncover the secrets to successful investing.

Main Takeaways

Creating a Budget and Identifying Discretionary Spending

• Step 1: Use a budget template to understand your income and expenses.
• Identify discretionary spending and pesky subscriptions.
• Shop around for new insurances to save money on monthly expenses.

Calculating your Total Expense to Income Ratio

• Step 2: Calculate your total expense to income ratio to determine how much you can invest every month.
• Aim for a total expense to income ratio of 85% or less.
• If your ratio is between 90-100%, cut back on spending or increase income.
• If your ratio is above 100%, identify and fix the issue to avoid perpetual debt.

Investing the Extra Money

• Step 3: Invest the extra money in low-cost index funds like the S&P 500.
• Automate your investments to avoid lifestyle creep and ensure consistent saving.
• Prioritize paying off consumer debt before starting to invest.
• Take advantage of employer’s 401k match and max out Roth IRA contributions.
• If no autonomy over 401k investments, open an online brokerage account and invest in recommended funds.

Investing in Art and Real Estate

• Consider investing in art through platforms like Masterworks for potential high returns.
• Explore house hacking as a strategy to reduce living expenses and benefit from real estate appreciation.
• Invest in real estate for long-term success and financial freedom.

Controlling Your Destiny in Investing

• Prioritize investing in a Roth IRA if a company doesn’t offer a 401k match.
• Understand and have control over your investments for a secure retirement.
• Diversify your portfolio with ETFs, index funds, Bitcoin, Treasury bills, and real estate.

Summary

Creating a Budget and Identifying Discretionary Spending

The first step in investing the Rich Habits way is to create a budget using a template that helps you track your income and expenses. By identifying discretionary spending and cutting pesky subscriptions, you can save money on monthly expenses. Additionally, shopping around for new insurances can further reduce your monthly costs.

Calculating your Total Expense to Income Ratio

To determine how much you can invest every month, calculate your total expense to income ratio. Aim for a ratio of 85% or less. If your ratio is higher, consider cutting back on spending or increasing your income. If it exceeds 100%, it’s crucial to identify and fix the underlying issues to avoid perpetual debt.

Investing the Extra Money

Once you have identified the amount available for investment, automate your investments to ensure consistent saving and avoid lifestyle creep. Prioritize paying off consumer debt before starting to invest. Take advantage of your employer’s 401k match and maximize contributions to your Roth IRA. If you lack autonomy over 401k investments, open an online brokerage account and invest in recommended funds.

Investing in Art and Real Estate

Consider investing in art through platforms like Masterworks, which allow everyday investors to participate in the art market with potential high returns. Explore house hacking as a strategy to reduce living expenses by buying a property and renting out a portion to cover the mortgage. Investing in real estate can lead to long-term success and financial freedom.

Controlling Your Destiny in Investing

If your company doesn’t offer a 401k match, prioritize investing in a Roth IRA. Control and understand your investments to secure a prosperous retirement. Diversify your portfolio by investing in ETFs, index funds, Bitcoin, Treasury bills, and real estate. By following these steps and practicing discipline, you can build wealth and achieve financial independence.

Conclusion

Investing the Rich Habits way involves creating a budget, calculating your total expense to income ratio, and investing the extra money wisely. By automating your investments, paying off debt, and prioritizing tax-advantaged accounts, you can build a secure financial future. Explore opportunities in art, real estate, and diversified investments to further grow your wealth. Remember, consistency, discipline, and focus are key to achieving long-term success.