Personal Finance

7 Unconventional Resolutions & Goals for a Wealthier 2020

Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
131 Articles Written
blacktop with freedom and an arrow painted in white, brown dress shoes and blue jeans pictured at base of arrow

The next 12 months represent the year you shift your wealth-building into high gear.

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No more “business as usual.” No more “I’ll get around to planning for my future when the time is right.”

You will never have a perfect moment when all the stars align and you magically find yourself in wonderful financial shape. You need to make that happen yourself, based on grit and will.

As the Chinese say, the best time to plant a tree was 20 years ago. The second-best time is now.

So quit with the excuses already, pull out a notepad or spreadsheet, and get ready to make this next year a turning point in your personal history.

7 Ways to Get Wealthier in 2020

1. Create a Plan for Financial Independence

Regardless of whether you want to reach financial independence next year or 30 years from now, you need a plan, a roadmap to get there.

If you're new to the term, "financial independence" and "financial freedom" typically mean the same thing in personal finance circles: the ability to cover your living expenses on passive investment income alone. At that point, working becomes optional. It's why financial independence often gets combined with the notion of retiring early—hence the acronym "FIRE."

In the old days, most people only reached financial independence in their 60s, and with the help of Social Security and Medicare. Today, more people are reaching financial freedom by 40.

financial-freedom-habits

Everyone’s financial independence plan is different, but I’d like to propose three FIRE concepts I’ve found to be true:

  • You should have multiple sources of post-FIRE income, including a portfolio of paper assets (I recommend passive index funds), a portfolio of income-producing real estate assets (direct or indirect), and some flexible income from doing work you love.
  • By continuing to flexibly earn some money doing work you love, after reaching financial independence, you can minimize your sequence of returns risk and keep all (or most) of your paper assets in higher-yield stocks, rather than low-yield-but-more-stable bonds.
  • Rental properties help you get there faster, through a combination of advantages. These include leverage, predictable returns, tax advantages, and ongoing income with no loss of underlying assets and no fretting about safe withdrawal rates.

Oh, and it probably goes without saying that the lower your living expenses, the easier it is to cover them with investment income. And the easier it is to save more money to invest.

Sit down and write out a plan for how you might cobble together enough investment income to reach financial freedom. And don’t be afraid to include some active income, doing meaningful work that you love.

2. Start Measuring 3 Key Numbers Every Month

As they say in business, that which gets measured gets done. After all, it’s hard to make progress toward a goal if you don’t measure that progress.

Toward that end, start keeping a simple spreadsheet each month that measures three numbers:

  • Savings Rate: The percent of your after-tax income that goes toward savings and investments. (More on this shortly.)
  • Investable Net Worth: The sum of your investments, not including your home or car, minus your debts.
  • FIRE Ratio: The percentage of your monthly living expenses that you can cover with investment income alone. For example, if your total living expenses come to $4,000 per month, and you currently bring in $1,000 in passive investment income, then you have a FIRE ratio of 25%. When this reaches 100%, congratulations! You’re financially independent.

And remember, you’ll probably continue to earn some money even after reaching FIRE, if you retire young. Sitting on the beach sipping pina coladas all day sounds great when you’re working in a cubicle, but in reality you’d get bored quickly. You’ll want to return to contributing to society through some kind of work, even if it’s charitable work that doesn’t pay well.

In other words, you don’t actually need a FIRE ratio of 100 percent to reach independence. You just need to get close enough that you can cover the rest with your post-FIRE gig(s).

Related: How to Get Happier, Healthier, and Wealthier in 2020

3. Increase Your Savings Rate

The more of your income that you put toward investments, the faster you build wealth. Period.

As a general rule, I’ve found that people who save around 15 percent of their income reach financial freedom in 30 to 40 years. Those who save 30 percent of their income can reach financial freedom in 20 to 25 years, those who save 50 percent can reach it in 15 years, and those who save 65 percent can reach it in 10 years, often less.

It depends on factors like your returns on investment, so these number aren’t written in stone. But if you want to become a prodigious accumulator of wealth, start making lifestyle changes and funneling your money into income-producing investments.

Want a challenge? Try rearranging your lifestyle to live on half your income. My wife and I structured our lifestyle to allow us a 60 percent savings rate, while still traveling frequently (we average around 10 countries each year). And no, we don’t have a massive income, either.

4. Automate Your Savings

Once you make those lifestyle changes, you need to automate the “good behavior” of actually saving the money each month. Don’t rely on your willpower alone; that will fail you, and usually sooner rather than later.

The easiest way to automate your savings is to have your employer split your direct deposit, with your savings going directly into a savings account. If they can’t do that, set up automated recurring transfers to take place every time you get paid. Not every month–every payday!

Alternatively, you can try automated savings apps like Acorns or Chime Bank. Regardless, the important point is that it happens automatically, in the background, without any effort on your part.

5. Automate Your Stock Investments

Real estate comes with a series of barriers to entry, including (but not limited to) knowledge, skill, and effort required to do it right.

Stocks don’t come with any of those challenges. Take advantage of that fact by forgetting all the fancy-schmancy stock picking strategies and research. Save your efforts for learning about real estate investing and implementing it.

I recommend creating an account with a robo-advisor service, and letting them invest for you. Personally, I use Schwab’s Intelligent Portfolio service—it’s free if you invest at least $5,000, and they’ll invest based on your personal needs and parameters.

Related: 12 Reasons You’re Poor

For anyone under 50 and pursuing FIRE, I’d get aggressive with your asset allocation, buying stock funds from all over the world, not just the U.S.

If you’d prefer to go it alone, buy a mix of low-cost index funds that expose you to small-, mid-, and large-cap stocks in all sectors of the economy. I’d buy 50 percent U.S., 30 percent international developed countries, and 20 percent emerging markets. But you invest how you like.

6. Define (and Expand) Your Competitive Advantages in Real Estate Investing

You need some advantages if you want to succeed in real estate investing. Those could include experience and knowledge, funds available for investing, an investor-friendly market, a strong network of bird dogs and other contacts, the ability to do renovations yourself, strong relationships with contractors, or any number of other advantages.

But you should know what they are, and you should actively build on those advantages.

Take it from someone who lost a lot of money in real estate early in my career, and learn from the real estate lessons I wish I’d learned earlier.

As a final thought, master the science of forecasting rental property cash flow. It's not "rent minus mortgage," and until you know exactly how to do it, you have no business investing in rental properties.

closeup of key in lock on door

7. Create Diverse Streams of Passive Income

I like a combination of rental properties, dividend-paying index funds, private notes, and private REITs for streams of passive income.

A bear market hits your stock portfolio? No problem, lean more heavily on your rental income by deferring maintenance and incentivizing tenants to renew rather than turn over. Get hit with lots of rental expenses at once? Sell off a few stocks.

You need multiple streams of income, which don’t affect one another. My income from private notes comes in regardless of what’s going on in the stock market.

Diversify your investments. Rental properties can be particularly effective for creating retirement income, but don’t invest exclusively in them. You don’t want all your nest eggs in one basket.

With every extra dollar of passive income that you build through investments, you snowball your income and can keep rolling the money back into more and more income-producing investments. At a certain point, your portfolio takes on a life of its own, generating income faster and faster with every month that goes by.

Final Thoughts

It’s never too late or too early to start investing for financial independence. I’ve known and worked with plenty of students who started in their 60s and 70s, and others who started in their early 20s. Both age extremes come with their own advantages and disadvantages; if you’re older, read up on some of the perks of starting to invest in rental properties later in life.

Financial freedom isn’t about age. It’s part mindset, part strategy, and part relentless execution. Embracing a frugal lifestyle, saving aggressively, building diverse streams of passive income.

With enough will, you can reach a seven-figure nest egg in a few short years. But it starts with committing to your financial goals, resolving to make the next 12 months different than the last.

What are you doing to build wealth faster over the next year? What lifestyle changes will you make to realize those plans?

Hold yourself accountable by sharing in a comment below!

G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their ...
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    Jim Armitage Rental Property Investor from Massachusetts
    Replied 6 months ago
    Love this article, Brian! Thank you for writing and sharing it! It is particularly motivating to me as, this year, I am pushing hard to plan my path to FIRE within the next 5 years. One way I am working towards accomplishing that is by creating a new budget based on saving at least 50% of my W2 income and working towards fitting my lifestyle into it. I'm not there yet and, if I'm honest, am struggling to see how I can make it work. But, I'm not giving up and BiggerPockets and articles like this help to keep me motivate. So, thank you again!
    G. Brian Davis from Baltimore, MD
    Replied 6 months ago
    Thanks Jim! I too am on an aggressive FIRE plan, and one tip budgeting-wise is to not just knock out the little expenses (like cable TV) but to focus on the top three expenses: housing, transportation, and food. They make up 2/3 - 3/4 of the average American's spending, so that's where the greatest opportunity for savings is. Look into house hacking, and ideally moving somewhere that you can either live without a car or share a car with your spouse. Best of luck!
    George Lui Investor from Palo Alto, CA
    Replied 6 months ago
    Thank you for the article Brian! It as a gently reminder for me to put some priority on my non-RE assets!
    G. Brian Davis from Baltimore, MD
    Replied 6 months ago
    Glad it was useful for you George, and best of luck with your goals over the next year!
    Nathan G. Real Estate Broker from Cody, WY
    Replied 6 months ago
    Good article, Brian! I did not hop on board the financial Independence train until early last year and it's difficult because I'm simultaneously focused on growing my business with the intent of structuring it for sale in the next three to four years. I'm finally buckling down and putting my goals in writing for the first time in my life. I now anticipate being financially independent and working no more than 30 hours a week, by choice, by the end of 2020 while still learning as much as I currently do (or more). Once I've met that goal, I'm going to find opportunities to help others around the world.
    G. Brian Davis from Baltimore, MD
    Replied 6 months ago
    That's a great goal Nathan! And I understand the simultaneous goals of FIRE and growing a business, as I'm doing the same currently, but fortunately both goals go well together. Best of luck!
    Scotty Ball Investor from Gainesville, Georgia
    Replied 6 months ago
    This is a great article! Great checklist to move forward in 2020 towards financial independence!
    G. Brian Davis from Baltimore, MD
    Replied 6 months ago
    Thanks Scotty, much appreciated, and best of luck on your own journey toward financial independence!
    Adi P. Real Estate Investor from Portland, Maine
    Replied 6 months ago
    Hi - thanks for the article. Can you recommend a good resource (on Bigger Pockets or elsewhere) for forecasting rental property cash flow?
    Adi P. Real Estate Investor from Portland, Maine
    Replied 6 months ago
    Ah - I found 2 more of your articles specifically on that topic. I will now recalculate my maintenance/turnover/vacancy rates. I had something built in, but I am pretty sure it has been worse and my net income has fallen below my expectations. Since I know have 1-2 years worth of data, I can get a more realistic number
    Russell Wagner
    Replied 6 months ago
    When I was 22, my boss gave me all these same recommendations. I followed most of them, but now more disciplined. Brian the other side to this coin that you could add or second on this article is the creep. The Disney+, the upgraded Phone with unlimited, the high end IPAs, and the neighbor driving the brand new mercedez G wagon. You take this article, and keep your champaign tastes on the PBR beer budget then you are way ahead of the game. This article is spot on, great work!
    G. Brian Davis from Baltimore, MD
    Replied 6 months ago
    Thanks Russell, and it's a great point about lifestyle creep. It's insidious, mostly because we don't notice it happening. Important to freeze your spending budget, even as your income rises!
    Ivan Chikigak-Steadman from Anchorage, AK
    Replied 6 months ago
    Wow. This is exactly what I needed to hear. Thank you sir!
    G. Brian Davis from Baltimore, MD
    Replied 6 months ago
    Thanks Ivan, glad to hear it resonated with you!