How do I get to next level

Question

I’m 31 make 100k a year with zero debt other than my mortgage. Contribute 12% of paycheck to my TSP account. Wife stay at home mom so only 1 paycheck. Other than just working earning a paycheck and saving I’m not to sure what to do to really get to the next level of wealth generation. I feel like we’re doing good but just kind of stuck in same routine. I have a personal trading account with little over 30k but I’m very conservative with it and typically when I profit it’s only about 100-500$ a trade or a few thousand a year, but I rarely ever lose money. I lean more risk averse and don’t “YOLO” calls etc. but rather invest in good fundamental companies that pay dividends. Hesitant to pile into the market cause I know it’s all being held up artificially by the fed and a handful of tech. I’ve looked into real estate multiple times but I never know how to really get started in that and seems like to really be successful you need to have the capital upfront to not open a second mortgage. Plus I don’t have any experience in the property management aspect. So that’s what always throws me off the train. In your opinion is it really just stocks and real estate? What else can be done to generate wealth.

William Fritsche · Answer

Eric,

Most of us would say having some self education is very important in any area you are investing your money in.

Using property management to assist you is a way to have someone, that knows the area you are looking to invest in, has access to contractors that are reliable, knows the local laws and frees up some of your time.

Having help is an option as long as the help is vetted and has your best interests protected.

Will,

Steven Nguyen · Answer

I do both real estate, stocks (specifically Vanguard index funds and apple stocks), and indexed universal life insurance.  I currently have a high paying job of ~200k but plan to retire in 10 years if possible.  For stocks, I have a very boring and bland strategy, every 2 weeks I will automatically invest $500 into 3 Vanguard index funds (Total US Stock Market 60%, Total International Stock Market 20%, and Total Bond Market 10%).  I don't time the market, but rather am IN the market for a long time.  The average is 7%/annually with dividends reinvested.  With every 2 week investments, it helps me dollar cost average and makes it a very passive investment for me.  Indexed universal life insurance is the same concept.  I max fund my policy to allocate more towards cash value then the cash value is invested into index funds (S&P500) with a floor of 0.75% and ceiling of 13%.  After about 15 years when the cash value builds up and fees start to drop off. you can use for "infinite banking" or pull money out as a loan that is tax free to retire early or invest in real estate.  My focus on real estate is value add and equity more so compared to cash flow since I am still working.  For example, I will buy houses and add bedrooms/bathrooms or build ADUs in the backyard to "force appreciation".  I hope to build up as much equity as I can in the next 10 years then deploy that equity into index funded or indexed universal life insurance, once I want more passive investments.  I hope this helps in anyway.  Thank you.

Andrew Powers · Answer

This post reminded me of BP Podcast #403 developing millionaire mindset and overcoming limiting beliefs with performance coach Jason Drees. One of the things says is "you can't solve a level 2 problem with a level 1 mindset"... really good podcast to listen to, worth the hour

Cal Dunagan · Answer

@Eric W.You're getting some good advice here. Stock trading is always a good place to stay if you can find success or a good mentor. If you're not feeling that traditional stocks are bringing in enough, I would do some research into closed-end funds. I have a buddy who makes a considerable amount of money trading this way. However, if you're looking to get into real estate investing or starting a small business, look into the Small Business Administration. It's a great source of information for people starting out in the small business/RE world. Here's a great article regarding how it can help you.Best of luck!

Chris Pasternak · Answer

Bump up retirement to 15%.  Your wife's a stay at home mom, are you saving anything for kids college?

Single income with family I trust you have term life insurance policy.

Otherwise pay down mortgage = no payments.  How will that make your family feel?

Tierra Carter · Answer

@Eric W. The Book "How to Invest in Real Estate" by Brandon Turner and Josh Dorkin is a great resource for giving you an overview of what investing in real estate looks like and all the MANY different ways you can invest. I would highly recommend checking that out to help you in deciding whether to move forward investing in real estate. I think it will give you a greater understanding of what it entails and your options.

Patrick Blanchard · Answer

@Eric W. Getting to the “next level” is less about deciding which investment vehicle is “best” and more about understanding which vehicles align to your goals & your “why”. Wealth is a subjective term, it doesn’t always mean a pile of debt-free money, and is differs from person to person.

I’d suggest you and your wife spending some time to understand what your “why” is and how different investment vehicles align with that why.

Always here to help.

Scott Jensen · Answer

@Eric W. In my opinion, wealth is built through stocks and small business ownership. For BP folks, real estate investing is the small business of choice.

I would recommend reading Scott Trench's Set for Life, John Bogle's Little Book of Common Sense Investing, and Gary Keller's The Millionaire Real Estate Investor (in that order).  Also, for managing properties, Brandon Turner's Book on Managing Rental Properties is really good.

Bill Hampton · Answer

Eric,

You should look into working with a fee-only financial planner. A fee-only financial planner can help you put together a holistic financial plan to generate wealth that can include stocks, mutual funds, real estate and other assets.

There are multiple ways to invest in real estate that don't include property management.

Good luck and let me know if you have any questions.

How do I get to next level

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