How Not to Live the Dream: How I Handled the Broader Realities of Wealth
Learning who lived in your neighborhood was common when I was growing up in Seattle. My father, like all the other fathers on his block, always encouraged me to get involved in the community through sports and volunteering at the local clinics. There was never any question that I’d eventually graduate high school and go to college and my dad never missed a chance to remind me that he would love to see me receive a college degree.
That all changed when I was a freshman at Eastern Washington University. I learned a very valuable lesson that I’d always sought to understand – the true value of hard work and initiative. Despite making substantial contributions to the lives of countless children in our communities through volleyball and the involvement of my father, I never saw him get a real job at a place like Boeing or Deere & Company.
Over time, that reality became more clear. My many hours of volunteering and deep involvement in the community would not be enough to pay for college – I needed to find a way to save and build my own money to pay for an education and a start in the workforce. Now it was time to consider what I would actually be able to do.
There are four areas in my life where I’ve had to put my wealth-building skills to work. I never worked as hard in high school, I never paid much attention to finance and I never invested the time I would’ve done in order to personally save and create a nest egg for myself and my family. Here are some strategies I’ve employed to help build a portfolio worth more than $800,000 and enjoy a financial future of my own:
High-interest savings accounts and checking accounts: For the most part, most high-interest savings accounts and checking accounts aren’t meant for the average person. You won’t see many people earn rates over 1% at any time – if you get an account that does offer that rate, you’re likely to get tired of making deposits within a few months. Instead, you need to set up direct deposit for your paychecks or max them out at the highest rate in your jurisdiction.
Dividend stocks and S&P 500 funds: For everyone, dividend-paying stocks are a great way to increase your income and limit risk. Most dividend stocks pay at least 1% per year and they can be very rewarding if you hold them for the long haul. With the S&P 500 Index, you should buy the 40% of the index with the highest dividend yields. Now you have a pretty good amount of money to get you off to a good start. If you want to play it safe, use an S&P 500 fund that holds at least 50% of its assets in blue-chip stocks.
Commissions and tips: While commissions may seem like a monthly expense, you can make significant money just by buying things online. Some simple shopping tools help you avoid so many extra costs, such as paying full price for stuff online. Instead, buy only things you know you’ll use – you’ll save thousands by making time to go to the store to pick up your purchases.
Vanguard Funds: For those who can’t afford the upfront $2,500 or $3,000 investing costs or don’t have the room in their portfolios to pick high-yield dividend stocks, low-cost index funds make good choices. Vanguard’s S&P 500 fund is an excellent choice for conservative investors. In addition, Vanguard’s Industry Leaders Fund may be a suitable choice for growth investors.
Beyond traditional investments, there are many other ways you can build wealth. Follow the advice of an advisor or take in the guidance of a financial planner to help you select the right investments that will help you reach your financial goals. If you’re not ready to invest in stocks or bonds, consider establishing a savings account through a company like Charles Schwab or Ally Bank that lets you manage your money on-the-go.
– James L. Clark is the CEO and founder of MindShift, a leading personal finance tool for the online generation. James is the creator of three pioneering cash-back credit cards that give back customers up to $0.75 in rewards for every $1 they spend on their statement.