What's the Next Step in Your Financial Journey?

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06/01/2022

 
 

It was only 3 years ago when I started focusing more on my balance sheet and not just my income statement. I happened to read the book Rich Dad Poor Dad by Robert Kiyosaki, and it opened my eyes to a new way of thinking. Most of us are groomed into saving money by depositing our savings into a 401k or an IRA and never really thinking about accumulating assets on a balance sheet.

Before I continue, I'll define some of these terms in the simplest way I can:

  • Asset - something that puts money in your pocket
  • Liability - something that takes money out of your pocket monthly
  • Income statement - your monthly budget where you add up your “ins” and subtract your “outs”
  • Balance Sheet - the assets you own and the liabilities you are on the hook for

Don’t get me wrong, a 401k and an IRA are assets, but have you thought about how these can or cannot put accessible money in your pocket every month?

I want to share a few alternative investment options to consider that are assets that put passive income into your pocket each month. 

Real Estate

Most people who scoff at the idea of investing in single family rentals do so because they don’t want to get a midnight call from their tenant who needs their toilet fixed. Understandable, but single family rentals aren’t the only option. 

Maybe you have an interest in farmland or a vacation rental in your favorite destination. Perhaps you want to rent out your old barn for boat and RV storage, or just rent the extra room in your house to a friend. 

There are so many options out there and I don’t want you to limit yourself when you hear “real estate investing.” Be creative about where you can derive some extra income passively. Another option that is becoming more popular is real estate syndication. This is where you invest passively into a real estate project that is run by a management company. 

Paper Investing - Stocks and Bonds

Series I Savings Bonds

I recently learned about series i savings bonds and wanted to share what I’ve found. They are very similar to the paper bonds we all got as kids from our grandparents but they pay a fixed rate of return + a variable rate that is set based on inflation. 

They are currently paying 0% on the fixed rate, but 9.62% on the variable side. The fixed rate never changes while you own it, but the variable changes every 6 months. There are some rules to follow such as minimum and maximum purchase amounts and how long you have to hold them. All of these details can be found at TreasuryDirect.gov and that is where you purchase them as well. 

Other types of bonds aren’t a favorable investment with interest rates on the rise. Please talk to a financial advisor prior to purchasing other types of bonds. They may not know much about these series i bonds, but it should be something you consider doing on your own. 

Dividend Paying Stocks

Another great option to talk about with your financial advisor is dividend paying stocks. My only tip here is don’t buy a stock only for the dividend, but rather look at it as a bonus if they pay a higher dividend. Dividends can be cut at any time and you want to make sure the company is solid with some expected growth in the future. 

Businesses

Buying an entire business is a pretty far-fetched dream for the everyday American but being self employed isn’t. I know many people who are self-employed and could transition from self-employed to a business owner. If your income is directly tied to the work you do, you are self employed and you don’t have something you can sell. If you can get your business to a point where you are making money but not required to do all the work, now you have a business that can be sold or held for passive income. 

This may seem like an impossible task, but it might just take some creative thought. You might need to hire another crew for your construction business, or maybe transition to an online education platform for your diet and nutrition consulting business. 

The purpose of this article was to open your mind to the next step in your financial wellness journey.

You may be still trying to master your income statement so you can have savings at the end of each month, and that’s ok. Once you have that mastered, you can start exploring these other options that are out there. It’s a fool's game to start down this path without mastering step one which you can read about here. Find a route that works for you and take your financial health into your own hands.