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Tuesday, June 2, 2015

Best Advice You Can Get for Your 20s IF You Want to Be Rich



¿Que pasa?—everyone.


I have the monumental task today of providing the best advice I can give to people in their 20s that want to be Rich.  Before you click away because you're not in your 20s, I want to inform you that this advice is worthwhile to people over 20 as well.  Besides, aren’t you normally telling everyone you’re still 21?


A little background if you’ve just tuned in.  This blog post is the third in a series that started with: How to Tell if You want to be Rich or Wealthy and was followed by, The Best Money Advice You Will Get for Your 20s.  In the former, I expound on the difference between being Rich vs. being Wealthy with a helpful chart as a visual.  In the latter, I introduce my personal metaphor for helping people understand the difference between being a true member of Camp Rich (A Spartan) versus being a true member of Camp Wealthy (A Roman).  I included mention of my latest and free eBook: Do I Want to be Rich or Wealthy, a short money personality, self-discovery quiz that lets anyone identify whether they are a Spartan or a Roman.  I also suggest three money mindset must do’s for all young people: 1) Become Financially Literate 2) Listen to Business Builders and 3) Be Reflective about your money personality.


And now…we break for station identification…just kidding.  Now I give you what I would tell myself if I were able to go back in time to my 20s, and had the knowledge of being a Spartan of Camp Rich.


I am rich today, worth over a million dollars.  I accomplished this in a 14-year period (from the age of 24-38) via the conventional and Camp Spartan route:




Tier
The “What”
Investing
Securities: From age 28 to Ongoing.
Real Estate (Personal Residence 1): from age 25 to 30, sold Townhome in San Jose for $88K profit; used to put 10% on home in Oceanside, CA currently valued at $635K, but was at one point, prior to the crash, valued at $814K.
Real Estate: 3 rentals bought from stock market profits from the start of the bull to ongoing, from age 33 to 37.  
Career
Became a founder teacher in 2001 of San Jose’s second established Charter high school (that I know of).  Distinguished myself and was promoted to Lead Teacher (more pay).  Left for a comprehensive HS in San Jose after three years.  Started out as a Probationary 1 and within three months was promoted to “Small Learning Communities” grant coordinator.  Left to So Cal and used these two leadership positions to get a job as a HS Assistant Principal at a new HS in Lake Elsinore, CA.     
Education
San Jose City College, A.A.
UC Santa Barbara, B.S. Biological Sciences
UC Santa Barbara, Masters of Ed, and Teaching credential
San Jose State University, Masters of Administration and Tier 1 Admin Credential
Cal State San Bernardino Tier 2 Clear Admin Credential


Sorry for putting my life story out there, but there really is a point to all of this.  Just bear with me.  Okay, let’s analyze what I did, both positive and negative, on my path to becoming a member of Camp Rich.


Education:


Positive—
  • I cut my educational expenses by attending Junior College.
  • I worked two years, part-time, while at Junior College for a company called, “Top Priority Sales,” selling random things at Costco (set up a table and talked to shoppers about the various products I presented).  This helped me pay for my educational expenses and gain sales skills.
  • I worked two summers while at UCSB as a painter’s apprentice, painting graduate student housing.  More money to pay expenses.
  • My senior year at UCSB, I procured a paid Internship, working as a teacher’s aide at a middle school in Santa Barbara.  Professional experience and money to pay expenses.
  • My loans were all subsidized.
  • I applied for grants, and got some that helped with both undergrad and grad school tuition. Financial aid paid the rest.
  • I majored in Science and got a B.S. when I could’ve left a semester or so earlier with a B.A.  The B.S. degree would give me an advantage if I ever decided to enter biotech.
  • I got a Masters degree and teaching credential in one year, saving money and giving me units that would later help boost my salary as an educator in the public school system.
  • I did not need to use credit cards, though I did occasionally to help build a credit profile.  No credit card debt.
Negative—
  • I took out one or two loans I did not need.
  • I spent way too much time at the UCSB recreation center, gettin’ my yolks on.  Exercise is good, right?  Wrong, I was body building, meaning I had to buy more food to sustain my muscle weight.  Much of my loan money went to food, and I shopped at Trader Joes!
  • I didn’t work enough.  I should’ve worked more than I did to reduce the amount of loan money I needed.
  • I did not network enough; I only keep in regular contact with my former roommates and one died, so I have to keep in contact with him in spirit.  Not networking enough was a huge mistake!
  • I studied for my major and did not pursue learning of any other kind.  I should’ve equally studied financial literacy topics.
  • I bought too many textbooks.  Some were used books, but they were still books I probably did not need to pass the course.  I was told, “They will be useful for you during your career as resources you can always reference.”  The ones I kept currently collect dust in my library. If I had Campus Book Rental.com back then, I would've used them!


Education Summary, for Spartans:
Education is in fact a Spartan’s foundation for becoming rich.  Your earning’s potential will be dictated by your major of study.

Therefore, majoring in a 21st Century in demand field (which is incredibly hard to do nowadays with robots handling everything) will be the single most important thing you can do.  Doing so without incurring too much debt is priority number two, followed by networking as much as possible as priority number three.  Gaining financial literacy skills while going through college as a “side study” would be priority number four, and building a credit history number five.


Major > Doing College Inexpensively via Frugality and Money Gained from Work Experience > Networking for Career Advancement > Minoring in Financial Literacy (okay, not really a minor of study, but pretend that it is) > Build Credit > Dating and Partying (you gotta have some fun!)


Career:


Positive—
  • I didn’t take the traditional teaching route, starting in the “system;” rather, I joined a disruptor system (Charter schools in CA were very disruptive and new in the early 2000s).  This allowed me, an out-of-the box, Roman, to thrive.  I would have been put under the scrutiny of veteran teachers and the union had I started my career at a traditional school district.
  • I sought to distinguish myself during my first three years of teaching because I worked in a system that paid for performance.  My evaluation years each resulted in a pay raise, and a promotion with added pay after my first year of teaching.
  • I promoted to the second highest paid position at a school site, an Assistant Principal, after four years of teaching and worked it for ten years.  The “tradition” is for teachers to work two-thirds or more of their careers and promote on the verge of retirement.
  • I worked as a science teacher (a high need position) in an “under-serviced” community.  This allowed me to apply to the Assumption Program of Loans for Education or APLE program.  They assumed $15K (slightly under half) of my total student loans for four years of teaching science in East Side San Jose.  The program ended after this timeframe, meaning, I had fully taken advantage of it.  
Negative—
  • Worked long hours, focusing mostly on my career until age 28 when I met a teacher couple at my new school in Lake Elsinore, CA, during my rookie year of being an administrator.  They got me interested in stocks and bonds.
  • Did not supplement my retirement via the available retirement options (403b) for educators, until 2005, starting with my fifth year of being an educator.  I missed on five years of adding, beyond my Cal STRS “pension,” to my retirement.  Similarly, I didn’t take advantage of utilizing all of my pre-tax options until the same time period.  I could’ve used Section 125 from the get-go!
  • Realizing I was a Roman (member of Camp Wealthy) AFTER I had started a career.  I may not have become an educator had I known my money personality sooner.


Career Summary, for Spartans:
Careers are difficult to come by this century.  Many people switch careers several times over the course of their working years.  A Spartan’s financial goal is building a sizable nest egg, and ensuring they will not experience any shortfalls during retirement.  Do not wait to supplement retirement savings like I did.  Put as much as you can in your 401k and especially if there is an employer match.  No 401k?  Do both a traditional and Roth IRA then.  Look for employers that are on the cusp of something new to work for.  Though there may be more “security” in working for an established employer, it’s the disruptor companies that will give you the opportunity to pad your resume, giving you jobs or tasks you may never have been given otherwise, working in hierarchical organizations.  Don’t let anyone discourage you from trying to promote.  Remember it's the Spartan way to boost your income so that more of it could be earmarked for retirement savings, keeping a frugal lifestyle while doing it, of course.  And lastly, if you are a daring Spartan, start your career in a city that will assume your college loans for residing and working there.  Yes, they exist!  Here are a Spartan’s career priorities:


Procure An In Demand Career with Disruptive Systems for Skill Acquisition Purposes > Seek to Promote As Soon As Possible to Boost Income > Funnel As Much Money to Retirement Savings > Take Advantage of Anything Your Employer Provides


Investing:


Positive—
  • Bought my first home at 25.  Sold it at 27 for $88K profit.  Did not fall in love with it or the area I lived in.
  • Spent $2,500 on a three day Real Estate seminar at 28 that taught me all of the available ways of making money with real estate.
  • Started investing in securities two years before the Great Recession and gained enough sense to not be scared away, plugging ahead instead, and making a great windfall with the beta market rewarding anyone with courage.
  • Kept my trading costs down by getting a PMA account (100 free trades a year) at Wells Fargo.
  • Invested in individual stocks (I still pick my own) versus mutual funds with fees.  And I didn’t diversify!


Don’t want to spend 1-3 years learning how to stock pick?  Leave the securities picking to math and algorithms with what I consider to be the best automated, low-expense, investing service provider…Betterment!


  • Used proceeds from stocks to buy hard, income producing rental properties.
  • I took a Roth IRA from $11K to $40K investing in securities and used $10K (still have $30K invested in stock) to fund my investment with Rich-uncles.com.  This investment led to another income stream!
  • Made investing a priority above paying down the balance of my college loans.  I had refinanced to a 4% interest rate on my college loan balance (around $18K after the A.P.L.E. program).  I also made investing a priority over building emergency savings.
Negative—
  • Waited too long (age 28) to start investing in securities.  The stock market is the most accessible, easiest way to make money!
  • Didn’t start using a Roth IRA until age 29.  The Roth IRA allows you to invest with all of your investment gains being tax-free provided you don’t withdraw until 59.5 years of age.


Investing Summary, for Spartans:
Investing aggressively in your 20s will allow you to make crucial mistakes.  Mistakes are good, you can learn from them!  I kept a journal of my trading activity, and jotted down all of the stupid things I did when I was starting out, like putting in "market" instead of "limit" orders.  Have both a Brokerage (liquid) and a Roth IRA (retirement) because although you will be taxed in the former for any capital gains, you need liquidity to buy other assets or for emergencies.  Your brokerage account becomes your emergency savings.  Meanwhile, other than a “Roth” type IRA, there is no other platform where you can invest, make a profit, and not worry about taxes on gains ever (following the age withdrawal guidelines, of course).  Finally, a Spartan should own at least two rental properties in addition to their paper asset portfolio.


Investing > Building Emergency Savings > Paying Down College Loans


How can you divert any more money than you're already diverting to investing?  Well, you can’t with just the income from your job.  That’s why this next portion is the Ultimate Spartan Guide to a Plush and Early Retirement.  Here’s the easy to understand visual:


        Investing

Career IncomeSupplemental Income

 
   


The key to an early retirement is working side hustles in tandem with your career from Day 1!


I started side hustling in my thirties when I published my first eBook and made passive income from eBook sales.  Mistake!  I started my content marketing and brand education business at age 38.  Mistake!  I started this blog, another business, at age 38.  Mistake!  I started freelancing on Elance at 38.  Yes…another mistake.  You get the picture.  All in all, had I started side hustling at age 24, when I first started my teaching career, I figure I’d be worth 1.5 million right now instead of 1.1 million. So start side hustling now!

This has been yours truly, Carlos, doing my sincere best to provide you with what I've come to understand about being Rich and Spartanly. If you liked this post, please comment and share any insight you may have with all of us. Also, please come back for my next post, titled, Best Advice You Can Get for Your 20s IF You Want to Be Wealthy. The Romans of Camp Wealthy invade CCM blog! Thanks!

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