4 Money Makers You May Be Missing Out
We’ve heard many investment success stories. The Winklevoss twins are reportedly now billionaires through their early bitcoin investments. Our uncle who invested $10,000 in Berkshire Hathaway stock in 1965 would now have $88 million.
What is the latest wealth generator out there today? We’ll give you four. They’re not the get-rich-quick schemes you may be hoping it would be. But upon closer look, it can generate tens of thousands of dollars in more wealth.
1) Contribute to a Roth IRA
Sounds boring? Look past the name. A Roth IRA is a beautiful way to grow our money.
If your income is less than $120,000 for individuals and $189,000 for married couples, then you can contribute the maximum amount in a Roth IRA ($5,500/person for 2018).
Say you contribute $5,000 a year for the next 30 years and make a compounded return of 6% per year. You will actually generate more than $250,000 in earnings – all tax-free!
*The blue line represents your contributions; the orange is your total Roth balance; and the difference between the two is your earnings.
If you no longer qualify for a Roth, talk to us about a backdoor Roth IRA option.
2) Avoid “Termite-Infested” Funds
Termites are super tiny. We can hardly see them, but they’re eating away the foundations of our house.
Fees are the termites that eat away our retirement savings foundation.
All mutual funds that you own in your 401(k) and IRA charge fees, so they can hire people to manage the fund. Some funds charge high fees, some charge low fees.
John Oliver did a hilarious but fairly accurate segment on mutual fund fees. I highly recommend watching it.
If you invest $100,000 in a fund that generates a 6% annual return with no fees, you will earn $330,000 over 25 years. However, if you invested that same amount in a fund that charges a 2% annual fee, you will lose about $170,000 to fees.
Image from Vanguard.com
Index funds that are available in your 401(k) and IRAs have lower fees, since they don’t need to hire a lot of fund managers. Those who work for the government are lucky, since they have access to TSP funds, which has ultra-low fees (0.033%!). If you just landed a government job, think about rolling over your old 401(k)s to your TSP. (One downside to TSP funds though is they lack exposure to emerging market stocks.)
3) Park Your Cash at An Online Savings Account
Are you the type who likes to keep lots of cash in their checking or savings account, for emergencies? If it’s just sitting in a regular brick and mortar bank savings account, you can do better.
Look for an online savings account that give a higher deposit interest rate. There are several, including Capital One 360 Money Market, Barclays, Synchrony, and Ally Bank.
If you move $50,000 in savings from an account earning 0.01% to one earning 1.5%, you can earn an extra $8,000 in interest over 10 years. This could be more if rates continue their upward trend.
*Image from Ally Bank.
4) Work With a Credentialed Financial Planner
A 2014 academic study showed that those who worked with a holistic financial planner were able to build up to four times more wealth, compared to those with no financial plan.
Numerous non-profit studies have shown that having a financial plan improved people’s credit scores, net income, and net worth.
For example, one of our couple clients were able to increase their net worth by more than $300,000 in a span of two years!
By working with a credentialed financial planner, you can learn many more money-making strategies. It may be one of the best investments you will ever make.
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