As a young professional who will make a lot of money over the course of your career, you may be approached by a financial advisor. Although some advisors can be great assets, others were trained as salesmen and may not have your best interest at heart. They may overcharge for advice or worse, convince you to purchase expensive investment products you may not need. One of the products you should be weary of purchasing is an annuity.
What is an annuity?
An annuity is a type of investment product you can purchase from an agent at a brokerage or life insurance company. You pay a set amount of money to the company (via a lump sum or in monthly payments), the company invests that money on your behalf. After a certain time period, the company will then return the money you gave them back to you in smaller fixed monthly payments (usually for the rest of your life) with interest. In other words, you give the company your money now to invest and the company returns your money back to you later (in small payments) with a certain amount of interest. It some ways, it is similar to a bond (with many more fees attached, as we will discuss below).
When it comes to annuities, there are different types. The main types are immediate annuities and deferred annuities. With an immediate annuity, you pay a lump sum for the annuity and the company starts paying you in monthly installments immediately. There is no waiting period between the time you purchase the annuity and the time you receive your first monthly payout. With deferred annuities, there is a waiting period. You may pay for the annuity with a lump sum or with fixed payments, then you wait a number of months or years before you get your first payment. Along with the timing of when you get your first payout, there are also variations in the amount of your payout. Some annuities have fixed payouts in which you receive the same amount of money each month. Other annuities have variable payouts (in which your monthly payment changes based on how well or how poorly your money is being invested). Lastly, some annuities have payouts that follow a certain index (like the S&P 500).
Why do some financial advisors recommend them?
It may provide a guaranteed income. By purchasing an annuity you get a set amount of money no matter how long you live. If you don’t know much about investing and want to virtually ensure that you will have a certain amount of money each month in retirement you can buy this product. Financial advisors may also state that this product is better than investing in taxable accounts because the profits are tax deferred until you start getting withdrawals/payouts. Annuities are sometimes purchased by retired individuals who fear they may outlive their retirement savings and want to guarantee themselves a monthly payout for the rest of their lives.
Why you should be weary of an annuity?
The agent and company takes a large portion of your investment returns
In order for the company to be able to guarantee you an income for the rest of your life they have to make sure you give them enough money to cover the cost of the payout they will give you while also netting themselves a profit. They need to be able to pay you and make money for themselves. Companies who sell annuities are businesses not charities. Ensuring a profit for themselves is how they stay in business. Unfortunately, this profit is at your expense. While a small cut is reasonable, many of the agents and companies who sell annuities take rather large cuts of your profit, often up to 10% of the total value of your payout.
The money you loan them is invested in inefficient ways which reduces your profit and payout
Along with the agent and company taking a rather large portion of your payout, the payout that you do receive is often not as a large as it should be. Why? Because the money you put into annuity is usually invested in inefficient mutual funds that have a track record of underperforming the market (getting lower investment returns than the average). Plus, many companies charge high expense fees on the profits you do make. In other words, you get lower investment profits and have to pay more even more money in fees for them.
Purchasing an annuity is inflexible and binding.
If you want to take money out of the annuity early (to get payouts sooner or increase the amount of your payout temporarily to pay for a large expense), it is extremely costly. You would have to pay a high percentage in taxes to take money out sooner. Plus, if you want to sell the policy or get rid of the policy at any point, the company will charge you an exorbitant fee (often 10% of the value) to “surrender it.” Lastly, once you start getting your fixed payments, you have to pay taxes on this income at your ordinary income tax rate which tends to be much higher than the capital gain tax rate you would have been charged had you simply invested your money in an taxable account yourself instead of purchasing/investing money in an annuity.
What is a better alternative to an annuity?
Prioritize retirement accounts like your work 403b and Roth IRA. Through employer-sponsored retirement accounts you can contribute money to invest for retirement in a way that lowers your taxes each year. You may also get extra “free” money to invest if your job offers a retirement “match” (extra money employers put in your retirement account free of charge as a bonus for choosing to invest). Along with those two perks, prioritizing retirement accounts lowers your taxable income which can decrease your student loan payments. Retirement accounts like a Roth IRA, even offer a wide variety of investment options and allow you to get tax-free growth on your profits. A Roth IRA also allows you to take out your contributions at any time instead of having to wait until you retire, providing more flexibility and serving as a backup emergency fund should unexpected expenses arise.
Invest money in index funds via taxable accounts (after maxing out retirement accounts). Instead of purchasing an annuity, you can simply open a brokerage account and invest the money in low-cost index funds. Doing so, will allow you to invest even more money, on top of what you already invested in your retirement accounts, to build your net worth sooner. With taxable accounts, you can withdraw the money at any time and your profits will be taxed at lower rate.
My point? Annuities may seem like good idea but many young professionals should be weary of them because they tend to be costly, expensive, and inflexible. The money in them is often invested in suboptimal ways and the agents and company who sell the policy take a large chunk of your money. Instead of opting for an annuity, invest money in low-cost index funds since they have low fees, good profits, and lots of diversification that decrease your risk of losing money. When investing in low-cost index mutual funds, you may first want to prioritize doing so through retirement accounts (due to the tax advantages) then opening up a brokerage account to invest the rest. Unless you are currently retired and fear you may outlive your savings, annuities may not be the best investment option.
Calculate your net worth and increase it
When it comes to personal finance, the ultimate goal for many people is financial independence. Financial independence is when you have enough money to do whatever you want in life and have control over your time. You can stop working if you want or cut back to part time. You can travel as you desire and afford to have incredible experiences with the people you love. In order to get to this state of financial independence you must be diligent with your finances and save/invest money in a smart way. Before you start investing money or begin your journey to financial independence, you must first figure out your starting point and calculate your net worth. Here’s how:
Step 1: Understand what net worth is
Your net worth is a number that tells you how much money you have. It takes into account the cash in your account and the things you own that you could sell for money. It subtracts any debts or loans you owe to others. In other words, your net worth is your assets (the things you have that are worth money) minus your liabilities (your debts).
Contrary to popular belief, your net worth is not how much money you make. Many people who make a lot of money assume they are “rich” but that may not be the case. There are those who make a lot of money but still have a low net worth (because they spend most of what they make and have a lot of debt). In contrast, there are those who make a “small” amount of money but have a high net worth (because they keep their expenses low and save/invest most of the money they earn). Knowing your net worth helps you know where you are starting from as you begin your financial independence journey.
Step 2: Make a list of your assets
The first thing to do to determine your net worth is to make a list of your assets. Assets are things that you have or own that are worth money. They usually fall into these 3 categories: Cash you have on hand (in a checking or savings account), investments you have (in stocks, real estate, or other currencies), and possessions you own that you can sell for money. In order to calculate your net worth, get out a sheet of paper (or open a file on your computer or phone). Write down all of your assets on one side of the paper and write down the value of each asset on the other side of the paper.
Some examples of things that can go on your list of assets are: the amount of cash you have on hand and in a checking/savings account. You also want to list investments you have in the stock market along with any investment money you have in your work retirement accounts (like a 401K or an IRA). If you have a home (or homes), write it down along with its estimated value. If you have a business, write down it down along with its approximate value. If you have expensive jewelry, a car that you own (leases do not count), or other things like furniture and equipment you can sell, then add those things to your list along with the estimated value of each of them.
Step 3: Make a list of your liabilities
Now that you have your list of assets you need to make a list of your liabilities. Remember, liabilities are things that take away your money. They are the debts you owe and loans you have. Things like credit card debt, car loans, house mortgages, student loans, business loans, medical bills, and other outstanding debts/bills are all examples of liabilities. As you make this list, be sure you are clear on what truly counts as a liability vs an asset, keeping in mind that some things like a car or a home may be examples of both.
If you have a home, the total value of your home will be listed under the asset column along with the amount of how much money the home is worth. If you do not own your home outright and are still making mortgage payments, then you would list your home again in the liability section and write down the total amount of the mortgage you have left to repay. For example, let’s say you bought a home last year. The purchase price was $180,000, you paid $20,000 as a down payment, took out a $160,000 mortgage to cover the rest of the cost, and that the value of your home has now increased to $200,000. In this example, you’d list the home in the asset column for its current value of $200,000 (because that is how much you could get for the home if you were to sell it). You’d then list your house mortgage in the liability column and write down the total amount of the mortgage you have left, which may be around $160,000. My point? Your liabilities column should list all of your current debts and loans (including your mortgage).
Step 4: Subtract your liabilities from your assets to determine your net worth
In order to calculate your current net worth, add up the total value of your assets and the total value of your liabilities. Then, subtract the total amount of your liabilities from the total amount of your assets. The number you get is your net worth. For example, if all of your assets equal $200,000 and all of your liabilities equal $150,000, then your net worth is assets ($200,000) minus liabilities ($150,000) which equals $50,000. For some people, doing that calculation may be quite surprising.
Don’t be alarmed if your net worth is negative. Many young professionals have a high amount of student loans or a large mortgage on their home that adds a substantial amount to the liabilities’ column. If the total amount of your liabilities is bigger than the total amount of your assets, then you have a negative net worth and a much longer road to travel to become financially independent. But don’t be discouraged. Calculating your net worth is good to get a baseline of where you are. Now that you know where you are you can determine how to move forward.
Step 5: Find ways to increase your net worth
Regardless of where you are starting from you can always get better. You can increase your net worth by buying more assets (or increasing the current value of the assets you already have). You can also increase your net worth by lowering your liabilities and paying off the debt/loans that you have. Take a look at your spending plan or monthly budget to identify ways you can increase your net worth. Perhaps you can start investing a larger amount from each check into your work retirement account? Maybe you can open a Roth IRA and start investing additional money on your own? You can decide to save more money from each check into your checking account by spending less or purchase other investments like real estates that increase in value. If you have debt and loans, you can try to make extra payments or larger payments each month to decrease the amount of money you owe at a faster rate. Regardless of which method you choose, make it a goal to increase your net worth. Choose one strategy to focus on over the next few months then recalculate your net worth after that time to see how much progress you’ve made.
My point? Calculate your net worth so you have a starting place on your journey to financial independence. One you have a starting point, identify a couple ways you can increase your net worth over the next few months.
Your priorities affect your lifestyle and net worth
When it comes to making money and living well, we all have different priorities. Some people choose to spend a great deal of money on their family while others choose to live a fancier lifestyle as a single person or invest for their future. Since you can’t rely a huge raise at your job or a large influx of cash overnight, you have to prioritize spending money on the things that are most important to you. The choices you make have a huge impact on your lifestyle and net worth. For example:
If you prioritize living by yourself in the city… realize that this simple desire is considered a luxury. Many people want to live in the city close to various entertainment options and nice restaurants. They value having their own personal space and want the freedom to come and go as they please. Since this desire is so common, the demand for one-bedroom apartments in the city is high. Because demand is high, the prices are high. In my current city of Atlanta, a modern one-bedroom apartment in the city can cost around $1500 a month, if not more. Paying $1500 a month in rent may require a big sacrifice. It likely means that you cannot save or invest as much money as you otherwise would each month.
If you prioritize investing money for retirement… realize that doing so means the paycheck deposited into your account each month will be lower than it otherwise would. For a person making around $60,000 per year, who plans to allocate at least 10% of their income for retirement and building wealth, their monthly take-home pay will decrease by about $500 per month. For people who are already on a tight budget, getting $500 less each month may be a little too much to handle. For other people, the $500 per month is doable and they like knowing they are building their net worth and will be able to retire with enough money in the bank when they please. Investing money in retirement accounts is vital since it allows you to build wealth in a tax-efficient way but doing so may require you to live below your means. You may have to decrease monthly bills by opting to live with a roommate, travel less, or drive a more affordable care.
If you prioritize living a nice lifestyle (with fancy cars, good food, and lots of spare cash to spend) … realize this costs a lot of money. Choosing to live in a nice apartment or home will increase your monthly mortgage (or rent) each month. Choosing to lease or purchase a luxury vehicle may cause you to have a car payment that is well over $500 per month. Having spare cash to spend on concert tickets, frequent restaurant outings, and weekend bars can cost you hundreds of extra dollars per month as well. Although you have the freedom to live that lifestyle, understand that doing so may prevent you from being able to invest money for retirement. It may also preclude you from saving money in an emergency fund or being able to go on vacations without getting into debt.
If you prioritize giving money away… realize this may require you to make a sacrifice in another area of your life. As a Christian, I tithe. This means I give away 10% of my income each month. Because I give away 10%, I have 10% less money to invest, spend on housing, or use to save for a future vacation or wedding. To make up for this “loss,” I lived way below my means and shared an apartment with a roommate for 2 years until I was able to increase my income. Giving away money may be an important religious tenant for you as well. If so, think about how you can fit this financial priority into your current lifestyle.
If you prioritize saving money (for a nice vacation, future wedding, or house down payment) … realize this may require you to live in a cheaper apartment, invest a little less towards retirement, or be more frugal in your disposable spending. Perhaps you have a goal of saving $5,000 a year to finance a large international vacation and build up your emergency fund? This may require you to save an extra $400 a month. This may require you to turn down a few happy hour invites or forgo a few music concerts. If that doesn’t work and you can’t figure out where to get the extra $400, you may have to get a side hustle or part-time job that can net you the extra money you need.
If you prioritize having a family (with children) … realize that although having a family with children can bring you joy, it may also add to your monthly expenses. With more people, you may need more space which means getting a larger apartment or house. Because there are more people, you will also have to spend more money on food. If you have small children, you may have to allot a certain amount to daycare. All of these added expenses can amount to thousands of dollars per month causing you live a more frugal lifestyle and decreasing the amount of money you can allot to other things like travel, entertainment, and investing.
My point? You may have to pick and choose what to spend money on. Until you increase your income, you won’t be able to do it all. Part of being a fiscally responsible young professional means that you have to prioritize your desires and figure out what’s most important to you.
Would you rather build wealth as quickly as possible by investing a large chunk of money for retirement or do you want your own personal space via a luxury one-bedroom apartment?
Would you rather avoid going into debt by saving up for a fancy vacation and unexpected expenses ahead of time or do you want to spend your disposable income right now by consuming expensive food, nice cars, and city entertainment?
Part of being an adult means you have the freedom to make your own decisions and spend money how you see fit. However, you can’t have it all, and neither can I. What are your priorities? What will you choose?
6 Steps To Redesign Your Career
Many of us have goals and dreams. We may even know our purpose in life or have a side project or business idea that we are passionate about. Instead of letting this go by the wayside or telling yourself that now isn’t the time, find ways to bring these ideas to life. Be bold and use the combination of your skills, talents, passions, and values to redesign your career. Bestselling author and current talk show host Elaine Welteroth talks about this in her new masterclass. Several other young professionals have emphasized similar thoughts. Instead of going to work unfulfilled, use the steps below to redesign your career.
Step 1: Make note of your skills, passions, and talents. The first part of redesigning your career is to make note of things you are good at and pinpoint things that bring you joy. If you aren’t sure, ask your closest friends what they think your strengths are. Are there things that other people struggle with, but you do with ease? Is there something you are highly educated in or have tons of experience with that has made you an expert of sorts? Is there a certain topic that people often ask for your advice on? Maybe it’s politics or finance or being a mother or starting a non-traditional career or opening a business. Take some time to write down your skills, passions, and talents. You will use this information to redesign your career.
Step 2: Create a vision of what you’d like your career to look like. Once you have your list of skills, passions, and talents, use it to gather ideas and create a vision of what you’d like your career to be. Think of creative ways you could use your skills in your current job. Are there talents that you can monetize? Do you want to create a business centered around your passion? If you’re not sure, get some ideas from others. Find celebrities, entrepreneurs, politicians, or colleagues you want to model your career after. Pinpoint aspects of your job, or their job, that you find fascinating. Dream about what your ideal career would look like. What do you want to spend your time doing every day? Create a vision of what you want.
Step 3: Make time in your schedule to work on this vision. Once you have a list of the things you are good at and take the time to visualize what you want your career to look like, the next step is to start working on it. Begin by figuring out how to go from where you are now to where you’d like to be. Is there something else you need to learn about your craft that you don’t yet know? Read a book, listen to a podcast, or take an online course to increase your knowledge.
Perhaps you know a lot about the kind of career you want but you don’t know marketing? You can write the best book or develop the most amazing product in the world but if no one knows it exists then what good is that? Learn how to market yourself. Get better at social media. Write pitches to programs, jobs, and companies who can help you gain experience. Take an entry level job to learn the ropes. Shadow people to get more insight on the industry you want to enter. My point? Now is your time to grind it out. Invest time learning more about the things you don’t know.
Step 4: Incorporate these elements into your day job to gain experience. Once you have a vision for your career and have learned more about your craft and how to market yourself, find ways to use these skills to gain experience. Leverage your expertise at your current job (or get a new one) to get even better. I know you may want to branch out on your own. Perhaps you are tired of the bureaucracy at your current job or maybe you’re just bored? Resist the urge to move too quickly. This may be a prime opportunity for you to test out your ideas before you make the big plunge to start a business.
If you love photography, volunteer to take some company photos at the next outing. If you like website design, offer to upgrade the current website or assist your colleagues in getting websites of their own. If you like physical fitness, start a fitness challenge at your job or offer free workout courses. My point? Find a creative way to test out your ideas in the safe environment of an employed job. You may discover that you don’t know something as well as you thought. Perhaps you have a weakness you didn’t realize before. Now is the chance to hone crafts, further develop skills, and test out ideas. You get to make mistakes and learn what works or doesn’t work while still having a paycheck come in each month. Take advantage of this safety net.
Step 5: Discover ways to monetize your skills and passions. With the previous stage you basically started a hobby and found better, more efficient ways to carry out that hobby. Once you get good, gain the necessary experience, and figure out what ideas work and don’t work, your next step is to turn this hobby into a legitimate side hustle. How? By finding ways to monetize it. Once you’re good at something or gain invaluable experience others don’t have, you should figure out how to monetize it. Even the most altruistic person has to find a way to make a living.
If you feel bad about charging money for services, ask yourself if you’d rather spend 40+ hours per week at a job you find less than fulfilling or if you’d rather spend that time doing something you love. You have to make a living somehow. You might as well do something you love. But don’t worry, you don’t have to be an entrepreneur. Owning a business isn’t everyone’s dream and it’s perfectly fine if it isn’t yours. Either you will monetize your hobby yourself by turning it into a side hustle or you will work at a company who does that for you. My point? You need to make a living so it would be great if you found a way to make a living doing the thing you enjoy.
Step 6: Turn your side hustle into a business – and make it your career. This may seem like a no-brainer, but believe it or not, many people never make it to this step. It can be terrifying to leave the safety net of an employed job to venture out on your own. It can also be quite daunting to ask for a promotion at work or leave your current job for a better, more fulfilling job at a new company. Trust me, I get it. But there are certain times in life that we have to be brave and take a chance. Apply for your dream job. If you get it, great! If you don’t, ask for feedback to learn how you can be an even better candidate next time. Find ways to excel at your job and move up in the company until you are doing what you love.
If your goal is to own your business realize that going from side hustle to full-time entrepreneur will require a unique set of skills. Do you have the correct business structure? Do you keep good records? Do you need to hire help? Are you ready to manage others? Do you have the financial stability needed to stay in business as you are getting things off the ground? Discover what you need and work on those things. Make sure you have a financial cushion for unexpected costs and events. When you have your foundation in place, take the plunge. Redesigning your life is about having enough confidence in your ability to succeed and a large enough desire to pursue your passions that you overcome the doubt and fear that inevitably exists and decide to go for it. You can do it.
5-Step Investing Plan to Build Wealth
Although many people invest money, the most successful investors often have a plan. In order to build wealth and meet your financial goals you need to have to clarify your investment strategy and decisions. Use the 5 steps below to map out an investing plan.
Step 1: Write down what you are investing for. Most people invest money with the hopes to make a profit. While this makes logical sense, you need to get more specific. In order to set up an investment plan you must first clarify why you are seeking to make more money. Are you trying to build wealth and retire early? Is your goal to increase your net worth or pay down your student loans? Do you want to stack money to buy home or finance your kid’s college education? Whether you have one goal or many different ones, the first step to crafting an investing plan is to write down your financial goals. What are the various reasons you plan to invest money?
Step 2: Determine how much money you plan to invest. Now that you have a list of the reasons you are investing, figure out how much money you want to allot to your goals. This should not be the first random number that comes to mind or a goal you plan to achieve some time in the distant future. This should be a concrete and realistic number, something you can start doing with your next paycheck. Take a look at your monthly spending and your monthly income. Pinpoint areas where you can cut back and write down a total amount you can use to invest each month or each year. Once you have the total amount you plan to invest, figure out which portion of that total you want to use for each of your investing goals. Perhaps you have $400 to invest each month and decide to use 75% of it to build wealth and 25% to save for a down payment on your future home. Or, maybe you carve out a special 10% of the total amount to start investing money for your kid’s education? The amount you invest is up to you, but come up with a number.
Step 3: Create a timeline for when you need the money (and the profits). Once you make your investing goals and figure out how much money you can use, the next step is to create a timeline for when you need your money and the profits. How soon you need to use the money affects what types of investments you can make. If you know you will need money to buy a home in a couple years then you will likely make much different investments and take much less risk than if you are investing money for your kids college over the next 10 years or planning to build wealth over the next 20 years. What is the timeline for each of your investing goals?
Step 4: Figure out the investments you want to make. If you know what your investment goals are, how much you can invest, and when you need the money the next step in your investment plan is to figure out what type of investments you want to make. You can choose to invest in bonds, stocks, cryptocurrency, real estate, fine art, startup businesses, etc. The choice is yours. However, it’s wise to remember that different types of investments have different levels of risk and different degrees of profit. For example, buying an individual stock or investing in a startup may have the potential to make a lot of money but those types of investments can also come with a high level of risk since there is a chance you could lose all of your money if the company tanks or the stock goes down in value. Investing in bonds gives you a guaranteed return on your money but that return may be so small that it barely keeps up with inflation and doesn’t allow you to meet your investment goals by your designated timeline. Other people choose to invest in real estate in an effort to increase their cash flow and decrease their taxes but take on a great deal of debt (in the form of a mortgage to do so). Most people who are new to the world of investing purchase index mutual funds (large funds that are full of hundreds, if not thousands of different stocks, from many companies in a variety of industries). They invest in these index mutual funds to increase diversification and minimize risk while still leaving room for a decent profit. The choice of investment is yours.
Step 5: Pick the right investment account. The last step of your investing plan is to invest money through the correct account. Many young professionals like to use apps like Robinhood to invest for simplicity and convenience’s sake. However, there may be other types of accounts that could provide more benefits. For example, if you are building wealth for your future and trying to invest for retirement, then using your employer-sponsored 401K or 403b may be a good option. If you want to open an investment account that is not tied to your employer and still desire the ability to take your contributions out of the account at any time, then opening a Roth IRA may be the right option. The type of account you invest in (whether it’s a 401K, Roth IRA, or taxable brokerage account like the Robinhood app or a traditional brokerage firm like Vanguard) depends heavily on your investment goals, timeline and risk tolerance.
My point? Everyone should have a goal to invest money on a consistent basis. If you haven’t already, use the 5 steps above to craft and investment plan that meets your needs and allows you to reach your goals.
4 Things to do before you start a business
1. Clearly define your “why.” Contrary to what you may have heard from others or witnessed on social media, entrepreneurship is a lot of work. To start a business and be your own boss requires a specific set of skills that you may not have developed before. Many business owners spend countless hours thinking of ideas, putting systems in place, and developing their product or service without compensation. It can be task that has lots of delayed gratification before you start to see the fruits of your labor. I say all of this not to discourage you from starting a business but to emphasize the importance of knowing why you want to do it. If the sole reason you want to start a business is have the ability to quit your day job or not have to answer to a boss then you may want to think twice. Make sure you know exactly why you want to start your business. Knowing your why will help you push through the less glamorous parts of entrepreneurship and help you develop the resilience needed to push through the tough times.
2. Clarify what your business does. Knowing why you want to start a business is helpful, but if you ever want your business to be profitable you must also articulate what your business does. Customers like clarity. Do you sell certain products? If so, make it crystal clear what those products are and why they would be helpful. Does your business provide a service? If so, make it clear what that service is and who it is for. If you are too vague about what your business does people can get confused which can make them hesitant to trust you or buy from you. Clarify your business’s purpose and make that very apparent to your potential customers or clients.
3. Differentiate your business from others. Unless you are inventing something completely new, chances are there is another business or website that does something similar to what you do. Just because you don’t personally know of these businesses, does not mean they don’t exist. Get your google on. Search and do research. Make of list. Figure out what these businesses do well that you’d like to emulate. Pinpoint what you want to do differently that could make you standout. Do you want to cater to a certain market? Will you offer more affordable services? Do you have additional products or better products for customers to choose from? Do you have skills in a certain area that you can leverage in a new way to increase appeal? Make it clear to your potential customers why they should choose to do business with you over someone else.
4. Identify your target audience & market to them. Figure out your target audience. What type of people would most benefit from your service or product? Is it for adults or kids? For educated young professionals or middle-class Americans? Many people try to appeal to everyone and end up being attractive to no one. Describe your ideal customer. Write down 20 characteristics about the kind of person who would buy your product or most benefit from it. Once you know what kind of customer you are looking for, market to them. Figure out where they go, what websites they frequent, and what social media platforms they use. Market to them there. You can have the best product in the world, but if no one knows you exist it won’t matter. Part of being a success entrepreneur is learning how to sell yourself and market yourself to your ideal customer.
5 Life Lessons to Remember this Summer
1. Create Your Own Happiness. Happiness can come in many different forms. Some people love to try new foods and travel. Other people like to relax on their couch and watch a new television show or spend time with family. As adults, it’s vital that you figure out what makes you happy and ensure that your happiness doesn’t depend on anyone else. Although there’s nothing wrong with inviting others to share experiences, you have to be comfortable creating your own happiness that doesn’t depend on someone else. Take some time to figure out what things you enjoy regardless of who is around you. Learn to make your own self happy instead of relying on others.
2. Define Success for Yourself. As you continue to progress in your career, there are things your co-workers, bosses, friends, or even family members feel may “mark” your success. Perhaps it’s when you make a certain salary, find a long-term partner, start having children, or travel to certain places? While all of these things may be sources of enjoyment, it’s important that you take a step back and learn to define success for yourself. What does success mean to you? It’s important for you to create a life that YOU like and that YOU enjoy. Maybe success to you means reaching a certain level at work or achieving a certain milestone in your personal life, but it also may be something entirely different. Take a few minutes and define success for yourself.
3. Put Yourself and Your Mental Health First. Life has its amazing moments, but it can also be challenging at times. Certain things in your life that may not go according to plan and unexpected occurrences can serve as a source of added stress. It’s vital that you take the time to invest in your mental health and gain the tools needed to deal with life’s challenging moments in better ways. Recognize when you should keep pushing yourself while also knowing when you need to take a break. Although you may be tempted to make other people, projects, or responsibilities a higher priority, don’t neglect your mental health.
4. Pursue Your Passions. Life is not guaranteed. Make use of your time today. Figure out your passions and pursue them as best you can. If you aren’t sure what your passions are, write down a list of things you are good at, things you enjoy, and things other people compliment you about or “pick your brain” on. You may not have as much time in the future as you do right now. Take advantage of the current state you are in and pursue your passions. Perhaps you want to start a business, create a product, or work for a different company. Life is too short not to spend it working in the area you love doing the things you enjoy.
5. Enjoy every season of life. Don’t get so focused on looking to the future that you forget to enjoy the “now.” If you’re single, use the extra time you have to learn about an area that excites you, pick up a new skill, or grind it out working so that you can build up your finances. If you’re someone who is in a relationship, invest time getting to know that person and create a foundation that can withstand the test of time. If you’re a parent, enjoy all the priceless moments you have with your kids at every stage. If you’re someone who is focused on your career or are new to the city, find ways to enhance your skills and cultivate friendships that can last a lifetime. Instead of always looking ahead, take time to enjoy the season of life you are in.
My 5-Part Plan for Extra Money
Whether it’s stimulus checks, tax refunds, friendly donations, or work bonuses many of may receive unexpected money in our bank accounts from time to time. Although this money is greatly appreciated, without a plan, we may inadvertently spend it all in haste. As money savvy young professionals, we should have a plan for unexpected money and use it to meet some of our financial goals. Here is my 5-part plan for any extra money I receive:
1. Allocate a percentage to building wealth. As someone who has a goal of building generation wealth, a percentage of all the money I get goes towards increasing my net worth. I increase my net worth in two main ways: 1) by investing in assets (like stocks and real estate) that will increase in value overtime, and 2) by paying off liabilities (aka minimizing debt) that take away from my wealth. In other words, when I get extra money, I invest a portion of it and pay down debt with another portion. In fact, one of the first things I did with my first few paychecks as a resident doctor was allocate about 10% of each check to paying off the credit card debt I accumulated in grad school and invest another 10% in index mutual funds within my work retirement plan. My goal is to use a percentage of every dollar I get to build wealth by increasing my net worth.
2. Reserve money for taxes. Unless the money I receive is a tax refund or an untaxed gift, most of the time, when I get extra money, I will have to pay taxes on it. This is true for you as well. It doesn’t matter if you did all the work in your job, or took all the risk in that investment or business idea that has finally paid off, when you make money, Uncle Sam wants a cut. Since I don’t like having to scramble to pay extra money in taxes each April, I plan for my taxes throughout the year. Anytime I get extra money that I know will be taxed, I set aside a certain percentage for taxes and place it in a savings account.
3. Pay tithes and give to charity. As a Christian who goes to church and believes in giving back to those who are less fortunate, I set aside money for giving. One of things first things I do with extra money is give 10% to the church, as part of my tithes. I then allocate additional money for giving to charities or people outside of church. Sometimes, I invest in my friends’ businesses. Other times I donate to a non-profit or bless someone I know with an expected gift. As a successful young professional who is actively building wealth, I recognize that despite my hard work and dedication, I have several advantages and blessings that other people do not have. Because of this realization, I try to be a good steward of my resources by giving money away and making a difference in the lives of others.
4. Save money for future expenses. As someone in her early 30s who hates surprise expenses and loathes credit card debt, one of the things I do with unexpected money is save some of it, in cash, for future large expenses. I try to always have money in a savings account to pay for what I call “friendship expenses” like weddings, birthday parties, and baby showers. Between bridesmaid dresses, bachelorette parties, bridal showers, and wedding gifts these expenses are not cheap so I have to plan ahead. Along with these “friendship expenses,” I also reserve money in my savings account for vacations. I also have an emergency fund for unexpected expenses or changes in income and plan to start saving money in a “housing fund” to cover the down payment on a future home. My point? There are always large expenses I have coming up and as someone who likes to plan ahead, I like to have money set aside for these things.
5. Give myself a spending allowance. Although I prioritize building wealth, I also like to live in the moment. So although I may not treat myself all of the time, I do reserve some money to spend from time to time. I love to invest and I understand the importance of being responsible with money, but I am realistic. I know I can only delay gratification for so long without completely going insane. Thus, I find ways to “treat myself” and reserve a portion of the unexpected money I receive as a spending allowance. Sometimes I’ve gone shopping, other times I’ve booked a trip to see a friend. Sometimes I treat myself to a fancy restaurant and other times I’ve bought some new gadget or electronic device. Finding ways to enjoy a portion of your money is key.