How to Invest

Let’s become financial wizards together! Now that we know how to get ourselves out of debt ( healthywealthytribe.com/get-out-of-debt ) and how extremely important compounding interest is ( healthywealthytribe.com/compounding-interest )… Let’s discuss what to do with our money once we are more financially fit and ready to start saving and investing.

WARNING: I am not a financial advisor. I do not have a finance background. I’m just a guy who desires to be financially free and I’m working hard on becoming a financial wizard. The opinions, stories, and ideas presented here are my own and do not constitute a recommendation of or endorsement for any particular or general use. I strongly recommend taking my advice with a grain of salt… Do your own research and use my articles more for helping you to better yourself. I accept no responsibility for anyone who tries this and loses money. Obviously, your money and your circumstances are individual. YOU are responsible for your own finances and the outcome of trying things.

With that out of the way… Let’s discuss your paycheck and what to do with it! In the future I will have an article discussing budget creation, but for today we’ll chat about savings. I have done a lot of my own personal investigating on this subject. This is a compilation of what I’ve gathered from a plethora of sources and resources. It is my personal opinion of how to successfully save for the future.

The most important part of this message is that you must pull the savings out of your paycheck before you see it. Ask your payroll division to withdraw 10% (pretax) of your gross pay and deposit it into a different account. This way you never even get a chance to see the cash before it is invested.

Before we talk about how to invest, let’s talk about two other investments you should be making… I believe that you should put 10% (or at least what your company matches) into a 401K plan. This is free money, so you must take advantage of it. I also think that you should give 10% back to the community. This can be in the form of religious tithing or charity. Regardless of what it is, I think it is our duty and responsibility to giveback to the community that give so much to us.

Now let’s talk about what you do with your 10% savings…

Like the piggy-banks in my article picture, you will break your savings into three different types of savings: Safe, Risk, and Wish. Here’s a breakdown of what each is:

SAFE
This one is simple and straight forward. You look for a low interest form of saving that is secure and guaranteed. This type of account is money market, CD, or other account. The idea is that it will grow at a very small rate, yet be a safe place for your money.

Any interest that is earned on this account gets re-invested back into itself.

RISK
This is the fun one… Think stock market or real estate. This account will be considerably more risky, but it is also a growth account that has the potential to grow at a phenomenal rate.

Because this account is riskier, we will re-invest the interest earned in all three piggy-banks equally. i.e. Put 1/3 of the annual interest earned into Safe, Risk, and Wish. In this way, we get to keep some of the massive growth even if you have a bad year or two in the stock market.

WISH
This account gets money deposited only from the 1/3 interest earned by Risk. This is essentially an account that you will use to treat yourself to something nice. Sometimes you will wait a few years and get something big (think motorcycle, screened-in deck, swimming pool, or something else extravagant). Other times you will spend it immediately on small items like clothes, shoes, jewelry, paintball gun, or something similar.

Essentially, this account is used to celebrate you being so good with your savings. It is important that you celebrate every now and then and get something for all of your hard work!

Now let’s talk about how much of your savings goes to the Safe fund and how much goes to the Risk fund… This is totally up to you, but I have a simple formula based on three quick questions:

1. How old are you?
2. Do you worry about (or fear) losing money in risky investments like the stock market?
3. Does risk (in general) worry you?

Baseline your “Safe” deposit amount by using your age. Round this number up to the nearest decade (e.g. If you are 24, you would round to 30). Next, add 10 points for each of the next two questions that you answered “yes” to.

For Example: I am 46 years old, and answered “no” to both questions, so my value is 50.

Once you have your number, think of it as a percentage… Deposit the percentage into the Safe category and put the remainder into Risk. My calculated percentage was 50%. That means I will deposit 50% of my savings into Safe and 50% into Risk.

Remember, initially we won’t deposit anything into the Wish piggy-bank… That one only gets money as you get interest income back from the Risk category.

That’s it in a nutshell.

The most important part of this whole thing is that every year you wait to save is an immense amount of money lost from your savings. Think about how compounding interest worked… The longer your money is earning interest the greater the gain. Start today!

I hope this was helpful! Please chime in with your experience and ideas!!!

See ya,
Vaughn

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Compounding Interest

There is an urban legend that says that Albert Einstein said, “Compounding interest is the most powerful force in the universe.” (or something along those lines). Regardless of whether he really talked about the power of compounding interest, the statement is still very viable and profound. The truth is, that with an understanding of compounding interest, you can reveal an immense power that can double your money in a short period of time. First…

WARNING: I am not a financial advisor. I do not have a finance background. I’m just a guy who desires to be financially free and I’m working hard on becoming a financial wizard. The opinions, stories, and ideas presented here are my own and do not constitute a recommendation of or endorsement for any particular or general use. I strongly recommend taking my advice with a grain of salt… Do your own research and use my articles more for helping you to better yourself. I accept no responsibility for anyone who tries this and loses money. Obviously, your money and your circumstances are individual. YOU are responsible for your own finances and the outcome of trying things.

Let’s start by talking about a simple formula to find out how long it will take your money to double when using compounding interest. This formula is called, The Rule of 72. This is the formula:

72 / interest amount

In other words, if you get a 10% annual interest on your money, you would calculate how long it would take to double like this: 72/10 = 7.2

So, your initial investment would double after 7.2 years.

Now here is the magical part of this… When we say 7.2 years, that is assuming that you did a one time investment and let it sit for 7+ years. If instead you re-invested the same amount each year, your money would obviously double the second year. But, there is much more value that comes from this. If you add to this money each year (as you should) than your savings go up astronomically!

Let’s assume you decide to invest $50 per month to a savings account. After a year, you would have saved $600 (not including interest). If you stopped adding money after the first year and relied on the 10% compounding interest, it would take just over seven years to double your money. However, the better way to save is by continuing to add to your funds on a monthly basis and reap the rewards of your investment plus the interest.

Let’s take a look at our two examples:

One-Time Investment of $600
$600.00
$660.00
$726.00
$798.60
$878.46
$966.31
$1,062.94
$1,169.23
$1,286.15
$1,414.77

Continued Investment of $600 Annual
$600.00
$1,260.00
$1,986.00
$2,784.60
$3,663.06
$4,629.37
$5,692.31
$6,861.54
$8,147.69
$9,562.46

As you see, in the one-time investment chart, we saved just over $1,400 over a ten year period. However, if we continue investing each year, our savings jumps to nearly $10,000 over the same ten years. That is the magic of re-investing in conjunction with compounding interest. For a real eye opener, let’s look at these two styles of investments after a forty year period:

A one-time investment over forty years of $600 gives us: $24,687.12

That is a very nice chunk of change for simply investing $600 and re-investing the annual interest (compounding interest).

Ready for the shocker? If we add $600 each year over those same forty years, it gives us: $265,555.67

I dunno know about you, but I prefer the quarter million dollars. This can simply be achieved by saving $50 per month and re-investing the interest. Think about this for a moment. You could simply quit something (like smoking or drinking) and this would save you approximately $5 per day. That is $152 per month or $1825 per year. Not only would you be saving, but you’d also be making a healthy alternative choice by quitting something detrimental to your health!

If we saved $1825 per year over those same forty years and received 10% annual interest, our savings account would be: $807,731.73

How do you like them apples?

The moral of this post, is that you need to start saving today. Even if it is a paltry $50 per month, you can see how important this is!

Look for my next post, which helps us decide how to invest our savings…

Good luck, and keep me posted on your thoughts and ideas!

-Vaughn

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Allowance for Children

May I ask you a question? Oh wait… That was a question…

Do you give your children an allowance?

We just started, and I thought I would share what we’re doing in an article to get some feedback and ideas from everyone. Our kids are eight and five, so they understand a little bit about money and their just learning that it takes money to get things.

The first thing that Kristine and I discussed was, Do we make them work for the money or not? Eventually what we came up with was more along the lines of: If you’ve been good (this can include doing chores) you will receive an allowance for the week. It is entirely up to us, and either parent can choose to withhold a weekly allowance for any reason.

Once the ground rules were established we needed to come up with an amount. We decided to simply give them one dollar for each year old they are. This was mostly for ease and a simple way to remember.

Now we dug into what I consider the most important part… We designed some simple deductions that would teach them about real life. I chose to use three straight forward and simple deductions: TAXES, SAVINGS, and CHARITY/TITHING. I know we could have said, Roth IRA, 401K, health insurance, FICA, 503b, and so on and so forth… Alas, we want to make this easy and enjoyable. We also want it to be a learning experience. So, we stuck with three main deductions.

Next, we created easy percentages for each deduction to explain how percentages work. So we came up with:

TAXES = 20%
SAVINGS = 10%
CHARITY/TITHING = 10%

In this way, we can easily and quickly calculate what they owe.

During our first “payday” the kids were enthralled and thrilled to learn. Mostly I think they wanted to get their grubby little fingers around some cold hard cash!

I showed each of them what their gross pay (whole amount prior to deductions) was. $8 and $5. Then I explained deducting taxes by saying, “This is what we have to pay the man.” HA! In all seriousness, I explained that our military, police force, firemen, roads, and agencies need funding to exist. After pulling that out, we talked about what savings was and we deducted that. Finally, I explained charity and tithing and the importance of giving back to the community and helping others. The kids were excited and took it all in.

Once all of that was done, I explained what net pay (take home after deductions) was and handed them each their allowance. $4.80 and $3. This actually hit home with me when I saw how much of a chunk was missing.

It was fun for the whole family, and we can’t wait to continue with this.

By the way, Kristine and I are keeping track of their taxes, savings, and charity/tithing… Our plan is to give them a lump sum (approximately $2000) of this “savings” on their sixteenth birthday. This will be our final financial lesson; which is that saving money REALLY pays off!!!

What do you guys do (or plan to do)?

See you next time,
Mr. V

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Gears for Good 2013

I’m riding (for the third year in a row) 156 miles (from Paw Paw to Washington, D.C.) over three days (September 27-29, 2013). Funds that are raised (last year we raised over $38,000) from this ride are directed to the Helping Hands program to assist families in the bleeding disorder community who are going through financial difficulty. It not only helps these families, but we also raise awareness and build a growing, strong community of friends! Gears for Good is an AWESOME cause!!!

please donate (no amount is too small) to help support me and hemophiliacs like me by going to this page and clicking “Donate.” www.razoo.com/story/Vaughn-Ripley

I wrote an article for the Hemophilia Federation of America (HFA) in their quarterly Dateline magazine. You can find my article on page 10 of this issue: hemophiliafed.org/dateline/HFA_Dateline_2013_Q2_Summer. Please checkout my article and let me know what you think!

In this article I give the Top ten reasons why you might want to join us on the Gears for Good Ride… Here they are:

Top Ten Reasons to Join Us

10. Meditative effect and fresh air (instead of being cooped-up in a stinky gym)

9. Strength and aerobic improvement (plus it builds stamina)

8. Boost your overall mood and self esteem

7. Longevity

6. Burns calories (and most importantly – fat!)

5. Improves coordination and balance

4. Low impact exercise

3. Strengthen joints (knees, ankles, and hips)

2. Raising money and awareness for an amazing cause

1. Meet and hang out with some incredible people who are living with a bleeding disorder just like you

Checkout this COo.oOL HFA video from last year to see a brief clip about our ride, our camaraderie, and our community!

If you can’t join us, you can at least be there in spirit… And, your donation is going to an incredibly good cause!

As I said before, please donate (no amount is too small) to help support me and hemophiliacs like me by going to this page and clicking “Donate.” www.razoo.com/story/Vaughn-Ripley

If you prefer to donate manually (not online) you can write a check to the Hemophilia Federation of America. Please write “donation in support of Vaughn Ripley” in the memo and mail the check to:

Hemophilia Federation of America
210 7th SE
Suite 200B
Washington, DC 20003

I will continue to ride this event every year (until I can no longer ride) in support of my blood brothers. Please help me to help others!!

Let me know what you think in the comments.

Love you all,
Rip

Please comment by clicking “Leave a Comment.” And, if you dig, share this article! Also, please type your email address into the “Subscribe” box up top to get updates each time I post a new blog article.

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Get Out of Debt

Did you know that the total U.S. credit card debt is nearly $800,000,000,000. Yes, that is 800 billion!! That means that the average credit card debt per U.S. household is close to $16,000. Average household debt (credit cards and loans) is $54,000. More than 50% of Americans carried an unpaid balance on their credit cards from 2011 to 2012. I imagine this number is only growing.

In 2010 the total amount of consumer debt in the US was nearly $2.4 trillion … TRILLION!!

It is my belief that much of our economic problems and woes are due to this very fact. If I’m right, that means that you and I are at least partially responsible for the economy that we bad mouth! It is time that we (you and me) do something about this. You are probably asking yourself, If he has credit card debt, why is he capable of telling me how to fix my financial issues? And this is an excellent question. The simple answer is, I’m not qualified or certified on any financial level and I’m not really a good example of how to manage your finances. That said, I am adamant in wanting to fix my (and our country’s) current financial shitstorm. Also, I have read literally dozens of books on debt reduction and money management. So, even though I have not been a perfect practicer (is that even a word?), I am ready to say, “Do as I say, not as I do.”

My humble opinion dictates that I am capable of becoming debt free and eventually experience financial freedom! Together, we can make ourselves Financial Wizards and free ourselves of the debt chains that hold us down and stress us on a daily basis. So, bear with me as I preach about something that I have oodles of knowledge, yet have not perfected in my own life…

Getting out of debt is easier than we might initially imagine. Firstly, the credit cards have recently been forced to share a very important piece of information with us: How much we would have to pay to eliminate our credit card debt within three years. It’s true! Look on any of your credit card statements and there is a small box (often hidden away some) that was mandated by the Federal Reserve. This box contains some vital information including how long it will take to pay off your debt when only paying the minimum monthly payment (this can be terrifying when you see something along the lines of 23 years!) Also, this box tells you a payment amount that would have the debt eliminated in only three years. The surprising part is that this number is often only slightly higher than the amount which might take nine or more years to pay off your debt. For instance, I have a card with a minimum payment of $82; which will take eleven years to pay off at the minimum payment amount. However, if I change my monthly payment to $126 ($44 more per month), my card debt will be paid off in precisely three years.

Think about this for a second, and seriously consider paying one or more of your cards at the higher payment amount than the minimum allotted by the super wealthy financial institute we affectionately call, Bank!

Also, it has long been known/believed that you should pay the highest interest card in your stack of bills first. I concur with this one, with the caveat that it may make sense to pay another card first in a few circumstances. Regardless, it is clearly a good idea to rank your cards and work on paying them down in an orderly fashion. As you pay one card off, do not go out and buy something new on a payment plan, rather use the new found money and increase another credit card’s payment amount.

My sister, Raeghn, gave me a different approach that also takes advantage of the “snowball” effect of knocking away at your debt. Instead of going with the highest interest card, you can go for the smallest balance owed. In this way you eliminate a card much quicker and then can apply that money to the next smallest balance. Either way works very nicely and you need to decide based on your particular circumstances.

Most important is tracking your expenses using a budget. Regardless of whether it’s handwritten, software based, or kept in a spreadsheet, you must do this part. And, having your budget on paper does not make it so. YOU are responsible here. You MUST stick to your budget each and EVERY day! The only way to eliminate your debt is to make a plan and stay the course.

If at all possible, I recommend shredding as many of your credit cards as you can. If you keep them in your wallet, it is too tempting to simply use them again the next time you see a shiny gadget that you absolutely must have. If you can’t bring yourself to shred them, at least keep them locked away in your safe at home. You do have a safe… Right?

Finally, I think it is important to reward yourself from time-to-time. Most people struggle with being frugal every day of their lives. Instead, plan a small celebration every three months (or so) to sit down with your spouse (or friend) and blow a small amount of money on a nice dinner (or something along those lines). Toast the fact that you have created a plan and have managed to stay on track. These small joyous celebrations are something we crave, and they help us to appreciate ourselves and believe in why we are doing this in the first place.

If you have budgeting ideas, or crafty ways to reduce your debt, please comment!

My plan is to eliminate my credit card debt within three years (credit card debt free by: 8/1/16). And, then I will work on my other remaining loans and reduce them.

Savings and savings options are another subject entirely, and I will post some of my information regarding this important topic in a future article.

Until next time, I hope you will join me on my quest to become a financial wizard!

-Vaughn

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Monetize Your Website with Advertisements

As you can see on my right sidebar (bottom of page on your mobile device), I use Google AdSense and highly recommend it to monetize your website. That said though, there are some fairly strict rules that you must adhere to, or you risk being banned from the program. For instance, I cannot ask you to click on my ads, and would never dream of requesting that, even though it would help support my blog. This post is going to discuss some of these rules in a little bit of detail.

First things first – If you fail to follow Google’s AdSense program policies, you might be banned for life. I’m not kidding! Fortunately, the gist of the program policies are straight forward and easy to adhere to. Basically you cannot encourage clicks or click your own page ads… Also, your content must meet the guidelines (no porn, gambling, and so on).

AdSense is what you join to get advertisements to post on your site. If you’re looking to advertise on websites, you need to look into Google AdWords.

Before going down this path, I highly recommend that you investigate the policy and read other information you can easily find. Make yourself comfortable with the rules before proceeding. Remember: it is your responsibility to check this stuff out. Just like everything else in your life, the onus falls on your shoulders.

Let’s define a few no-no’s that are recognized by several of the big advertisement companies:

Click Fraud
Click fraud is when a website owner clicks on his own ads to boost the number of advertisement ad clicks that he gets. Clicking your own website ad is against the policy of nearly all advertisement companies, and should never be done. Not even once to test that it’s working okay.

Cloaking
This is a technique that some website developers use to make a search engine think your site is something completely different than what it actually is. If you participate in this sort of bad behavior than you can lose your AdSense account and you may even have your website removed from Google (and other) search engine indexes.

Keyword Stuffing
When you inundate a website with repeated keywords, this is known as “keyword stuffing.” Usually done by hiding keywords inside content by matching the font color and background color. In this way, visitors rarely see the extra words, but search engines pick them up.

Title Stacking
Essentially this trick is done by using the HTML “title” tag redundantly. By making multiple title entries using same or different keywords, you can optimize your site for searches. However, this is pretty easily found out and you chance having your website removed from the search indexes.

Unrelated Keywords
Any time you pile up keywords that aren’t related to the content of a page, you are guilty of this practice and chance having your site banned from search engines.

Duplicate Content
Website administrators sometimes put up the same article on different pages to enhance and boost the page views that they receive.

All of these “dirty tricks” are considered bad and can easily get your site removed from advertisement companies and search engine indexes. DO NOT DO ANY OF THEM!

In all honesty folks, it ain’t complicated. If you want a descent amount of visitors and repeat customers than your best bet is to do things the old fashioned way… Earn them! This isn’t rocket science. There truly is a simple formula to get tons of visitors and returning readers:

1. Create good content.
2. Create regular content.
3. Be honest.
4. Offer your knowledge and help when you can.
5. Don’t be a bozo! (okay, I just made that one up)

Is that so tough? Not really.

Now that we’ve covered how to get you kicked out… Let’s talk about getting you in! Before we stand-up your AdSense account, let’s quickly go over what you need in order to get validated.

You need a website that has existed for a while and is loaded with great and frequent content. Your website will need to have been created more than a month ago (longer is better, as long as you’ve been pumping it with content). A blog works really good for this, because you update the content on a daily (or at least weekly) basis – Don’t you? Once you have about 22 blog articles posted, you are ready. Google doesn’t publish there standards, so these are only guesses based on previous experiences.

In order to request an AdSense account, you simply login to your gmail account (you will need one of those) and follow these quick steps:
support.google.com/affiliatenetwork/publisher/answer/156883?hl=en.

BTW – You only need to be accepted at one of your websites, so pick the very best one with lots of content and updates and submit that one for approval. Once you’re approved, you can use this account for ALL of your websites (as long as they follow the guidelines).

After you’ve setup your account, go to AdSense and create your ad. After creation, AdSense will give you the short bit of code that you can insert into your webpage(s). Viola!

Now all you need is for people to click your ads! Like I said, you want people to click your ads, but you can’t ask them to. Remember this rule. As much as I’d love to tell all of you to go over and click my ad, I cannot. As an honest and upstanding blogger it makes sense that you wouldn’t want to cheat the system. Instead, provide good articles and information and wait for the readers to start clicking on their own accord.

I hope my post was helpful.

See you next time,
V

Please comment by clicking “Leave a Comment.” And, if you dig, share this article! Also, please type your email address into the “Subscribe” box up top to get updates each time I post a new blog article.

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Money is NOT the Root of All Evil

When I first came up with the name for this blog, I feared that some folks would not like the word wealthy. As predicted, when I ran the name by a few friends, some of them came back with, “Aren’t you afraid to say wealthy in there?” I asked why, and many responded that it sounds greedy. Or, it goes against religious beliefs… I thought about this some, and then I dug deeper and tried to figure out why everyone is so afraid of admitting that a little more money would not be a bad thing. Heck, even a lot more money isn’t bad.

The more I dug and researched, the more I uncovered countless misrepresentations of a particular Bible verse. Repeatedly, I found the statement, “Money is the root of all evil.” This struck me as odd, considering that the verse does not say that at all.

There are countless translations of the Bible, but NONE of them say, “Money is the root of all evil.” In some translated form or another, this is what it says in First Timothy 6:10, “For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.”

Did you spot the difference?

“Money is the root of all evil.” (popular saying that people use to give us a fear of money)
vs.
“The love of money is a root of all kinds of evil.” (actual Bible verse)

Read both of those a few times and you will notice some glaring divergences. Nowhere in the actual Bible statement does it talk about money as the subject. “Love of money” is what I see. And, not even the root of all evil, rather, “all kinds of evil.” That is QUITE a difference, and I’m surprised that so many people foul this one up.

Regardless, now that we’ve cleared that up, let’s talk about another money related topic.

Did you know that 50% percent of first marriages, 67% of second, and 74% of third marriages end in divorce? Financial planners who have worked with divorcing couples say that money is frequently a “key factor” in couples’ decisions to split up.

Now you tell me… Is it okay to talk about money and wealth in my blog articles? Even better, is it a crime to put “wealthy” in the blog name? I say, “It’s absolutely okay!”

So there you have it. Now you know the story behind my choosing to keep the word “wealthy” in my title.

Now that we’ve got that out of the way, let me just tell you that you can expect some of my articles to be about money. From time-to-time I will talk about ways to get out of debt, increase your savings, and maybe even (heaven forbid) get wealthy!

That’s all for today,
Vaughn

Please comment by clicking “Leave a Comment.” And, if you dig, share this article! Also, please type your email address into the “Subscribe” box up top to get updates each time I post a new blog article.

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