Depending on your political views here in early 2021, you may be celebrating right now or you may be terribly disappointed. Regardless of which emotion you're feeling, you still need to make smart financial decisions. I'm asking you to put those feelings and emotions aside for a moment, and let me give you some thoughts about your money. I believe 2021 can be a great year for you financially...if you make the right choices.
COVID has destroyed many people's finances and businesses. Whatever your situation is, I want you to believe it can get better. It will be better in 2021. As long as you're alive, you have the power to create a better and brighter future for yourself and your family. Your best days are just around the corner.
For small business owners, you may be starting over. Failure is a part of business. Many successful business owners came out of failure. You can too. COVID was just a bump on the road to your bigger success. Pick yourself up. Brush off the dust. Set aside all the distractions; Netflix, Amazon Prime, everything. Get focused. Success is just around the corner in your business and your life!
If history is any indicator of what we will experience in 2021, then you can expect a few things to happen, and you need to be prepared.
Your taxes will go up. It's not a political statement. It's just fact. The democrat party raises taxes as part of their political idealogy. Unfortunately, these tax hikes usually apply to more than just the top 1%. Get ready and plan your finances accordingly.
Depending on which market sector you work, your job could be at risk. While Trump changed the laws to make things more favorable for businesses and many businesses reopened or move back into the United States, Joe Biden has already passed several executive orders that reinstate favoritism to China and shows hostility to some American business sectors like the energy sector. Plan accordingly if you work in one of the market sectors targeted by the Biden Administration.
Gas prices will go up. Under the Trump administration, we saw a shift in American energy policies for energy independence. This lowered our energy costs and gas prices. That put more money into American family's hands and more money back into the economy. The Biden administration has already begun changing that in the first seven days of his term. Biden has begun shutting down American oil production and moved to importing oil from foreign countries. This sends billions of oil and gas dollars outside the US as well as costing 1,000s of jobs in the United States. Expect gas prices to escalate. Soon we will return to $4, $5 and maybe even $6 gasoline. Rising gas prices are detrimental to American families by pulling large amount of cash out of several family spending areas and flowing them all to the oil production and supplier companies. During the 2008 and 2009 financial collapse, gas prices were at some of their highest levels and pulled billions of dollars out of the economy every month. Check your budget, make sure you have a good handle your gas and energy expenses.
National debt has ballooned under both the Republican and Democrat parties. This is bad for Americans. Very bad. The Democrats and Joe Biden have shown that they will continue this practice. Not to scare you, but with over $20 Trillion of debt, our government is essentially bankrupt. When this balloon pops, you better be ready. Eliminate as much debt as you can before that happens. Diversify your assets. If you're heavily invested in the stock market, look at diversifying into real estate, precious metals or something else. You may feel safe by having your money in a mutual fund in the stock market, but you're not. You're eggs are still only in the stock market basket even if you've lowered your risk by investing in mutual funds. Warren Buffet, Bill Gates, Jeff Bezos and many others have spent the last ten years moving a lot of their wealth into tangible assets. Warren has been buying up railroads. Gates and Bezos have been buying up land. JP Morgan Chase bank has been buying up silver. What do they know that you don't know? They're preparing for a crash, and it's going to be a big one when it happens.
Diversify Your Cash
Hopefully, you done some good financial management over the last several years and that's left you with a little cash in the bank. Typical financial wisdom says that you should have 3-6 months living expenses in the bank just in case you lose your job or some other emergency comes up. That's why it's called an emergency fund. It's for emergencies. Hopefully, the COVID scare hasn't caused you to use all of that up, but if it has, don't feel too bad about it. It's what emergency funds are for.
You may not think about your money this way, but holding cash in the bank isn't as safe as you might think. Yes it's a lot safer than stuffing it into your mattress or a cookie jar, but there is still some risk in storing a lot of cash in the bank. Just ask anyone who has lived through America's Great Depression or grew up in a family after the Great Depression. Many immigrants that come into America from foreign countries don't trust banks. They've lived through governments who've seized money from the citizens. They've seen their money disappear overnight when the government needed funds. Inflation is another attack on your cash and emergency fund. While the published rate of inflation is around 3%, the actual inflation rate is closer to 7-10%, and you don't have to look very far back in American history to see the 17% inflation rates of the 1970s. Inflation lowers the value of your money and your work. This year in 2021, I encourage you to consider diversifying some your cash into silver and gold. You don't want to convert all of your cash because you need some of it to live. Consider converting 20-25% into gold and/or silver. I started buying gold and silver in 2018. I wish I'd started 25 years ago. Having some gold and silver as an asset is just wise financial planning. The US dollar has been around for a little over 200 years as a form of money. Gold and silver have been a form of money for 3,000 years.
Take Time in 2021 to Keep Getting Money Smart
Your finances will be stuck forever unless you take time to get money smart. There is so much to learn about making, managing and multiplying your money that you can't possibly learn it all in one year, but you can get started. Once you start, be sure to keep increasing your knowledge of how money works. If you work fulltime, you spend over 2,000 hours a year working. From age 16 to age 65, you will spend over 100,000 working. Isn't that mind blowing? Now imagine yourself at age 65 after working for 100,000 hours. What do you want your life to look like? Do you want to be broke? Do you want to be living on a social security check where the government tells you how much money you get to spend? That doesn't sound too fun to me. You have the power to shape your future, but it starts with improving what you know about money.
Here a few suggestions to help you get money smart in 2021
Listen to a few money podcasts. I listen to my podcasts while I workout. It's like improving your life 2x for every minute you spend on that treadmill! Millionaires Unveiled by Clark Sheffield and Jace Mattinson Choose FI Bigger Pockets
Read a few books. Read one book a month about money. By the end of the year, your brain will be rewired and ready maximize every dollar you make from that 2,000 hours per year of work! The Millionaire Choice by Tony Bradshaw (Read it. It's FREE!) Rich Dad Poor Dad by Robert Kiyosaki Unshakeable by Tony Robbins The Wealth Choice by Dr. Dennis Kimbro The Blessed Life by Robert Morris (Religious) Permission to Prosper by Ray Edwards (Religious)
Find a Money Mentor. You can try to figure out this money thing on your own, but it sure is a lot easier if you have someone who can guide you!
Join an investing club or online community. It's amazing what you can learn from a group of people.
Save and Invest Aggressively in 2021
In 2021, rewire your brain to think "invest first" instead of "spend first." We live in consumer based economy where we're bombarded everyday with hundreds if not thousands of advertisements. The world makes it hard not to spend all of your money! But if you want to get ahead, you have to change that. You need to think "invest first."
Set goals to increase the amount of your income you're investing. Your first milestone for the year should be getting to $10,000 year. That's $833 per month. If you've already passed that goal, shoot for $20,000 per year. Every time you reach one of these milestones, increase your annual goal by $10,000 or more. This kind of thinking will help to rewire your brain to a "millionaire mindset" and break free from the "consumer mindset" we've all been indoctrinated with by the television and the culture. If you're new to investing, here are few simple steps to get you started.
Start with your company retirement plan whether it's a 401k or Simple IRA. Investing in these first will provide you a with tax benefits.
After the retirement options offered by your business, setup your Roth IRA. I suggest doing this through vanguard.com or a similar option and selecting a growth stock investment like an S&P Index fund with very low fees.
If you have anything left over, then keep going! Set aside $1,000 per month to invest. For newer investors, it's usually best to stick with safer investments like index funds, but if you are okay with a little risk and want to learn, split that $1,000 up.
Open a vanguard.com account. Place $500-750 into a low fee S&P Index fund or similar investment.
Open an eTrade account. Please the remaining amount of your $1,000 per month and pick a stock you like and have researched. Always do your research before investing. If you plan to invest this way all year, make sure you don't put all your eggs in one basket. Typically, you should diversify your stock portfolio over time so that you have 20-30 stocks. If you are investing $250-500 per month, it may take you several years to complete your portfolio of 20-30 stocks.
Regardless of what your financial situation is right now, I want you to know, you can have the power to prosper in 2021. Your first step is to have the right mindset. What is your vision for 2021? After that, it's about making the right choices and doing the work to create the vision you have for 2021.
Good luck! I'm cheering for you!