Adopting a Frugal Mindset
I’ll be honest. It took me a long time to develop a frugal, thrifty mindset. Now frugal doesn’t necessarily mean cheap. As the dictionary says:
“sparing or economical with regard to money or food”
Being frugal means you definitely live within your means. You don’t frivolously (and carelessly) spend your hard-earned money. In other words, you have a monthly budget in which you have enough money leftover to save for the future, to invest in stocks, or contribute to your 401K or retirement plan.
And you shop for bargains so you don’t have to pay top dollar. You also reduce or eliminate your credit card debt! Credit cards are EVIL! And don’t I know that from experience. It took me years to become credit card free. I still have a credit card or two, but I make sure it’s zero’d out if I have to use it. The finance charges and interest rate will kill your budget, especially with some credit cards having as much as 25%. When you compare that to a regular savings account that generates .01% interest, or a Certificate of Deposit (CD) that has 1% interest rate; wow, credit cards will really harm you financially. So, in order to become a good investor you would have to get control of whatever credit card debt you have.
Ideally, a frugal lifestyle is one in which your monthly expenses are well within your monthly income, so that you have extra cash to invest, save, or put into your 401K or retirement plan. For people who like to travel, you’ll want to start a vacation savings account.
The Basics of Investing
For me, the stock market is the place to invest. But many are skeptical about the stock market, since there has been much news about market crashes and all. But… in the long run, the big U.S. companies have always thrived and have always gone up in price, eventually. And many stocks have a dividend that you receive quarterly. If you have enough shares, you could get a nice side income!
Many investors want to play it safe by investing in Index Funds or ETFs. These are like Mutual Funds on the stock market that in turn invest in a collection of stocks; some by sectors like Tech and Pharmaceuticals. Others track the major indexes like SPY which tracks the S&P 500.
Still, many investors like to invest in their favorite companies. I personally have shares of Apple, Inc. (AAPL), and I’m a longtime investor in Shopify (SHOP) and Intuitive Surgical (ISRG). Shopify offers an e-commerce solution for everyone from small businesses to the BIG companies. And Intuitive Surgical makes medical robots like the Da Vinci, which allows surgeons to perform non-invasive surgeries. I think medical robots are the way of the future for modern medicine.
Whatever you do, it’s a good start to buy 5 stocks of top performing companies that you like and believe in their products and services.
Passive Income is any kind of income in which you aren’t physically working at earning money. Rental Properties is probably the most common one I know of, but I have yet to buy my first rental property, so I’m still working on it.
I think that with rental properties, there will of course be an initial investment up front; buying the property, paying escrow fees, a down payment, etc, and maybe some work to fix up the property to be ready to rent. And after that, you would just sit back and the checks will start to come.
There are all sorts of passive investment opportunities like crowdfunding and passive investing in startups, etc… Other than rentals, passive income is something rather new to me, but on the stock market, buying enough shares of dividend stocks will function as a passive income source, and probably the ultimate since there are no extra costs like property maintenance.
I have some dividend stocks in the portfolio, but I would have to expand that part in order for the passive income to be substantial. More on this later…