BY COLLIN HARNESS
It still feels strange looking at my net worth and seeing that it has crossed the $1 million threshold. I still have my mentality from 7+ years ago when I had no job and was wondering what I was going to do next. That time triggered my frugality switch and lit a fire in me to make and become good with money.
I honestly thought it would takes decades for me to earn enough money to become financially stable, let alone build wealth. The thing about money is that it is a snowball, once it starts rolling it picks up steam. Money is never finished. I am constantly keeping an eye on my progress and working on creating more progress.
My goal is just consistent growth. Try and not move backward, but move forward.
I wish I could say it was one thing that led me to reach this milestone, but there were many things I tried and linked together with other experiments to hit this number.
If you are starting at zero or in debt the best thing that you can do for yourself to get out of that situation is to change your mentality. You have believe that you life is going to get better. Everyday I look at positive messages and repeat a mantra of success. You also need to switch from a mindset of consumer to producer. From spending to saving.
Mindset is just the first step. There are lots of times when I do not have the right mindset or I am critical of my performance. This is where action comes into play.
Make sure you are constantly taking action or you have wealth building systems in place to take action for you. In order to always make progress you are going to need to take action even when you do not want to. Sometimes I do not want to go to work. Or I get nervous about investing in the stock market. Or I question if I should max out my 401k or invest more in my stock brokerage account.
But I take a beat and then make the best decision that I can at the time. I do not let fear stop me from taking action.
I have given this a lot of thought and there are many things I did to build wealth, which I think other people could also do or benefit from my knowledge.
Change your mentality
No one taught me about me in the traditional sense. School did not teach me. My parents never sat me down and talked about it. I did not know how money worked or compound interest. I just knew that saving money was a good thing.
When I went into the workforce I knew that entrepreneurs existed, but I did not know that it could be a career path for me. So I became an employee and traded time for money. And spent what I made. I did not invest in the stock market and I did not save money.
The first mindset shift that I had to make was that I could earn more money. I have had many low paying jobs in my “career”: Macy’s, Starbucks, Walgreens, Plant Nursery. It is time to tell yourself a new truth. That money is all around you and that there are more than enough opportunities for you to make more money.
The second mindset shift that I needed to make was that I was good with money and that I was an investor. My money could work for me instead of just me working for it.
This is when I started reading about money and how it works and how to be a good steward of the resources that you acquire.
The last mindset shift is one that is the most difficult and one that I continue to work at everyday. I am a business or I am producer rather than consumer.
The vast majority of people look at themselves as consumers rather than producers. They look for ways to consumer more to make their lives better. But the wealthy are owners and producers. They create/buy assets that have valuable output.
Being creative and creating assets can be difficult and time consuming in the beginning, but there are massive benefits over time.
You must do more than just learn about money. Reading a book or taking a course is not good enough. You need to take action.
Making investments can be scary and involve risk. Most people get paralyzed when making an investment, because they fear losing what they have worked so hard for.
But the truth is that you should be afraid of not investing, because you are losing out on the chance or drastically increasing your wealth. If you money sits in a bank it slowly loses value to inflation till it is practically worthless.
There are plenty of investments that are not risky at all and will increase your wealth over time.
When I began investing I made mistakes. I invested in a few horrible investments. But then I also made some good investments. Each time I took more action I learned a little bit more and became a little bit better with money. And that knowledge compounds over time to a place where you make really good investments that have really good returns.
Invest in the stock market
The vast majority of my wealth has come from the stock market and will continue to come from the investments I have made in businesses.
My wealth will continue to grow, because I continue to invest in growing businesses.
There are few things that really helped be a better investor.
When I went to create my emergency fund I invested in Index ETFs. VTI, VUG. Large ETFs of the entire market. That would move with the entire market or sector. These investments are heavily diversified and rarely lose money.
I created several emergency funds: 401k, Roth IRA, HSA, Stock Brokerage Account etc.
Throughout this time I was dollar cost averaging. Most people should dollar cost average for their entire lives. But once I felt that I had a strong foundation it was time for me to stop DCA and start picking stocks that I believe in.
If you want to be successful picking stocks you need to do a lot of research. The research gives you a strong conviction about which companies are currently winning and will continue to win.
Today, I practice lump sum investing, but I still earn a paycheck so I am investing 24 times a year, which is pretty much dollar cost averaging.
Get in the game. It is worth it.
Less cash more assets
What people do not realize is that the more assets own, the less cash you need on hand. Cash does come in very handy when you need to buy things. My issue with cash is that it is always losing value. I need my cash to work for me. Even if only for a short while until I need it.
I use credit cards to pay for everything in order to earn travel points.
And then at the end of every month I pay off the credit card.
Keep a certain amount of money in the bank in order to make you feel comfortable. For some that may be $1,000 others it may be $10,000. But then anything over that threshold gets invested. The more assets that you own the less you need cash on hand. Because in a true emergency you could always borrow against your assets to come up with cash.
The less amount of money you keep in your checking account the less tempted you will be to spend a lot of money, because you will be aware that you only have a finite amount of resources available to you.
Increasing my income
I had so many low paying jobs and I always work hard, but felt like I could never get ahead. I had to stop working for low hanging fruit. You must identify what skills you currently have and how you can monetize those skills for the most amount of money.
I have always been good with technology. So I connected my people skills with technology to get a salaried position with a local tech company. And then as I worked for that company I began to skill stack and increase what I was able to do and how much I was able to charge the knowledge that I had acquired.
You will always have to fight for what you are worth.
I remember working at Apple and my manager telling me that there were no open positions to move up. And then when I told them I was leaving she told me to think about the “perks” I was giving up. Sorry, but I would rather have a higher salary over “perks”.
Increasing my income has been my biggest challenge and each time I have had to fight to prove my value. But every time it has been worth it, because it made me realize how valuable I really am.
There are many different kinds of partnerships and they are all important.
Picking your spouse is important.
Finding a mentor is important.
Here are the different partnerships in my life:
- Career coach
- Business partner
- local community
Partnering with someone in business can be extremely powerful.
Having a partner gives you someone to lean on and someone to challenge you and make you better. Your spouse is probably your most important partner and can make you wealthy or make you poor. I choose a great partner romantic partner that has the same money values as I do. We save more than we spend. We are both investing for the future. We prefer travel over and experiences over more stuff.
My business partner has more experience than I do and challenges me to learn more and become better at my work and my business.
I am always looking for partners that can help me improve. It also really helps me to mentor other people that could use my skills.
Buy depressed assets and rehab/add value
Investing is the best way that I have found to increase your net worth. There are many different ways to invest: in the stock market, real estate etc. Some of my most successful investments have been in things that other people did not believe.
So many people told me not to invest in real estate that needed a little work. Or invest in stocks that were out of favor.
Be careful when investing into assets that down in value. First you need to do your homework. See if you can put in sweat equity or add value to the asset yourself. Be confident in your decisions and also be patient. It can a long time for certain assets to turn around. I put money into an oil stock when the price of oil had dramatically declined and took about five years for the business to recover from the losses, but the wait was worth it for the returns.
Look for real estate that is undervalued and that you feel you could improve and add value. Finding diamonds in the rough can be really lucrative.
Buy rare assets
I have to admit that I do not like to collect items. I would rather get rid of stuff. My house is clean and simple for the most part. But you can make a lot of money collecting items that are rare and increase in value over time. Like paintings, cars, handbags, baseball cards etc. Like I said I was never really into collecting until I started going to music shows quite often.
At one music show I notice at the merchandise table they were selling a signed poster from the artist and so I bought it. As I went to more shows I noticed there were all kinds of signed artist merchandise that they would offer for sale. And so I became a collector. I am not sure how much my collection of music merchandise is worth, but right now I have over 100 signed music posters/albums.
The more you can collect of a specific type of item the better you will get at knowing the value and the more you will understand that topic. The longer you hold the item the higher in value it will increase. If you hold valuable items for decades it can really add up.
Imagine if I had a signed Michael Jackson Thriller album! I do not, but that would be amazing. I can dream.
Use real estate
Most people know that real estate is the ultimate way to build wealth. It increases in value over time and you build equity rather than paying apartment rent.
But most people do real estate wrong. Real estate takes a lot of work. Not everyone is cut out to be a homeowner. Rather than viewing real estate as a place to live or your personal home, it is better to think of real estate as an investment.
Buying something much less than you can afford. Buy something you can rent out. Buy something you can add value to over time.
It is really nice to have a house that is beautiful and fully renovated, but that also comes with a cost and often that cost is not really worth it.
I purchased my first house when it was “on sale” and it needed work. And I have put a lot of work into the home and continue to put more work into the home.
I paid off the mortgage as fast as possible so I would much lower expenses. I have always lived with someone else to split. What I am saying is be strategic when making a real estate purchase and consider how it will affect your wealth over time. And how much maintenance the property will cost in time and money.
This is by far how I have accumulated as much wealth as I have. Frugal does not mean that you deprive yourself of things. I have more stuff that I could ever really need. I have a closet full of clothes and a pantry full of food. Frugal to me, just means that you are aware of how you spend money and look for the best bang for you buck.
There are lots of frugal hacks that I use that I will go into at a later time. Like travel hacking, buying clothes at a discount, shopping in bulk, DIY and paying for things in cash without financing.
You all know by now that my wealth building issue has never been savings money, but rather earning money. I have had a ton of minimum wage jobs before I found my current salaried position.
Saving money comes a lot more naturally to me over earning money, but you must work them both the create real wealth. There are a lot of people that make a lot money, but they will never be rich, because they spend it all.
The reason I save is to have money to invest. I automatically save a set amount each money in order to always be investing into the market of the next deal that I am looking into.
Track your net worth
Do you have a scorecard? Remove all of your emotion from tracking your net worth. You just need to know where you stand right now and where you are going. By tracking your net worth every money you will be able to if you money is moving up and down.
Everyone should be tracking their net worth. Even if let someone else manage your money, you should be watching it to make sure that money is doing its job. It should be working for you and making your life better and easier. Not making life harder and sucking you dry.
Once you know that you are moving in the right direction and your net worth is increasing then you can put more effort into what is working to increase your net worth
It is definitely exciting to see my net worth increase to this point, but it still does not quite feel real. And this is because 99% of my equity is not in cash. I keep very little cash in my bank account. I have found this keeps me from overspending. I know how my cash I have in my bank account and I spend on what is in there.
Most of equity is locked into assets that I am not able to access easily or for many years. I own my house, so in order to use the equity in the house I would need a line of credit. More than 50% of my net worth is in retirement accounts which I cannot touch without penalty till 59 1/2. I most likely will use those funds until I must withdraw them at 72.
Once I put money into an asset it is locked away. My core assets I plan to never sell. Unless I start a charity and then I will transfer assets over there and let them sell them in order to raise money for the charity.
My stock brokerage account is my bank account. I have a checking account at a traditional bank, but I also have one with my stock account that I use to hold cash and buy stocks.
I recently changed from dollar cost averaging to lump sum investing, because I feel I get better returns this way.
What about my emergency fund?
My stock account is also my emergency fund.
This goes against most financial guru advice. Traditional financial advisors will tell you, you need 1-2 years worth of expenses in cash in a savings account in case of everything goes to shit. I do not practice that. I have about 2 months worth of cash in my bank account to cover how much I need to pay off my credit card every month.
When I started on my path to $1million I did start with an emergency fund. I started putting money into a savings account and letting it build up. At the time it was not a mistake to do that, but if I knew what I know now I would have done it different.
Looking back I would have put everything I had into a stock account and kept adding as much as possible to it. Because I started saving before the pandemic and the stock market went on the ultimate run during that time.
I played it safe, because I needed to. I put myself in a bad position and had to climb out of it.
Even though a stock account should be for long term investments you can easily sell off stocks and use the money in an emergency. I should have realized that earlier and worked at build up my stock account as high as possible. Then you can also get a line of credit known as margin to use in case of a true emergency.
When I did realize all of these things I put as much as possible into all of investment accounts.
My life really has not changed much since I passed the $1 million mark. I still have a job and side hustle. And I am still in the process of remodeling my home myself. I have touched every room at this point. This past month I painted my spare bedroom “office”, removed the old gross carpet and installed a ceiling fan. Right now I am removing the last of the popcorn ceiling from the master bedroom.
I am still accumulating credit card travel points. At some point this year I would like to go to New York City or Las Vegas for a vacation. The ultimate vacation dream is Hawaii and an African Safari, but those have not happened yet.
When you are trying to build wealth it can seem really slow and daunting. Or that you take one step forward 2 steps back. That has happened to me more than once. But the moves you make forward really add up over time.
It does not matter where you start as long as you keep moving forward.