Savings Account Versus Investing. My Rant On Money, Debt, And Investing.

My friend just got a really good job and is making near $5000 per month so he's able to invest $2000 per month. He said he was going to put it in his savings account that he has locked in with a 4% annual interest rate, until I talked to him. I said 4% annual is HORRIBLE. Then we had a long talk about investing.

What is investing?

Investing to me is anything that you spend money on to make more money.
If you want to be rich or wealthy in your life, you need wealth generating assets.
You must know the difference between an asset and a liability.
An asset is something that you have that generates money and does not cost money.
Many people look at their car and their house and think of it as an asset. This is not true in my opinion.
Your car and your house are liabilities. They cost you money to keep them and maintain them.

Real Estate:

However if you have a house that you are renting out to someone, that you are paying a low 30 year mortgage of $500 per month and your renters are paying you $800 per month, which leaves you $300 per month in your pocket to re-invest in something else. This is an income generating asset.

Imagine starting out with that one house, then later on getting another, and it also generates and extra $300-$500 per month extra that you can re-invest. This is enough to pay for these two houses, PLUS you can re-invest that money to pay for another mortgage, which after you find a renter it will help pay for itself. This can be a never-ending process if you have good credit and enough money to get that first house going.

Then say you multiply and buy a duplex, so now you have 3 houses, a duplex, and 5 years down the road you sell one of your houses, and pay off the mortgage, plus you have all the money it generated for you while you had a renter, plus you may sell the house for more than you paid for it, because 5 years from now that house may be worth more than you paid for it. Cha-ching more money to re-invest. Then say you keep the other 2 houses and the duplex, and buy a 8 unit apartment complex, 5 years later you sell it for more than you paid for it, re-invest in a 16 unit apartment complex, which is netting you $4000 per month after paying your $5000 per month mortgage. Meaning your 16 renters are paying you $9000 per month, $5000 goes to the bank, and $4000 goes to your pocket for re-investing. And imagine 30 years down the line, this apartment complex is paid off, you will be an old man, 65 years old, your friends will be withdrawing social security and living on their $800-$1200 per month check being happy they were in the military for 20 years. And you will also be living on your social security check. PLUS your 2 rental houses, duplex, and 16 unit apartment complex. Wow, you will have $10,000 per month, because all your properties will be paid off, and you will own all your property, and your renters will still be paying you! Wow! Isn't that a great concept? Takes time and money, but there are thousands of people doing this already.

Used Cars:

Cars work the same way. Those used car dealerships that are letting you make payments with no credit.

Think about they go to an auction and buy a car for $1200. They put it on their lot for $1200 down payment. Then they collect $200 per month from you for a year or longer. Imagine 150 accounts paying you $200 per month. That's $30,000 per month. And their down payment already paid what you paid for the car. You have nothing else to lose, just collect the money. Sure everything has its down-sides, but this is very possible too.

Being in debt:

Too many of us get stuck in a hole way too early and it's hard to dig ourselves out. We purchase too many liabilities, like a brand new car that we can barely afford to pay the payments, plus full coverage insurance, and our mortgage, and our kids that we had when we weren't ready. Everything is expensive, and it's easy to get yourself stuck in a position of living paycheck to paycheck. This also leads to credit card debt. Credit cards can be addicting if you're broke. Because say you want something really bad or even need something or think you need it. Then you buy it with a credit card right there and then. It gives you a relief because you can just buy it, and it's yours now. If you're buying on impulse you don't think about the credit card bill that will come at the end of the month.

Oh oops a pipe just broke in your bathroom, your house is flooded. And you have NO money to pay for it as you're stretched so thin already living paycheck to paycheck, and you just spent more than you should have with your credit card, and you have no money saved up for emergencies. And you already took out a loan, and you were planning to pay it off tomorrow, but now you can't. So you go to another loan place, and get out a loan, to pay off your other loan. And now you're stuck. Paying interest, and your debts keep getting more and more expensive, and your pay is not getting any higher. I see this happen wayyyy too often.

So what does the smart person do? All things take time, and times get hard. You have to adapt. Sell your brand new car and pay it off, and you will lose money, but you will not owe anymore. No more $500 per month payments and $100 per month insurance. Now you can get a cheap used car for $3000 cash and pay no payments, and get liability for around $50 per month. Boom, you already knocked off $550 per month, which can now be used to pay your debts.

Stop eating fast food. The other day I went to dairy queen, and you wouldn't believe it cost $19 for two people. Wow you can eat at an all you can eat buffet for that price, or cook nice T-bone steaks at home for cheaper than that.

Stop buying soda from gas stations and Mcdonalds. Drink water.
This alone will help you lose weight, and save tons of money.
Think about you have 3 meals per day. And you drink soda with every meal.
Each soda from a restaurant, or mcdonalds will cost you $1-2.
So this is $3-5 per day. Say 5 days per week.
$60-$100 per month.

Wow, adds up doesn't it? So now with your cheaper car, and by not drinking soda. You've already dropped your expenses by $600-$650 per month! Just something to think about.

So now with your saved $600-$650 per month, you can start paying off your credit card and loan debts. Then once that is all paid off, you will be able to start SAVING money. Congrats, you're almost out of the living pay-check to paycheck hole. And once you pay off your debts, you can start INVESTING that $600-$650 per month, or say you invest $500 per month, and use the extra $150 per month to take your loved one or kids out once or twice a month.

Just starting out:

I think eBay is a good investment for anyone just starting to make money online. I've tried everything from affiliate marketing to cpa to freebies and survey sites and rediculous things. Having your own website and using adsense, your goal is to start making $1 per day, and even this can take a month.

But with eBay, in my first month, I made over $1200 in sales. Wow! I'm done with trying to make $1 per day and typing articles alllll day. Now I sell real items to real people and it feels great.

I started to write about my journey here: www.EbayCareerBlog.com

Investment Size:

For small investments, say $100 per month, I'd say try eBay. First sell things around you house. One day when you're off work or just have some free time, get a box or a trash bag, and pick 20 items around your house. Pick things you know you can sell, then pick a few rediculous things that you don't think will sell, like a bamboo spoon or something. And post all 20 items, eBay lets you post 50 items per month for free! But there is a final value fee of 9%. If you think about having your own ecommerce site, 50% of your profits would go to finding traffic and buyers. So I'm happy using ebay and paying the 9% instead of 50%.

Try searching for your item on ebay first and see what it sold for in the past. Look at the ones that did sell and didn't sell. What is the difference between the two? Price? Description? Feedback? It all matters. So make yours like the one that DID sell. But don't copy it. Just use it as a reference.

Once you've sold everything in your house that you don't use, you should have at least $100 to start your eBay journey. I have a good site that I can direct you to where you can buy products for cheap from Chinese wholesalers, and resell on eBay to make a profit. You can have a profit margin as high as 15%-50% PER SALE. Much better than a 4% annual interest rate from your savings account eh?

Cheap short term investments:

I'd go with phone accessories, computer parts, housewares, cheap items that you can resell for 15-20% profit. Your goal here is volume. Down the line for example, you buy a wholesale lot of 500 ipod wall/car chargers. You pay $3 each. That's $1500 investment. And you sell a decent volume of 30-40 per day at $10 each. Average 35 sales per day for a week. That's 245 in a week. After shipping and eBay fees you make $5 profit EACH. You could move those 500 chargers in 2 weeks. Turning your original $1500 investment into $2500. $1000 profit in two weeks! Wow! $2000 per month with one product. Now duplicate that and sell 50 things in your eBay store. Selling 10 items per day of each item. That's a big volume. 500 items per day. Makes $2500 per day look doable doesn't it. And say you hire a couple people to help you pack and ship, pay them $250 per day each to work their butts off, and you pay rent for your warehouse, insurance, taxes, all that. You're still pocketing $800 per day. That's VIP status already. And people are doing it! Great thing about eBay is you make money constantly. 7 days a week. No days off. You set it and forget it. Other than the fulfillment which is packing and shipping.

Long term investments:

A cheaper long term investment would be Silver. Silver is a great thing to invest in, and the price is constantly rising. When I was younger, silver was $20 per ounce. Now it is nearly $42 per ounce. Imagine if I would have invested $10,000 in silver back then. I could have had five 100 oz bars of .999 silver. Then I could have sold it 10 years later for $20,000 and made a 100% profit in 10 years. Which is about 10% annual. Much better than a savings account!

If you have a lot of money, another great investment that is very popular right now is GOLD. Gold is nearly $1800 per ounce!!!! WOW. It even hit $1900 not too long ago. When I was a kid gold was $370 per ounce...
Imagine investing $10,000 in gold back then. Could have bought 27 ounces of gold. Which would now sell for $48,600. More than quadrupling my money. 480% profit in 10 years. 48% annual? Don't even think about a savings account. lol I keep about $1000 in my savings account for emergencies. The rest is invested.

Large investments:

For large investments, I recommend real estate. Real estate is a great income generating asset. Think about buying foreclosed houses for $30,000 and fixing them up for $10,000 meaning you're at $40,000 now for the nice house. And then selling it for $80,000. You just made $30,000 in probably 2 months. Not bad, if you have money.

Also another good thing to invest large amounts of money into is, stocks, and forex. But this takes a lot of time, practice, and knowledge. You must constantly educate yourself and stay on top of things. One day could easily give you a $5000 loss or a $5000 gain. There's much to learn.

Alright, I'm done ranting. It's been nearly 45 minutes.
Thank you very much to everyone who reads this. I hope you actually get something out of it.
Please leave comments, advice, or share your knowledge. Or hate if you wanna, I don't care. Lol

 

With your permission.
Are your ideas come from your own personal experience, or it's a theory only? Honestly, it reminds me the ideas of Mr. Robert Kyosaki (he has good ideas, by the way, though they're now largerly misinterpretated...)
Your rating may be good for some cases, but theoretically I could easily say, that the best "investment" is in apples (not Apple): I buy one durty apple at $1, wash it, and then sell it at $2. It's 100% profit, and if you repeat it 100 times a day, in a month you'll make $1x100x30=$3000...
Sorry.

 

I have read one of Mr. Robert Kyosaki's books, Rich Dad, Poor Dad. It has helped me A LOT. And I've read many other books that have opened my eyes. I have not done real-estate yet. My grandparents and parents have tho. And I plan to in the future. I've bought and sold cars, I've been in debt, my mom has been very deep in debt and gotten out. I have bought and sold silver and gold. I have collected coins and sold them. I have messed with Forex. And I am currently selling on eBay. I'm not making a living with it, but it is enough to pay for the gas for my truck and my expenses. What do you mean buying dirty apples? lol And where do you sell apples?

 

"Dirty" here means when you take an apple from under apple-tree -- it's dirty, stained with soil and like that. When you clean it with water it becomes washed. Then you can sell apples at your front-yard.
The problem with your rating is that it says what must be done and shows very seductive calculations, but doesn't say anything about how it must be done and about possible pitfalls. Do you have a working method to make 35 sales/day on Ebay? Do you live in a tax-free country and your for-rent house doesn't require any insurance or maintainance? What if price of your house go down, your bank send you a margin call, your tenants lose their jobs and move to a cheaper house, and you wouldn't be able to find new ones at $800, because unemployment rate around went up? Gold and oil already were high priced 30 years ago and then fell down, but this time it's different?
Anyway, I've seen a lot of such ratings, and yours is quite a normal one. Hope it helps someone to earn something.
When I was in high school, silver was about $5. But I'm not a millionaire anywhere near...

 

4% on a savings account is an awesome rate. Why would you say that is horrible?

 

Because you can invest in so many other things and make 10% or more per month, which is 120% annual instead of 4% annual.

 

I'd take a guaranteed 4% on a liquid savings account over any of the speculative suggestions you have made instead. Not one of those is assured of anywhere near a 10% return and all involve a risk of principle.

You can say you will make 10% as a guarantee on all your other suggestions, but someone would have to be a fool to believe that is possible on a consistent basis with no potential risk, a factor your analysis completely ignores.

Another factor you ignore is that a savings account makes the guaranteed 4% and you do nothing, no work at all, freeing up you to do other things to earn money. You discount the value of labor in comparing your "investment" suggestions which sounds more like jobs than investments.