Blake Sauter

Financial Advisor

Blake is a financial advisor who works at Edward Jones

 

Everyone wants to be wealthy. However, few know how to reach that goal, and so it remains more or less a fantasy. In a world where the United States is in trillions of dollars of debt, and money problems are a main cause for divorce, it’s as important as ever to get your finances under control.

Let’s start with the obvious, spend less than you earn. You may think the next step would be to open a savings account. This simply wouldn’t be a wise choice, as the interest rates are so low it’s a waste of time. Of course there’s inflation which fluctuates, but a good rule of thumb is to assume 4% to be safe. So in essence, you want to be earning at least that so your money isn’t losing value. In business school, a minimum of 6% annual rate of return is often suggested.

You need to open an investment account with a brokerage. There are plenty out there, some with lower expense ratios and some with higher. You need to be well aware of these management fees as they can be a significant part of your earnings. However, if you want above average earnings, they come with the cost of a good financial professional.

One of the gold standards in the U.S. is Standard & Poor’s 500 which is a stock market index based on 500 of the largest companies. Essentially it tracks the market, which historically has averaged a 10% annual return.

Warren Buffett, widely considered the greatest investor of all time has in his will to invest the majority of his estate in low-cost index funds like the S&P 500. Over the long-term it is very difficult and rare to beat the market.

If you’re young earning little money there’s an attractive option of opening a Roth IRA (Individual Retirement Account). It’s tax free up to $5,500 in annual contributions. Opening a Roth IRA is something everyone should do with the first bit of money they get from their first job.

The earlier the better. This is where it gets really fascinating as the power of the compound effect comes into play.
As you can see below, there are two people in the example. One invests from age 25 to 35 and stops contributing, having invested a total of $55,000. The other person delays 10 years and invests from age 35 all the way to 60, having invested a total of $130,000. Oddly enough, as you can see the first person who invested significantly less earned significantly more in the end. That’s the power of the compound effect and starting early. It’s examples like this that first inspired me to pursue a career in finance.

 

 

“Compound interest is the 8th wonder of the world”
-Albert Einstein

“Until you find a way to make money while you sleep, you will work until you die”
-Warren Buffett

The beauty of it, is that the compound effect applies to anything worthwhile. If you hit the gym and are in good shape you know this to be true. It’s the compounding of all your work outs that overtime has given you results.

I hope you have a better understanding of how money works, and how you can make your money work for you. It’s been a pleasure to write for 1stMAN.

Feel free to reach out and connect with me on LinkedIn Blake Sauter

Blake Sauter

Financial Advisor

Blake is a financial advisor who works at Edward Jones

Everyone wants to be wealthy. However, few know how to reach that goal, and so it remains more or less a fantasy. In a world where the United States is in trillions of dollars of debt, and money problems are a main cause for divorce, it’s as important as ever to get your finances under control.

Let’s start with the obvious, spend less than you earn. You may think the next step would be to open a savings account. This simply wouldn’t be a wise choice, as the interest rates are so low it’s a waste of time. Of course there’s inflation which fluctuates, but a good rule of thumb is to assume 4% to be safe. So in essence, you want to be earning at least that so your money isn’t losing value. In business school, a minimum of 6% annual rate of return is often suggested.

You need to open an investment account with a brokerage. There are plenty out there, some with lower expense ratios and some with higher. You need to be well aware of these management fees as they can be a significant part of your earnings. However, if you want above average earnings, they come with the cost of a good financial professional.

One of the gold standards in the U.S. is Standard & Poor’s 500 which is a stock market index based on 500 of the largest companies. Essentially it tracks the market, which historically has averaged a 10% annual return.

Warren Buffett, widely considered the greatest investor of all time has in his will to invest the majority of his estate in low-cost index funds like the S&P 500. Over the long-term it is very difficult and rare to beat the market.

If you’re young earning little money there’s an attractive option of opening a Roth IRA (Individual Retirement Account). It’s tax free up to $5,500 in annual contributions. Opening a Roth IRA is something everyone should do with the first bit of money they get from their first job.

The earlier the better. This is where it gets really fascinating as the power of the compound effect comes into play.
As you can see below, there are two people in the example. One invests from age 25 to 35 and stops contributing, having invested a total of $55,000. The other person delays 10 years and invests from age 35 all the way to 60, having invested a total of $130,000. Oddly enough, as you can see the first person who invested significantly less earned significantly more in the end. That’s the power of the compound effect and starting early. It’s examples like this that first inspired me to pursue a career in finance.

 

“Compound interest is the 8th wonder of the world”
-Albert Einstein

“Until you find a way to make money while you sleep, you will work until you die”
-Warren Buffett

The beauty of it, is that the compound effect applies to anything worthwhile. If you hit the gym and are in good shape you know this to be true. It’s the compounding of all your work outs that overtime has given you results.

I hope you have a better understanding of how money works, and how you can make your money work for you. It’s been a pleasure to write for 1stMAN.

Feel free to reach out and connect with me on LinkedIn Blake Sauter