Study, research, look for investments. How to get started...

It's tough to teach people how to study, most people have never learned how to do research or think The majority of people know how to prepare for tests and exams. Preparing for tests and exams are key skills to have if you want to get good grades and for some specific careers. But investing is not a 10 question exam that you only take once in life, it's a marathon of critical thinking and research that never ends till your dead or homeless. Sure lots of people claim: you should buy once and hold forever, and some have done that and succeeded but there is a smarter way.  If you understand the companies and industries you invest in and keep up with new opportunities you can plan for both good and bad times. That's a simple sentence but if you break it out its a ton of work.
independently.  Critical thinking is not skilly easily learned or taught. 

Number one thing is to pick something that you like if you like real estate, research real estate. If you start today you have easier than anyone in history.  Information is so easy to get these days. When I started researching real estate you had to have a small fortune to get started at the lowest levels (It took me 10 years to buy my first house), now you can buy a share of a fix and flip loan for $10, or buy a fractional share in a REIT for $10.

I spent months researching p2p lending before I chose to invest in LendingClub, then I only started with a small test investment. Once I started I knew I was picking loans using good credit criteria I stayed away from risky high return loans and favored borrowers with double incomes and a home. My returns have always been higher than average, I don't wonder why because I did the research. i see a ton of videos youtubers trying to explain why LendingClub is a bad investment, but in each case it's obvious they had no idea of how to invest when they started.

I spent more than a year researching real estate crowdfunding (p2p lending), then I did a small test investment. In fact you could call my current investment a test investment, I'm still trying to see if this will be a a small, medium, or large balance in my portfolio going forward.

I can't teach you how to "study, research, look for investments" but I can tell you it's important and I hope my content about the things I have done in the past is helpful. In fact this entire blog and the youtube content are basically examples of, or the results of: studying, researching, looking for investments I have done or thought about doing. Example when I write about Groundfloor or Peerstreet. I still haven't fully decided if they deserve my money, I'm constantly looking for reason to decrease, keep even, or increase my allocation. The things I look for aren't just someone writing an article or blog shitting on crowdfunding or problems in the industries. I do research in everything I can think of: consumer confidence, credit models, and judicial foreclosure states, etc.   

Bottom line you gotta do the work if you want to see the results. You can make money with or without studying investments. But I would rather do the work.

If you liked this article check out the "How to get started" series for more.

Ok Boomer

Facts

- Boomers have been the largest spending generation in history.
- Boomers have pushed back retirement in record numbers
- We have already hit a tipping point in Social Security where it can not sustain it self without major increased taxes or decreased benefits.
- Pensions are at record levels of stock to bonds, adding enormous risk to the equity markets
- The average Boomers assets are over allocated in equities with little to no real estate or bonds
- Increased life expectancy not only increases the total number of years to plan for in retirement but also increased health care expenses
- This is the most overvalued stock market in history
- Behaviorally most investors will sell off equities during a crash
- In retirement consumption will decrease at least 30%

Theory
We are poised for a "Boomer Retirement" driven crash.
Entering retirement Boomers will begin to draw on pensions forcing the sale of equities pusing down values. At the same time these Boomers sell stocks from retirement accounts to pay for other retirement expenses, further pushing equity values down. In retirement Boomers consumption will go down more than 30% adding additional pressure pushing down equity values.
Ironically fear of not having enough money in retirement is causing Boomers to stay in there jobs and contributing to 401k's while keeping them off their pensions. This fear is actually the one reason we don't slip into recession. But if we were to enter into recession for other reasons things could be even worse when combined with "Boomer Retirement".
Right now the average age of a retiree is 65 and the average of Boomers is 65, interesting. Leaving the rest of us just 2 short years to invest in guns and ammo. Last recession many Boomer pushed back there retirement but this recession many will qualify for full Social Security benefits and they will likely retire weather they are prepared or not.  In a finial F-you the Boomers will likely drive down values so low it will take an entire generation just to recover.

Actions
Boomers aging bodys can't be repaired, and they lack the ability to heal themselves, they will require the blood of the young and expensive medical treatments. I predict the biggest returns will be in what I call the "Silver Rush". The "Silver Rush" will be any business poised to explode the aging Boomer. Businesses like; health care, senior living and other age related business. The "Silver Rush" will likely be bigger than the gold rush, the tech bubble and the tulip mania combined. 

Build a small emergency fund, How to get started...

An emergency fund should be 3 month expenses, FALSE

Use your emergency fund during an emergency, FALSE (Never use it, unless you have no other choice)

You can have more than one emergency fund, TRUE

Before you start, pay off your debt, check this article on paying off debt for more info

To Start you need a small emergency fund, if you don't have one, start a small one, nothing big, this is for real emergencies, like car repairs and we hope we never have to use it. You can have it in quarters in a jar, or put it in a saving account. Personally I would prefer a high yield saving account so it keeps pace with inflation so your not losing money.  Only you know what this number should be, but be realistic and start saving it today. 

If you complete this step it's no excuse to waste money, please dont think once you have $400 in a saving account, you can now buy lots of tequila, and get jet ski (with loan), and other bad decisions. 

As you go through life you need to look at your responsibilities, each new responsibility will require planning for new emergencies. When you start out this might be you: single, renter, 10 year old car. If your car gets older you'll be more likely to need repair. If you have an life event like a new child, marriage, other life events your exposure changes and you must plan accordingly. People who drink tequila and ride jet skis have more emergencies than people who go to libraries and read. 

Don't use your emergency fund, try to find a better way.  A lot of people are not willing to change, if you're reading this I hope your open to changing. When I lost my job in the last recession I didn't run to my emergency fund. I made huge changes in my life and my expectations of life. I reduced all spending to ecentials. I found a 3 month contract doing work I didn't like with a long commute being paid less than I was "worth". I worked hard and didn't complain, they extended the contract 30 days. I took the train and walked long distances to save money. I repeated this at another company and eventually found a full time job I didn't really want, paying less than I was worth. I never had to touch the emergency fund because I changed to fit the situation. If I had waited for a good job or If I had not reduced my spending, I probably would have been in serious trouble. I found a better way, I went out in the world and said I will do work i'm over qualified for, and I'll do it less money than everyone else. That is survival. So just leave your emergency fund until you have no other options, because when it is gone what will you do? and will it be enough?  

Congratulations you can now plan for a large emergency fund!  I would start with 3-6 month "Survival" expenses. For now just jam it in a high yield saving account, we can talk more about this later just make sure to start.

Questions:

• What happens if I lose my job, what can I do before I dip into my emergency fund?
• I would try a lot of things before ever touching an emergency fund, the emergency fund is not there to provide you with champagne and caviar while you "search for a job" that has a cool work life balance. 
• If you lose your job you should try the following
• find a job
• If you can't find a job, your wrong, try again
• go to temp agencies and say I will do anything (I find a lot people I know don't even try this)
• go to neighbors and offer to mow lawns, shovel snow, baby sit, painting, etc...
• get rid of all bills you can (like canceling cable or netflix)
• find cheaper living arrangements
• sell any assets not needed for future employment
• dip into any investments you have any
• dip into your emergency funds
• What happens if I have a big expense like roof replacement?
• If you have responsibility like a house that could require large amounts of money in an emergency, you should plan ahead and save for those emergencies.
• if you buy a house with a roof that needs repair or is in a bad state, start saving for a new roof. That money needs to be highly liquid and should be put in something like an emergency fund! 

If you liked this article check out the "How to get started" series 

Pay off all debt, How to get started...

You have to pay off all debt, FALSE
Everyone agrees there is not such things as good debt, FALSE.

You have to pay off all debt before investing, FALSE

Paying off debt is a guaranteed return on investment, TRUE

In general if you have debt where the interest rate is over 5-6%, pay it off. Stop buying Lakers tickets and imported beer and focus on paying off that bad debt. If your not sure whether it is good debt or bad debt, its bad debt so just pay it off. 

If you were not aware there is such a thing as good debt, you probably don't have any good debt. One example of good debt: a mortgage on one of my rentals, is 4.75%, with a 30 year term. The mortgage is fully paid each month by my renters, the interest expense is deductible, inflations has recently been >2% and it averages about 3% rent increase per year. In this situation I like this debt, so I don't chose repay it early. I could make extra payments on this debt with the income from this property or income from another passive source, but then than money would be gone and I couldn't invest that money and make ~11% probably making right now.

Examples debt:
Buy a rental with debt: GOOD
Credit cards > 6%: BAD
Buying your home: (It depends on your: home, market, economy, timing, etc...)
Buying your home and you rent out spare rooms: GOOD
Buying your home, it a fixer upper, you do all the work, while living there, and you rent out rooms: GOOD
Buying stocks on margin: (It depends)
College loans < 5%: GOOD
College loans > 6%: BAD

If you want to keep going, the next step is building a small emergency fund.  If you liked this article check out the "How to get started" series for more.

Investing, How to get started...

This is how I would get started, knowing everything I know now.

Stage 1 - Prepare
1) Pay off all debt you have where the interest rate is over 5-6%. If we assume your going to invest and get a 8% return annually after inflation you be getting 6% return, so you should start investing in paying down debt because it's the highest guaranteed return you get. For more, check out this article on debt.
2) Build a small emergency fund. Nothing to big, just think of all the real emergencies you had in life so far: car break downs, bailing mom out of jail and tickets to see the Detroit Lions play the 49ers. All these things are usually between $400-$900 so start there. For more, check out this article on planning for emergencies.
3) Study, research, look for investments. Try to find something that interests you, but be open to the idea that you might need to learn stuff you think isn't fun. I'm, not say you need to know how to calculate a company's EBITDA, but you should understand concepts like debt, inflation, etc... Pick more than two different investments types to research, this is important we don't want to just do one thing (eggs & baskets). For More, check out this article.

Stage 2 - Invest
1) Select multiple investments. If I was starting now I would pick Groundfloor and M1 Finance and I would put 50% in each
2) Build an opportunity fund. The opportunity is yours, maybe you want to buy a house, if you don't have an opportunity your planning for but it's best to act as if you do, so just pretend your saving for a house and you can fill in the blank later.


Stage 3 - Rotate
1) When an economic crisis or down turn arrives be ready. All that money you save for a new house in your opportunity fund, sorry your going to need that now. You thought you like some stock before, well the economy is crap so you can buy that stock at big discount.

Stage 4 - Retire
1) Your going to retire early. If you do all this you might be able to retire in your 20's lots of people in FIRE have already, only you can answer the big questions like is having Starbucks worth adding 5 years to your retirement date? can I mountain bike to work 15 miles in the snow?
2) Now that you're retired find a job you love and keep working. Wait I thought I was retired, ya but don't you want to buy an island? Also what if taxes go up or we have bad inflation, etc.. You don't have to make a lot of money the focus here is to have fun and work on something you love, the money will be a bonus.