Term of the Day – “Rule of 72”


The “Rule of 72” is a formula used for approximating the time that it will take for a given amount of money to double at a given compound interest rate. The formula is very simple. It is 72 divided by the given interest rate. Ex.) 72 divided by 12 (interest rate) equals 6:  In 6 years $100 will double at a compound annual rate of 12%.

Mutual Funds


What exactly is a mutual fund?

A mutual fund is a fund that is operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, futures, currencies, or money market securities. These funds offer investors the advantages of diversification and professional management. A management fee is charged for these services. This can range from 0.5% – 2% of assets per year. Funds may have other fees such as 12B-1 Fees, Exchange Fees, and other administrative charges. Funds sold through brokers are called Load Funds, and funds sold to investors directly from the companies are called No-Load Funds. Mutual Fund Shares are redeemable on demand at Net Asset Value by shareholders. All shareholders share equally in the gains and losses generated by the fund.

Mutual funds come in many varieties. Some invest aggressively for capital appreciation, while others are conservative and are designed to create income for shareholders. Investors need to assess their tolerance for risk before they decide which fund would be appropriate for them. The timing of buying or selling depends on the outlook for the economy, the state of the stock and bond markets, interest rates, and other factors.

Summarized and in simpler terms, a mutual fund is like a bucket that multiple people put their money into and the bucket of money is invested into multiple combinations of companies, bonds, securities, etc.

Mutual Funds are often divided into categories based on their market capitalization. This is the total market value of a company determined by multiplying the stock price by the total outstanding shares of the company.


Large Cap mutual funds consist of companies with a market cap greater than $10 Billion Dollars.  These funds will have a slow and steady growth rate and pose less risk due to the size and stability of the companies. Companies in large cap funds will be those such as Wal-Mart, Microsoft, and Amazon.


Mid Cap mutual funds consist of companies with a market cap between $2 billion and $10 billion dollars. These companies have more potential for growth and therefore are higher risk than large cap. These funds are made up of companies such as Tupperware and Goodyear Tire.


Small Cap mutual funds consist of companies with a market cap between $250 million and $2 billion dollars. These funds are made up of new companies and pose the most risk. Since these companies are newer, they have a high growth potential and can also be very volatile. Since small cap funds are very risky, they also have the potential to be the most rewarding. These aggressive funds are recommended for a young person who plans on being in the market for a long time and will not be needing to take the money out anytime soon. An investor in this type of fund needs to be willing to stay on the roller coaster that is the stock market. An example of a company that would fit this category is Buffalo Wild Wings and Papa John’s.

*In addition to the above three categories, it is recommended to also have some international funds in your portfolio to maximize your diversification.

There are many advantages of mutual fund investing but there are also some disadvantages.


  • Advanced portfolio management
  • Dividend reinvestment
  • Risk reduction through diversification
  • Convenience


  • Expense ratios can be high
    • If your expenses are exceeding 1.2% you are overpaying
  • Tax inefficiency through paying capital gains taxes
  • Poor trade execution
    • Cannot trade in real-time. Share prices are determined as whatever the closing price was that day.

There are a multitude of companies that offer mutual funds as a form of investment:

  • Vanguard
  • Fidelity
  • JP Morgan

Vanguard typically has the lowest expense ratios and the lowest minimum balance required to open an account. Vanguard has what they call their “STAR” Fund which only takes $1,000 in your account to get started and has an expense ratio of 0.34%.


Success Through Self-Discipline


“Success can only occur when opportunity and preparation meet.”

I came across this quote while reading and it really made something in my mind “click”. Success needs two things in order to occur. Opportunity and Preparation. You must be prepared so that when an opportunity arises, you can jump on it while it’s there. This is true for all types of successes. Athletes, celebrities, stock market investors, real estate investors, job promotions.

A lot of times the “opportunity” portion of success may be somewhat beyond your control, but you can almost always control your level of preparation. A big part of preparation is related to self-discipline. Athletes utilize self-discipline with vigorous training and healthy diets. Investors utilize self-discipline by putting their money into the stock market or other various investment accounts instead of blowing it on a vacation or consumer goods.

Successful people stand apart from unsuccessful people by their level of self-discipline. At some point in their preparation, they told themselves “no” to all the temptations so that later, they could tell themselves “yes”. Begin with the end in mind. Whenever you think you might stray from your path, think of the goal you are working towards. It might take some time to reach your goal of being successful. Success is a journey, not a destination. You don’t just wake up one day and you’re suddenly a huge success. (Unless you won the lottery). You have to work toward it. All of this preparation will allow you to seize an opportunity whenever it comes knocking.

My personal self-discipline is saving money so that I can purchase investment rental property and also so that my retirement will be taken care of in the next 40 years. I’m “beginning with the end in mind”. I don’t want to wake up one day when I’m 60 years old and say “Woe is me. I spent all my money on car payments, restaurants, and vacations in my working years and now I have no retirement. I sure hope the government will take care of me in my old age.” Sadly, this is what happens to a lot of people

It’s important to have self-discipline in every area of your life. You need self-discipline for your physical appearance and fitness. It’s easy to eat junk food and cookies all day and much harder to eat vegetables and salad. You need self-discipline to eat healthy and to exercise. It’s so much easier to sit on the couch and watch tv after a long day at work. It takes true dedication and self-discipline to change from work clothes to running clothes and go outside on a run after work. I promise that the benefits of taking care of yourself will outweigh the short amount of “feel good” you might get from another cookie or watching the next episode of Lost instead of getting in your workout.

“You’ll never achieve more than you think you can. So create a big dream.”

This quote ties back to the self-fulfilling prophecy that I talked about in previous posts. I always try to make my dreams and goals a little bit bigger than I think is possible so that I’ll have to work even harder to achieve them. One of my goals is to run a full marathon. I barely survived running a half marathon but since I have that marathon goal written down, I keep trying to achieve it. Another “stretch” goal for me is to have $5,000,000 by the time I retire. This is very lofty, but seeing this written down on my goal sheet, every day, helps me to take the preparation and self-discipline steps necessary to achieve this. So what if I retire with only $3,000,000? I will still be perfectly happy and content because who wouldn’t with that much money? Because I had a large goal, I worked harder trying to achieve it than I would have if my goal had been $1,000,000.

I hope that this post has encouraged you to dream big and be willing to do whatever it takes so that when you are presented with an opportunity that will help you achieve your goal/dream, you will be well prepared to seize that opportunity.

Health Savings Accounts


If you’ve never heard of a health savings account or don’t know exactly what it is, then this post is for you.

Depending on what type of health insurance you have, a health savings account can be a great idea.If you are a fairly healthy person and do not go to the doctor often then you should choose a plan with a high deductible and open a health savings account. A benefit of a high deductible plan is these are the plans with the lowest premiums. Many banks such as First Bank and Trust, offer Health Savings Accounts.

A health savings account is an account that you use to pay for qualifying health and medical expenses. Say the deductible on your insurance plan is $3,000. Once you have saved up $3,000 in your HSA, then you are 100% insured. Below I have outlined some benefits of an HSA.

  • All contributions that you put into the account are tax-deductible. This means that if you itemize your deductions and file a schedule A with your tax return, you can lower your adjusted gross income by the amount you put into your HSA. For individuals you can put in $3,350/year and a family can contribute $6,550/year.
  • Some employers have what is known as a cafeteria plan which would allow contributions to be made to your HSA directly from your paycheck. Your taxes on that paycheck would be calculated after your contribution was made, making the contribution tax-free. This allows you to pay for qualifying out-of-pocket medical expenses using tax-free dollars.
  • Any unused funds in the account at the end of the year continue to remain in the account year after year, unlike the flexible spending account which is a “use it or lose it” account.
  • To access the funds in your HSA is very simple. Once the account is established, you get a debit card that you use like a regular card. You can present this card at stores or doctor’s offices to pay for a co-pay, pay for medical services, buy prescriptions and even some over-the-counter medications.

Morning Routines


“The early bird catches the worm”

If you ask any highly successful person what time they get up to start their day, chances are the answer is sometime before 6AM.

Your morning sets the tone for the remainder of your day. If you are stressed and running around trying to get out the door on time, then it is likely that the rest of your day will be stressful. However, if you wake up early you actually have time to collect your thoughts and plan out how your day will go.

Waking up in the morning is the signal that it’s a new day, a new opportunity to make a difference, to think of a new idea. You should be leaping out of bed with a smile, ready to conquer anything that comes your way!

Morning is my favorite time of the day. I usually get up around 5AM. As soon as my alarm goes off, I’m up and out of bed making coffee and eggs. After breakfast I’ll have the news on in the background while I read a business related book. While I’m reading I’ll jot down any thoughts or ideas that come to me. Occasionally I might exercise in the morning by jogging or doing yoga. I’ve been doing this same routine every morning, even on weekends, for over a year now and it has drastically changed my life.

I recently listened to a podcast that featured Hal Elrod, author of “The Miracle Morning”. In his book he stresses the importance of having a morning ritual. He researched all of the morning routines that successful people do and combined them all into one routine that he calls “the miracle morning”. He compiled everything you should be doing in the morning into an acronym called “SAVERS”. I’ll go into detail about what each letter stands for.


Start your day off with silence. Many people’s days are filled with noise and hectic activity. You need to take some time to just be with yourself and reflect on any thoughts that may come to mind during this time of silence. You can do this through yoga, meditation, or prayer.


Affirmations are like chants that you say over and over to yourself to get in your mind that you can do anything that you set your mind to. They are like a self-fulfilling prophecy. Creating an affirmation is a 3-step process.

Step 1: What Do I Want?

Step 2: Why Do I Want It?

Step 3: What Am I Committed To Doing In Order To Get There?

Here is an example of one of my affirmations:

“I want to be financially independent so that I can live the life of my dreams, therefore I am committed to working hard and being as successful as possible.”


You need to visualize yourself doing the process of achieving whatever your goal is. Don’t just think of the end result. You need to actually see yourself doing the steps necessary to get there. So if your goal is to run a marathon, visualize yourself lacing up your shoes and going out the door for a run. This visualization process will help you realize that the end result is dependent on the process necessary to get there.


Some people just aren’t morning exercisers, and that is fine. If you like doing your workout in the evening, continue doing that. The point of exercise as part of your morning routine is to get your blood flowing and getting you energized. You can go out and run 5 miles if you want to or just do one minute of jumping jacks. Either one of those activities will get your heart rate up and your blood flowing.


This is what I spend most of my morning routine on. I need to start dedicating more time to the other categories. Reading in the morning will give you so many ideas and get your thought process flowing which in turn will allow you to have a more productive day. Reading allows you to learn from people who have already accomplished what you dream of accomplishing. The point of reading in the morning is to learn insights and new ideas from successful people and businesses, so you probably shouldn’t be reading Harry Potter or 50 Shades of Grey. Nothing wrong with those books, I’m a huge Harry Potter fan, but for your morning reading, you should be reading something more educational.


Keep a journal or notebook and just write down anything that comes to mind. You can write about what you did yesterday or write down any new accomplishments you hope to achieve during the day or anything you learned from reading during your morning routine. Allotting just 5 minutes to writing something down is a stepping stone to becoming successful.

With that, I will leave you with this quote that I read in one of Robert Kiyosaki’s books.         “Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it. Begin it now.”

Zero Based Budgeting


According to a Gallup Poll, two-thirds of Americans do not keep a personal budget. A budget may sound overwhelming and be the last thing you want to think about doing, but your life will be so much easier and stress-free if you make a monthly budget.

Technology makes the daunting task of doing a budget very easy. I personally use http://www.everydollar.com   This website makes it very simple to keep up with your expenses and allows you to see what category you are spending the most in.

Zero based budgeting is a form of budgeting where no penny is left behind. Your income minus your expenses equals zero. Every single dollar coming in is allocated into a certain category. There can be no leftover money at the end of the month. Giving every dollar a name gives your money a purpose and a mission. If you don’t have a designation for each dollar, you will be more tempted to spend money that you may have just lying around in your checking account at the end of the month.

A budget gives you permission to spend your money. I still have trouble with this concept and will just move any remaining funds in my lifestyle or food category into my savings category.

Below are some tips for creating your first budget:

(if you are going to use everydollar.com then setting up your budget will be pretty self-explanatory)


This is one of the most important parts of a budget. You need to pay yourself first or there will never be any leftover money for savings at the end of the month. If your budget is tight, start off by saving just 1% of your income and try increasing it by 1% each month. A good goal to shoot for is saving 10% of your income. I usually manage to save around 50% of my income but that comes with a lot of lifestyle sacrifices. I love Dave Ramsey’s quote, “Live like nobody else so that later you can live like nobody else”.  


Did you know 47% of Americans would not be able to pay for a $400 emergency? You should always have an emergency fund because emergencies are not surprises. You know something will eventually come up so you need to be prepared for when it does. A good starting point for your emergency fund is $1,000 until you pay off all consumer debt. After that you should save up 3-6 months of expenses for your emergency fund. While you are building your emergency fund be sure to add this as a budget category that you can add money to each month.


Making a budget is great but it means nothing unless you actually follow it. You need to make sure you remember to track all of your expenses. If you run out of money in your food category then you have been eating out too much, buying too much at the grocery store, or you need to allow more money for your food category and find a different area of your budget that you can tighten up.


Having a budget gives you permission to spend your money. Each month you can have a category of “me” money which gives you permission to spend that money on whatever you want and not feel guilty about it. Just make sure you don’t spend more than your budget will allow.


Having a budget forces you to track all money coming in and all money going out. If you don’t have a budget it’s hard to realize how much all of the small expenses can really add up. It may sound tedious, but every time you spend money, you need to enter it  into your budget at the end of the day so you can know where you are at and prevent you from deviating from the plan. A habit takes around 66 days to form. So for the first few months, doing and sticking with your budget will be tough, but eventually it will just become a part of your daily life.

The Magic of Compound Interest


Albert Einstein said, “Compound interest is the eighth wonder of the world”. 

The earlier you start saving, the more time your investment will have to grow, allowing the interest to compound over time.

At 20 years old, if you maximize your contributions to a Roth IRA every year ($5,500), assuming an 8% return, by the age of 60 you would have $1.4 Million dollars. Yes MILLION. You could retire a millionaire having saved only $5,500 per year. That’s $458 per month. That’s the amount of a typical car payment. Would you rather have a nice car or be a millionaire? As Dave Ramsey would say, “I hope you liked the car!”

The great thing about a Roth IRA is that it grows tax-free. So the $1.4 million dollars will have ZERO taxes when you start making withdrawals. Although by the time it gets to being that large, you should just be able to live off of the interest it generates and leave the principal alone for your children and grandchildren.

Here is another example to demonstrate the power of compounding interest.

In the example I’ll use Jane and Sally.

Jane has planned her future and knows how powerful saving early in life can be. She starts contributing $5,500 per year to her Roth IRA and gets an average of 8% return. She maxes out the Roth from age 20 to 35 and then decides she no longer wants to invest for retirement.

Sally liked to party in her 20’s and never even thought about retirement. On her 35th birthday she suddenly realized that she had $0 in her retirement account.She decided she should start maxing out her Roth IRA and put $5,500 in every year until she retired at age 65.

Now, both Sally and Jane are 65 years old. Jane contributed to her Roth for only 15 years and then went 30 years putting nothing into it. Sally contributed to her Roth for 30 years. Twice as long as Jane.

Who has more money at retirement?

Jane! When I first learned about this scenario, I couldn’t believe it. That is how powerful compound interest is.

Jane had a 15 year head start on Sally, so her interest had that much longer to grow. Jane enters retirement with $1.5 Million dollars. Only $150,000 of that is principal. The rest is compounded interest.

Sally enters retirement with only $623,000. That is a difference of $877,000. All because Jane started investing when she was 20 years old instead of 35.

Assuming that Jane still started investing when she was 20 but decided not to stop at age 35. She diligently contributed to her Roth from age 20 to age 70. That amounts to $275,000 of principal and an overall balance of $3.1 Million dollars!! Her retirement account is made up of 91% interest.

I recommend opening a Roth IRA and start putting money in it as soon as you can. You can start contributing to it whenever you start having earned income. So a 15-year-old high school student with a job can contribute to a Roth IRA, up to $5,500 or the amount of money they earned that year. So if they only earned $2,000 that year, they can only put in $2,000.

I was fortunate in that my parents knew to open a Roth for me when I had my first job at 17 years old. In addition to the Roth, you should also try to make use of any retirement plan you may have through work.

You would first want to contribute to your work plan, up to the match. Then you would want to maximize your Roth contributions for the year, and if you still have extra money to use for retirement investing, invest the remainder in your work plan.