If you're new here, this blog will give you the tools to become financially independent in 5 years. Here's how I did it and here's a few dozen online journals from other people who are currently doing it. This is not some stupid get rich quick scheme. The method is robust and replicable (no need to win the lottery, sell your business, or win at real estate), but not easy; much in the same way that a diet results in weight loss but is hard to follow persistently unless you set your mind to it.
The key is to save 75%+ of your net income and invest it in income producing assets (bonds and dividend stocks). This is done by running your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. See this post on how to enjoy a middle class lifestyle on $7,000/year (Please read it, especially the part about the lentils!). There is a "21 day" step-by-step plan for how to get beyond 75% in the left side bar. Also, check out my answers to Frequently Asked Questions which also covers common misconceptions regarding my personal budget, blog income, retirement, marriage, children, health care, etc. I also suggest reading About ERE in the top menu bar.
These days it seems that any purchase is thought of as an investment. I just “invested” in a new pair of shoes, or an ice cream cone. Bah! Humbug!
You are only investing if
- You consider valuation.
- You buy to realize an expected a positive return.
From this, it follows that anyone with a dollar cost averaging stock “investment” plan is not really investing. They are simply saving in a “currency” denominated in stock. It also follows that those who buy with no idea of the internal valuation of an asset are merely speculating.
Hence we conclude that there are far fewer investors among us than we used to think.
Originally posted 2009-07-01 00:25:20.
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