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Alex’s Financial Tips: How to build wealth by flipping the time, money, and stuff equation.

Most weeks I usually talk about a very specific financial topic and usually tell a hypothetical story from something I have seen during my time as a Financial Advisor. This time, I am going to talk about a broad outlook and discuss something from a macro level. Hopefully, this will provide you a different perspective on the relationships between time, money, and stuff. Let’s jump into it. 

Time, money, and stuff may just seem like 3 random things, but in reality, they are the three components that make up the way you interact with the world around you. Most of us spend our time acquiring money so we can buy stuff.  Why do we spend our time at jobs, usually Monday through Friday, 40+ hours a week?… For a paycheck. We need money so we can buy stuff. Stuff like housing, food, transportation, childcare… the list goes on and on. So why did I bring this up? Why is it important to understand this system and this equation between time, money, and stuff? 

Because you need to learn how to flip the equation. 

The standard and basic middle-class progression through the steps starting with time, then money, followed by stuff. The big key to jumping up in the class structure is flipping the equation to stuff, money, time. The richest people in the world utilize their stuff to make them money to buy their time. The stuff they own can also be described as their investments. Some examples of these people’s stuff could be a business, property, intellectual property, talent, or an investment portfolio. All of these things, this stuff, makes people money. Jeff Bezos is pretty relevant these days. Let’s use him as an example.  He owns this little online bookstore, Amazon.com, and that business made him billions of dollars that he used to buy himself time, that for some reason he decided to spend in space. 

So at this point, you may be thinking to yourself, “Okay Alex, well I don’t have that kind of stuff so why are you making me feel like crap by telling me this?” My first-world privileged simpleminded response would normally be something like, “ You can build the stuff!”. But, the truth is you probably can’t. You probably don’t have the next great new business idea and you also might not have the drive to grind the required 80 hours a week. However, you do still have a few other options on what you can do to still flip the equation. 

There are lots of everyday millionaires in this country and they all have different beautiful stories on how they got there. But, all of them at some point flipped the equation. That doesn’t mean they built an international corporate enterprise. Some took a passion of theirs and turned it into a side hustle that grew into a sustainable small business. Some saved their money over the years and eventually had enough to buy a franchise or some investment properties. But the majority of millionaires I know, accomplished it in the last 5 years of their working careers. They did it by investing over the long run. They created an investment portfolio or a retirement account that now sustains their lifestyle. The small amount of interest that they pull out each year replaced their income from working. They flipped the equation. Their stuff (investment accounts) makes them money, so they can buy their time, usually (traveling, relaxing, or spending time with the people they love.) I guess going to space will eventually be an option on how you could spend your time.  Flip the equation.


Alex Garner is a licensed Financial Advisor, but do not take the information in this article as financial advice. Examples are hypothetical and for illustrative purposes only. The rates of return do not represent any actual investment and cannot be guaranteed.
Registered Representative, Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC. 

Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Garner Wealth Management LLC and Cambridge are not affiliated.
The information in this article is not financial advice.

Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including loss of principal.




Alex’s Financial Tip: The Awesome Thing About Compound Interest

Compound interest, that’s a fun term that is used in my industry. If you use that high-powered computer in your pocket and go to the Google machine, it will tell you that compound interest is “the addition of interest to the principal sum of a loan or deposit over time”. Let’s break that down and do a real-life example that a lot of you may have to deal with. In plain English, compound interest is interest earned on interest. You are compounding the interest by reinvesting the interest. Now, why is that important and why should you always be compounding? 

The real-life example that a lot of you will have to deal with is the inheritance from the death of a family member, probably a parent or grandparent. Yes, I realize that I am somewhat speaking from a place of privilege and some of my readers won’t ever receive any inheritance. One of my future articles will be about the importance of building family wealth and our desire as humans to leave a legacy. 

I have been a Financial Advisor for over 6 years and over that time, I have had hundreds of clients. Most of the time I have been working with middle-income hardworking Americans.  Most of my clients over the years that made it to retirement age had between $400k and $900k of invested assets. This is the money that they worked their whole lives to accumulate with the goal of maintaining their standard of living during retirement and to leave a little money to their loved ones. 

So this brings me to the point of this article. Why is compound interest important and why should you always be compounding?  Let’s say that you are 40 years old and your second parent passes away leaving you and your sibling each an inheritance of $250k. You decide to invest the whole thing. Your sibling decides that they need to spend a lot of it on things like a new car, a new roof on the house, and their children’s education. Plus, they are a little scared of the market, so they put the rest into their savings account. They do decide to start investing around $1000/month from their nest egg savings account. They figure that over the next 20 years, it will be worth close to the same as the $250k that you invested…  

Your sibling’s investment result
Your investment result

This is just a hypothetical example, but as you can see from these two charts, they were very wrong. The money that you invested has now grown to over a million dollars, the vast majority being the interest due to compounding. Your sibling’s account is roughly half that amount. Why would that happen? What caused this? I am sure you all guessed it. Compound interest! 

Compound interest is an awesome thing, and now that you have a better understanding of it, you can make smart decisions with your money.  If you ever find yourself with a large amount of money from either an inheritance or winning the lottery, give your Financial Advisor a call.  You will be glad that you did.  


Alex Garner is a licensed Financial Advisor, but do not take the information in this article as financial advice. Examples are hypothetical and for illustrative purposes only. The rates of return do not represent any actual investment and cannot be guaranteed.
Registered Representative, Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC. 

Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Garner Wealth Management LLC and Cambridge are not affiliated.
The information in this article is not financial advice. Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including loss of principal




Alex’s Financial Tips On How to Get One Million Dollars

I hope everyone had a fun Independence Day weekend and I also hope you and your family made it through Hurricane Elsa. The only issue at our home is that we lost power for about an hour on Tuesday night, so no real issues. For this week’s installment of Alex’s Financial Tips, I want to tell you about a fun conversation with a few friends while at the beach on the 4th of July. 

My friend, who is around 55 years old, asked me, “Hypothetically, if I invested for the next 10 years, would it be possible to reach 1 million dollars in an account?”

The funny thing about that question is that I had a client basically ask me the same one about a month ago. I gave both of them the same response. “I can’t make you any guarantees, but anything is possible. We just need to crunch some numbers with a time value of money calculator”

Because I had already spent some time crunching different hypothetical numbers the month prior, I was able to just casually bring them up to my friend at the beach. Once again, this is just hypothetical and I can’t make any guarantees, but if you were able to save and invest 60k a year and you do that for the next 10 years, and if you achieve an annual interest rate of return of 7.5%, that time value of money calculation brings you to a future total value of $1,016,376.

The breakdown of the cumulative investment and the cumulative interest over the 10 years

As you can see from this chart, it shows you the breakdown of the cumulative investment and the cumulative interest over the 10 years. 

My friend from the beach is not ready to start investing 60k a year, but they are planning on starting by rolling over their old 401k which is around $15k, and we will start with that. As for my other client that I spoke to a month ago, they started by investing the $60k that I recommended. After two weeks, they were so happy with the decision that they decided to double it up for the first year, so I am already managing over $120k for them.

For some of you, this may just be a fun little exercise to see this information explained in a simple way, but I know that for many of my readers that are either nearing or are already in the last 10 years of their working careers, seeing these numbers may be hitting you hard. Don’t stress out over money, just give me a call. Everyone should know their numbers and have a plan of attack to help them achieve their financial goals. 


Alex Garner is a licensed Financial Advisor, but do not take the information in this article as financial advice. 
Examples are hypothetical and for illustrative purposes only. The rates of return do not represent any actual investment and cannot be guaranteed.
Registered Representative, Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC.
Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Garner Wealth Management LLC and Cambridge are not affiliated.
The information in this article is not financial advice.
Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including loss of principal




Alex’s Finance Tips: Do you know the difference between an investment and an account?

I write this column because I want to help you and save you from being taken advantage of while you are looking for options to invest your money. I am going to be brief, in the hopes that everyone reads the entire article. I deal too often with this particular issue. Certain terms can be confusing and are often used without fully understanding what they mean.  I hear terms misused often by friends and clients.  It wouldn’t be that big of a problem, except for the fact that I know if people are talking like this with me, they are probably speaking the same way to other people in my industry. I have had to say this same thing in some of my past articles, sadly, not every Financial Advisor out there is a decent and moral person. If you say something wrong, that could be an indicator to them that they could sell you on anything because you don’t know any better. I don’t want that to happen to you. 

You need to know the difference between an investment and an account. 

Some of you may be laughing right now. That’s because you have some kind of foundational knowledge on this subject, but I promise you, a lot of people get confused about this. This may be new information for you or it could be a friendly refresher. Either way, this is something that comes up in conversations a lot. It is important to understand the difference between these and understand the most common terms. 

I like to use the term “investment vehicle”, rather than “account”. The simplest comparison I can think of is how you put cash into a bank account.  You put investments into investment vehicles.    


Here is a list of some common investments:

  1. Stocks
  2. Bonds
  3. Mutual Funds
  4. ETFs (Exchange-traded Funds)
  5. Index Funds
  6. Options
  7. Commodities

Here is a list of some common investment vehicles:

  1. 401k
  2. Traditional IRA
  3. Roth IRA
  4. 403b
  5. Individual or Joint accounts
  6. 529- Education Account
  7. UGMA (Uniform Gifts to Minors Act)

Yes, there are plenty more investment vehicles and a whole lot more investments. These are just some of the most common ones that I come across. What caused me to write on this subject this week is sometimes I have conversations with people and can tell that they don’t understand the difference between these two terms and how they relate simply by how they use these terms. Probably the most common indicator that I see is when someone talks to me about their 401k. When I say something like, “ Great! You are contributing to your 401k! What are the investments that you hold?”. More often than not, they don’t know much more than the name of whatever large fund company is managing the account. This tells me that they really don’t have an understanding between the investments and the investment vehicle. To them, their 401k is just this magical savings account that grows faster than their bank savings account. 

Another thing that I hear often is, “I contribute to my mutual fund every month.” This one is great because it opens up the conversation for me. This gives me the opportunity to go into the same detail as with this article. I usually reply with something like, “Cool, you are invested in mutual funds. What kind of an account? Are you open to having a conversation so I can better explain what you have?”

The main takeaway here is that there is a difference between investments and investment vehicles. Almost any investment that I have listed here can go into any of the different investment vehicles that I have also listed. Using these terms correctly will show that you somewhat know what you are talking about. Having a basic understanding of your financial situation is important for many reasons, but also arms you with the knowledge you need to protect yourself when choosing the right financial advisor for you and discussing your investment options.



Alex Garner is a licensed Financial Advisor, but do not take the information in this article as financial advice.

Examples are hypothetical and for illustrative purposes only. The rates of return do not represent any actual investment and cannot be guaranteed.

Registered Representative, Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC.

Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Garner Wealth Management LLC and Cambridge are not affiliated.

The information in this article is not financial advice.

Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including loss of principal




Three easy ways to start investing

As a Financial Advisor, I get asked a lot of one-off questions from my friends and family members. I want to start this article by saying, that is completely fine, keep asking questions. I truly love helping people any way I can. With that said, you are not really utilizing this relationship to its full potential.  If you have someone in your life that is a Dentist, go get your teeth cleaned a little more often. If your best friend from high school is a Chiropractor, go and get adjusted on a regular basis.  If you have a relationship with a Financial Advisor, schedule meetings with them at least once a quarter, have them build you a financial plan. 

This column is to answer some of those one-off questions I receive from my friends and family.  I get a lot of the same questions.  If the people in my life are asking them, then I am sure a lot of our readers have the same ones. 

This week I am answering one of my favorites…

“Alex, what is the easiest way to start investing?” 

Here are 3 easy ways to start investing:

First, start contributing to your 401k. I know that not everyone has this option, but if you do have a 401k, 403b, or any other kind of work sponsored retirement account, this is a very easy way to invest. Most of these plans are close to free by having very small management fees. If your work offers any kind of matching, you should take advantage of that amazing benefit. A standard saying in my industry is, no financial advisor can beat an automatic 100% growth. That is essentially what is happening with a company match. Let’s say that your company offers a 3% match. If you were making 50k a year, 3% a month would be $125. Your company would be giving you an additional $125 a month through the match.  That’s awesome. Especially when you factor in compounding.  A topic I’ll cover in another article.

Besides a work sponsored retirement account, the second easy way to start investing is to open up an IRA (Individual Retirement Account) or a Roth IRA. A Roth IRA has income limits. You can’t make over $140k/year as an individual or $206/year as a married couple. I am a huge fan of Roth’s for a lot of reasons. The money in a Roth IRA is what we call “after-tax dollars”.  The after-tax-dollars grow tax free. The big benefit of a Roth IRA over either a traditional IRA or traditional 401k, is you won’t have to pay tax on either the initial investment or the growth during retirement. Another way to think of this is, “Would you rather pay tax on the tree or on the seed?”. Let’s look at another hypothetical. If you put $500 a month into a retirement account for the next 30 years and get an average 7% rate of return, you would end up with $614,044. That breaks down to $180,500 that you personally contributed over the years and $433,544 of compounded interest. If this money is in a Roth IRA, at retirement, all of this money is yours. If this is a tax deferred account like a traditional IRA or a 401k, you still have to pay ordinary income tax when you start pulling the money out. Because we don’t know what the tax laws are going to be 30 years from now, it’s impossible to understand what that tax consequence is going to be. For me, I would rather pay the tax now on the $180,500 and not the total $614,044 during retirement.

The third easy way to start investing I want to mention is to open your own individual investment account using one of the many DIY digital platforms out there. I don’t want to mention any by name, because I don’t want that to be misconstrued as a recommendation or endorsement. Most of these platforms have almost no minimum to start. I have a friend who contributes $10/month, and he does it all through an app on his phone. This method is known as dollar cost averaging, which is one way to invest effectively with out trying to time the market, which is something to dive into more in a future article.  My one caveat to this third easy option is that it is great to test out the waters of investing, and it’s fine if it evolves into your “play-money” investing account, but you really want a financial professional to handle your retirement accounts, children’s education accounts, and large investment accounts.

I hope this information helps you out. These are the 3 easiest ways for people to start investing and nothing is stopping you from doing all three.  Many of my clients max out to the matching contributions on their 401k at work, they either have a Roth IRA or a Traditional IRA with me, and they also contribute a few hundred bucks a month into their personal investment app on their phones. The possibilities are endless.

If you would like to talk to me to learn more about any of these tips or to set up a time to have a more comprehensive discussion, I would be happy to talk to you.  

-Alex


Alex Garner is a licensed Financial Advisor, but do not take the information in this article as financial advice.
Examples are hypothetical and for illustrative purposes only. The rates of return do not represent any actual investment and cannot be guaranteed.
Registered Representative, Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC.
Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Garner Wealth Management LLC and Cambridge are not affiliated.
The information in this article is not financial advice. Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including loss of principal.




List of things to consider when selecting or working with a financial advisor

It’s an early Monday morning, I just sat down at my desk and started work for the day. My phone rings, when I read the caller ID, I notice that it’s one of my old clients from when I worked for a different financial firm. This client always had her money managed in different locations, I managed a portion, her bank managed some, and she also had some of her money in a few annuities with a third financial institution. Her call was out of the blue as I had not talked to her in over 2 years. She asked me a lot of questions because she was having concerns about her new advisor and some of the recommendations that he was recently making; “Why does he want me to convert money to a life insurance policy?”, “Why does my bank want to sell me another annuity?”, “Do they get incentivized to sell me different products?”. I listened to her vent and say all that she had to say before I offered any kind of response. This is a topic that I am extremely passionate about, so I needed to take a second to calm down and gather my thoughts. 

Conversations like the one I just described is the reason why I decided to start my own business. I was tired of feeling like I wasn’t encouraged to offer my clients exactly what I felt was in their best interest. I gave her some advice on what she needed to do, but after getting off the phone, I realized that I could have worded it differently. I was not sure I adequately made all the points that I wanted to make.  As soon as I put the phone down, I decided that I needed to go and write an article about this to pass on some insight to other people. If this person was feeling this way, I am sure a lot of other people feel the same. 

Here is my list of things to consider, questions to ask yourself, and questions to ask your financial advisor.

First, do some research on the firm and the advisor you plan to use. You want to know what kind of advisor and business that you are working with. Go to brokercheck.finra.org. Here you can look up the name of the advisor you are considering to see what licenses they have and if they have any complaints. Also, go to their firm’s website. Almost anyone can call themselves a Financial Advisor. You want to know what kind of advice they really give. Sadly, a lot of advisors are only capable of selling certain products, like annuities or life insurance, so those are the products they recommend. It’s not always based on what is in the best interest of the client. 

Second, ask the advisor how they get paid and if they get paid differently for different products. A lot of advisors use a fee-for-service model, usually charging a fee of 1%-3% on the assets they manage for you. Some advisors charge a commission on the products they offer. For financial advice, the advisor may charge an hourly or set fee for a financial plan, or they may charge a monthly subscription service. The basic thing to understand is, there are lots of different ways that advisors can charge you. You need to ask and understand what you are being charged. 

Lastly, ask the advisor about their investment philosophy. If you and your advisor don’t see eye to eye on anything and they aren’t willing to take your thoughts or beliefs into consideration, they are probably not a great fit.  Here are a couple of examples: What if there are things that you don’t want to be invested in, like tobacco or fossil fuels?  You have the right to tell your advisor that you don’t want your money invested in those kinds of businesses. What if you are extremely conservative with your money, but the advisor wants to put you in all speculative and risky investments? Once again, that’s probably not a great fit. 

If you are going to have someone manage your life savings, you need to make sure you know, like, and trust them. It doesn’t take a lot of time, but it is important to do your due diligence making sure you have the right person for the job.  


Alex Garner is a Financial Advisor, but do not take the information in this article as financial advice. 

Registered Representative, Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, member FINRA/SIPC.

Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Garner Wealth Management LLC and Cambridge are not affiliated.

The information in this article is not financial advice. Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including loss of principal.