I have 30 grand. What should I do with it?

[benny]

I want to build wealth and achieve financial independence. Just starting to learn about finance, investing, and financial literacy in general. Looking for guidance. Thanks.

 

P.S. I am also open to suggestions outside investing. If, for example, there is some way I could spend the money to deepen my growth in a substantial way, I'm open to those types of suggestions too.

[Yarco]

Nowadays with most people struggling paycheck-to-paycheck or already deeply in debt, just having $30k saved up is a pretty substantial achievement. But in the grand scheme of things, it isn't much. It's good to have something to start with, but it's a minor amount on your overall wealth-building journey.

First if you plan to have any kind of public-facing job, working in sales, going to interviews, running your own business, are still dating / looking for a partner... I would invest in your wardrobe a bit first. Instead of buying a lot of mediocre clothes, buy just a few quality outfits that will look great and last a long time. Just buying decent outfits isn't enough though unless they fit you perfectly off the rack. Pay an extra $50 per shirt or pair of pants for maybe 5 different sets of clothes. $500 worth of tailoring will give you a week's worth of clothes that look 10x better on you because they'll fit perfectly and really make you stand out as a high-quality person.

If there is something specific you want to learn or master, I'd invest up to $1,000 in a couple courses.

You spend 1/3 of your life sleeping, so if you have any kind of back problems or your current bed isn't comfortable, I'd get a decent mattress. Getting good quality sleep is critical to being your peak self. That's like $1,500.

If you need eye or dental care, get that done. If you use a manual toothbrush, buy an electric one. Probably $2,000 on the high end to get a new pair of designer glasses, multiple cavities filled, etc. 

If there's anything else in your life that is costing you a lot of time or causing lots of frustration, and there's a way you can spend money to make the problem go away, do that.

Even if we say you spend $10k on all the stuff above and whatever else you need, then you still have $20k to invest.

With that savings I'd put the majority of it into an ETF that tracks the entire market like the S&P500 or NASDAQ. It's like investing in over 3,000 companies all at once which really spreads your risk out but will still earn you 7 - 10% per year on average.

Up to 5% you can put into highly speculative assets like crypto. I would only invest in Bitcoin or Ethereum, no altcoins or NFTs.

I don't have the stomach for buying rental properties and dealing with tenants, but that seems like one of the objectively best ways to really build wealth and financial independence. The first rental or two you need to get somewhat lucky and not get a bad non-paying tenant. But then by the time you build up to owning a dozen properties or an entire apartment building, the risk is way more spread out. You probably want to have more like $100k+ in savings before you start looking at real estate though.

If you are pretty much ready to settle down and live in the same city for the next 10+ years, I would at least buy a home for yourself. I bought my house for $250k in 2017 and today it's worth probably $650k. One of the best investments I've made, and absolutely necessary if I ever want to trade up to something better. If I had rented all this time, I'd probably be priced out of the housing market entirely now.

As a slight caveat -- I have a strong hunch that we will see a pretty big market correction sometime in the next couple of years. In the stock market, the housing market, pretty much everything. So if you feel the same, you might actually want to just keep your money in cash on the sidelines and wait to buy into everything at a 30%+ discount while everybody else is panicking. Although there is a saying "time in the market beats timing the market." People have been predicting a recession for 5+ years and if you had waited all that time you would've really missed out on a lot of gains. In the long-term, even if today is the peak and you buy and we go into a recession, you'll still be ahead 20 years from now vs not investing at all. But realize you'll probably be shitting your pants to see 1/3rd of your wealth evaporate overnight too if you invest at the wrong time, so maybe you want to keep a decent amount in cash and dollar-cost average in a little bit over several years.

Edited April 26, 2022 by Yarco

[benny]

@Yarco

 

This was extremely helpful, thank you! As far as bedding, dental, tooth brush, etc. All that is covered. My 30 grand is entirely free for investing.

 

I think I'm going to put all of it into an ETF like you mentioned and contribute a fixed amount of money per month to buy more stock. I'm in this for the long haul; more of a get-rich-slow mentality. That compounding interest is very appealing to me.

Edited April 26, 2022 by benny

[benny]

@A_v_E

 

The ETF may be lazy, but it's still a viable strategy. I am focusing all of my time and energy into two domains: Personal Finance and Life Purpose (with the overwhelming majority of my time being spent on the latter). The way I see it, the ETF produces steady growth and frees my time to focus on my work.

[benny]

@A_v_E Great point. I wouldn't learn a lot by sticking it all into an ETF. Gives me something to think about.

[Leo Gura]

I would keep it in cash and use bits of it to develop yourself, your life, and your career/biz.

Don't go investing that in stocks, crypto, etc. The ROI from that will not be substantial enough to make much of a difference to your life. However losing it will be devastating and trap you into wage slavery.

Use that money to escape wage slavery.

[benny]

@Leo Gura So courses, workshops, investing in my LP, books, coaches/consultants. Would you recommend anything else?

 

Also, wouldn't the compound interest on a 30k investment in a strong ETF likely pay off big-time in the long run?

[Leo Gura]

39 minutes ago, benny said:

Would you recommend anything else?

Mostly you just need that money to pay for your living expenses as you go about building out your life.

Stocks return 8%/year average. If you think you can beat that you're mostly fooling yourself. And once you invest in stock you gotta keep it there for years. You can't use it. And you'll be paying 30% tax on profits if you ever cash out. But more likely you will lose that money in the market as a naive investor.

It very much depends on how high your income is. If you got a good income then you can invest more in stocks. But if your income is low then I wouldn't put my limited money in stocks. Stocks are for money you don't need.

I invest in stocks because I literally have money I don't know what else to do with. If all I had was $30k, I would be using it more directly to bootstrap myself. You're just not gonna feel 10% gains on $30k. You are better off investing that in therapy and meditation retreats.

[Hello from Russia]

Dude, 30k is nothing, invest in yourself short term, it will give you the most long term gains

Go live in a better more eco-friendly environment and more eco-friendly nicer home. If it will be like $500 more in rent monthly it will be well worth it for all your systems as a human being. That's an example

Edited April 27, 2022 by Hello from Russia

[benny]

@Leo Gura I hear you. I'm going to contemplate this tomorrow and make a decision. Thanks Leo.

[benny]

@Hello from Russia Could you elaborate on that? What exactly do you mean by eco-friendly home? What do you mean by systems?

[Hello from Russia]

26 minutes ago, benny said:

@Hello from Russia Could you elaborate on that? What exactly do you mean by eco-friendly home? What do you mean by systems?

Just better apartment with better shit/surroundings in it that makes your health/heuristics better

By systems I mean your health, creativity, mental, personal growth or degradation, exercising, friends, your environment, logistics, all cause & effect stuff that you do

Edited April 27, 2022 by Hello from Russia

[Bando]

Use that money to understand Crypto and Online Ventures, buy courses from reputable people who have already provided you enormous free value and join their private communities, the others in this thread are right 30k is good savings but not enough to change your live.

Leo has a bad mentality when it comes to crypto, when you understand how these projects work and not blindly throw your money into things you can get substantial ROI. Ive made close to $50,000 with crypto only starting off with 4k because I was apart of private forums and paid for courses. Crypto is only gambling when you don't understand what your doing. It's also a really fun concept once you start to get the hang of it.

Pay for knowledge and access to private communities where all the people in the group are focused on one goal thats what i'd do with your $30,000

Edited April 27, 2022 by Bando

[UnbornTao]

I like Leo's advice. Also, buy books.

[MsNobody]

@Leo Gura Should I take my savings out of the bank? 

I make 8K per month and will be working in this job (as an architect) till end of the year, save a little more money and start the transition to coaching (I got the iPEC cert.) and youtuber.

I have a YT channel (3K followers) and Instagram (18K followers) which I started a year ago but my content is all in Portuguese, the conversion of the coin to dollar is every 1 (real = Brazilian coin) is $0.18 dollar. 

I'm about to create an immersion/course about psychedelics and start coaching services but am unsure due to the currency. My English is good and I could totally record videos in English but my intention is to give back to my culture in Brazil

Would love to know your take on it. 

Thank you Leo! 

[Leo Gura]

1 hour ago, MsNobody said:

Should I take my savings out of the bank?

I don't understand, take it out for what?

To me the biggest point of building up a savings is to be able to use it to launch your own career/LP/biz by taking time off from a grinding 9-5 job.

You want to have enough savings so you're no forced into a desperate position where you must work a job you hate just to pay the bills.

Making $8k/mo is really good salary. I would save up as much of that as I could, maybe even for a few years, and then go do my own thing. You need to be realistic about how long it takes to start making money doing your own thing. You'll want at least enough savings to sustain you for 2 years. But ideally more. Don't expect to make enough money to pay your bills within 6-12 months. You need wiggle room when launching your own thing.

It's also very important to cut all your expenses to the bone. Live cheaply while starting your own thing. Move to a city where rent is cheap. Once your biz is doing well you can move to a better place/city.

[benny]

Alright, so I've spent my morning contemplating this. The way I see it, I have five options.

1. Invest in stocks

2. Invest in S&P 500 ETF, contribute 20-30% of my monthly earnings each month, and let it grow.

3. Invest in businesses

4. Learn about and invest in crypto

5. Invest in myself, my life, and my life purpose

 

Option 1: invest in stocks

Basically, the appeal here is that I can leverage family connections to get a highly reputable financial advisor who works for one of the big firms to manage my money. There is also a very small chance of exponential growth.

The downsides are (1) I can't touch the money; (2) at best, I can realistically expect 7-10% return annually, which in unsubstantial at 30k; (3) there is an equal, of not better chance of losing some, if not most, of the money; (4) I cannot use the money to invest in myself; (5) can't touch the money for years

 

Option 2: Invest in S&P 500 ETF

This is more appealing than option 1.  It's much safer, less stress, and, given historical averages, I can expect 8-10% growth annually. The compound interest, coupled with a 20-30% contribution of my monthly earnings each month, would generate substantial wealth in 20-30 years. Also, in Canada, we have something called a TFSA (tax-free savings account). All the money in that account, including all interest and profits, are 100% tax-free.

 

The downside: (1) can't touch the money for literal decades. (2) best case scenario, I'm in my mid-late forties by the time it materializes into anything substantial (I'm currently 27). Worst case scenario, I'll be in my early 60s. (3) There is still some risk and I could still end up losing the money. (4) in 20-30 years, 1-4 million dollars will not be worth as much as it is now.

 

Option 3: Invest in businesses

The upside here is potential for high ROI with rigorous due diligence. I'd also be investing in someone and their vision, rather than a stock, which I like. There's also potential for learning a lot about the market sector of the business I invest in.

 

Drawbacks: (1) I'd have to learn a lot about investing in businesses. I know absolutely nothing about it. (2) I'd have to do a lot of homework about the company before investing. (3) this option doesn't excite me. (4) I have no contacts I can leverage to make myself a valuable angel investor. All I have is 30 grand. (5) I don't have a direct impact. The people I invest in are the ones making the impact. (6) Diverts tons of time away from my life purpose. (7) Can't touch the money for years. (8) Could easily lose it all as a naïve investor. (9) I can't help but think of something I learned from Eben Pagan: employee ---> self-employed ---> biz owner ---> investor ---> philanthropist. Seems I'm out of sequence with this option.

 

Option 4: Learn about and invest in crypto

Upside: I'll learn about an important emerging technology, there's potential for massive ROI (with lots of due-diligence), and I'll learn a lot about finance and investing

 

Downsides: (1) All of my time is diverted away from LP. All my time will be spent learning about this field. (2) this option doesn't stir me. (3) much less investment in myself - my natural strengths, core competencies, etc. (goes for all options so far). (4) crypto is extremely volatile and there is a high likelihood of losing everything; (5) my life will be devoid of vision, meaning, and purpose; my life will be about money and investing, rather than meaning, impact, and contribution; (6) drastically lower capacity to invest in myself.

 

Option 5: Invest in myself, my life purpose

The upsides: (1) I'll have capital to invest in myself and my biz - I can pay for books, professionals who can help me develop my natural strengths and core competencies, coaches, consultants, workshops and seminars, courses, private communities/mastermind groups, therapy, coaching. In short I have much more power to move forward and actualize my life purpose. (2) $$$ for high quality website. (3) Massive personal growth. (4) Enables me to develop mastery in my chosen domain. (5) excitement and meaning in pursuing my life purpose (intelligently and strategically, of course) and having the freedom to move forward. (6) Guaranteed returns by investing in myself and my biz. (7) investing in myself has always paid the highest returns.

Downsides: (1) lump sum gradually shrinks; the investment in myself is what would be used to generate value in the long run. This entails greater responsibility because it's on me, which makes this option scarier (this, of course, is how you build a profound life. Taking more and more responsibility for my life has always led to better and better outcomes, and this is an opportunity to take more responsibility. In this sense, this is actually an upside). (2) what if I want to switch directions? Will the money I spent still be of value?

Edited April 27, 2022 by benny

[bazera]

@Leo Gura Hey Leo, wanted to ask you a question kinda similar to this thread.

For the last couple of years, I've been working and developing highly demanded web-development skills. I'm 27 years old and I don't have my own house, paying rent at the moment and when I calculated my monthly expenses, it's about 1700$ (I live alone but also I'm providing for my family).

I was thinking of maybe collecting 100k$ and buying a house in 2-3 years. But what you said above got me thinking. My long-term plan is to have my own income source (I don't know how yet) and to figure out how and try some things, I need some free time, months maybe. 

The good thing about web development is that I can do freelance jobs even part-time, or work for a couple of months, and then take a couple of months off. Making 5-6k$ each month, and considering that I only need ~1700$ to support myself and my family, I am able to take time off and even travel a bit with my savings and explore spirituality a bit as well.

But if I decide to buy a house, that won't be possible yet.

So basically my question is, what do you think, is it a good idea to buy a house in late 20s? 

[benny]

Option 6: Put my current savings into an ETF and then work to build an addition 30k to use on LP

Pros: I get the benefits of the cash for LP/investing in self and I put myself on track to generate wealth

 

Cons: It will take me roughly 2.5-3 years to generate the 30k. During that time, very little time to invest in personal dev or my LP. I'll also be 29-30 and still not on track with LP. Also, all the work (or at least some of it) that I've done in the LPC will be outdated.

 

I'm writing this as a way of processing my thoughts, but I welcome any insight or perspective.

Edited April 27, 2022 by benny

[Thought Art]

Financial strategizing is a weakness. It’s also not something I can just fix in a week it takes fucking years. Gaaaaa… 

Im older everyday. Music is a dead dream for me. My “Life Purpose” has to be realistic.

So, I’m working on the next best thing… we will see how the next 12 months go…. I think I’m making progress. 
 

I doubled my income this year. No where near 8k a month. If I was making that much I would be laughing.

I have invested so much in my education… it will pay off even though my situation is less than ideal. 

Edited April 27, 2022 by Thought Art