Reaching financial independence or early retirement is a game that takes several strategies and approaches. There is the earning and working part, the lifestyle frugality part and ultimately the investing part. The investing piece can be boiled down to one main approach: One must acquire an adequate number of income producing assets that increase in value. If you are reading this and desire to reach financial independence then you may want to enter the “Asset Accumulation Zone”. Your main tactic will be to enter the asset accumulation hot zone with each and every dollar possible!
Wealthy people like to collect assets. Some of us collect stamps, coins, comics, etc. These are all fun and interesting things. But wealthy people also collect stocks, dollars, property, businesses, houses, etc.
What does this mean?
All the things wealthy people collect usually keep their value or go up in value through proper management. The things wealthy people collect often provide income or regular payments to the owner.
4 Ways to conquer this zone:
1. Push contributions to the limit
Remember when you are adding to a 401k or Vanguard account you are not only placing your money in. You are buying shares of companies. Focus on the shares you are accumulating each month and add to your collection. At least gain your employer match and then incrementally increase your contribution percentage each year.
2. Dividend stocks
I am a big fan of dividend stocks for us middle class folks. We can slowly build up shares (and even purchase them for free through Robinhood). Each quarter those shares spin off income. In the early years it might be best to have the dividends buy more shares through a DRIP program.
3. Be fearful when everyone is greedy and greedy when everyone is fearful.
This is a famous quote from Warren Buffett that makes a lot of sense. The main concept is that when assets are depressed is when we should try to pick them up at a discount.
Probably the greatest asset accumulator of all time is Warren Buffet. He got an early start owning gum ball machines as a kid. But when there are stock depressions is when a value investor like Buffett comes in and scoops up a bunch of shares!
4. Reduce liabilities!
The key component of enter the asset accumulation hot zone is having the spare cash to plow into investments. If a person has a $500 car payment, $1,000 eating and drinking out bill, $4,000 rent, luxury goods, etc., there will be nothing left to put into investment vehicles.
In the beginning of the year we completed the 30 Day financial challenge. Each day we challenged ourselves to do one positive thing for our finances. It resulted in decreased liabilities and increased assets! Give it a try!