In this episode, I talk about my experience as an investment advisor and a serial entrepreneur, highlighting the conflict between prudent money management and entrepreneurship. I emphasize the importance of proper money management before investing and share my personal financial story. I strongly emphasize the importance of getting one’s financial house in order, starting with eliminating consumer debt.
I discuss the importance of building a cash reserve before investing. I recommend having a cash reserve equivalent to 6 to 12 months of living expenses and explain that it should be money that cannot go down in value and can be easily accessed in case of emergencies. I review the importance of budgeting and outline the steps to create a budget. I advise listeners to define their after-tax income, list fixed expenses, and calculate variable expenses.
I briefly mention that employer-sponsored retirement accounts and regular IRAs are common starting points for investing, as they allow individuals to use pre-tax dollars to invest. I also review the benefits of using tax-deferred retirement programs, such as a 401k or IRA, to accumulate wealth.
After watching Episode 1, be sure to watch the Building Wealth Series Ep. 2 – Smart (Not Dumb) Investing.