Welcome Back to the Second Part of Our Series “Thinking Like a Millionaire”.
Today we delve further into the mind of an investor and learn how the investor thinks differently about money than most people do. As most people feel money is a dispensable item and are too easy to give it away for things they want or value. While an investor uses the same money as a tool.
For example,
A normal consumer uses money to purchase a vehicle. Some even believe that it’s an investment. However, a car is not an investment because you will never be able to use it to make the money back that you spent. You will never be able to resell it for more than you paid and most likely will get next to nothing when you finally do resell it.
Even worse, is when people see a car as an investment. They take out a loan on it, and make a promise to give away their future wealth for a vehicle that will never pay for itself let alone the interest their going to pay on it. (Click here to learn how to avoid Shark Loans)
A consumer views a vehicle as an asset and investment.
In the same vein but with an investor,
A normal investor purchases a vehicle with cash. They consider the gas mileage, reliability, reviews, and resale value of the car to ensure if it’s the best deal for their money and ultimately meets their needs. On top of that, they usually never purchase from a NEW car dealer and instead get it from a certified-used dealer, craigslist with proper inspections, or my personal favorite EBay.
In comparison to a consumer, an investor views a vehicle as an expense and liability that can eat money quickly and leave you in financial stress if it isn’t properly purchased.
Therefore it’s time to get started and think about money like an investor.
Because when you think of money as tool, you begin to understand how to use it to better position yourself in life. If you don’t, even when you make more money as a consumer, you ultimately just spend more money as a consumer. You don’t really change your habits, you simply have more and you spend more like a bigger house, better car, or the NEW ITEM YOU JUST NEED NOW.
Instead of consuming with your money, here are some common investments that are offered by the government that are available to you right now. That most don’t even know.
Government Offerings
U.S. Government Bills or Notes
Also known as Treasuries, they are government notes that are backed by the U.S. government. And there are two types, Treasury Bills which are short term-loans that mature in less than a year. While Treasury Notes are longer term and mature after a year and can go up to 10 years. In simple terms, you are giving a loan to the government and they pay interest to you on the loan.
Pros:
· Safe – Unless the U.S. Government defaults and goes bankrupt (Not very probable)
· Commission Free – unlike a lot of investment vehicles they can be purchased directly, without the need of a broker
· Tax Exempt – treasuries are exempt from state and local taxes which can help the savvy investor save a lot of money in the long-run
Cons:
· Better Interest Elsewhere – Good returns, but if you shop around, you may find higher yielding investments that are just as safe such as CD’s, Money Market Funds, and bonds.
· Hefty Penalties for Cashing out Early - If you need your money before the security matures, you may not get back all of your original investment.
I-Bonds
I-Bonds are a Government Backed Bond that gives you protection from inflation by changing the interest rate on the bond semi-annually. They began offering this as many people who buy bonds don’t want to have to keep up with the macroeconomics of the US Economy.
Pros:
· Backed by U.S. Government - makes it one of the safest bets on Earth
· Inflation Protection - Protects your investment against inflation risk by adjusting the payout interest
· Manageable Denomination – you can buy I-Bonds ranging from $50 to $10,000.
· Tax Exempt/Tax Deferrable – are exempt/deferrable from state and local taxes which can help the savvy investor save a lot of money in the long-run.
Cons:
· Penalty for Cashing-Out Early - must hold for at least 12 months before redeeming, but if you redeem it before five years, you have to pay a 3 month Returns Penalty.
Municipal Bonds
Municipal bonds are similar to federal bonds but are issued by state and local governments. They use the money you give them to fund the building of schools, highways, and other projects for the city and state. Used mostly by high-income investors to reduce their tax liability.
Pros:
· Safe – almost as safe as U.S. Government backed securities
· Tax Exempt/Tax Deferrable – are exempt/deferrable from federal taxes and sometimes state and local taxes which can help the savvy investor save a lot of money in the long-run.
Cons:
· Low Interest Rate – because the taxes are low on municipal bonds, they have much lower interest rates. Which might not make sense unless you’re in a high tax bracket and looking to avoid taxes
· Commission–Based - you may have to pay a commission to buy municipal bonds
· Hefty Penalties for Cashing out Early - If you need your money before the security matures, you may not get back all of your original investment.
If your interested in more, please check out the entire series.
Today we delve further into the mind of an investor and learn how the investor thinks differently about money than most people do. As most people feel money is a dispensable item and are too easy to give it away for things they want or value. While an investor uses the same money as a tool.
For example,
A normal consumer uses money to purchase a vehicle. Some even believe that it’s an investment. However, a car is not an investment because you will never be able to use it to make the money back that you spent. You will never be able to resell it for more than you paid and most likely will get next to nothing when you finally do resell it.
Even worse, is when people see a car as an investment. They take out a loan on it, and make a promise to give away their future wealth for a vehicle that will never pay for itself let alone the interest their going to pay on it. (Click here to learn how to avoid Shark Loans)
A consumer views a vehicle as an asset and investment.
In the same vein but with an investor,
A normal investor purchases a vehicle with cash. They consider the gas mileage, reliability, reviews, and resale value of the car to ensure if it’s the best deal for their money and ultimately meets their needs. On top of that, they usually never purchase from a NEW car dealer and instead get it from a certified-used dealer, craigslist with proper inspections, or my personal favorite EBay.
In comparison to a consumer, an investor views a vehicle as an expense and liability that can eat money quickly and leave you in financial stress if it isn’t properly purchased.
Therefore it’s time to get started and think about money like an investor.
Because when you think of money as tool, you begin to understand how to use it to better position yourself in life. If you don’t, even when you make more money as a consumer, you ultimately just spend more money as a consumer. You don’t really change your habits, you simply have more and you spend more like a bigger house, better car, or the NEW ITEM YOU JUST NEED NOW.
Instead of consuming with your money, here are some common investments that are offered by the government that are available to you right now. That most don’t even know.
Government Offerings
U.S. Government Bills or Notes
Also known as Treasuries, they are government notes that are backed by the U.S. government. And there are two types, Treasury Bills which are short term-loans that mature in less than a year. While Treasury Notes are longer term and mature after a year and can go up to 10 years. In simple terms, you are giving a loan to the government and they pay interest to you on the loan.
Pros:
· Safe – Unless the U.S. Government defaults and goes bankrupt (Not very probable)
· Commission Free – unlike a lot of investment vehicles they can be purchased directly, without the need of a broker
· Tax Exempt – treasuries are exempt from state and local taxes which can help the savvy investor save a lot of money in the long-run
Cons:
· Better Interest Elsewhere – Good returns, but if you shop around, you may find higher yielding investments that are just as safe such as CD’s, Money Market Funds, and bonds.
· Hefty Penalties for Cashing out Early - If you need your money before the security matures, you may not get back all of your original investment.
I-Bonds
I-Bonds are a Government Backed Bond that gives you protection from inflation by changing the interest rate on the bond semi-annually. They began offering this as many people who buy bonds don’t want to have to keep up with the macroeconomics of the US Economy.
Pros:
· Backed by U.S. Government - makes it one of the safest bets on Earth
· Inflation Protection - Protects your investment against inflation risk by adjusting the payout interest
· Manageable Denomination – you can buy I-Bonds ranging from $50 to $10,000.
· Tax Exempt/Tax Deferrable – are exempt/deferrable from state and local taxes which can help the savvy investor save a lot of money in the long-run.
Cons:
· Penalty for Cashing-Out Early - must hold for at least 12 months before redeeming, but if you redeem it before five years, you have to pay a 3 month Returns Penalty.
Municipal Bonds
Municipal bonds are similar to federal bonds but are issued by state and local governments. They use the money you give them to fund the building of schools, highways, and other projects for the city and state. Used mostly by high-income investors to reduce their tax liability.
Pros:
· Safe – almost as safe as U.S. Government backed securities
· Tax Exempt/Tax Deferrable – are exempt/deferrable from federal taxes and sometimes state and local taxes which can help the savvy investor save a lot of money in the long-run.
Cons:
· Low Interest Rate – because the taxes are low on municipal bonds, they have much lower interest rates. Which might not make sense unless you’re in a high tax bracket and looking to avoid taxes
· Commission–Based - you may have to pay a commission to buy municipal bonds
· Hefty Penalties for Cashing out Early - If you need your money before the security matures, you may not get back all of your original investment.
If your interested in more, please check out the entire series.
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