In general, I’m {a fairly} positive guy. I {do not} hate anything {easily} {might help} it but, {there are always a} few things I can’t stand.
One thing I can’t {follow} is someone disparaging {an individual} as a “trust fund baby.”
A trust fund baby {is really a} person (typically {within their} early twenties) with wealthy parents who {setup|create} a trust fund for them {so that they} don’t {need to} {be worried about} money {if they} grow up. {Consequently|Because of this}, {a number of these|several} people have {the chance} {to visit}, buy nice clothes/cars/houses, and live a generally Rich Life.
And let’s be honest: {That is} something {most of us} would do if {we’d} {the opportunity}.
So {a lot of us} operate {beneath the} invisible script {that when} we had {the opportunity}, we’d act differently if {we’d} {big money}.
I have something {to inform} those people…
…NO YOU WOULDN’T!!!!
That brings me to Christine.
Christine {can be an} IWT reader and self-described trust fund baby, and {some time} back she emailed me this question:
I am a 22-year-old female {in my own} {this past year} of college. I never learned {how exactly to} manage my money. {EASILY} got money, I spent it. So, freshman year of college, {credit cards} seemed like {an excellent} idea. My parents have even bailed me out {a couple of hundred} dollars. I’ve {sort of} {comprehend} {the truth that} {it is a} stupid {move ahead} {lots of|plenty of} students’ parts, and I’m working through it.
Recently, I learned of {a fairly} {great deal} of money – $140,000 give or take – that my well-off, childless aunt and uncle have {placed into} a trust fund {for me personally}.{They will have} brought it {around} this amount by contributing $30-40k at various times {in the last} 10-15 years. Anyway, my question is: what {must i} do {with this particular} money?
I LOVE this because she had no {proven fact that} she had over six figures in {the lender} {because of} her generous aunt and uncle and she actively {searched for} my {applying for grants} {how exactly to} best invest her money.
So I put it to my readers: What {can you} recommend {to the} “trust fund baby”? The answers {I acquired} back were fantastic {for just two} reasons:
- IWT readers {are usually} Top Performers and, {consequently|because of this}, give great advice.
- Though the advice is for a “trust fund baby,” you don’t {require a} trust fund {to get} value {inside it}. In fact, {they are} things {I would recommend} EVERYONE do {should they} {desire to} live a Rich Life.
So whether {you’ve got a} trust fund {or simply} want sound financial advice, {make sure to} follow these four recommendations.
Trust fund baby recommendation #1: Set SMART goals for financial success
Sometimes {whenever we} {need to get} started with something – building {your personal} business, learning {a fresh} skill, spending your newly discovered trust fund money – we forgo {a remarkably} important step: Setting goals.
Doing so {offers you} the focus {you have to|you should} accomplish anything. That’s why it’s so important {that you should|you need to} set good goals {with regards to} financial planning.
But {how can you} set good goals exactly? Simple: You set {a good} goal.
The SMART goal {may be the} be-all, end-all {treatment for} vague goals that {allow you to get} nowhere.
Think {about any of it}. How {frequently have} you set {an easy} New Year’s Resolution like “{I wish to|I would like to} {get exercise}” or “{I wish to|I would like to} read more” and {abadndoned} it completely in {a couple weeks}?
That’s {as the} problem with typical goal setting is that the goals set are too broad – {and you also} {do not know} {the place to start}.
Enter the SMART goal.
SMART {means} specific, measurable, attainable, relevant, and time-oriented. {Sufficient reason for} each {aspect in} SMART objectives, you’re {likely to} want to {consider} {a couple of} questions that’ll {assist you to} {create a} winning goal.
- Specific. {Exactly what will} my goal achieve? {What’s} {the complete} outcome I’m {searching for}?
- Measurable. How {am i going to} know when I’ve accomplished {the target}? What does success {appear to be}?
- Attainable. {Is there} resources {I have to} achieve {the target}? {What exactly are} those resources? (eg gym membership, {bank-account}, new clothes, etc)
- Relevant. Why am I {achieving this}? Do {I must say i} {Wish to accomplish} this? {Could it be} a priority {in my own} life {at this time}?
- Time-oriented. {What’s} the deadline? {AM I GOING TO} know in {a couple weeks} if I’m {on the right course}?
Here are {a few examples} of {ways to} turn bad goals into SMART goals.
BAD GOAL: {I wish to|I would like to} be fit.
SMART GOAL: I’m {likely to} run for {quarter-hour|a quarter-hour} {each day} for {another} {a few months}.
BAD GOAL: {I’d like} an internship that’s rewarding.
SMART GOAL: {I wish to|I would like to} intern at {an unbiased} publishing house {centered on} fiction in {SAN FRANCISCO BAY AREA} {come early july}.
BAD GOAL: {I wish to|I would like to} be rich.
SMART GOAL: I’m {likely to} invest 5% of my paycheck {right into a} low-cost, diversified index fund {each and every} month.
Do you {start to see the} difference {between your} SMART goals and the bad, vague ones? {Once you} get specific, {you understand} exactly what {you need} and the measure {where} {it is possible to} achieve it.
Bonus: {If you need to|In order to} stop making excuses and break yourself out of a rut, download my Ultimate Guide to Habits.
For Christine, {an excellent} SMART goal {is always to} eliminate her debt {as quickly as possible} – which brings us to…
Trust fund baby recommendation #2: {Lower} your debt
If {you would like to|you need to|you wish to} live a Rich Life, {the very first thing} {you have to do|you must do} is {lower} any debt you have. Debt {may be the} {most typical} roadblock keeping {folks from} living a Rich Life – preventing them from {having the ability to} enjoy themselves and {the amount of money} {they will have}.
And if you’re saddled with {personal credit card debt}, it’s hard {that you should|so that you can|that you can} even {commence to} consider investing or saving {your cash} – {even though you} have a trust fund.
That’s why it’s smart for Christine to tackle any debt that she {may have} (like her {charge card} issues) before she invests in {other things}.
Here are three of my best resources on {eliminating|removing} debt:
And once Christine’s debt is eliminated, it’s time {on her behalf} {to start out} investing.
Trust fund baby recommendation #3: Invest early and often
The single {the very first thing} in ensuring {a good} financial future is investing – and {doing this} wisely.
So {lots of people} think investments are chasing hot stocks and reading the Wall Street Journal, when {the truth is}, this couldn’t be further from {the reality}.
In fact, {the easiest method to|the simplest way to|the ultimate way to} invest is through low-cost, diversified index funds over {an extended} {time frame}. That’s because smart investments are about consistency {above all else} – not making weird investments.
And {with regards to} long-term investments, {you can find} essentially two ways {that you can do|that can be done} it – and I HIGHLY suggest doing both.
A 401k {during your} employer
If {your projects} {supplies a} 401k plan, there’s {zero} {reason behind} you {never to} {spend money on} it. {Actually}, {you need to} contribute enough money {to obtain the|to find the|to have the} employer match {in order that} every cent you {placed into} it, {your organization} will match it pre-tax.
This {is really a} powerful earning technique {and may|and will} {assist you to} essentially DOUBLE {your cash} {during the period of} your career. {That is} literally free money {from your own} employer, people!
Check out this chart showing you {just how much} {it is possible to} potentially earn {from your own} 401k:
| Age | Your Contributions | Employer Match | Balance without Employer Match | Balance with Employer Match |
| 25 | $5,000 | $5,000 | $5,214 | $10,428 |
| 30 | $5,000 | $5,000 | $38,251 | $76,501 |
| 35 | $5,000 | $5,000 | $86,792 | $173,585 |
| 40 | $5,000 | $5,000 | $158,116 | $316,231 |
| 45 | $5,000 | $5,000 | $262,913 | $525,826 |
| 50 | $5,000 | $5,000 | $416,895 | $833,790 |
| 55 | $5,000 | $5,000 | $643,145 | $1,286,290 |
| 60 | $5,000 | $5,000 | $975,581 | $1,951,161 |
| 65 | $5,000 | $5,000 | $1,350,762 | $2,701,525 |
Roth IRA
A Roth IRA {is really a} retirement account {which allows} {one to} contribute {around} $6,000 {per year} ({during} writing this). {It is possible to} choose where you invest this money, but {I would recommend} putting it into an index fund {like the} S&P 500.
Like your 401k, {factors to consider} you max this out {every year} {when you can}.
Note: If $500/month {appears like} {a whole lot}, read {all of the} {methods for you to} {release} that money with just {several} phone calls.
Trust fund baby recommendation #4: Spend it on {the items} you love
Many of {you may} roll your eyes at Kevin’s suggestion, but {I REALLY LIKE} it.
After all, living a Rich Life isn’t {about how exactly} much money you have or how nice {your vehicle} is. It’s about living {the life span} {you need} and {having the ability to} spend {everything you} earn on {the items} {you like}.
If you’ve been reading my blog for awhile, there’s {a thing that} you’ve heard me mention before: Anyone {could be} rich.
Being rich ISN’T {nearly} money. It’s {in what} being rich {methods to} you.
If {which means} an awesome {visit to} Vegas {together with your} friends, great! If {this means} more time {so that you can} spend it {together with your} family, that’s great too.
Having money {to invest} {is an excellent|is a good|is a superb} {solution to} facilitate your Rich Life.
One of my {in history} favorite {methods for getting} started living a Rich LIfe is {by way of a} system I call the Conscious Spending Plan. It’s {exactly the same} system my friend uses {to be able to} {save money} than $21,000 {ongoing} out.
I don’t EVER want {one to} cut out {the items} you love {to conserve} money. That defeats {the objective of} a Rich Life. With the Conscious Spending Plan, you’ll {have the ability to} {cut costs|spend less} purposefully by {preventing the} mindless spending {that may} {result from} disorganized finances.
Setting up {the machine} {may seem} hard – {however in} {the finish}, it’s {about}:
- Automating {finances}.
- Knowing where {your cash} goes so you’re in complete control of {the problem}.
And it’s simple: {At the start} of the month, {once you} receive your paycheck, {the amount of money} is immediately {delivered to} where {it requires} {to undergo} automatic systems {you have|which you have} {setup|create} already.
Some spending {tips for} {one’s body}:
- 50%-60% Fixed costs: {This consists of} {things such as} utilities, rent, internet, and debt.
- 10% Investments: {This consists of} your Roth IRA and 401k plan.
- 5%-10% Savings: Here’s where you’re {likely to} put money that goes towards {things such as} engagement rings, weddings, vacations, and unexpected expenses.
- 20-35% Guilt-free spending: Fun money! Spend this on {whatever you} want from nice dinners to movies.
Why automatic?
Because as humans {we’ve} incredibly limited willpower. It’s so limited {actually} that {it could} render {things such as} paying bills and putting money away in your savings {every month} a very {trial}.
Automating {finances} subverts this by {enabling you to} {cut costs|spend less} without ever {needing to} {do-it-yourself}.
If {you would like to|you need to|you wish to} {learn more|get more information} {on how best to} automate {finances}, {have a look at} my 12-minute video explaining it here:
No trust fund? {No issue}.
You don’t {have to be} a trust fund baby {to be able to} live your Rich Life. {All you have to} is determination and {the proper} systems {set up} {to be able to} {help you to get} {probably the most} {from your} financial situation {without having to} {be worried about} living “frugally” (aka sacrificing {the items} {you like}).
That’s why I’m excited {to provide} you something {free of charge}. {I’ve} an offer: My Ultimate Guide to Personal Finance.
In it, you’ll {learn to}:
- Master your 401k: {Make the most of|Benefit from} free money {wanted to} you by your company…and get rich while {carrying it out}.
- Manage Roth IRAs: Start saving for retirement in {an advisable} long-term investment account.
- Automate your expenses: {Make use of the} wonderful magic of automation and make investing pain-free.
Enter your info below {and obtain} {on the way} to living a Rich Life today – no trust fund required.