what's up guys welcome back to the channel a few weeks ago I made a video on what you should do if you're under $10,000 in net worth and a lot of you guys messaged me and said well what if I have more than 10K I'm doing too good for that video what should I do all right Mr and Mrs fancy pants I see you in this video we're going to be focusing on every single one of you that has a net worth under 50K and we'll talk about what steps you need to take to hit the 50k level and beyond that way you can enjoy the sweet sweet taste of going out to Sushi once per week or lasagna or whatever your heart desires but what you might actually find is that once you hit a net worth of 50k and Beyond it's quite addicting to grow your money and maybe you just don't ever eat out again just saying all right so today's video assumes you already have the fundamentals of the 10K video under your belt but the first step in today's video is to still focus on saving but also start investing saving is still going to be your number one priority on your way to 50K in net worth but then getting your money to work for you is also a huge step at this stage if you save $6,000 per year or $500 a month for 6 years and you get a rate of return of 10% investing that you will actually have $50,900 of that total will be comprised of savings and 29% will be from the interest you gain from the investing itself the point is is that your first 50k will mostly come from saving and being smart with your money we're going to talk about how to do that in detail today but basically you just want to be accumul culating more money slowly but that also means that we should be investing because of that 50k total that I showed you earlier 29% came from investing gains so it's on your way to this 50k in net worth number that you should be opening up a brokerage account or a retirement account like an IRA or a Roth IRA and start contributing to it and investing now there are two big reasons we want to invest first we want our money to work for us and having cash in the bank doesn't really offer you much of a return anymore so for example your typical big Banks like Chase or Wells Fargo will offer you typically an interest rate of 0 1% or maybe even up to 0.15% in your savings account and the second reason is simply the concept of inflation so the US has a central bank called the Federal Reserve which dictates the monetary policy of the entire country they have said publicly that they target a 2% inflation rate per year to keep the economy healthy but as of recent the inflation rates as I'm sure you have heard in the news have been pushing closer to 3 or 5% in the past year then means if our money isn't earning between 3 to 5% per year our money is losing value by just sitting in that said checking account that's not earning that much interest so by investing our money we are not only compounding our money and getting to that 50k net worth number as quickly as possible we are also protecting the value of our money against inflationary pressures now in terms of what to invest in to get that return you can invest in a variety of things such as Commodities like gold or you can invest in collectible Golf Putters like this Scotty Cameron one that I have right here I think I bought this like 10 years ago and honestly it hasn't really touched a golf course quite yet but uh you could also invest in that but you probably don't want to do this what you actually want to do on this channel which is what we like to do is invest in the stock market now the most popular investment within the stock market is simply just investing in an S&P 500 Index Fund the S&P 500's average annualized return since adopting 500 stocks into the index in 1957 is around 10.26% according to Investopedia so you can re POS L expect to get around a 10% return in the stock market historically and that's before taxes so if you really wanted to round down you could say an average of 8% per year you also don't have to deal with trying to find a buyer for let's say your collectible Scotty Cameron putter like I'd have uh you can just buy and sell stocks on the open market and it's very liquid and you can have access to that cash right away another great return on your time smashing the Subscribe button I know a lot of you watch me but aren't subscribed so I know it's just a vanity metric at this point but I would still like to see you guys as a continued viewer on this channel so make sure to subscribe and tick that notification Bell because it means a lot to me now besides investing in Saving the next thing that you can focus on at this level of net worth is specialization this is where you're going to make more money and ultimately supercharge your net worth and the way to do this is by specializing in something that not many other people can do Cal Newport has a good book titled so good they can't ignore you and in it he explains that those people that are at the top of every profession have actually spent years and decades on their craft now while you don't have to dedicate your life to say open heart surgery or becoming the best physicist think about some acual steps in your day-to-day to get slightly more specialization in what you do already for example if you were currently let's say a registered nurse you can take the steps required to become a nurse practitioner and a nurse practitioner is just like a more advanced nurse who can do some things such as what the doctor does such as write prescriptions and see patients on their own and generally they tend to get paid way more around 30 to 40% more in terms of yearly salary compared to an RN according to Cal Newport passion follows skill so he says that if you're in your mid-30s or 40s he doesn't recommend just pursuing your passion because that could actually Lead You astray you could be passionate about let's say golf or photography like I am but it doesn't mean that you should completely switch your career and become a golfer all of a sudden I mean while it does sound nice to go possibly teed up every single day it is also something that I haven't dedicated as much time to as other professionals out there and I'm also worried that I did it for a job I actually might lose my passion for the hobby instead what Cal Newport encourages you to do is to think of ways that you can sharpen your skills while operating within your own zone of competence and when you ultimately get better at something you're already decent at passion can actually develop out of that now whether we know it or not I think we all have some advantages and expertise in something over another person so if you think about all your friends and your family there's got to be things that you are naturally better at than they are simply because you've been doing it more than them or doing it longer than them I would say to try to lean into the things that you are better at and ultimately sharpen your skills and economically speaking your earnings should go up over time the next step you need to take on your way to 50K net worth is that you are allocating your money optimally I made a video on the seven best places your money should go when you get paid and I will link that down below but the idea here is that whenever you do get paid there should be some sort of hierarchy in how your money flows I don't think I'm going to repeat all the steps in this video but the general idea is that you should be taking care of your necessary expenses first such as the EXP you need to live minimum payments on debt and your emergency fund and then you can focus on investing and actually growing your wealth in terms of how to allocate any extra funds you do have towards investing the order should be the following first for 1K contributions up to your employer match if your employer offers you a match you always want to take advantage of this second IRA and Roth IRA contributions make sure to max out the Roth IRA or the IRA if you can and then third you can go back to maxing out your 401K or optionally you can invest in a taxable brokerage account lastly we just want to make sure our automations are set up correctly so whenever you do get paid do you have an automatic withdrawal that's set up in place to route to appropriate locations so here's how I personally do it when I get paid I get paid on the 21st of every month and when that happens the money gets deposited into my checking account all the spending for the month will come out of that checking account so that includes my bills my necessities and any discretionary spending then in my online banking I will set up an automatic transfer that happens on the 22nd it's just an extra day later to be be safe to move the portion of money I won't be spending into my savings account it's a preset amount that I set aside every single month and that just comes from knowing my monthly expenses quite intimately so I set that money aside it goes towards saving it goes towards investing and it's also money I set aside for taxes essentially it's all the money that I don't need to spend this exact month on Necessities or any impending bills that way I have my checking account which is the main place where I spend all my money and then the savings account just acts as a hub for all the type of money activities for my future I'd encourage you to set up your own type of automations tailored to your own situation now along the same lines another thing to focus on on your way to 50K net worth is what you should be doing with any raises or bonuses you might receive whenever you get a raise you want to be allocating at least half of that raise to your savings and investing so for example if you got a 5% raise at work this year try contributing half of that or 2.5% of that raise towards your savings that way you aren't allowing yourself to succumb to Lifestyle inflation because you're automatically setting aside half of that raise and that's just one good way of how you can maintain your wealth the average savings rate in the United States right now is about 3.6% so we want to make sure that when we are on our way to 50K net worth that our personal savings rate is hopefully at least double that which is around 7 to 7.5% now in fact if you can get to 10% of your paycheck saved every month you will actually make considerable strides towards growing your net worth so I really do hope that you take that part seriously now there is something called the 1% rule that I like to abide by on the way to 50K net worth and Beyond now if you watch the first video in this series I believe the rule was the 2% rule but for this video it's the 1% rule it states that you should think twice about any discretionary purchase that is more than 1% of your net worth so if you're worth about $20,000 as of this video today think about any purchase that costs you more than $200 that's going to be more than 1% of your net worth and you should really consider if you should buy that thing or not so what do I mean by delay you might want to sleep on that purchase maybe even wait a full week or a full month just to figure out if you actually need that item or not if you go one month and you still want that item at least you went through the process and know that it's a purchase that you actually want to make in general though I think this rule is really great for those in the 20 to 50K net worth range because this will keep your spending in check but also because of the time value of that 1% of your net worth for example let's pretend you have a net worth of 20K and you make a $200 purchase AKA 1% of your net worth every single month that's the equivalent of $2,400 per year or about 12% of your net worth if you invested that same $2,400 compounded over 40 years in the stock market you'd have 52k in 40 years now of course this is just a super extreme example but it highlights the time value of money and the opportunity cost that money has since a lot of the friction for making your first 50 or your first 100K are in the beginning we want to make sure we're keeping an eye on any purchase that could actually derail our progress now eventually as your net worth passes 50k and eventually into the six figures we can relax this rule a little bit and spend a little bit more freely but hopefully by then the habit of putting your bigger purchases under a microscope will be a habit that you already have once you've established an investing Cadence and habit it is at this level or at this stage that you can possibly consider investing let's say 1 to 5% of your total investable assets into something with more higher risk or higher upside so alternative assets riskier ETFs or for example some individual stocks that you have a strong thesis in the idea here is that you are diversifying your portfolio and by having a very small percentage I want to emphasize very small percentage of your portfolio and a riskier asset you could get a boost into increasing your net worth now I do want to make a distinction between choosing a riskier asset and straight up speculation or gambling when I think of speculation I think of penny stocks that promise High huge returns or an altcoin cryptocurrency that has less than $10 million in market capitalization that would be speculation and gambling I'm not talking about that I'm simply talking about having 1 to 5% of your portfolio in something like a more aggressive ETF like QQQ which some people on this channel don't even think is aggressive you could also put 1% of your portfolio and say Google stock I don't know why I said Google in particular but it's still a reputable company with a pretty large market cap again that last point is very optional and you don't want to get into a slippery slope with investing in higher risk things because all of a sudden if your entire portfolio is high risk you could actually lose your progress on your way to 50K net worth all right guys I hope that this video was helpful let me know in the comments if you have any anything else that the community should focus on when going for their first 50k net worth on the screen I will put up the next video in my net worth Series right here and I do hope to see you guys in that video or a future video on the channel thank you for being here make sure to subscribe all right peace [Music]