Investing 101

How Small Sacrifices Can Make a Big Difference to Financial Success

It’s been more than a decade since wide receiver Darrius Heyward-Bey was taken No. 7 overall by the Oakland Raiders.

This pick sparked controversy, as most picks do.

Many argued that Heyward-Bey shouldn’t have been drafted that high.

But he ran a 4.3-second 40-yard dash at the NFL combine. And the Raiders’ owner at the time, Al Davis, had a thing for tall, speedy wide receivers.

But don’t worry… today’s article isn’t about football.

And it’s not about how Heyward-Bey proved all his doubters wrong and had a Hall of Fame career… because he didn’t.

He never posted numbers worthy of where he was taken in the draft.

This is about something else… something we rarely discuss in terms of athletes. It’s about being financially smart, planning for the future and understanding how big of an impact small sacrifices can have.

Now, because Heyward-Bey was drafted so high, he got a sizable rookie contract with the Raiders. We’re talking $30.3 million for four seasons. He then signed a $3.8 million three-year deal with the Pittsburgh Steelers.

The real shocker is that he still has almost all of that money, even though he’s no longer playing.

His mother has been a certified public accountant for more than 20 years. He said he grew up knowing what to spend his money on and what not to. And when Heyward-Bey signed his big rookie contract, the two set up a monthly allowance for him.

His money was invested. As his accountant and financial advisor, his mother sends him a report showing him his inflows and outflows every Tuesday.

And as the years have passed, his monthly stipend has grown along with his investments. Plus, he’s learned that making sacrifices is easy.

He doesn’t spend what’s allotted each month. He doesn’t care about keeping up with the Joneses or impressing anyone. He even canceled the cable in his California home for half the year when no one was there to watch it.

That’s a man after my own heart. And this is a lesson for everyone, millionaire or not.

The Struggling Majority

The figures are truly astounding.

Total U.S. household net worth now stands at a record $142 trillion.

That’s more than a 25% increase from what it was in 2019!

It’s a level of wealth that every country on this planet can be envious of. There is no nation that comes close.

At the same time, major U.S. indexes continue to trade near all-time highs. And new millionaires are being created at a record pace.

But at the same time, 75% of Americans are classified as “strugglers” by the Federal Reserve.

They have no savings to speak of. And they don’t have a safety net.

They live month to month and are unable to cobble together any sort of carryover from one year to the next.

In fact, an unexpected $1,000 expense would send the majority of Americans into a tailspin. Alarmingly, 61% simply don’t have the cash on hand to cover it.

Most people in this country have less than $5,000 in savings, with a third sitting on less than $1,000 stashed away.

It’s a precarious predicament that has a cascading effect.

People in this position can’t save or plan for retirement. And investing – at least without tapping margin – can often feel like a pipe dream.

It’s hard to admit, but it’s very likely we all know someone who is like this, regardless of their income or education level.

They’re individuals who make good – even great – annual incomes… but are constantly broke.

And it has nothing to do with income inequality.

They live a lifestyle 10 times more lavish than what their salaries can support. They could live happily and comfortably if they stayed within their means, but they can’t and/or won’t.

That so often leads to self-inflicted financial wounds and potential ruin.

The Rise of the Thrivers

Think about it this way, almost 8 out of 10 NFL players file for bankruptcy or go broke merely two years after retiring. And for NBA players walking away from the game, 60% will experience the same fall from grace.

More often than not, the reasons aren’t any more spectacular than what plagues the rest of the country.

There’s the overwhelming belief the good times are never going to end and that money and credit are infinite.

Debt is just a problem for our future selves.

But instead of taking potshots and criticizing those who are struggling, let’s focus on my real takeaway. And that’s this: If the U.S. comprises 75% “strugglers,” then the other 25% are “thrivers.”

Sure, some of the 1% are included in this “thriver” category. The math is in their favor.

But the majority aren’t.

There are individuals who – no matter their income level – always have money tucked away. They’re always on top of their expenses and steadily accumulate wealth year after year after year.

They live below their means and are frugal.

My wife and I were devout followers of this philosophy before we were wealthy, and we still are to this day.

The U.S. is now home to 21.95 million millionaires. The country saw the largest increase in the number of millionaires of any nation this year.

More impressive, for the first time ever, more than 1% of Americans are now millionaires – thanks to the surging stock market in late 2020 and booming cryptocurrencies.

Unfortunately, as is so often the case… most of them don’t feel rich.

Is that because $1 million isn’t what it used to be? Or because no matter how much we make, it never seems to be enough?

If you aren’t a “thriver,” then you have some serious reflecting to do.

Successful investing must begin with successful saving.

Here’s to high returns,

Matthew

P.S. We’re in the midst of one of the most financially stressful times of year – the holiday season. If you want to learn how to take back control of your finances this month, click here.

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