5 Tips for Being a Disciplined Investor

When it comes to building wealth, the average person has two options: earning income or investing. Most people require both a stable income and consistent investing to truly amass wealth over their lifetime.

However, if you want to find success with investing, you must remain disciplined.

Disciplined investing sounds nice on paper, but is challenging to execute in the real world where market conditions change, incomes fluctuate, and personal needs and desires evolve. If you really want to be a disciplined investor, you must study what others are doing and create a game plan that allows you to remain steady for decades to come.

Here are five tips for remaining disciplined with your investments:

1. Start Investing Early and Often

Disciplined investors invest money into the market early and often. They don't just invest large chunks of money one year and nothing the next. Month after month, year after year, they put money away and watch it grow.

2. Don't Let Emotions Dictate Behavior

There should be nothing emotional about investing. While it's hard to gain and lose money without feeling twinges of excitement and fear, you have to insulate yourself against external factors. This will allow you to stay the course when positive and negative events happen.

3. Respect the Cyclical Nature of the Market

If you have a bunch of money tied up in the stock market, it's easy to get nervous when there's steep downward movement. However, disciplined investors understand that the market is cyclical and there will be periods of growth and decline.
 
Just recently, we experienced a rather significant market correction, which MarketBeat describes as a 10 percent decline from a recent peak. While a lot of people jumped ship when they saw the markets plunging, disciplined investors simply shrugged their shoulders and saw it as an opportunity to stay put and invest more. Over time, this correction will become nothing more than a blip on the radar. The historical trajectory of the market has always been up, so there's no reason to panic when you have years to ride it out.

4. Balance Your Portfolio

Diversification is one of the staples of disciplined investing. While there will be times when it's tempting to throw all of your money at a "surefire" investment, making these high-risk decisions will eventually bite you in the rear. Strategically allocating your portfolio over multiple assets and funds will allow you to maximize earnings while mitigating risk.

5. Don't Touch It

As you see your investment grow over time, you'll occasionally feel the temptation to pull some of it out and spend it on something fun - like a new car, bigger house, or fancy trip. But if you're truly disciplined, you'll fight these urges and leave your money alone until you reach retirement.
 
"Don't touch it," financial analyst Todd Lebor of The Motley Fool says. "I know this sounds harsh, but that's how money grows. It feeds on itself. Like a virus, it multiplies and multiplies. Messing with it kills the regeneration. Pick a figure that you are comfortable you can do without. Invest it regularly, and keep your grubby little hands off it."

Slow, Steady, and Strategic

While it may be more fun to chase hot stocks and move money around as the market ebbs and flows, an approach like this is risky and unstable. You may experience some hot streaks and good years, but you're more likely to eventually get burned using such a strategy. Over the long run, disciplined investing is far safer and more effective.
 
If there were three words to describe disciplined investing, they would be slow, steady, and strategic. If these descriptors sound boring, you're probably right. But do you know what isn't boring? Watching your money grow and amassing wealth that allows you to enjoy a happy and comfortable lifestyle and/or retirement.

In fact, it doesn't get much more exciting than that.

A Test With No Wrong Answers

Back in your school days, you likely had tests that included multiple-choice answers. And sometimes the difficulty of those questions was compounded when one of the answers was "all of the above."

That's the situation workshop participants encounter during an exercise I suggest.

Question: Your company is enjoying a banner year and you're looking to keep the momentum (and growth) going by buying a piece of equipment that costs $100,000. How do you finance the purchase?

A.      The manufacturer offers a 2 percent discount if you pay upfront, so you pay $98,000 in cash.

B.      The manufacturer offers 0 percent financing for 12 months, giving you a monthly payment of $8,333.

C.      You obtain a five-year note with a 3 percent interest rate. Your monthly payment is $1,797 and there's no pre-payment penalty.

D.      Any of the above options could work.

The correct answer here is D, although read on to see the preferred choice.

Most growing small- to mid-sized companies don't have piles of cash lying around, but if you're the exception, and can get the equipment at a discount and don't have to add debt, go for option A.

Meantime, if you have strong monthly cash flow and don't have a lot of debt to service, option B may be a great choice.

That said, it's likely that most companies are going to pick the third option.

Cash flow typically is a problem for our clients, so paying for equipment in bite-sized pieces tends to be the most-palatable option. A 3 percent interest rate is more than manageable, especially for clients that tell tales of interest rates topping 20 percent. And with no prepayment penalty, if you happen to somehow wind up with excess cash, you can always pay off the loan balance.

More often than not, we recommend option C to our clients, even those that are legitimately considering the first two options. The reason for that is flexibility, which means having more options.

Say you decide to pay for the equipment up front, using up a majority of your cash on hand. What happens if there's some kind of emergency that also requires a significant outlay? Or what happens if there's a situation when you need to spend money to make a much more significant amount of money?

All of a sudden, your options are limited and you may be forced to secure a much more expensive loan. The interest on that loan may negate the few thousand dollars you saved when you paid cash instead of took on a low-interest loan.

Too many entrepreneurs are scared to take on debt. While there's a general perception that debt is a bad thing - and too much debt certainly is - a reasonable amount of debt is a tool your business can use to grow and stretch your expectations.

Remember that if by assuming some debt it gives you a chance to increase your growth rate and cash flow, you may find yourself paying off that loan faster than you expect - opening up the possibility of using debt again to further improve your prospects. That's the happy exact opposite of a death spiral.

A 40-Year-Study Found That Rich People Exhibited This Undesirable Trait as Kids

Imagine you are asked to look at a sixth-grade class and predict which students will earn the highest income as adults. Which kids would you choose?

Do you go for the studious kids? The shy kids who are eager to please? The athletic-looking kids? Well, if you pick any of those groups, you're probably wrong.

The defiant kids who break the rules might be your best bet, according to a 40-year study published in Developmental Psychology.

Rule Breakers Earn the Most Money

In 1968, researchers began studying 12-year-old students who were in the sixth grade. They examined the influence of their intelligence, characteristics, behaviors and their parents' socioeconomic status.

Then, 40 years later, they followed up with those students. Not surprisingly, the students who were described by teachers as "studious" were more likely to have prestigious jobs. But, the studious kids didn't make the most money in adulthood.

The highest income earners were the "naughty kids." The kids who broke the rules and defied parental authority became the highest income earners as adults.

Why Rule Breakers Earn More

The authors speculate one reason that the 12-year-old rule breakers may have turned into higher-income earning adults was because they weren't afraid to negotiate higher salaries or raises.

The authors suggest another possible reason rule breakers earn more money is because they value competition. Rather than worry about getting along with others, they may be more interested in advancing their own interests.

The authors couldn't rule out the fact that some of the high-income earners could have been earning a living unethically. But the study didn't find any evidence that participants were engaging in this type of behavior.

Other Studies Support These Findings

Other studies support the notion that the non-conformists may have clear advantages in life. A 2012 study published in the Journal of Personality and Social Psychology found that agreeable people earn less money than other people.  

Another study, The Illinois Valedictorian Project, found that Valedictorians were less likely to become millionaires than their peers. The high school valedictorians did well in college and went on to have prestigious careers, but they weren't likely to be the highest earning people in their class.

In his book, Barking Up the Wrong Tree, Eric Barker cites the study and says, "School rewards people who follow the rules, not people who shake things up."

It's the kids who are willing to break the rules who go on to become entrepreneurs, innovators, and millionaires.

Channel Your Child's Defiance Into Something Positive

If you're raising a defiant child, you might find some solace in knowing your child's rule violations could be an asset. Of course, you'll want to channel her energy into something positive to ensure she becomes a trailblazer who doesn't worry about pleasing everyone, as opposed to a criminal who disregards authority.

So rather than squash her spirit, help her turn her willingness to go against the grain into an advantage. Teach her empathy so she is kind and caring and give her consequences when she goes too far. 

But don't discourage her from breaking a rule or two when she's not actually hurting anyone. She could grow to become a mentally strong person who isn't afraid to break the rules when doing so could make the world a better place. 

Trump’s Plan for Funding Infrastructure? A Gas Tax

President Donald Trump has a plan to invest in infrastructure, and his administration believes it has found a way to pay for it: A gas tax.

According to Senator Tom Carper (D-DE), the President suggested in a meeting last week that a 25-cent increase in gas and diesel taxes would be needed to help pay for his plan.

"[President Trump] said that he knew it was a difficult thing for legislators to support and said that he would support the leadership to do that and provide the political cover to do that," Carper told CNN. "And he came back to that theme again and again and again."

The White House formally unveiled the infrastructure effort this week laying out a plan to create $1.5 trillion total to improve the country's bridges, roads, and tunnels, but use only $200 billion of federal money.

How does that discrepancy get made up? By leveraging local and state tax dollars and private investment... and a gas tax.

Response to the gas tax concept has been decidedly negative, as would be expected with any nationwide initiative that results in higher prices at the pump, but not everyone is against the idea. The U.S. Chamber of Commerce, for one, has committed to lobbying for a gas tax, suggesting that a 25-cent tax would raise $394 billion.

A deeper analysis of the plan from the firm Energy Innovation found that a 25-cent gas tax hike would increase annual electric vehicle (EV) sales by about 100,000 per year by 2050, putting around 1.2 million more EVs on the road.

Among the loudest voices condemning the idea of a gas tax were the major Republican donors, the Koch brothers, who sent a letter to Congress suggesting that a higher gas tax would inevitably result in higher consumer prices on wide range of good and services.

Transportation Secretary Elaine Chao was also critical of the idea, saying: "The gas tax, like many of the other pay-fors that are being discussed, is not ideal. There are pros and cons. The gas tax has adverse impact, a very regressive impact, on the most vulnerable within our society; those who depend on jobs, who are hourly workers. So these are tough decisions, which is why, once again, we need to start the dialogue with the Congress, and so that we can address these issues on this very important point."

Given all of the vitriol associated with the gas tax, is a large scale increase really plausible? As Secretary Chao explained, gas taxes are typically felt hardest by those who make the least. That likely won't be appreciated by the 41 percent of Americans that make less than $50,000 annually who voted for Trump in the 2016 election. What's more, it is sure to create some political problems for Republicans who diametrically oppose more taxes, especially as they prep for the midterm elections.

But outside the political issues, one has to wonder if would garner as much revenue as estimates predict.

While there is still plenty of gas being consumed by Americans - 143.37 billion gallons in 2016, a daily average of about 391.73 million gallons, according to the US Energy Information Association (EIA) - the automotive landscape has changed drastically. Low gas prices have slightly suppressed hybrid sales, but these vehicles still continue to sell well. So well, in fact, that we've seen certain states try to enact alternative ways to recoup lost gas tax funds.

In July of 2016, Oregon enacted a program where qualifying residents could choose among three devices that track their mileage and charge them a 1.5 cent fee for each mile they drive on public roads in the state. The gas tax they pay at the pump would then be deducted to avoid double taxation.

Meanwile, several automakers, like Volvo, are still betting big on hybrid sales. The Swedish manufacturer said that, by 2019, every one of the cars it produces will have an electric motor. And with Tesla ramping up both production and delivery on its electric cars, including the reasonably priced Model 3, Americans may find themselves not gobbling up quite as much gas in the near future.

Still, nearly $400 billion in revenue is nothing to sneeze at, especially if the President believes this can be a quick, one-off hike to pad his infrastructure bet. And with consumers still enjoying relatively low gas prices, the 25-cent hike may go relatively unnoticed to a large swath of drivers. It might not be a long-term solution, or a very popular one to boot, but a 25-cent gas hike could be a reality very, very soon.

The Oddball Bromance Between Blockchain and Real Estate

Would you put your house on the blockchain? What does that even mean? What about just buying property with cryptocurrency? These are the questions that cryptocurrency and real estate pioneers are investigating.

In October last year, TechCrunch founder Michael Arrington made blockchain history when he used an Ethereum smart contract to buy a Ukrainian apartment. (A smart contract is, essentially, an application programmed on top of a blockchain, meaning the underlying data is distributed and verified by that particular blockchain's network of participants.) Arrington used Propy, a startup that aims to provide a global marketplace for these types of real estate transactions.

Arrington isn't the only one interested in using the technology behind bitcoin and other cryptocurrencies to manage his real estate. People are intrigued by the possible efficiencies of handling the whole process through code, and want financial flexibility beyond what traditional banks and insurance companies typically allow.

In early January, an Idaho resident named Zach Doty announced on Reddit, "I just warranty deeded my house into an Ethereum smart contract. AMA." Doty accomplished this by setting up an irrevocable trust and designating an Ethereum address as the grantee.

He explained in a comment, "Beneficial interest in the irrevocable trust can be assigned through our smart contract from one ETH address to another." Each address has to be tied to a legal entity in order to satisfy existing legal requirements, Doty said.

Arguably the Reddit post was a publicity stunt. Doty is the founder of a project called SmartLaw, which aims to facilitate arrangements like the one he set up for himself, as well as other financial services. "We're kind of like a blockchain notary," he told Inc. 

When you control the legal ownership of real estate via self-executing code, "a lot of things become possible, for example, fully automated foreclosure processes," he said. A smart contract could be set up to automatically auction a property, via the smart contract, after a certain number of payments were missed, and then split the proceeds between the creditors. Instead of needing to go through lawyers and manually conduct the process, in theory the SmartLaw code would handle all the administration of the auction.

Doty has big plans for SmartLaw: "It'll support buying and selling real estate, it'll support borrowing against real estate," along with "a lot of cool lending features."

Rick Stacey, an Idaho lawyer with a specialty in real estate, says he thinks the arrangement is probably legal, albeit baffling. "I don't see any advantage to it," he said, while there are "potentially some downsides" like not being able to procure title insurance.

Stacey pointed out that until this structure is tested in court, there are inherent unknowns. (Granted, someone willing to entrust their home to a cryptocurrency is probably not fazed by the unknown. But how many of those people can there be?) "You can do the exact same thing with a trust without using blockchain," Stacey said.

A more straightforward way to blend the world of real estate and cryptocurrency is just to buy property using cryptocurrency. Los Angeles real estate agent Piper Moretti is actively representing and seeking clients who want to use their cryptocurrency investments to buy property. So far it's been pretty uncomplicated: People sell their cryptocurrency when they're ready to pull the trigger, then complete a normal cash transaction.

As for crypto-to-crypto transactions, "I have people that are working on it and they can't wait for this to happen," Moretti says. She is a cryptocurrency investor herself, with almost 20 different varieties in her portfolio. "I don't think blockchain technology is going anywhere. We're on the very forefront...and that's definitely going to disrupt the real estate industry."

Of course, it's still early days. All of these efforts to blend cryptocurrency and real estate are experiments that may or may not spark trends. Are we ready to hand over our family homes to computer code? Perhaps not yet.

Your Business Can Accept Bitcoin Right Now

There's currently around $200 billion of bitcoin floating around in people's digital wallets. For many of their owners, those bitcoins have proved to be a valuable asset. They're happy to leave them to rise in value and build up their wealth. For others though, those giant piles of coins are exactly what they're supposed to be: a currency that they want to exchange for goods and services.

But businesses are reluctant to accept them. In July last year, Bloomberg reported that just three of the Internet's top 500 retailers were willing to accept the cryptocurrency. The biggest reason is clear enough. When the payment you take for a product can lose as much as a quarter of its value within a week, pricing becomes difficult. A seller that paid $80 for a product and sold it online for $100 in bitcoin could find that he has only $75 a week later--and no business at all not long afterwards. On the other hand, they could find that they've earned an additional 10 percent the day after the sale with no extra effort.

While those fluctuations are exciting, business owners tend to want stability. They want to be sure that the payments they receive for their goods and services cover their costs and deliver a reliable profit. It's the only way that they can stay in business.

So how can you take advantage of the availability of billions of dollars of a new currency without leaving yourself vulnerable to the currency's volatility? How can your business join the cryptocurrency world and accept bitcoin risk-free?

There are options and smart businesses are making good use of them. In 2013, a man in Florida called a Lamborghini dealership in Newport County, CA and asked if he could buy a Tesla from them using bitcoin. Other dealers had already turned him down, he said. The dealership was cautious. The car cost $103,000. But the company didn't want to reject a sale so it accepted the payment using Bitpay. The buyer paid 91.4 bitcoins and the seller received the money in dollars. According to CNN, news of the sale prompted ten more potential buyers to call the dealership.

Bitpay still allows businesses to accept payments while receiving fiat. Users of bitcoin transfer their payments using the company's payment platform. The firm locks in an exchange rate and delivers fiat to the seller's bank account. Companies can advertise to wealthy bitcoin owners and accept their payments without exposing themselves to the coin's volatility.

A number of other companies now offer a similar service. CoinGate extends the acceptance to more than 40 different kinds of altcoins with instant conversion to euros or dollars.

These tools, and more are surfacing, allow business to accept bitcoins risk-free. They can also allow businesses to receive their payments in bitcoin. While that brings back the risk, it's worth noting that if the Newport Beach car dealer had kept the bitcoin, he would have sold that Tesla for around $1.5 million in today's money. Some risks might well be worth taking.

 

5 Ways to Get Clients to Pay You Faster

Whether you're a freelancer or you own your own company, billing clients is one of the most frustrating parts of the process. You've gone above and beyond to deliver great work, and you expect to be paid for it on time! Unfortunately, not every client wants to make a payment on the timeline you'd like. If you're struggling to get your clients to pay on time or faster than usual, try these five ways to get your money. 

1. Set It Up Right
One of the biggest mistakes made by many professionals--especially new business owners or freelancers--is failing to set up appropriate terms for payment from the beginning. When you enter into a contract with a client, you should both know precisely what you expect to be paid and when you expect payment. Make sure to take the time to lay this out during your initial conversation with a client to avoid confusion later. 

2. Offer Incentives
A client paid earlier than anticipated? A small discount on their bill might not make a big difference to you, but it's a better incentive for them to pay it in the future. Incentives can also work in reverse: if invoices aren't paid on time, you can start to add a fee for late payment. Knowing that paying on time will benefit them is often all the incentive a customer needs to get that invoice paid. 

3. Don't Ignore It
You've got an invoice hanging out there that you know needs to be paid, but you've been putting off addressing it with the client. Unfortunately, merely ignoring it usually won't get that invoice paid! Instead, discuss it with the client. Send appropriate, timely reminders if needed. Your clients are busy, and they may forget that they need to pay that invoice--so send a reminder to ensure that it will get paid. Be persistent. 

4. Be Polite
You're starting to get very frustrated with a client who has consistently failed to pay an invoice--but you shouldn't let that frustration sneak into your language! In fact, offering a "please" or "thank you" when you send your invoice can increase your chances of being paid by as much as 5%. 

5. Be Predictable
You've been working with a client for a while--so they should know what to expect from you. If you typically send invoices on the first Wednesday of the month, sending them late will throw off your clients--and reduce the odds that you'll get paid on time. This is particularly important if you're working on retainer with a client long-term or if you do business with them on a regular basis. 

Getting paid doesn't have to be as challenging as you think. By following these simple tips, you increase the odds that your clients will submit payment for your outstanding invoices on time, leaving you with more money in the bank--not to mention more time to focus on those important projects and less time worrying about collections.