TIPS: Pay Yourself First

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Tips that I’ve followed over the years...

OK, so I’m a few months away from 50...yeah I know, what am I doing on a Reddit? Lol, I know much old-man geezer here, dude. But all kidding aside...I just want to post some insights on how I got to where I am that I think can be applied in almost all cases for much success. I’m not offering any guarantees or individual investment advice here, just some insights into what works and doesn’t work for me. Key investment concepts and a roadmap to much success. 

Feel free to add to this list in the comments or tell this old geezer go pound salt (if yinz youngins know what that means. Lol). 

I know, I know WSB is sexier and they say let’s  just all jump in and force the shorts to pay for their evil ways. Let’s break sh!t, make a new way. Well, that’s fine, but risky. And those who get in first are always the ones who win. Diamond hands...suckers paying for the first movers. Plain and simple. What I’m offering here is a long-term (and yes boring) approach that works without someone having to be the last one in on the latest “hot stock” and selling that pump to the next the biggest set of suckers so that they’re left holding hot potato. Ya follow? That said, I dig what WSB is doing...just don’t have the years left to pay for the major losses many people are subjecting themselves to...

OK the list of do’s and don’ts (in no particular order):

1) Start young. Start early. Don’t stop. No matter how little. Time really is an asset and it cannot be gained once lost. 

2) Pay yourself first. Then buy that new John Deere. Not the other way around. 

3) Clear debts when possible. 

4) Invest in any company 401(k) with matching programs. It’s free money. Tax-free money on top of that. 

5) Speculate a little to make it fun, but only a very small portion of your portfolio...and only the portion you’d be fine setting on fire and never seeing again. See my blog ...I’m risking $300. I’ve already written it off as lost money. 

6) Explore SELLING Covered Calls and Cash Secured Puts to get in and out of a position while making premiums on your trades. Only sell never buy options. Insurance is the goal of the business here, not speculation. Never buy on margin or naked options. People have ended themselves over those kind of failed trades and margin calls. Don’t be one of them. 

7) Never buy with a Market order. Don’t chase a stock. Set a Limit order and let the market come to you. See #6. 

8) Do your own Due Diligence (DD) and never rely on someone else to do your homework for you. 

9) Own your mistakes and learn from them. Don’t dwell on them. 

10) The markets go UP, but they also go down and sideways. See #6 for how to get excited when things aren’t always going up. 

11) Hold a position in Bonds that can be converted to Cash for when the Market corrections come, and they will come. 

12) Hold some cash for opportunistic trades and Market corrections. 

13) Hold through Market corrections if you got caught in them. Selling at the bottom and buying at the top is always a recipe for a falling portfolio. 

14) Read and Ask questions. 

15) If your 401(k) has limited investment options look for the investments that consistently make over 10% per year over a five and ten year period. It’s about as close as you’ll get to a guaranteed 10% return. Look first for your employer’s best S&P 500 Index funds and Russell 2000 Small Cap funds for strong and consistent growth. No guarantees, but a well managed fund will react accordingly to the direction those indexes go.

16) If you don’t have access to a 401(k) through work. Open an IRA account at one of the major brokerages. Then follow step #2. Traditional IRA or Roth it doesn’t matter. Just follow #1 and start now. It matters. A lot.

17) Doge or crypto when you can in increments that follow #5. Yes, crypto may just be the future, but it could also be the next bubble. Look at the history of bubbles, much loss.

18) SECRET SAUCE: Long term, guess what...you can live off of premiums, dividends, and profits...with less than $1-million in principal. Believe it. Anyone know what 1000-shares of JPM pays quarterly? Aside from a ridiculous return last year if you got in at say $99, they pay 90-cents per share...every. quarter. You got it now. $900 four times per year. That’s $3,600 on $99,000 worth of stock. Yeah, that’s a lot of money to have invested, but not if you start young. Not if you build it up over time. And I know no one is living on $3,600. But if you follow #6 you could have traded in and out of JPM with options, selling cash secured puts and collecting premiums until you got into the stock where you wanted to get into it, and then having 1000-shares you could have sold covered calls all the way up as the stock rose and collected those premiums as well. 

Collecting these premiums all along the way (up, down, and yes even sideways) for additional monthly income is a hidden gem. The secret sauce, if you will, to investing. 

How much could you have made on options? If you had gotten into the stock at $99 and had 1000-shares, you could have sold 10 July 2nd Call contracts today, for example, and that would have made you about $2,000 this month. Right now for just having 1000-shares. That’s money paid to you on top of your dividend, a dividend you collect if you had timed your assigned entry accordingly. 

And remember this options and dividend income is money given on top of profits earned. Remember what I said, had you do your option trading appropriately you could have entered into JPM stock around $100. It’s at or near $160 today. $60,000 higher for your $99,000 investment. So on that play alone? $3,600 dividends, $60,000 profits, possibly $1000 ton$2,000/mth in premiums. That’s $6,300 to $7,300 per MONTH in income. $88-ish thousand dollars per year. Sounds like a livable income to me. Taking profits and dividend out of the mix, and extra 1- to -thousand per month goes a long way for me, personally  

Complicated? Am I oversimplifying this? Maybe more than a little, sure. Profits are NEVER a given. Guaranteed? Nope. Nothing is guaranteed and there’s no saying a play like JPM comes along every year. But with this method you can be better informed on when to “back up the truck” as the saying goes. This approach is it doable while you’re young or when your older to help build a larger principal balance safely...and to take a passive monthly income on top of that, when needed. This approach also offers a way to build wealth with lower risk than buying individual stocks with Market orders and hoping and praying that you make a profit. Hoping and praying is NOT a viable investment strategy. Ever.

I won’t go into this technique too much, but I may at some point provide links to materials and services that opens these secrets up to those who want to know more. That said, look up the concepts around #6 for more information in the meantime.