This week we have the privilege of reading the 10 commandments. At the beginning of the Torah portion we read about Yitro, the father-in-law of Moses. The first verse says, “And Priest of Midian, father-in-law of Moshe HEARD all that Elo-kim did for Moshe and for Israel His nation, for Hashem took Israel out of Egypt.”
The famous commentator Rashi asks what was it Yitro heard? He cites the Talmud and says he heard about the splitting of the sea and the war with Amalek. The question that begs to be asked is why just Yitro decided to come and visit the Israelites, and we have no record of anyone else coming. Surely, they also heard the great miracles that had just happened. I think the difference is that Yitro “Heard” about the great miracles. To really hear something is to understand what you hear. It’s not going in one ear and out the other. He was able to understand that something ‘big’ was happening. That these were not just isolated events, rather, they were part of a process, and some big plan was in the works, and he wanted to see it for himself.
I can see my oldest daughter right now starting to roll her eyes and thinking – there he goes again. I know that I sound like a broken record but when it comes to building wealth too often, we forget the process. We don’t realize that it’s a continuous process, not just some one-off, one-time event that secures your financial future. If you can’t see that each step leads into the next and into the one after that, then you are not understanding what financial independence means. In honor of this week’s Torah portion, here are 8 commandments of wealth building. Feel free to add 2 of your own to get up to the required 10!
Budget
Take control over your spending. Track income and expenses and then you can start a realistic savings plan and start building wealth.
Get out of debt
Credit card debt or overdraft is the number one obstacle to making it financially. It’s a lot better to take those interest payments and plow it into savings, than to keep paying the credit card company.
Emergency Fund
You may be fired or your refrigerator may die. By creating an emergency fund, you will be able to handle surprise expenses. Keep 3-4 months of income in a short-term deposit or something similar in order to have it liquid and available at a moment’s notice in case you need to draw upon it.
Save
There is no shortcut to building wealth. You need to start investing and with discipline, the wonders of compound interest and the growth of the stock and/or real estate market, over time you will create a comfortable nest egg.
Know your limitations
It’s well-known that Warren Buffet, often tells investors that the best advice he can give them is to know their limitations. He means that investors should be aware that their chances of performing better than the major averages are statistically small if they pick individual stocks. As such most investors should stick to index and exchange traded funds (ETFs).
Tax loss harvesting
A portfolio that is tax efficient can literally save you thousands of dollars a year. Multiply that by 20-30 years of investing, and you can keep tens if not hundreds of thousands of dollars in your account, instead of giving it to the government. You want to offset capital gains with losses. Speak with your accountant before moving ahead with the selling, so that you understand all the rules and restrictions that apply to tax loss sales.
Maximize your retirement account contributions
There is no better investment than a tax deferred investment. If living in Israel, make sure you are maximizing contributions to your Keren Hishtalmut and Kupot Gemmel. Keep the money invested and you will be surprised at the long-term growth of those accounts.
Understand what you are investing in
Allan Roth, in an article for the AARP writes, “Simple and transparent products are almost always superior to more complex alternatives. So why do people get pitched so many complicated investments? My fervent belief: Those perplexing features are designed to obscure and excuse the seller’s profits. So it’s critical to understand what you’re buying, what it costs and why it’s right for you. Take this commandment a step further and never buy an investment you can’t explain to an 8-year-old.”
For 99.9% of the population, there are no shortcuts to building wealth. Yes, I am aware of the fact that there is a NIS 50 million jackpot in the lottery this week, but if that’s your plan for financial success good luck. For everyone else, follow the process; it works.
May all the families of the fallen be comforted. May the hostages be released. May the injured have a speedy recovery. May our dear soldiers be safe and protected.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing. www.gpsinvestor.com; aaron@lighthousecapital.co.il.