How to Make More Money, Part 2

In this series, I give tips that you can immediately implement to start earning more money in 2015. Last week we talked about the power of compound interest, getting automated and how to use psychology to your advantage.

• Be an investor, not a consumer. Instead of paying to own an Apple product, you should pay to own Apple. The first Apple iPod cost $399 in 2001. If you had bought Apple stock with that money instead, you would have more than $25,000 today! You want an investment that will appreciate, not a product that will depreciate.

Be committed to investing a portion of your income every month. One of the biggest regrets retirees have is not saving enough. Stick with it even in good or bad times. Look at a market downturn as an opportunity to buy more shares at a lower price. It is interesting to see that people will buy products on sale in a heartbeat (just look at Black Friday!), but when a stock is on sale, many head straight for the doors. If you had invested $10,000 at the bottom of the market in March 2009, you would currently have more than $27,000. How many do you know who sold near the bottom instead of buying? Stay disciplined and look at the long-term. You will thank yourself later.

• Know what you are paying for. For years I have helped manage finances for clients who didn’t have the time, knowledge or desire to do it themselves (or a combination). If you are in any of these categories, you should hire a financial professional. But it is important to understand the fees you are paying for that advice. Are you paying a commission? Or are you paying a fee? Do you have mutual funds? What are the expense ratios? What hidden costs are in the fine print?

Just like there is compounding growth, there are compounding costs that can eat away at your investments. This is your hard-earned money, so take the time to see how much you are paying and how it will affect your financial future. If you have a $100,000 investment and were lucky enough to get 7 percent each year with a 1 percent annual fee, you’d have about $574,000 after 30 years. If you paid 3 percent in fees, you’d only have about $324,000, a difference of $250,000!

Remember, you get what you pay for. Many of the wealthiest people pay top dollar to their financial advisers to grow their wealth, find investment opportunities and reduce their risk. A great adviser who focuses on your overall financial picture and not just a financial product can add tremendous value. The average investor in the past 20 years barely beat inflation, but those who had an adviser who set a diversified portfolio and helped manage emotional trading saw huge gains in the same time period.

Understanding how much and what you are paying for will help you take advantage of the financial system, instead of having it take advantage of you!