#FinCon15: An Interview with Linda P. Jones of Be Wealthy & Smart
Posted By Abby Perkins on September 17, 2015 at 1:36 pm
We’re here at #FinCon15 – and we’re still posting the pre-conference interviews we did with our fellow attendees! This one, our second, is with Linda P. Jones of Be Wealthy & Smart.
Linda is a financial expert who made $2 million by the age of 39 – just by investing. Now, she empowers others to find financial independence with her courses, webinars, mentoring services and blog. We spoke to Linda about learning to invest, building wealth, and the pros and cons of living a frugal lifestyle:
GC: You earned most of your wealth by investing. What are your top tips for someone who is interested in investing, but might not know where to start?
LJ: If you want to start investing, but don’t know where to start, I would read Rich Dad Poor Dad. Author Robert Kiyosaki shares the challenges of beginning investors, the mindset they must overcome, and how to invest.
Reading books has always been a source of knowledge for me. I recommend reading biographies of wealthy people, investment books and positive thinking books. They all helped me get started. Then, when I got more serious about investing, I read How to Make Money in Stocks by William J. O’Neill and started reading Investor’s Business Daily and Barron’s.
I would also advise people who are in debt to pay off their debt before investing. Many people ask me if they should pay off their debt or invest and I think it’s best to pay off your debt first. That way, you stop accumulating more interest charges. Investing involves risk, and I’ve found it’s difficult for most people in debt to take risk since they could have paid off their debt with the money. It’s best to pay off the debt and then save money to invest.
GC: What do you believe are the biggest hurdles people face when it comes to building their wealth, and how can they overcome them?
LJ: There are some giant hurdles to overcome when building wealth. Here they are, and a quick tip to overcome each one:
- Lack of knowledge: Many beginning investors do what I did initially: jumped into buying a mutual fund after looking at Morningstar and selecting a fund with 5 stars. I promptly lost 30% of my investment! In order to be a good investor, there is a technical aspect and an emotional aspect. You need to master both. From a technical perspective, yes, you can dollar cost average in and select an S&P 500 ETF like just about every financial expert recommends, but you should also be studying up on where the best place is to invest now. To do that, you must also give some attention to understanding cycles.
- Learn about cycles: Cycles are where money flows rotate to over time. There’s usually one asset class that outperforms for many years. Since Modern Portfolio Theory proved that the asset class you invest in is more important than an individual stock or market timing, you need to pay some attention to how cycles work and where money will flow next. For example, when interest rates have been falling or stable and begin a rising trend, that’s a good indication of a cycle change. It can be telling you to look for a new asset class trend to emerge.
- Don’t delegate all your wealth building: Sometimes people think they can just turn over their money to a financial advisor and it’s handled. It’s important for you to take an interest in your own money and not “delegate.” No one cares about your money as much as you do, so keeping an interest, getting educated, and maybe even investing a portion of it yourself is a good idea.
- Lack of money: It takes time to save and accumulate money for an investment portfolio, but the sooner you start, the better off you’ll be. Wealth is a function of money, time and a compounding rate. The bigger any of those 3 pieces are, the more wealth you will build. Most people start out pretty limited with money, so time and compounding rate become even more important.
- Read up on the emotional side of investing: A book like Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay is a good one. Learning the mass psychology of the market and how to avoid investing with the crowds can be a valuable lesson as an investor.
GC: You’ve written before about why being a “frugalist,” or extreme saving, is not the best way to go about building wealth. In the financial blogging community, that’s a fairly uncommon point of view. Can you tell us a little bit about why you feel that way?
LJ: My point is that if you are wanting to build wealth, saving money alone will not get you there. You must take your savings and invest it wisely. It’s the higher rates of compounding and time that will create wealth for you.
If someone is in a tight circumstance where they don’t have much money beyond their bills, then being frugal is necessary and important. However, if someone has a good income and no debt (other than a mortgage perhaps), then being frugal is not going to make them wealthy. They will have to invest and compound their money in order to do that, so I think focusing only on being frugal is overrated.
Rather than being frugal or focusing on budgets, I recommend people create spending priorities. They should know what they really want to spend their money on – a vacation in Europe? A house? A car? By knowing what they really want, they can eliminate unnecessary spending on items that aren’t important to them. For example, many people eat meals out, but it’s more of a convenience than something that’s important to them. If they stopped eating in restaurants and ate at home or at less expensive places (deli, grocery store, salad bar, etc.) and put that money toward their priority, they would make more progress and be happier than just being frugal about everything. The idea is to use money to create the life you want, and not limit yourself with everything, which being frugal or living a frugalist lifestyle does.
Stay tuned for more interviews from #FinCon15 this week!