Buy lottery tickets for instant income.
Don't
This is not an income strategy. It is a fun play. You can buy lottery tickets from time to time as a fun thing to do for the heck of it. It also contributes to various state that runs the lottery funds. Though it cannot be a growth goal or a serious investment.And here is why...
If you buy 10 Powerball tickets each week for 50 years, you will have 26,000 tickets, resulting in a 1 in 11,239 chance of winning the jackpot.
Instead, if you invest $50 weekly into an index fund, your investment could grow to over $1 million in the same 50 years. You can see the calculation below and use our calculator to figure it out.
Do
The lottery isn’t a financial plan. Focus on real wealth-building strategies. Rather than playing the lottery, focus on building your own wealth through investing and saving.Rely Solely On Income
Don't
If you're relying on a W-2 paycheck alone, you are running on a treadmill just to stay in the same place. The wealthiest people don't rely on a salary alone. They rely on assets that continue to compound and pay them without much effort on their part.Did you know:
Teachers are 5% of U.S. millionaires.Doctors, on the other hand, make up around 3% of U.S. millionaires.
Median teacher salary → $67K
Median doctor salary → $239K
The difference is that Teachers start investing from day one in 401(k), 403(b), and 457(b) plans, whichever are available at their school districts.
Doctors start off in debt. They take longer in school and, on average, begin investing 10 years later. Then, as their income increases, so does their lifestyle. It is now known as "lifestyle" creep. Lifestyle creep is when your spending gradually increases as your income grows, making it feel like you never get ahead. This gets in the way of saving and investing. It also prevents the magic of compounding from kicking in early.
Do you still think that the salary will make you wealthy?
Jump into the get-rich-quick program scheme
Don't
$$ That $1,500 online course won’t make you a millionaire. $$Do you know how most of the people selling you these classes, videos, and programs get rich? By selling you the programs!
They might have basic knowledge of the topic, created cool-looking materials or sales pages, and written or generated some e-books. However, here, more than anywhere else, the old saying that those who can't do, teach, goes really well. If they had all these secrets, all these steps, for making ridiculous money, would they be doing all these how-to classes or enjoying their livelihood afforded by these programs?
Do
Invest in your self. Be it in your health, educations, savings, or investing, it is money a lot better spent.Go Into Debt
Don't
Compound interest can work against you. And it is called debt. This is the flip side of the concept of compounding. Instead of your money compounding in a positive direction, interest charges, fees, and taxes also compound with time. However, they create a hole in your wallet instead of filling it up.Compound interest doesn't care which side you're on. The same force that grows your wealth can silently destroy it through:
Unpaid debt compounds quickly. Be it credit card debt or loan debt, if you don't pay it off right away, you will pay interest on top of interest.
Do
Avoid Credit Card DebtThe high fees (APR) for rolling over the balance from month to month add up fast and compound in a negative way.
If you can't pay for it in cash, do not put it on a credit card
Credit card debt — average rates of 20–25% APR mean a $5,000 balance can balloon to over $10,000 in just a few years of minimum payments.
Do Not Take Out Or Rely on Loans
There is a caveat for this, of course, if you take a loan responsibly. Meaning, you have/will have funds to pay the monthly payment with interest in full each month and cover at least half of the loan amount.
Payday loans - they only seem good, as you have money in hand. They come with a huge "gotcha" in terms of interest and fees that you pay.
Some of these loans come with an insane APR of 400%. They require two-week repayment periods. And if you do not repay, you will get hit with fees and that super-compounding interest.
Because of that quick repayment schedule, borrowers are often forced to roll over the balance of the loan into the next month. This racks up additional fees without paying down the original principal.
Here is another kicker for payday loans. Unlike traditional loans, paying off a payday loan on time generally does not help build your credit score. Mostly downsides, with very little upside.
Student loans — We all know why we need these. Taking out a student loan gives students access to education that they might not be able to pay for otherwise. They provide immediate capital, allowing borrowers to attend college and gain skills that significantly increase lifetime earning potential, as has been researched many times by different organizations (see below).
However, student loans create a long-term debt burden on the graduates. Borrowers graduate with substantial balances. If not managed correctly, this debt can drag on for decades. While the loan does not accumulate interest during the school years, it does start to compound after graduation and the start of a working career. The interest continues to accrue on the loans while you’re working to pay them off. While federal loans come with low interest rates, most begin accruing interest as soon as they’re disbursed. Over time, this can significantly increase the total amount you owe, the principal, especially if you use deferment or an income-driven repayment plan. Interest capitalizes (compounds) during deferment.
Association of Public Land-grant Universities
There are substantial differences in lifetime earnings by educational attainment.
Report: A College Degree Increases Lifetime Earnings
Auto loans & mortgages — most early payments go almost entirely to interest, not principal (amortization). Amortization is the process of spreading out a loan into a series of fixed, regular payments over time, usually monthly. Each payment covers both the original borrowed amount (the principal) and the fee for borrowing it (the interest).
Folks take out auto loans for similar reasons as student loans, to afford the purchase. However, an auto is a depreciating asset. While secondary education is like an appreciating investment, based on the studies above. While in some cases it can make sense, when your interest in the loan is lower than your investment return percentage. In a lot of others, it is a drag on your savings and investment capabilities, as well as on your credit history and debt amount.
On the other hand, eliminating high-interest debt is like a guaranteed return on investment at whatever rate you're paying. Paying off a 22% credit card is like earning a guaranteed 22% return.
Not Save
Don't
Have no savings or low savings.The personal saving rate—what Americans put away as a percentage of their disposable income—sunk to 3% in April and May, according to the Bureau of Economic Analysis. That's down from 3.5% in March and 3.8% in February.
