Anyone Can Become Wealthy, But Not Everyone Can Maintain Their Wealth.
By Floyd Saunders, Founder at Really Simple Investing
One of the first things that stood out for me with my interview of Marissa Greco-Reale, the author of Bottom-Up Wealth How Real People Can Build Real Wealth, was this idea from Marissa.
"Anyone can become wealthy, but not everyone can maintain their wealth."
It’s one of those quotes that can cause you think about where you are prioritizing your money.
Marissa is a licensed financial planner and certified retirement planning specialist who manages the wealth portfolios of over 300 clients. She also promotes a women’s financial network where women help other women become more successful with their money.
In the interview on the Really Simple Investing podcast, we discussed her six-step prosperity plan for building wealth, which includes risk management, cash flow planning, and avoiding toxic debt. Toxic debt is high interest debt that you need to get rid of. Marissa likes to start paying off high interest debt over the snow ball effect approach. Her best advice is to keep debt below 5 percent interest.
"Avoiding toxic debt is really important and trying to build wealth instead of take away which that does." – Marissa Greco Reale
We also dove into her recommendations for investing, retirement planning, and building and maintaining wealth.
Anyone Can Become Wealthy With Good Financial Habits
Marissa emphasizes the importance of developing good financial habits and consistently investing money in a disciplined manner. She recommends starting with paying off high-interest debt, such as credit card debt, before investing.
She also suggests a blended approach of 50% active and 50% passive funds in a portfolio to balance out the benefits of each type of fund. Marissa's approach to investing is focused on long-term growth and minimizing risk through diversification and professional management.
We also discuss the importance of reevaluating one's financial portfolio on a yearly basis and analyzing savings rates, investment earnings, and potential tweaks to one's portfolio. Marissa notes that many people fail to do this analysis, which can hurt them in the long run.
Overall, Marissa's goal is to provide education on these topics and help people build wealth through her webinars and other resources.
Risk management, cash flow planning, and avoiding toxic debt are foundational steps for building wealth. Just to review Marissa’s plan as defined in her book, let’s review the steps.
Step one is talking care of Risk Management. Which is taking caring of your insurance needs so you have protection. She recommends term insurance because all of the investing doesn’t matter if you are self-employed and get sued or if for example you lose your job. For Marissa, insurance should be insurance and investing should be investing so you have control over your money. If you don’t have risk management in place, all of the other stuff doesn’t really matter.
Step Two is Cash Flow Planning. This is about understanding what is coming in and what is going out, using what she calls reverse budgeting which is hitting your savings goals first. And making sure you are living below your means so you have money to invest and build for the future. When you use a reverse budgeting, you can then enjoy some of your money because you have hit your retirement and savings goals.
Avoiding Toxic Debt: A Key Step to Building Wealth
The next step is avoiding toxic debt, is really important. Toxic debt is high interest debt that you need to get rid of. Marissa likes to start paying off high interest debt over the snow ball effect approach. Her best advice is to keep debt below 5 percent interest. Toxic debt hurts your ability to start investing. The more toxic debt you have the more bleeding you have that prevents from enjoying life. You really have to focus on paying down that debt.
Now you start investing. Investing Planning is a bit like planning for a vacation, in Marissa’s view. You have to know how you are going to get there.
When it comes to investing, Marissa watches what millionaires do and she follows that.
Of all the investment products available, Marissa favors mutual funds because it comes with professional fund managers that can actively manage the fund for you. It important to understand each person’s situation and plan for that situation.
Professional managers have teams of people to help them manage money and they can get CEOs on the phone, plus they can visit corporations and “kick the tires” so speak.
Marissa says you should buy the entire market. You want to buy mid-sized and small cap companies because they have higher potential for greater returns. One example is buying a company like Amazon years ago.
You need to invest in international markets as well because the investment markets in many countries are going to double over the next ten years.
She likes a blended approach by keeping 50 percent is active funds and 50 percent in passive funds so you can take advantage of changing market conditions. Active funds help you respond to downturns in the market.
Step Four is Retirement Planning Talking about retirement planning. For many higher income people, a Roth is not a great option. But if you are in a lower tax bracket a Roth might be better.
With a 401 k or similar plans, you want to do that if you are getting a match from your employer, because that is free money. Most people are not really talked about enough, most people don’t understand the differences and Marissa likes to provide free training workshops to help people understand the difference.
Marissa also likes to helps people evaluate when it makes sense to own a rental property or in many cases consider a REITs or a real estate mutual funds. Real estate has a place in your portfolio.
Marissa says it sometimes takes an expert to help you evaluate which option makes the most sense for each person. Make sure your rate of return is five percent or higher to get the return that beast other investment product.
Habits of millionaires
Next, we talked about some of the habits of millionaires and how many millionaires are often the normal person living next door is a typical modest home. They have the habit of saving and investing their money and look and act like most of the rest of us.
Wealth is more than a high income. It is really is various strategies and habits and every year going back and evaluating how you did compared to your goals.
It is best to do an annual review with a professional. Most millionaires have a team of trusted advisors, typically a CPA, Trust attorney, a financial planner and sometimes a broker.
The principles of building wealth are really the same when you are starting as when you have money. Marissa calls a lot of tax planning a reactive planning. But she prefers proactive tax planning. You need to know when you pay taxes now vs. paying taxes later.
We wrap up with talking about Step Six estate planning and the need for a will and perhaps a trust to help make sure your money goes to heirs you want to get money and/or a qualified charity.
“Most people care about how money is passed on and avoiding the delays of probate with a revokable trust. When money is in a trust it is protected.”
Follow Marissa on Facebook, Instagram, TicToc and her website. Greco-Nader Wealth Navigation. https://www.greconader.com/Marissa-Greco.e1007259.htm
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