Barbara A. Friedberg is a finance and investing expert, author, and website publisher. We had a chance to chat with Barbara about the secrets of personal investing, wealth-building, and income generation.
Tell us a bit about your background. Why did you decide to start a personal finance blog?
My initial motivation for my first blog, BarbaraFriedbergPersonalFinance.com, came from a publisher. I was shopping a personal finance book manuscript to publishers. I received positive responses to the content, but all the publishers stated that I needed an “audience” for my work. So in 2010, I started the blog to build a platform for my work. I’ve since published three books.
Since the title of your book is How to Get Rich Without Winning the Lottery, could you tell us what you mean by “rich?” How much financial knowledge must a person have to achieve this goal?
Rich is a very personal term. If you live in affordable middle America and lack extravagant tastes, then rich is very different for you than for someone living in Chicago, New York, or Los Angeles and desiring a fancy home, cars, etc. In general, the wealth-building principles work regardless of your financial goals.
You don’t need a lot of financial knowledge to become wealthy. You need to understand basic money principles, moderate your spending, and start investing in diversified index funds. For example, in my book I reveal a simple lifestyle change that can create over $70,000. The book is filled with tips, insights, and strategies that help you decide how to only spend money on what’s important to you and also create wealth.
Are you seeing a trend these days toward entrepreneurship, side businesses, and/or people finding alternate sources of income?
There is an increased trend toward entrepreneurship and many pre-made opportunities for a side business. With the advent of Uber, TaskRabbit, Airbnb, and the sharing economy, there are opportunities for consumers to set up their own side businesses on ready-made platforms. Additionally, the internet makes it easy to set up your own business.
What are some of the most common savings or investing mistakes that you’re seeing from people today?
1. Waiting to start saving or investing. Time more than any other factor leads to the opportunity to compound your money.
2. Thinking the little expenses don’t matter. They do. Invest $5 per day for 20 years and you have $70,000 (assuming a 7% rate of return on a diversified mix of stock and bond funds).
Once a person saves a little money, how soon should he or she begin investing it? What types of investments should he or she target initially?
First, pay off high-interest rate debt. If you’re paying 15% on credit card debt, then earning 7% on your investment account means you’re still losing money.
I recommend low-fee, diversified index funds such as a total market stock index fund. There are also many low-fee robo-advisors such as Wealthfront, Betterment, and Wise Banyan that are great for beginner investors.
Do the techniques and advice you give to individuals about amassing wealth also apply to owners of small businesses as well?
How can company managers and leaders convince employees of the value and importance of saving money and/or investing it in a company 401K or similar account?
Many companies auto-enroll new employees into the company’s 401(k) plan. This is great for helping workers start to build their retirement fund. The employee must opt-out if they don’t want to participate.
Name one thing that a person can do today to start growing his or her wealth.
How about two?
- Enroll in your workplace retirement account. Choose a target date fund or low-fee index funds.
- Open an account with a discount broker. Schwab has a low minimum threshold for new investors. Set up an automatic transfer from your checking or savings account into the investment brokerage account. Buy shares in index funds with the money.
You’ll find that by automating investing, you won’t miss the money or be tempted to spend it. It’s the best wealth-building habit there is!