BUILDING YOUR FIRST MILLION

BITE-SIZE TIPS FOR YOUNG PROFESSIONALS TO SAVE $1 MILLION

2BUILDING YOUR FIRST MILLION

TABLE OF CONTENTS

INTRODUCTION 3

SET YOURSELF UP FOR SUCCESS 4

SAVE TO BUILD YOUR FOUNDATION 5

INVEST FOR GROWTH 7

INCREASE YOUR INCOME 9

GET A FINANCIAL ADVISOR 11

CONCLUSION 12

INTRODUCTION Building your first million doesn’t have to be hard—it just takes diligence. We know because, as financial advisors, we’ve counseled a lot of people through it. This ebook will offer the building blocks of building your first million (and the million after that). And because we know your time is limited, we’ve keep the tips short and sweet. That way, you can read and start incorporating today!

—The RPA Wealth Management Team.

3BUILDING YOUR FIRST MILLION

4BUILDING YOUR FIRST MILLION

SET YOURSELF UP FOR SUCCESSBuilding wealth isn’t just what you do. It’s what you think. Here we share some of the internal states you need to create your first million.

THINK LONG TERMWealth comes instantaneously to very few people. Most of us have to save and invest our way to it. And to do that requires a long-term perspective. If you don’t set wealth goals at least a decade out, you’ll be more likely to waste your money today on things you don’t really need. Thinking long term will also help you manage feelings of impatience and can instill perseverance—an essential ingredient in any great endeavor.

GET EDUCATEDYou should understand finances and how they work. With a financial education as your foundation, you’ll be less tempted by your buddy’s latest get-rich-quick scheme or your cousin’s hot stock tip. You’ll have smart practices to fall back on that really can give you wealth. We’ve read a lot of great personal finance books that can help you make smart decisions about your money. Some of the books we recommend are:

1. I Will Teach You To Be Rich by Ramit Sethi.

2. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley.

3. Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki.

4. The 4-Hour Workweek: Escape 9–5, Live Anywhere, and Join the New Rich by Timothy Ferriss.

5. A Random Walk down Wall Street: The Time-tested Strategy for Successful Investing by Burton G. Malkiel.

6. Reminiscences of a Stock Operator: With New Commentary and Insights on the Life and Times of Jesse Livermore by Edwin Lefèvre et al. (period on al.).

7. What Works on Wall Street: The Classic Guide to the Best-Performing Investment Strategies of All Time by James P. O’Shaughnessy.

5BUILDING YOUR FIRST MILLION

SAVE TO BUILD YOUR FOUNDATIONAn essential component of building your wealth is saving it. Here we give a rundown of strategies that can help you save even more of your money.

CREATE A BUDGETBudgets may be boring and even frustrating, but when you’re serious about building wealth, you’ll find a budget essential. It can really help you understand the impact of your financial decisions, both positive and negative. You can use an old-fashioned spreadsheet, or you can use an online account aggregator like YNAB or Mint. And for an easy-to-follow strategy, check out our article: rpawealth.com/creating-a-killer-budgeting-strategy.

SET A SAVINGS GOALYour savings are at the core of your first million, and you should set as much aside as feasible. We recommend that 20-somethings put aside at least 10% of their income. If you haven’t been doing that and you’re in your 30s, you’ll want to save even more. And of course, the more you save, the sooner you’ll reach your million-dollar goal.

LIVE WITHIN YOUR MEANSIf you’re feeling like your savings goals are impossible, take a look at your income (are you making enough?) and your spending (are you spending too much?). We’ll take a look at the income portion later, but if your spending is hurting your ability to save, review your budget. Could you do with a cheaper cellphone plan? Do you need both Hulu and Netflix? Some expenses may seem like mere dollars and cents, but those dollars and cents add up quickly.

AUTOMATE YOUR SAVINGSMaybe the best way to avoid spending the money you’ve earmarked for savings is to remove it upfront. Some bank accounts allow you to automatically route a portion of your paycheck to your savings account, or you can do it yourself. If you have a 401(k) through your work, contribute to it through pre-tax dollars. After a while, you won’t even notice the difference and will adjust your budget accordingly.

6BUILDING YOUR FIRST MILLION

BE LIKE A BOY SCOUT: ALWAYS PREPAREDLife is going to hand you a costly crisis—it’s almost inevitable. Someone may total your car, you might get laid off, or you may need an emergency home repair. We don’t want to be a downer. We just want you to be prepared. We recommend that you save three to six months’ worth of living expenses and then forget about that money. It shouldn’t be used for vacations or any other expenditure that you feel is important but isn’t really an emergency. It should be used for those situations that threaten to disrupt your daily life or put you in debt.

BANKROLL YOUR RAISESWhen you get a raise, use it to build your savings. You may need to allocate a portion of that raise to offset inflation’s impact on your spending, but saving the majority of it can help you build your million that much faster.

NIX THE DEBTDebt is a wealth killer. Although debt can be used opportunistically, most Americans’ liabilities serve no purpose other than to siphon the money out of their bank accounts. When you’re thinking about taking on debt, consider the benefit vs. the cost. The benefits of a home loan, for example, probably outweigh the cost, especially in Southern California, where rents can be higher than a mortgage. A new car, however, is going to lose value as soon as you drive it off the parking lot. So think twice about a pricey loan that you’ll only pay off in time for your next car purchase.

MONITOR YOUR CREDIT REGULARLYSpeaking of mortgages, the worse your credit score is, the more you’ll pay for your home. Having a good credit score can literally mean more money in the bank. Make sure you pay your bills on time, and keep your debt manageable (see the point above). Use annualcreditreport.com to order one of your free credit reports quarterly. You’ll not only be able to monitor how your credit is doing, but you’ll also be able to monitor it for identity theft.

BUY INSURANCEThis tip may seem counterintuitive. Why buy insurance when the goal is to save money? Because insurance can save you money when you most need it. If a fire damages your home or you need a surgery, the insurance you’ve been paying for will pay off. So consider your needs (health, homeowners, renters, disability, life), and buy the appropriate coverage. If you’re not sure about the right coverage, have a talk with a financial planner who will make recommendations based on your entire situation.

7BUILDING YOUR FIRST MILLION

INVEST FOR GROWTHIf saving money is one component of building wealth, investing it is the other. Take a look at these tips to make your money work harder for you.

START INVESTING NOWThere’s a term that’s called the “power of compounding,” and it’s what will increase the value of your investment portfolio. Essentially, compounding is reinvesting your earnings so that they join your initial contributions to increase your returns. Those returns will be reinvested, and so on, helping you build your million dollars perhaps more effectively than any other method. But compounding takes time, so the earlier you start investing, the better.

GET YOUR EMPLOYER’S MATCHIf your employer “matches” your contributions to a company retirement plan (like a 401(k)), that is as good as a raise. Make sure you take advantage of that raise, and contribute at least the amount that your boss will match. We say “at least” because it is a smart practice to contribute the total amount the IRS allows each year. Right now, that amount is $18,500 for a 401(k). If your income isn’t high enough to do that, we recommend that you still contribute enough to get that match—otherwise, you’re turning down free money.

MAX OUT A ROTHUnlike your 401(k), you’ll be able to pull out money from your Roth account tax-free in retirement. This makes it a valuable tool when it comes to retirement planning. More and more companies are offering a Roth option to their benefits, but you may need to open a Roth on your own. Either way, you can contribute up to $5,500 a year currently and give yourself an additional investment source. Keep in mind, if you make too much money, you are barred from contributing to a Roth, although you may be able to use a “backdoor” Roth conversion. We recommend you talk with a financial planner to see if that’s a smart course for you.

8BUILDING YOUR FIRST MILLION

GO BEYOND RETIREMENT ACCOUNTSOnce you have maxed out your 401(k) and your Roth, you can put your excess cash into a brokerage

account, such as an index fund or exchange-traded fund (ETF). Make sure your pick is low on fees and

efficient on taxes so that you can keep more of your money working for you.

OPEN AN HSAYou might not think of a health savings account (HSA) as an investment, but it offers incredible tax

advantages. With an HSA, you make pre-tax contributions, your money grows tax-free, and if you

use the funds to pay for qualified medical expenses, the distributions are tax-free. You don’t have to

wait until retirement to use those distributions either. However, given the high cost of health care, you

might want to. By paying for medical expenses out of pocket now, you can let your HSA contributions

compound (that word again) and help take the sting out of medical expenses when you’re in retirement

and on a fixed income.

9BUILDING YOUR FIRST MILLION

INCREASE YOUR INCOMELiving within your means is important, but perhaps the best way to save more is to earn more. Here are some ideas to increase your income.

INCREASE WHAT YOU’RE WORTHYou may be making a great salary, but could you make more? Continuing education and certifications can increase your value to your current boss or future bosses. Consider the cost of the education or certifications and how much you could potentially earn by pursuing them. If you would earn more than you would pay, then it’s a good deal.

USE YOUR EQUITY COMPENSATIONIf your employer provides equity compensation, congratulations. You have a potentially lucrative tool to use to your advantage. Compensation like stock options can be sold when the price is on the rise, giving you a nice income boost. Make sure you understand your particular compensation, including the potential tax impact, so you can make decisions that help build your wealth.

BUY A HOME—OR SEVERALMany people use real estate as an investment, even their own home. By purchasing rather than renting, you stand to build equity that you can convert into cash when you sell your house. You might also consider buying additional homes to hold and sell when the market is right, renting them out in the meantime. Some people enjoy flipping homes—buying cheap, making repairs, and selling higher—but it takes a special temperament to withstand the compressed timeline, understand the market direction, and deal with the surprise repairs that almost any home needs.

BE PASSIVEIf you’re a landlord, then your rent is passive income—it comes to you with minimal effort on your part. Passive income is great because you can collect income while keeping your regular job (or if you make enough passive income, you could quit your job). Some other sources of passive income include dividends, royalties, and capital gains.

BECOME AN ENTREPRENEUREntrepreneurs face business closures and other income risks, but they also have the potential for more income than they would ever make working for someone else. If and when your business becomes profitable, you will be able to use the profits to increase your savings (or reinvest for expansion). If you make a profit when you sell, that money could help build your wealth in a big way.

10BUILDING YOUR FIRST MILLION

11BUILDING YOUR FIRST MILLION

GET A FINANCIAL ADVISORA good financial advisor can help increase your wealth by employing an array of strategies that increase your investment returns, minimize your taxes, build your savings, and free you from doing the work yourself.

Unfortunately, anyone can call themselves a financial advisor (or a financial planner or a wealth manager), and not all of them would really be working for you. Here are some key words to look for when talking to a potential financial advisor:

FEE-ONLY A lot of financial advisors are commission-based. They get paid by an investment or insurance company for selling you products. Look for an advisory firm that is fee-only. They’ll get paid just like, say, a lawyer gets paid—by you for the services they provide you. A fee-only structure helps eliminate conflicts of interest. You can find a fee-only advisor by visiting the National Association of Personal Financial Advisors (NAPFA) webpage at www.napfa.org/find-an-advisor#tab=filters.

FIDUCIARYA Registered Investment Advisory (RIA) firm that is registered with the U.S. Securities and Exchange Commission or with a state regulator will generally be a fiduciary. That means that they have to put your interests first in all their recommendations and with all your accounts. As with a fee-only advisor, a fiduciary obligation helps keeps an advisor’s loyalty undivided and focused on you. To check an advisor’s registration status, visit the Investment Adviser Public Disclosure page at adviserinfo.sec.gov.

SOME ADDITIONAL POINTS Make sure you find out what the financial advisor provides (investment management only, comprehensive financial planning) and how they will charge you (hourly, per project, a percentage of the assets they manage for you). Ask what types of clients they work with to make sure they have experience with the needs of young professionals like you. And find out what certifications they have, such as the Certified Financial Planner™ (CFP®) designation. Not all designations are created equal, but the CFP® certification means the advisor has completed rigorous requirements in education, experience, and ethics.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

12BUILDING YOUR FIRST MILLION

CONCLUSIONWhen it comes right down to it, saving $1 million can be pretty boring. You save more than you spend, and over the long term, you build wealth. By adopting the tips in this book, you can help create a comfortable life both now and the day you quit working.

Still, building wealth does take regular monitoring, adapting to changes in your situation, and ongoing education. You might find you lack the time, ability, or desire to do it yourself. If you’re considering working with a financial planner, give us a call.

We are a fee-only, fiduciary RIA serving the Inland Empire and Orange and L.A. counties. We have an expertise in the financial challenges and opportunities that young professionals face. We’ll give you a customized plan to help you meet your goals (including that million dollars) and implement the details so you can focus on the rest of your life.

To set up a complimentary consultation, give us a call at 909.296.7977 or visit us online at rpawealth.com/contact.

W: RPAWEALTH.COM E: INFO@RPAWEALTH.COM O: 909.296.7977 A: 8885 Haven Ave #170, Rancho Cucamonga, CA 91730

All written content on this brochure is for informational purposes only. Opinions expressed herein are solely those of RPA Wealth Management and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual advisor prior to implementation. Fee-based financial planning and investment advisory services are offered by RPA Wealth Management a Registered Investment Advisor in the State of California. The presence of this brochure shall in no way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any State other than the State of California or where otherwise legally permitted.

CONTACT US TODAY TO SCHEDULE A FREE CONSULTATION. VISIT US ONLINE OR CALL US AT 909.296.7977.