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| Why not you!!! You deserve to build wealth and
enjoy the life you desire. I believe that everyone can build wealth.
Maybe not the wealth of the Forbes 400 wealthiest people in America,
but enough to enjoy and do the things you want to do. |
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| Wealth Explained.
Wealth means having three things. First, the confidence that you can
build wealth and make sound investment and financial decisions.
Second, having peace of mind that you can survive a crisis or
emergency; in other words, you own or control enough income
producing assets so you can survive the inevitable unfortunate
events. And third, having enough money to do the things you want to
do, when you want to do them. |
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| Myth versus Reality.
To me the reality is that you can build wealth for yourself and your
family and you can get ahead in today’s challenging world. The myth
is that you cannot. Several years ago, I held a mini-seminar at the
local super bookstore. One woman passed through the lecture area,
and I invited her to join our personal finance discussion. She
responded, “My finances are too far gone to make a difference. I
don’t have enough money to make a financial plan.” |
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| I don’t know her financial situation or how much
money she had. But I do know that her attitude will keep her from
getting ahead. |
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| The reality is that you can make your reality.
Decide what you want to do. Decide what you want to become. Decide
that you want to build wealth. Do it now!!! |
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| Set Goals and Objectives.
In my experience, the best way to achieve something is to actually
set a concrete target. To build wealth, put a specific dollar amount
on your target and a timeframe in which you want to accumulate that
wealth. Reach a bit. Ten million? Five million? One million? Five
hundred thousand? Pick a number. |
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| Decide whether you want to accumulate that money in
five years, ten years or twenty-five years. You may want to purchase
a new car in two years, a new home in five years and retire in 15,
20, or 25 years. Make sure the time horizon is reasonable. |
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| Be sure to select a few concrete goals that are
important to you. When your goals are important to you, you will be
much more likely to take action to attain those goals. This may
entail earning more income and restructuring your spending. |
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| My spouse and I wanted to purchase a home and we
did that in 1997. We wanted to boost our retirement savings and we
have done that through 401(k) and 403(b) plan contributions. We also
invest money every month into two different mutual funds. We are
confident that we will accumulate the wealth we desire to retire
comfortably. It would also be nice to send our three children to
college, and while we don’t know if we will achieve this goal in
full, we do save some money every year and are totally confident
that our planning and investing will help them gain some freedom of
choice. |
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The Rule of Three. In
my book the Personal Budget Planner, I describe the Rule of 3. In
practice there are three keys to making a financial plan that works.
First, become a good consumer of financial products. In other words,
learn what you need and what you don’t need and develop a sense of
fair prices. Second, establish two investment programs: a retirement
plan account that is tax deferred; and a regular account where you
can build wealth but can access your money to meet shorter term
goals without paying an early withdrawal penalty. And third, start
saving 3% of your pretax income. Ideally, you will want to save 10%
or more, but when you start out, begin with 3% and get comfortable
with that. Then expand and grow from there.
To learn more about the Personal Budget
Planner,
click on the icon below
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| The Financial Plan.
A financial plan is a concrete, specific plan that helps you arrange
your money in such a way that you achieve your goals. This may
entail earning a certain amount of money. Perhaps you need to
channel more of your income towards your investment portfolio and
less towards discretionary spending. Maybe your asset allocation
(the way you invest your money across asset classes: stocks, bonds,
real estate, etc.) may be hindering you from reaching your goals.
Set that financial plan and channel your money in such a way that
you realize your plan. |
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| The Balanced Financial Plan.
The balanced plan entails enjoying yourself and organizing your
financial affairs so you can realize your long-range financial goals
and objectives. Austerity is depressing and should only be pursued
when you are in dire straits. Spend enough money today to enjoy
yourself and at the same time, balance your desire to spend more now
with the discipline to save and invest for the future. |
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| The Spending Plan.
To implement your financial plan on a day-to-day basis, you’ll need
to reduce your financial plan to a series of daily and weekly
spending amounts. Many people call this a budget, but I prefer the
term “Spending Plan.” People view the term “budget” negatively and
they think of a budget as a straightjacket or a diet. A spending
plan on the other hand is a positive endeavor. You are deciding how
to spend your hard-earned money in the way that is optimal for you
and your family. |
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| Costs and Expenses.
There are several types of costs and expenses that are important to
consider when you make a spending plan. The first is fixed costs.
These include costs that are fixed in amount or relatively fixed and
you pay every month. These can include rent, mortgage payments,
escrow deposits, food, utilities, etc. You may want to include
monthly investments you make. Periodic costs are fixed costs but
occur at different times throughout the year. Examples include car
repairs and insurance premiums. Then there are variable or
discretionary costs. You’ll need to monitor and balance all three
types of expenses and channel your money to the areas that will help
you achieve your financial plan. And these factors are likely to be
different for you than for your neighbor and me. Analyze your own
cost structure and expenses and make changes to make your plan work. |
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Give Yourself a Financial Check-Up.
A financial check-up is like a doctor’s
physical exam except you review your investment account statements,
retirement plan statements, your credit card statements and your
checking account statements. In my book Checkbook Management, I
describe how you can use your checkbook as a diagnostic for your
financial health. The key is to critically and realistically analyze
your financial affairs and financial position and make sensible
changes to get ahead. The only way to do this is to conduct a
periodic review of your financial affairs.
To learn more about Checkbook Management,
click on the icon below
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| Guaranteed Savings.
Often the best savings programs are right under your nose. Consider
for a moment your favorite cup of super coffee at the gourmet coffee
bar. This deluxe beverage is likely to cost $3.00 to $4.00 per cup.
Certainly delicious and a pleasant social experience, but when you
cut back your gourmet coffee purchases by 20% per week, that can
help you save 80¢ per week. That’s over $40 per year. And that’s in
after-tax money. Examine your spending habits and cut back the
waste. You will be surprised at how much money you can save, simply
by reorganizing your spending habits. |
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Another way to save money is to develop and
implement a grocery shopping and food management system. By
rearranging your grocery shopping habits and practices, you could
save $25, $50 or more every week. And, the beauty is that whatever
you save, you actually save. There is no risk or gimmicks. In my
booklet 157 Ways to Cut Your Grocery Bill, I explain how you can
develop a system that can help you begin saving more money and
building wealth right away.
To learn more about how to cut YOUR Grocery
Bill,
click on the icon below
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| The Best Investments for YOU.
There is a lot of chatter and discussion about the best investments
for this kind of person and that. The real key is to select only
those investments that you understand and are suitable for you. In
other words, you must select investments that will help you achieve
your financial goals while at the same time meshing well with your
risk tolerance |
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| Mutual Funds.
Mutual funds are pools of money where mostly individuals deposit
their money and professional fund managers select investments. The
rate of return on your investments depends on the success or failure
of the securities (stocks, bonds, etc.) that the mutual fund owns.
Mutual funds can be an excellent way to take advantage of economies
of scale and professional money managers at a reasonable cost. Every
year, mutual funds distribute to the fund’s investors (shareholders)
almost all of the income and capital gains realized by the fund. Be
sure to reinvest your distributions. This should really help you
build wealth. |
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| Taxes. Income
taxes definitely take a chunk of money out of your pocket. One way
to reduce your tax bill and build wealth at the same time is to
participate in your company’s retirement plan. Today, (in the United
States) there are plans called 401(k) and 403(b) plans and IRAs.
With these plans, generally your contributions are tax deductible in
the year you make the contribution and your income accumulates
tax-deferred until you make withdrawals. This can be an excellent
way to build wealth, especially when your employer matches a portion
of your contributions. |
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| In the past five years, the US has implemented
several other tax-advantaged programs. These include healthcare or
flexible spending accounts, dependent and elder care accounts, and
transit accounts. Under these plans, people can contribute money in
pre-tax dollars (generally in the form of payroll deductions) and
your taxable income is reduced by the amount of your contributions.
Then when you submit qualifying receipts, the plan administrator or
trustee remits the money to you. There are restrictions with these
plans, but they can help you reduce your tax bill. Over the years,
we have participated in three of these programs. |
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| Automatic Pilot.
Automatic pilot means you enroll in regular payment programs for
saving and investing money. With today’s technology, you can elect
payroll deductions and automatic withdrawals from your checking and
savings account. Deposit these funds into an investment account and
help your money and wealth multiply. When you establish these
automatic payments, your money works for you every month. |
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| Monitor Your Results and Adapt.
The key to success and building wealth is to monitor your results.
Let’s be realistic: not everything works. But, when you make
(mostly) sound financial decisions, make a reasonable financial
plan, purchase solid investment products, buy quality and invest for
the long run, you stand an excellent chance to build the wealth you
desire and live the life you deserve. As your circumstances and
goals and objectives change over time, adjust your plan. Take
action. |
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| Disclaimer. The
information is designed to explain general financial planning and is
not meant to be a substitute for professional guidance. Be sure to
see your financial advisers before taking action. |
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