Saving

What do you think is the path to riches?  Most people believe that you have to win the lottery, inherit the money or have a super high-paid job like a CEO or celebrity. While having a high paying job makes getting to the million dollar mark easier, it isn’t the only factor.  It isn’t even a necessary factor.

If you earn $40,000 per year, working from age 25 to 65, you will earn $1.2 million dollars in your lifetime.  About two decades ago I was told by a financial planner, “It’s not what you earn.  It’s what you keep.”

Think about that for a minute.  There are plenty of lawyers and dentists who are broke.  They earn $143,000 annually and spend $142,000.  What is left over usually is used to maintain credit card bills and rich living.  If anyone with an income spends less than they earn (after taxes and expenses), they will be able to save money.  Save money and you’ll have it available to invest.  You will have it available when “once in a lifetime” opportunities come up.

Most Americans don’t have 3 months salary in the bank.  You should have a few years worth of salary in the bank.

If you’re thinking of buying a house and the bank approves you for a $250,000 loan.  Buy a $150,000 house instead.

Your car running good?  How about a detail instead of a new car payment.

Instead of going out to the movies and blowing $100 on a family of 4, how about rent some movies and cook some microwave popcorn.

Live within your means!

This is one characteristic that you will find with all self-made millionaires.  THEY LIVE WITHIN THEIR MEANS.

Being frugal makes it easier to live within your means.  But if you are serious about becoming wealthy, you have to change your mindset to a state where saving and accumulating money becomes normal.  You’ll never get rich spending what you take in.  You have to spend much less than you take in and then save and invest.

Becoming a millionaire isn’t easy!  If it was, everyone would be rich.  But if you are serious about becoming a millionaire, you have to start by saving.

More on this topic as this blog evolves.  But if you’ve decided to start on the path to millionaire status, begin to start saving your money.  Track your progress and find ways that you can save more.

The use of copyrighted material in this website is protected by the Fair Use Clause of the U.S. Copyright Act of 1976, which allows for the sharing of copyrighted materials for the purposes of commentary, criticism and education.  All shared material will be attributed to its owner and a link provided when available.  All other comment on this site may be reproduced with the author’s consent.  Please source any references or quotes of this website to: http://www.my1stmillion.net

On being frugal

There are several disciplines that must be mastered in order to become wealthy.  Aside from inheriting money or winning the lottery, these steps are crucial and failure to master them most assuredly makes wealth growth nearly impossible.  In order to grow your wealth you must increase your income, manage and grow your investments, manage your expenses, and manage or eliminate your debt.  We’ll talk about income, investments and debt at a later time but for now, let us focus on managing expenses.  There is no more direct way to managing expenses than to just be plain frugal.

I get grief from my friends all the time about being a “tightwad,” being “cheap,” and they even nicknamed me “Jew.”  Now before I get a rash of hate-mail for being anti-semetic, let me just say that I take the Jew nickname as a compliment.  Let’s face it, per capita, Jews are the most wealthy people on the planet.  Why is this?  It is because they respect money and they teach that respect to their children.  All of my Jewish friends have told me the stories of being scolded by their parents for leaving $.35 cents in change on their dresser drawer at the end of the day.  “Respect that money, that isn’t how I raised you, put that money away.”  Quite to the contrary, most Gentile families criticize you if you don’t spend outside of your means, calling you cheap.

Well, lets just look at the results.  Being frugal with your $ = long term wealth creation as demonstrated by, not only Jewish families but also many in the Asian community, Armenians and even the American Scottish.  It may not seem like much, $.35, but added each day, over 10 years, when invested wisely, those pennies add up to dollars and then to thousands of dollars.

Now, I’m not talking about being “cheap,” wherein you sacrifice quality to save money.  I’m talking about getting good bargains, buying things on sale, spending within your financial situation and not overspending on silly things like tipping at restaurants.  My brother is notorious for tipping the wait-staff 25% for every meal.  He is an owner of a large corporation that does millions in business and I’d be surprised if he has $1,000 in the bank.  He also spends lavishly going out to dinner and to bars, on expensive cars and on gifts for his children.  I’m all for buying a nice Rolex watch or a Mercedes sedan, but only if you can afford it.  If you don’t already have a million bucks in the bank, if you have to borrow to afford it, guess what, you can’t afford it!

There is no way you will ever grow a million dollars if you are extravagantly spending money on things like this…

There is a lot of social pressure to “not act cheap” so much that people feel obliged to tip 20% or more at restaurants.  Didn’t tipping used to be 10%?  Then it went to 15% and now people are tipping 20-25% or more!  On a hundred dollar bill (not uncommon for a diner for two), you’re looking at an additional $25 for the tip!  Multiply that times twice a week and at the end of the year you’ve spent an extra thousand dollars!  Put that thousand dollars in a stock mutual fund and after ten years, you could have as much as $20,000!  Every time I tip 10% and sometimes 15% and I get that “look,” I just smile and think about that $20k in my bank account.

If you want to become wealthy, you have to be strong enough to ignore social convention and do what is right for you!  

Sometimes thinking of yourself first instead of other people (the waiter) is the difference between financial mediocrity and serious wealth generation.  Suppose you do cut back on tips and you do save $20k in the next decade.  You later hear that a house is up for sale because of some financial problems and you are able to step in and buy it at a discount.  Later, you sell the home and make an additional $50k profit.  This is how and why rich people get rich and stay rich – they have the financial means to take advantage of opportunities when they arise.  I bet deals pass you all the time and you don’t have the $ to take advantage of them.

Cut back on your extravagant spending now to have $ available for those “once in a lifetime” bargains that occur more often than you realize.

I have a colleague here at work, young, maybe in his 20′s.  He has a six-figure salary and he has no idea how to manage his money.  Last year he bought a Cadillac Escalade for $70k and put on $15k worth of rims and then bought two Breitling watches and a Rolex for an additional $25k.  Despite his six-figure salary, he is close to bankruptcy now.  Heaven forbid he should ever get laid off from work, he surely will be in bankruptcy court.  Meanwhile, banks are almost giving houses away to anyone with a serious down payment.  With the money that he spent on these luxury items, he could have easily bought four houses in the Texas area netting two thousand dollars a month in rent.

I made a deal with myself – when my account hit $750,000, I would buy an Omega watch to reward myself.  I told myself that when I hit a million, I’d buy a Rolex.  The photo at the top of this post is the watch that I’m going to buy.  But why haven’t I bought it yet?  Because I haven’t found the right deal.  Why do I want to spend $8-12k on a watch when I can find someone who spent outside of their paycheck, ran into financial trouble and now they’re selling theirs at a discount.  I’ve seen watches like this sell for as low as $3,800.  I’ll be patient and get a good deal.

When you go to buy ANYTHING, shop for the best price.  Most people say, “Oh, its not worth the trouble.”  Isn’t it?  If you save $50 here, $100 there, over time, those bits add up (just like the Jewish kid’s $.35 cents) and eventually, you’ll see a once in a lifetime deal and you’ll have the means to capitalize on it.

In my case, I worked and saved hard and when the 2008 stock market crash happened, I had a few hundred thousand in the bank.  I loaded up on stocks and in 2009/2010 I realized about $400,000 in stock gains.  If I hadn’t been frugal, hadn’t saved that money, I would have missed out on the best stock-buying opportunity of our generation.

When someone looks “down” at you for leaving a moderate tip, turn it around on them and tell them that to do otherwise is foolish and fiscally irresponsible.

Your bank account will thank you in the long run!

The use of copyrighted material in this website is protected by the Fair Use Clause of the U.S. Copyright Act of 1976, which allows for the sharing of copyrighted materials for the purposes of commentary, criticism and education.  All shared material will be attributed to its owner and a link provided when available.  All other comment on this site may be reproduced with the author’s consent.  Please source any references or quotes of this website to: http://www.my1stmillion.net

Think and Grow Rich

Probably the most profound “self-help” book ever written.  I first read this book nearly two decades ago and it finally paid off.  I can confidently say that my success in breaking a million dollars wouldn’t have been possible if I hadn’t read this book.

Authored by Napoleon Hill in the 1930′s this book is the original “get-rich” book.  But unlike so many of the fads that have come and gone over the decades, this book still delivers.  I would bet that most of the financial self-help books are spin-offs of this book.  Napoleon Hill wanted to know what made newly-rich people different from “ordinary” people.  He went around and interviewed people like Mellon, Carnegie, Edison, Vanderbilt and catalogued what they all had in common.  He found that they all had similar characteristics, recorded them and then set out to try them himself.

Indeed, Napoleon Hill did become rich and proved that the method that he recorded worked.  He does not take credit for the method – he only recorded what he learned from the moguls of industry and finance.

If you don’t have a copy, here is a link where you can download a free copy to be read on your Kindle, iPhone, computer or any other electronic device.

Think and Grow Rich by Napoleon Hill

Reading this book is a must read for anyone who desires financial independence.  Since it is free – and proven, there is NO EXCUSE not to read it.  I’m currently re-reading it again – this is my 8th or 9th read.  I’m reading it to glean ideas for my 2nd million.

I can vouch for this book – it worked for me, it can work for you!

The use of copyrighted material in this website is protected by the Fair Use Clause of the U.S. Copyright Act of 1976, which allows for the sharing of copyrighted materials for the purposes of commentary, criticism and education.  All shared material will be attributed to its owner and a link provided when available.  All other comment on this site may be reproduced with the author’s consent.  Please source any references or quotes of this website to: http://www.my1stmillion.net

How Rich People Think

Now that I’ve “made it” to a significant financial milestone – one that the vast majority of Americans will never see, I can confidently say with some experience that this article is right on the nose.  I just saw this on Yahoo Finance last week and thought that it would make a superb post.  In this article, the author interviews some rich folks and looks at how they think compared to poor folks.  Some of the answers I already knew but some surprised me.

Have a look at this list of 21 differences between how Rich and Poor think and ask yourself how do you think?  If you’re answers match the poor folks, it is likely a time to adjust your thinking.

By Mandi Woodruff | Business Insider – Tue, Sep 4, 2012 10:50 AM EDT

World’s richest woman Gina Rinehart is enduring a media firestorm over an article in which she takes the “jealous” middle class to task for “drinking, or smoking and socializing” rather than working to earn their own fortune.

What if she has a point?

Steve Siebold, author of “How Rich People Think,” spent nearly three decades interviewing millionaires around the world to find out what separates them from everyone else.  It had little to do with money itself, he told Business Insider. It was about their mentality.

“[The middle class] tells people to be happy with what they have,” he said. “And on the whole, most people are steeped in fear when it comes to money.”  Average people think MONEY is the root of all evil. Rich people believe POVERTY is the root of all evil.

“The average person has been brainwashed to believe rich people are lucky or dishonest,” Siebold writes.  That’s why there’s a certain shame that comes along with “getting rich” in lower-income communities.  “The world class knows that while having money doesn’t guarantee happiness, it does make your life easier and more enjoyable.”

2. Average people think selfishness is a vice. Rich people think selfishness is a virtue.  “The rich go out there and try to make themselves happy. They don’t try to pretend to save the world,” Siebold told Business Insider.

The problem is that middle class people see that as a negative––and it’s keeping them poor, he writes.  “If you’re not taking care of you, you’re not in a position to help anyone else. You can’t give what you don’t have.”  Average people have a lottery mentality. Rich people have an action mentality.

“While the masses are waiting to pick the right numbers and praying for prosperity, the great ones are solving problems,” Siebold writes.

“The hero [middle class people] are waiting for may be God, government, their boss or their spouse. It’s the average person’s level of thinking that breeds this approach to life and living while the clock keeps ticking away.”

4. Average people think the road to riches is paved with formal education. Rich people believe in acquiring specific knowledge.  “Many world-class performers have little formal education, and have amassed their wealth through the acquisition and subsequent sale of specific knowledge,” he writes.

“Meanwhile, the masses are convinced that master’s degrees and doctorates are the way to wealth, mostly because they are trapped in the linear line of thought that holds them back from higher levels of consciousness…The wealthy aren’t interested in the means, only the end.”

5. Average people long for the good old days. Rich people dream of the future.  “Self-made millionaires get rich because they’re willing to bet on themselves and project their dreams, goals and ideas into an unknown future,” Siebold writes.

“People who believe their best days are behind them rarely get rich, and often struggle with unhappiness and depression.”

6. Average people see money through the eyes of emotion. Rich people think about money logically.  “An ordinarily smart, well-educated and otherwise successful person can be instantly transformed into a fear-based, scarcity driven thinker whose greatest financial aspiration is to retire comfortably,” he writes.

“The world class sees money for what it is and what it’s not, through the eyes of logic. The great ones know money is a critical tool that presents options and opportunities.”

7. Average people earn money doing things they don’t love. Rich people follow their passion.  “To the average person, it looks like the rich are working all the time,” Siebold says. “But one of the smartest strategies of the world class is doing what they love and finding a way to get paid for it.”

On the other hand, middle class take jobs they don’t enjoy “because they need the money and they’ve been trained in school and conditioned by society to live in a linear thinking world that equates earning money with physical or mental effort.”

8. Average people set low expectations so they’re never disappointed. Rich people are up for the challenge.

“Psychologists and other mental health experts often advise people to set low expectations for their life to ensure they are not disappointed,” Siebold writes.

“No one would ever strike it rich and live their dreams without huge expectations.”

9. Average people believe you have to DO something to get rich. Rich people believe you have to BE something to get rich.  “That’s why people like Donald Trump go from millionaire to nine billion dollars in debt and come back richer than ever,” he writes.

“While the masses are fixated on the doing and the immediate results of their actions, the great ones are learning and growing from every experience, whether it’s a success or a failure, knowing their true reward is becoming a human success machine that eventually produces outstanding results.”

10. Average people believe you need money to make money. Rich people use other people’s money.  Linear thought might tell people to make money in order to earn more, but Siebold says the rich aren’t afraid to fund their future from other people’s pockets.

“Rich people know not being solvent enough to personally afford something is not relevant. The real question is, ‘Is this worth buying, investing in, or pursuing?’” he writes.

11. Average people believe the markets are driven by logic and strategy. Rich people know they’re driven by emotion and greed.  Investing successfully in the stock market isn’t just about a fancy math formula.  “The rich know that the primary emotions that drive financial markets are fear and greed, and they factor this into all trades and trends they observe,” Siebold writes.

“This knowledge of human nature and its overlapping impact on trading give them strategic advantage in building greater wealth through leverage.”

12. Average people live beyond their means. Rich people live below theirs.  “Here’s how to live below your means and tap into the secret wealthy people have used for centuries: Get rich so you can afford to,” he writes.

“The rich live below their means, not because they’re so savvy, but because they make so much money that they can afford to live like royalty while still having a king’s ransom socked away for the future.”

13. Average people teach their children how to survive. Rich people teach their kids to get rich.  Rich parents teach their kids from an early age about the world of “haves” and “have-nots,” Siebold says. Even he admits many people have argued that he’s supporting the idea of elitism.

He disagrees.

“[People] say parents are teaching their kids to look down on the masses because they’re poor. This isn’t true,” he writes. “What they’re teaching their kids is to see the world through the eyes of objective reality––the way society really is.”

If children understand wealth early on, they’ll be more likely to strive for it later in life.

14. Average people let money stress them out. Rich people find peace of mind in wealth.  The reason wealthy people earn more wealth is that they’re not afraid to admit that money can solve most problems, Siebold says.

“[The middle class] sees money as a never-ending necessary evil that must be endured as part of life. The world class sees money as the great liberator, and with enough of it, they are able to purchase financial peace of mind.”

15. Average people would rather be entertained than educated. Rich people would rather be educated than entertained.  While the rich don’t put much stock in furthering wealth through formal education, they appreciate the power of learning long after college is over, Siebold says.

“Walk into a wealthy person’s home and one of the first things you’ll see is an extensive library of books they’ve used to educate themselves on how to become more successful,” he writes.

“The middle class reads novels, tabloids and entertainment magazines.”

16. Average people think rich people are snobs. Rich people just want to surround themselves with like-minded people.  The negative money mentality poisoning the middle class is what keeps the rich hanging out with the rich, he says.

“[Rich people] can’t afford the messages of doom and gloom,” he writes. “This is often misinterpreted by the masses as snobbery.  Labeling the world class as snobs is another way the middle class finds to feel better bout themselves and their chosen path of mediocrity.”

17. Average people focus on saving. Rich people focus on earning.  Siebold theorizes that the wealthy focus on what they’ll gain by taking risks, rather than how to save what they have.  “The masses are so focused on clipping coupons and living frugally they miss major opportunities,” he writes.

“Even in the midst of a cash flow crisis, the rich reject the nickle and dime thinking of the masses. They are the masters of focusing their mental energy where it belongs: on the big money.”

18. Average people play it safe with money. Rich people know when to take risks.  “Leverage is the watchword of the rich,” Siebold writes.

“Every investor loses money on occasion, but the world class knows no matter what happens, they will aways be able to earn more.”

19. Average people love to be comfortable. Rich people find comfort in uncertainty.  For the most part, it takes guts to take the risks necessary to make it as a millionaire––a challenge most middle class thinkers aren’t comfortable living with.  “Physical, psychological, and emotional comfort is the primary goal of the middle class mindset,” Siebold writes.

World class thinkers learn early on that becoming a millionaire isn’t easy and the need for comfort can be devastating. They learn to be comfortable while operating in a state of ongoing uncertainty.”

20. Average people never make the connection between money and health. Rich people know money can save your life.  While the middle class squabbles over the virtues of Obamacare and their company’s health plan, the super wealthy are enrolled in a super elite “boutique medical care” association, Siebold says.

“They pay a substantial yearly membership fee that guarantees them 24-hour access to a private physician who only serves a small group of members,” he writes.  “Some wealthy neighborhoods have implemented this strategy and even require the physician to live in the neighborhood.”

21. Average people believe they must choose between a great family and being rich. Rich people know you can have it all.  The idea the wealth must come at the expense of family time is nothing but a “cop-out”, Siebold says.

“The masses have been brainwashed to believe it’s an either/or equation,” he writes. “The rich know you can have anything you want if you approach the challenge with a mindset rooted in love and abundance.”

From Steve Siebold, author of “How Rich People Think.”

sourced at Yahoo Finance

The use of copyrighted material in this website is protected by the Fair Use Clause of the U.S. Copyright Act of 1976, which allows for the sharing of copyrighted materials for the purposes of commentary, criticism and education.  All shared material will be attributed to its owner and a link provided when available.  All other comment on this site may be reproduced with the author’s consent.  Please source any references or quotes of this website to: http://www.my1stmillion.net

 

So you want to be rich?

It seems everyone’s dream is to someday be “rich.”  But what most people don’t know, is how to get there.

Now, whether or not having a million bucks in the bank is “rich” or not is debatable as inflation has eroded the value of the dollar.  I was recently forwarded an article that says that the “new rich” is $3.8 million.  Well, I can say this.  Once you have a million bucks, it is a lot easier to get your second million.

Why is that?  Accumulating wealth is difficult.  But once you have wealth, if invested well and “left alone,” wealth will grow.  Eventually, the money that your savings earns is more than your job pays.  If you are frugal and wise, getting “rich” in your lifetime is not beyond reason.

Over the next weeks and months I plan to share my story of how I accumulated a million dollars and offer advice on how you can too.  I also plan to offer advice on investing, getting out of debt, on saving money and on changing your mindset.

Welcome to this site – I hope it is of some use to you.

The use of copyrighted material in this website is protected by the Fair Use Clause of the U.S. Copyright Act of 1976, which allows for the sharing of copyrighted materials for the purposes of commentary, criticism and education.  All shared material will be attributed to its owner and a link provided when available.  All other comment on this site may be reproduced with the author’s consent.  Please source any references or quotes of this website to: http://www.my1stmillion.net