Category Archives: Financial Independence

financial freedom

College, Credit Cards, Financial Freedom, Retirement, Saving, Wealth

How I went from $5k to a six-figure 401(k) in 6 years

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“It’s not your salary that makes you rich, it’s your spending habits.” ― Charles A. Jaffe

It seems like every other day I read about some new 401(k) millionaire.

I think that’s really great, but you know what I always think about when I hear about newly minted 401(k) millionaires; I think how that money is all on paper only. You cannot access those funds without cashing out. Making this investment illiquid.

There is nothing wrong with that except if you need or want the money now to spend or invest. Tapping a retirement account before age 59 ½ comes with a 10% penalty and a 25% income tax rate. Ouch!

Therefore, I focus on earning more, saving more, and investing more all at the same time.

However, years ago I thought to myself why not also focus on getting a million in investable assets.

That’s when I set about focusing on what I could do to get to $1 million in my retirement account.

After doing some research, I found that millionaires did the following:

  1. Invest at least 20% of their income
  2. Spend less than they earn
  3. Read about finance

So, then I determined that I would have to make some sacrifices, if my goal was to get to $1 million.

First, I looked at what it would take to get there.

I learned that a $100,000 could turn into $1 million in 30 years at an 8% rate of return or higher and that is a great return on investment (ROI). Since, the stock market has averaged a return of 9.8% over 90 years from 1926-2016, then I figure 8% ROI is not an unrealistic percentage. And that is without adding another dime to your portfolio.

Imagine what life would be like if you no longer had to contribute to a 401(k). Pretty sweet. All that money now comes back to you and you can put it in other places such as a college fund, real estate, or seed money to start a business.

Now, I am not saying not to continue investing. Especially, if you get a match from your employer. That’s free money. Don’t give that up. It’s just good to have and know your options. Just FYI, I am still investing in my retirement accounts.

This is how I went from $5k to five zeroes in retirement accounts in just over 5 years.

DECIDE TO GET TO SIX-FIGURES

Once I made the decision to get to $100k, then I had to figure out a way to do it.

I decided to stick to a conservative estimate of a 6% ROI. That would equate to investing $12,585 per year. That works out to $1,048.75 per month or $484.04 bi-weekly.

Salary of $35k-$100k means you would have to put in anywhere from approximately 13% to 36% of your income in investments to get this figure.

COMMIT TO SAVING

I had to then commit to the idea. That meant some belt tightening. I looked for ways to save. I cut anything that was not required for me to eat, sleep, or stay healthy. I know financial gurus say it is best to focus on earning. And while I agree, I also know it is easier to cut expenses than it is to earn more.  Therefore, these things had to go:

  • Cable
  • Subscriptions (magazines, books, etc.)
  • Buying clothes (waved bye-bye to this)
  • Vacations
  • Nail salon visits
  • Restaurant Meals (ate out less)
  • Movies
  • CD’s, DVD’s and books (rented from the local public library for free)

This freed up quite a bit of money. Anywhere from $200-300 per month. Yep, that went to saving.

Then I turned my attention toward my debt. I was paying about $800 per month to service debt. Yikes! Even though that included different kinds of consumer debt (personal loan, credit cards), it was still a huge monthly expense. So, I decided to make some changes.

I wanted to stop paying so much in interest. That money could go toward saving and investing after all. I figured I could either pay it off, see about getting the interest rates down or both.

I called up a couple lenders to see if they would lower my interest rate based on payment history and credit score. They said no. And here’s a word of caution: after calling one lender, my credit limit was lowered. That’s right. You have no say or control when you owe money. The lender has all the power. Therefore, it is your job to pay off your debt so that you can have all the power.

Your credit limit is very important because this also affects your credit score.

Say you have a $10k credit limit and you owe $1k. That is a 10% credit usage. Very low. However, if your credit limit is slashed by more than half to $2k, then that $1k balance becomes a 50% credit usage. This would increase your debt ratio and lower your credit score.

And we all know how important your credit score is. The credit bureaus – Experian, Equifax, and Transunion – hold a lot of weight in the eyes of lenders. If you have a low credit score, it can affect whether or not you get a job, are able to buy a home or even a car. Credit scores below 620 usually mean you pay higher interest rates. On a mortgage, that could mean the difference of paying $10,000 to $100,000 in interest! No pair of name brand jeans, destination wedding, or fancy exotic vacation is worth a $100,000 dollars!

Going back to saving on credit interest, I had to figure out another route. Therefore, I did two things. One, I paid off all the low balance credit cards. Any lender I owed less than $500, I paid them off. Then, went after the ones under $1k and so on until I only owed two lenders.

That’s when I used the 0% balance transfer deals I had. I was able to put $10k at 0% for 18 months and another $5k at 0% for 12 months.

I also paid off my $20k personal loan! I had previously paid off my car loan. See my post Outrageous loan terms for Porsche that even the rich can’t justify about how and when I paid off my car!

I went from spending $1k to $1,100 per month to spending $500 and saving $600 more per month!

MAKE YOUR MONEY WORK AS HARD FOR YOU AS YOU WORK FOR IT

I was able to put that in my retirement accounts. I went from investing $450 a month with an employer match to investing $1,050 to get to the required $12,585 annually needed for $100,000.

Once I hit this goal I started looking for other ways to save. Mentally, it was a great feeling to know if I never invested another dime, that I could still end up a 401(k) millionaire by just letting my money sit and work for me while I was sleeping.

Then, I turned my attention toward other goals such as paying off all debt, building a 12-month emergency fund, and building capital to purchase an income property.

I also started saving more and looking for higher rate saving accounts because it’s not that the sky is falling (shout out to chicken little); I just need a better saving rate because inflation is coming!

Thus, the purpose you need to invest. You need assets that will beat inflation, which is anywhere from 2-3% per year.

I prefer to pay off debt first. All of it as fast as you can. If not, then prioritize.

If you know that your credit cards are going to charge an Annual Percentage Rate (APR) of 11.99 to 29.99%, then this has to go.

If your student loans and mortgage are charging you 7% or higher, then you may want to focus on getting the amounts down to under $50,00 or $100,000 respectively. That way you pay less interest over the life of the loan.

If possible, I say pay them all off before age 50. Then all your money is yours in your golden years. If this is not feasible, like, say a 15-year mortgage, then you may want to focus on beefing up your savings and investing more if your loans are charging 5% or less.

Either way, automate your savings. Can’t spend what you can’t see. Pay yourself first. You do this by putting money aside in savings as soon as it comes in and not the other way around. Paying bills first and then saving what is left is a recipe for disaster. Try to aim to invest 20%, save 30%, and use the other 50% for living expenses. If you can aim to save 40-50%, and then you can invest more money to get out of the rat race sooner.

Investing 20% or more in retirement and saving 30-50% would mean you are saving and investing 50-70% of your income. At a 50% savings rate, you could turn every dollar into two. At a 10% compound interest savings rate, you could double your money every 7 years! Now that’s what I’m talking about. Turn one dollar into more.

Remember this: It’s not what you make, it’s what you keep that will make you wealthy.

Celebrities and Money, College, Credit Cards, Financial Independence, Retirement, Saving

Meet an orthodontist with $1 million in student loan debt

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Unless you have not been reading headline making news lately, then you have heard of the man who ran up a tab of over a million dollars to become an orthodontist. It was featured in the Wall Street Journal and has attracted a lot of attention. His name is Dr. Mike Meru. He owes approximately $1,060,945.42 as of the reporting of the article in May 2018. There are only 101 people with $1 million in student loan debt. He is one of those people. Here is how this went down.

HOW TO GO FROM DEBT FREE TO OWING $1M IN 13 YEARS

Mr. Meru grew up in California. He has two brothers and is the eldest of the three. His parents said they would help pay for college. He got through undergrad with the help of his parents and by working through school. He graduated in 2005 from Brigham Young debt-free.

From there he decided to go to dental school.

Before we go any further in this story, I want you readers to know that becoming a doctor is incredibly expensive. It is not uncommon to have medical students be in debt for hundreds of thousands of dollars. Anywhere from $200,000-300,000 in medical school debt is their reality.  Dental school is also one of the most expensive programs and can cost upwards of $70,000 or more per year.

Getting back to Mr. Meru, he was informed that going to dental school would cost anywhere from a price tag of $400,000-$450,000 in student loans plus interest.

For me, this is a red flag. Even if you can earn a six-figure salary as a doctor, I am risk-averse and would be turned away by this eye-popping amount. However, if your goal is to be a doctor and be of help and in service to others, then this is what the cost will be.

FROM $0 IN STUDENT LOANS TO $340,000 IN FOUR YEARS

He then chooses one of the most prestigious institutions for dentistry: University of Southern California.  This is what he paid for four years of school from 2005-2009:

Year one at end he owed: $43,000

Year two at end he owed: $115,000

Year three at end he owed: $230,000

Year four at end he owed: $340,000

Dr. Meru has now finished dental school. He owes over a quarter of a million dollars in debt within four years of graduating from college debt-free.

Keep in mind that college tuition goes up every year around the country. USC is no exception. In addition, interest rates have gone up on student loans as well. In the WSJ article, his loans were at various interest rates throughout his time at school. Also, tuition increases at USC would go for about 6%. This is a huge amount of money. For instance, a 6% increase over 3 years would be the equivalent of an 18% increase in tuition by overall from start to finish.

The cost of college is going up faster than the cost of inflation. Generally, inflation goes up by about 3% annually increasing the costs of goods and services. Therefore, if it cost a dollar ($1.00) last year it will now cost $1.03 this year. Imagine paying 6% on $50,000 and then 6% on 53,000 and so on, all the while you are also accruing interest on this borrowed amount.

You are getting hit with a two combo even worse than Mike Tyson could ever do.

First, you get hit with tuition increases of 6% in this case. Second, you pay interest on the loans you take out of approximately $50,000 per year. The compound interest is brutal.

In the article, it states that Dr. Meru found his calling as orthodontics changed his life as a teenager. However, the one caveat he did not take into consideration: inflation. If you want to learn more about inflation, read my article Money Lessons I learned from Scrooge McDuck. The cost of becoming a doctor 20-25 years ago was cheaper then as it is way more expensive now.

This is not the first time I have seen people take bets like this on their education.

If you were to do some research, you will find that 50 plus years ago education was pretty reasonable and in many cases more  affordable. I will provide one such case below.

In the book, Generation Debt by Anya Kamenetz, a Yallie that was born toward the end of the 1970’s, stated in her book that her parents old college professors were in shock at the sticker price of Yale over a seven year time period which had risen- from $30,000 to almost $39,000. Her own father, who attended Yale on a scholarship, had appropriately asked the justification of the tuition increases. This considering when he went there the price was…wait for it…$3,000. That means within one generation tuition has increased $1,000% or to roughly 10 times the cost.

The absolute saddest and funniest part of the book, in my opinion, was at the high school graduation brunch of her younger sister. Her parents also wanted her sister to go to Yale, but cited cost concerns and rightly so. The speaker said of the 180 graduates they would divide $18 million in scholarships- that’ll just about get them to Thanksgiving. That was putting it mildly.

The problem is that education is not an equalizer. Although, there is nothing wrong with getting a good education. And going to a great school with high-quality education is awesome; some people may have to simply understand that it may not be the best option for them individually.

The jury is still out on the value of an education. Sure, they let you know on college brochures and in the media that a college degree can net you more than $1 million more in lifetime income, but in Dr. Meru’s case did it also say that if you flip a coin, it could be the opposite and you could owe $1 million dollars? I don’t think so.

Many employers are paying in wages nowhere near the cost of college.

I have read that some places cannot put a dollar amount on how much to pay their employees for their degree, but colleges have put a price on it as USC cost Dr. Meru over $400k.

FROM $340,000 IN STUDENT LOANS TO $601,506 IN THREE YEARS

You would think by finishing dental school that his education was done and over with. Alas, then there is residency, which is training for doctors. However, for dental specialists this costs too. Many doctors are paid while in residency, but Dr. Meru must continue to pay for training for an additional three years FROM 2009-2012. This would increase his debt to over $600,000.

FROM $601,506 IN STUDENT LOANS TO $1,060,945.42 IN SIX YEARS

Pay close attention here because things move really quickly.

He consolidates after finishing all his education and training. He then owes $724,817 by 2012-2013. This includes in interest and principal as a consolidation not only changes your repayment terms, interest rate, and payment amount but interest can capitalize. Capitalization is what makes student loans such a slippery slope. It makes you owe interest on top of interest making it harder to get it paid off.

From there he continues to accrue interest and owes $882,300 by 2015.

Within 3 years, interest continues and grows the debt to $1,060,945.42 by 2018.

How is this even possible? In 2005, Congress created Grad PLUS loans that removed loan limits and allows student to borrow for every expense from tuition to rent and living expenses. Dangerous.

He is now making monthly payments of $1,589.97. He has two daughters, a wife, a $400,000 mortgage, a $225,000 salary and is accruing $130 per day in interest on his loans, which is $3,900 per month and $47,000 per year.

If not for Income-based repayment, he would have to pay $10,541.91 per month. Instead, he pays about $1,600. This does not pay all the interest that is accruing and does not even touch his principal. Within 20 years he will owe $2 million. If forgiven, he will owe $700,000 in income taxes. Currently, his take-home pay after income taxes is $13,333 per month. That means if he pays the $10k monthly payment, he would have his debt paid off in about 13 years, but bring home less than $3,000 per month.

 WHY SO MUCH DEBT?

Keep in mind that it is mostly graduate students that end up in the most debt. With the cost of graduate school (2-4 years) easily topping $20,000 or more per year, it can dwarf undergraduate costs. Over 20 years ago no undergrad or graduate students owed six-figures of student loan debt. Today, over 2.5 million of graduate students do.

After reading about Dr. Meru’s story, I feel that there is a serious problem with the funding of higher education. I want people to be doing the opposite of owing interest on a $1 million and instead be earning interest on this amount of money.

I want people to have the trifecta of retirement funds- pension or 401(k), savings, social security. Over a 30 year career you want to have a paid for home, 25 times your annual income in a retirement account, and be able to get social security or have at least two forms of income to supplement your savings.

In the article, his wife said there are a few things that are OK to go into debt for: a home, an automobile, an education. I have to disagree. I say if you can avoid all debt, then do it. Pay cash for all your purchases. For a car you need one loan. Same goes for a home. However, her husband needed 50 loans to fund his education.

If you are unsure why or how you will pay cash for all purchases, let the advice of these millionaires be your guide.

Mark Cuban, billionaire owner of the Mavericks, says if you use a credit card, then you do not want to be rich.

Kevin O’Leary, shark tank entrepreneur, says all debt is evil.

David Bach, financial advisor and author of the Automatic Millionaire, says all debt is bad debt.

I rest my case.

Celebrities and Money, Financial Freedom, Financial Independence, Self-Made Millionaires

3 Rich Habits of Millionaires

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After doing some research on millionaires and billionaires, I have noticed some recurring attributes among them, which include: reading, pursuing a passion, and setting goals.

READ

“The more that you read, the more things you will know. The more that you learn, the more places you’ll go.”

― Dr. Seuss, I Can Read With My Eyes Shut!

Many of the affluent read daily or often. They seem to set aside at least 30 minutes a day for reading. This greatly improves their knowledge of their products, brands, and businesses. When you know what drives the market, then it makes it easier to compete with everyone else. I even read that Marilyn Monroe was also said to be a voracious reader.

I know in my life reading has helped me a great deal. I was able to do better in school, make better informed personal and professional decisions, and increase my investment knowledge.

One of the most successful investors of all time, Warren Buffet, says he reads every day.  Buffet typically spends 80% of his day reading. Here are some quotes from interviews he has done over the years in regards to how to become successful.

THE KEY TO SUCCESS

The CEO of Berkshire Hathaway, when asked once about the key to success, pointed to a stack of books and said, “Read 500 pages like this every day. That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”

WHAT BUFFET READS?

Warren Buffet starts his days with an assortment of national and local news. The billionaire investor tells CNBC he reads the Wall Street Journal, the Financial Times, the New York Times, USA Today, the Omaha World-Herald, and the American Banker in the mornings.

Even though Buffet reads tremendously, it would mean nothing if he did not retain what he has read. Buffets says that knowledge builds up over time. Here are some tips to remember what you read – take notes, skim the text, read out load – are just a few things you can do to retain what you read.

PURSUE YOUR PASSION OR GIFT

“To give anything less than your best, is to sacrifice the gift.” – Steve Prefontaine

I have always had an affinity for writing. I write pretty much every day. My goals are that my writing helps to plant the seed that inspire people, motivate them, and make them feel good about themselves. Writing about finances is the cherry on top of the sundae for me. And I give it everything I’ve got. No less. When I’m sick. I write. When I’m tired. I write. When I was down to my last $2. Still wrote. I would write down my thoughts, hopes, dreams, and goals. I have crossed off at least 5 items on my 10 year to do list. If it can work for me and countless others, then I know it can for you.

Dreams can come true. You just have to believe and lay down the groundwork. There is no builder of a home that would not first lay down the foundation and then build up. The same goes for life. You do not start in at the top. Otherwise, if you do, you are more likely to have created a house of cards, that can easily come tumbling down.  Like the three little pigs, you want bricks and not sticks or straw. You want something that is concrete. Construct your life blueprint on building or creating something that is solid.

If you can, find a mentor. Mentors help guide and keep people on the right path to succeed. I suggest finding someone who has already done what you want to do successfully and then asking them for advice. You can also read their books or attend their workshops. Either way study their success and see if you can imitate it.

SET GOALS

“Set your goals high, and don’t stop till you get there.” – Bo Jackson

The best advice I have ever read was to write down your goals. I have heard this from numerous celebrities including Beyoncé. She said she would write down her goals; and that she wanted to go platinum and sell a million records. Well, she wanted to be financially secure. Well, she can scratch that off her checklist. Simply heed these words: Write it down.

When you set goals and pursue your passion it is a winning combination for success. Instead of watching the clock, you just keep on working. There are too many hours on the clock when you do something you detest, but no enough hours in the day when you do something you love.

Forget the naysayers. They are not you and you are not them.  Focus your energy on doing what you enjoy putting your effort into. The energy you use to pursue your passion or anything that you do well is never wasted.  When you can focus and limit or ignore distractions, you are well on your way toward success.

Automobiles, Financial Freedom

Outrageous Loan Terms for Porsche that even the Rich can’t Justify

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Want to finance an exotic car? No sweat. It will only cost you $157,944.33.

That amount is based on a Porsche that costs $144,750 with loan terms of 144 months, with a 3.3% interest rate, and $14,475 down payment.

Yes, you read that right. Financing for 144 months is the equivalent of 12 years! Just ridiculous.

Especially, considering that a car depreciates in value the minute you take it off the lot.

For example, a $100k BMW 6 Series after five years will likely only be worth $40,000 in resale value. Therefore, over that time period you have paid over $70k. You would still owe approximately the same amount as the current resale value and it would be worth even less in a few more years.

What made me look into this was listening to talk on a radio show I heard about being able to finance a $100k Porsche over 8 years. I was like that can’t be real. Oh, but it is. The people on the radio said that people were doing it and taking out these loans. I was like that’s insane. You can buy houses in different countries all over the world or in certain parts of the United States for that.

If you are so set on having an exotic vehicle, then I think the best course of action is paying cash in the form of a cashier’s check. If you have to finance a $100k car, then that sounds like a red flag that you can’t afford it. Instead of spending $100k on a car, why not invest it? Over a period of 12 years with a 7% ROI you could have $272,641 in your 401(k). Even without investing another dime, you could be a millionaire in about 20 years. Is that car worth a million dollars? I don’t think so.

Who are these people that want to finance a $100k car? The only one I have ever seen was on a Canadian television show called Til Debt Do Us Part hosted by finance writer Gail Vaz-Oxlade. In one episode, a married couple had accumulated a significant amount of debt, but what made this episode stand out was the fact that the wife wanted a very fancy car and was thinking of financing over $100k to get it. Mind you, the couple had kids and debt, so where was this money coming from?

Here is a sample of how the show went on to explain to viewers how people are spending and where the money comes from: credit. If you want to order Gail Vaz-Oxlade or other financial books, then look to the side or go to the top of my blog page and click the Amazon banner link.

Who are these companies that are likely to finance these amounts? BMW Financial, Audi Financial, Porsche Financial, and the like. See the screen shot.

And not only do these companies allow you to finance, but expect a down payment on cars with six-figure price tags.

I have had my car for more than a decade. Actually, it has been 15 years. My car has been very reliable. Once I paid it off I decided I did not want another car note.  That was almost 10 years ago. Here is a snapshot below of my last payment. It may become my screensaver.

I have been able to do so much without having that payment hanging over my head. I decided to start paying off my credit card debt, invest more, get Lasik, join a gym, and get another degree. Basically, I invested in myself. I do not regret not purchasing a new car for one second.

Here is my take on it. Why stretch yourself financially, for a car you desire? Ask yourself if you would still be willing to do that, if the most popular car in the world among the money elite was a Honda? Financially savvy folks know that a fancy set of wheels is pricey in more ways than one.

I was told that a rapper was discussing online about owning a Bugatti or some other luxury vehicle that has three radiators. If one goes down, it costs $90k to replace. Gulp! That’s a hard pill or repair bill to swallow.

I heard an NBA player say that he knew people that would buy Bentley’s, but then would stop driving them because they were not meant for everyday driving. The wear and tear was ridiculous.  Owners were shelling out tens of thousands of dollars on maintenance. Don’t believe me. I read an article by Forbes about unreliable luxury cars.  Apparently, I am not the only one who has noticed that every luxury car that glitters isn’t gold, but merely sold to those willing to fork over their hard earned cash.

That means you basically are driving a house on wheels for the amount you paid. Then after all that, still have to worry about thousands of dollars in repairs. And since this isn’t your run of the mill car, you have to go to specific repair shops. Usually, this means repeated trips to the dealership. Who has time for that?

Luxury cars seem not only to come with a high price tag, but also lots of headaches. I say this: if you can afford the monthly payments, maintenance, and can hire a mechanic or chauffeur to repair or take your car in for service at a moment’s notice, then you can get the car. If not, you’re better off sticking to something you can take to Jiffy Lube.

Celebrities and Money, Financial Freedom, Financial Independence, Self-Made Millionaires, Wealth

The six ways to get rich

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“What’s keeping you from being rich? In most cases, it’s simply a lack of belief. In order to become rich, you must believe you can do it, and you must take the actions necessary to achieve your goal.” —Suze Orman

Sure, there are lots of ways to get rich, but they all fall into one of these six categories as there are only six ways to actually get rich.

The six ways to get rich are:

  • Capitalize on a unique skill or talent.
  • Marry rich.
  • Inherit money.
  • Own a business.
  • Take calculated risks and get lucky.
  • Spend less than you earn and invest wisely.

Let’s explore each category.

CAPITALIZE ON TALENT

Don’t make money your goal. Instead, pursue the things you love doing and then do them so well that people can’t take their eyes off of you.” ― Maya Angelou.

Become an expert in one area or niche and exploit it. Dominate that field. And never stop growing.

If you read my post on Beyoncé, you will notice that she started young, developed her craft, and expanded her expertise. She not only sings, but dances, endorses products, started businesses, and writes songs. She owns what she does. Everything from trademarks – Blue Ivy and Ivy Park – to owning a music streaming service. Put it simply, she dominates in her field.

If you want to be the next J.K. Rowling or Stephen King, then you just have to start writing. J.K. Rowling famously said she was rejected at least 12 times before anyone would publish Harry Potter. Persistence and determination are vitally important if you want to succeed. And just FYI, it took her 7 years to write Harry Potter.

MARRY RICH

“Don’t you know that a man being rich is like a girl being pretty? You wouldn’t marry a girl just because she’s pretty, but my goodness, doesn’t it help?”

―Marilyn Monroe as Lorelei Lee in Gentlemen Prefer Blondes (1953)

Dating is all about introductions and proximity. It doesn’t matter if you swipe right on Tinder or meet at your family’s country club, you just have to get some face time. You can’t date who you can’t see or touch.

In my experience, men date and marry women who are in their vicinity or social circle. Therefore, if you are looking for a rich man, then you have to be where they are i.e., charity events, sports games, auction houses, doctoral seminars, or the like.

In addition, if you know where wealthy men tend to reside, then hey you can pack up and find a job there and frequent their haunts. Location, location, location baby.

People also tend to look for partners that are successful in their own right. You don’t necessarily have to be rich, but having some sort of talent or career outside of just being a wealthy mate’s plus one bodes well for you and your prospects of landing and keeping a partner. So, invest in yourself – get educated, cultured, learn opera, play piano, paint or learn another language – either way you have a skill.

Above all else, respect yourself. Have your own life, career, friends, family, and money. No one wants a loner that can barely make rent, they want someone who is open to people, new experiences, and can pick up the check.

Don’t agree. Well, how’s this for food for thought; Chrissy Teigen once responded to a mean tweet by telling someone she does not just spend someone else’s money, but in two words replied: “my money.” She also went on to note her Forbes ranking and that she is a best-selling cookbook author. She basically told people to chew on that – no pun intended. A very nice retort on her part and her equivalent of put that in your pipe and smoke it.

Ah, gotta love that Chrissy.

You have to admit it sure sounds better when you can list your own accomplishments.  Respect for self is attractive and shows confidence. And confidence is key.

INHERIT MONEY

I would rather make my name than inherit it. – William Makepeace Thackeray

Studies into the wealth of households have shown that most wealth today is now earned than inherited. In my experience, people truly appreciate and cherish that which they work and sweat for.

For example, when I was given gifts of money or other items I am usually losing or unable to tell you whom gave me the gift. The car in my driveway that I worked so hard for is still there 15 years later.

There are those that inherit their fortunes, but the saying goes that a fool and his money are soon parted. I suggest you get a career, get educated, and learn a craft to earn your own living. If you do inherit, then you can manage your money instead of squandering it.

OWN A BUSINESS

Only I can change my life. No one can do it for me. – Carol Burnett

Starting a business is what two-thirds of millionaires do. This lets you know that if you are successful and become rich, then most likely you will or do own a business at some point in your life.

I suggest determining what you are good at and then turning that into a business. Passion is great, but just because you are passionate about golf and want to be a pro golfer does not mean that is what you are good at or meant to do.

Also study up and get a mentor or work with people in the field you want to be in. Read books, attend seminars and save money. All businesses need capitol. If you can find a business to start with a low barrier to entry such as a food truck or blogging, then the better.

BIG RISKS FOR BIG REWARDS

“If you want big rewards, you gotta take big risks.” Jessica Biel as Tenley Parrish in Summer Catch (2001)

If you read my post, wealth comes from doing not luck, then you understand that from preparedness comes opportunity and hard work creates luck and success.

It is okay to take risks, but I prefer calculated ones. The ones where you do your research, study your results, learn from you’re mistakes or the ones of others and keep moving forward. Make that pro con list, watch videos, attend conferences or better yet, speak to those that have done or are doing what you long to do. If you’re going to risk it all, then best to know all the facts first.

SPEND LESS, SAVE AND INVEST OVER TIME

The formula for getting rich is this: spend < money earned

Simply put, spend less than you earn.

If you can do that, you have got a shot at getting rich.

For example, you can be a millionaire over time if you do the following:

  • Save $6,000 a month for 10 years getting a 6% return
  • Save $2,200 a month for 20 years getting a 6% return
  • Save $800 a month for 25 years getting an 8% return
  • Save $600 a month for 30 years getting an 8% return
  • Save $500 a month for 40 years getting a 6% return

The combinations can vary based on the amount of savings invested and the return on investment of compound interest. However, the bottom line is saving can earn you a fortune.

For those concerned with inflation, here is an inflation-adjusted. 25-year wealth accumulation chart.

Source: www.businessinsider.com

THE BOTTOM LINE

Ultimately, no matter what path you take if you partake in spending less than you earn and investing, over time you will become rich eventually.