Entries Tagged 'Wealth' ↓
August 17th, 2008 — Money, Personal Finance, Wealth
Good morning! How is everybody’s Sunday fairing? There were several amazing wins during the Olympics this past week. Don’t you agree? Two swim races at least with only one one-hundredth of a second margin from first and second place. Wow!
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July 27th, 2008 — Money, Personal Finance, Wealth
Welcome to a new edition of Sunday Money Madness where another portion of the financial blogosphere is illuminated. I found these stories to be worth while and interesting and they should make great weekend reading if you haven’t read them yet.
Thanks to the carnivals this week for including Rich Credit.
Be safe and have a great Sunday all.
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July 25th, 2008 — Book Review, Personal Finance, Wealth
Everyone loves a true rags to riches tale, and although we’ve had some with the dot com boom, there were few that echoed the stories of immigrants that moved to the big city with a pocket full of pennies and a dream. We were thrilled to read this book and discover that the American dream is still alive and well, and this modern day rags to riches story was not only heartwarming, but packed full of advice that everyone can take to heart.
The author was twenty two when he decided to live his dream of making a million dollars by the age of 30. This Georgia native packed up what little he had and headed off to New York City to make his fortune. His family was not exactly supportive of his wild ideas, but within a space of six years, they were amazed to find that Corey managed to get the job done.
What we liked best about this story was that Corey didn’t find his wealth by getting lucky, nor did he make tons of money in the tech world. He did it the old fashioned way, and worked the same 9-5 job for that entire six year period. He simply managed his money, found good investments and watched as the balance in the bank grew to seven figures.
You really get the feeling after reading this book that anyone, given the right mindset and drive, can become a millionaire. There are few books that are this inspirational and helpful on the market, and there is a lot that can be learned from this story. The author did a great job of telling his tale, and it feels more like a memoir than a dull tome about personal finance.
However, even though this reads like a heartwarming novel, there is an incredible amount of advice contained in these pages that the reader can put to immediate use. While not all of it may be attainable, such as buying and wearing only one pair of shoes a year, there are some tips that everyone can use.
One of the biggest failings keeping Americans from realizing their dreams of wealth is overspending. You’ll sure be able to look at your budget in a whole new way after reading through Corey’s Cheapskate Strategies. While these can be modified to reduce their overall severity, chances are if you do follow them, you’ll be able to put quite a bit of money aside.
Overall, there are few books that have this much merit in the personal finance genre and we highly recommend this book. While you may not be able to follow all of Corey’s advice, even a small portion of it will help you get on the road to realizing financial security. A big part of Corey’s success is due to the fact that he was willing to sacrifice quite a lot before he was thirty, but now, he’s pretty much set for life. That’s a pretty small trade off in the grand scheme of life.
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June 30th, 2008 — Investing, Money, Personal Finance, Wealth
Every day we hear success stories of those who made a killing in the markets, and at the same time, we hear about those who lost everything they owned in the markets. What makes one person succeed and another fail? While there are thousands of answers to this question, let’s focus on the fundamentals of smart investing. Granted, you can never invest without at least some risk, but there are ways that you can minimize that risk, make smart choices and become one of the success stories instead of one of the failures.
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Trust
First, there’s the premise of going with your gut. Our instincts are very powerful and usually do not lead us astray. Usually – but not always. Smart and successful investors learn to go with their guts, but they also learn to separate what their heads, hearts and guts are saying to find the answer they need. This isn’t some strange spirituality, it’s actually common sense. We can convince ourselves of almost anything, but it’s hard to get rid of that little pit in your stomach that is warning you.
In order to become a smart investor, you need to learn how to hone your gut instincts. Listen to that little voice that says, “Are you sure?” before automatically defaulting to what your head is telling you. This is the easiest way to save yourself a lot of trauma, but it’s only one of the components that you’ll need to become a smart investor. There are a few others that are just as important.
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Due Diligence
Next, you’ll need to learn how to research and do your own due diligence on an opportunity. The Internet has made this easier than ever and you can learn quite a few things with just a simple search. If you’re thinking about investing in a new company, do background searches on all of the principles. You’ll learn a lot about what they’ve done in the past and if they have been involved in anything untoward or overly risky. Check the company with the Better Business Bureau and see if other people have had issues with it in the past.
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Balance
Due diligence is the key to becoming a smart investor, but it’s not the only one. The last piece of information that will separate the success stories from the failures is that you need to know how to balance your risks. Would you put your entire family into a car and head them toward a cliff, trusting that the breaks will not fail? You should never put your home, family or livelihood in jeopardy with an investment, no matter how solid you think it may be. It’s just not worth it.
Smart investors learn how to combine all three of these keys into one main philosophy that keeps providing them with winners, over and over again. Your best bet is to start small to test your instincts. Never get in over your head and always remember your instincts.
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June 26th, 2008 — Budget, Debt, Diversification, Leverage, Money, Wealth, bad debt, good debt
On the surface, this seems like an oxymoron. How could you possibly use debt to create more money? It actually isn’t an oxymoron, but you’re going to need to change your perception of debt and classify into two different categories for this to make sense. There are many ways that going into debt can actually end up securing your future, just as there are many ways that going into debt will ruin your future. Let’s look at both to discover how to turn your debt into wealth.
First, let’s discuss the kind of debt that you are probably most familiar with. Bad debt is the kind of debt that most of us get into after overspending on things that we really don’t need. It’s easy to get caught up in commercialism and want to have all the things that we think we deserve. Many of try to live like millionaires on a small percentage of their budget. With poor management, debt quickly grows out of control and before long, we find out that we are in way over our heads. Bad debt is very common, especially among people who are just starting out and have yet to learn this very valuable lesson.
The second kind of debt is much different. This is the kind of debt that you use to invest in something. The first kind of good debt you’ll probably get into is your home. While it really doesn’t have many measurable returns, unless the property value increases, it does have emotional returns and serves as a good lesson in how using debt can help you get better off in the long run. Think of this as an introduction in how to use debt to grow wealth.
There are many ways that you can leverage your debt to start creating alternative streams of income. For example, let’s say that you are living paycheck to paycheck and you have the opportunity to invest in a stock that is destined for greatness. You may have a couple of bucks put aside, but it’s barely enough to buy one share. You can let this opportunity pass you by, or you can leverage debt to help you take advantage of this future stream of income.
What’s better – going into a little debt to reap big returns or spending the rest of your life wishing that you had the money way back when before that stock took off? Managed properly and used for the right reasons, debt is a very powerful tool. If you want to make money, you are going to have to have money. Unless you came into this world with a silver spoon and a trust fund, chances are you don’t have a lot of it just sitting around. That doesn’t mean that you can’t become wealthy.
By leveraging debt and using it well, you can easily achieve your dreams of greatness. Just make sure that you don’t overextend yourself or make bad decisions.
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June 16th, 2008 — Debt, Leverage, Money, Personal Finance, Stocks, Wealth
How many stories have we all heard about the entrepreneur that came to America with five cents and turned it into an empire? It’s stories like this that make us long for a piece of that American dream. We all wish that we could turn our nickels into big money, but most of us don’t know how to do it. The secret is using debt wisely to leverage more income producing streams. No one can turn five cents into five million dollars overnight, but by taking chances and finding ways to use debt smartly, you can become financially independent, just like the entrepreneurs of old.
The thread that binds all of these success stories together is that somewhere along the way, these entrepreneurs had to go into debt to make more money. Unless you’re Rumplestiltskin and know a way to spin straw into gold, you’re going to have to start taking chances. While it’s perfectly acceptable to put money aside every month or even put it into an interest bearing account, you’re going to nickel and dime yourself for years. You might be able to put aside a nice little nest egg, but what if you want to become really wealthy?
In order to accomplish that, you’re going to have to extend what you already have. It’s pretty frustrating to look at your checkbook and see the cold hard truth that your dreams of wealth are not panning out. It’s even tougher to spot a great opportunity, like a hot stock, and not have enough money to take advantage of it. However, there are ways that you can take advantage of that opportunity, even if you don’t have a lot of money in the bank.
Let’s say that you have the chance to purchase some shares right now. You don’t have the money on hand, but instead of giving up, you go to the bank and you get a loan for the money you need. You buy those shares and in five years, they’ve returned 500% of your initial investment. If you hadn’t taken that risk of going into a small amount of debt, you never would have been able to reap those rewards. Instead, you’d be muttering into your coffee as the news comes in on how well that stock you could have had is doing.
While most of us think of the word debt and blanch, when used properly and managed well, it is the key to becoming wealthy. Do you think billionaires spend their own money when they want to buy a new building? No, that would be silly. They put together a plan and get financing to pay for it. Then, when the rents for the building come in, they pay off that loan and go find another property. That is leveraging debt at its finest. You’ve got to have money to make money and unless you’ve already got it, you’re going to need to go into debt, at least at first, to make those big dreams a reality.
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June 13th, 2008 — Leverage, Money, Personal Finance, Wealth
This is probably one of the most commonly used books by those who are looking to create wealth. It first came onto the scene in 1926, and shot to fame during the Great Depression as the desperate populace looked for a way out of poverty. While this book does raise many good points and offers a lot of good advice for standard money management, it is important to consider the time in which it was written.
It’s set up as a bunch of fables that all teach a lesson. While this is helpful for some readers, it can be pretty frustrating if you’re just looking for some hard hitting facts. Unfortunately, the morals in the stories are pretty much already well known. Don’t spend what you don’t have, put money aside for your future, and make smart investments. Most of us learned this before we even hit high school.
The central problem, at least as how I see it, centers around the fact that the fables all involve people who already have at least some money in their purse. After all, you’ve got to have money to make money. What it doesn’t cover is what to do if that purse is already stretched to the limit with normal living expenses. No matter how hard some people try, there just isn’t enough at the end of the month to sock away. Are these people then doomed to a life of living paycheck to paycheck?
The process of leveraging debt to secure your financial future is really nothing new. People have been doing it for thousands of years. Whether it’s as simple as getting an investment to start a new company or getting a loan from a friend to invest in a hot stock, leveraging debt is still one of the best ways to start making more money right now. And for those of us with moths living in our purses, it is the only chance at creating alternative streams of income.
That said, this is still a good book and there are some important lessons that can be gleaned from it. However, it is best suited as a primer for those who need guidance for personal management of their funds or for teenagers that are just getting started in the financial world. If you’re looking for a book that’s going to tell you how to fill up that empty purse, your answers will not be found inside its covers.
There is nothing wrong with this book per se, but it did fail to cover techniques that are already proven to help people make money. While you can easily follow the advice and have a safe and steady income over time, for those looking to dramatically increase their wealth in a short period of time, the book is a bit of a disappointment. Buy it, read it, and put it aside to give to your children when it comes time to learn about managing their checkbook and saving for their futures.
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June 6th, 2008 — Book Review, Personal Finance, Wealth
Thomas J. Stanley’s follow-up to his well-received book The Millionaire Next Door, follows a pretty interesting premise. It basically picks the brains of millionaires to find out how they got their wealth and how they keep it. It certainly offers an interesting read and I do recommend it, but not as a book that is going to teach you how to go out and make money today. It serves its purpose as a guide to help you understand how the rich think, but if you’re looking for step-by-step advice on how to make more money right now, it falls a bit flat.
This is basically a series of interviews that cover how some people managed to get rich. Unfortunately, it really doesn’t go very in-depth into these techniques. Instead, we get a whole chapter devoted to the process of picking the right spouse. What’s love got to do with it indeed? This rather antiquated view of picking the kind of spouse that will support you and be advantageous to your career is a bit out of place in today’s society. While there is a lot to be said for marrying someone who is going to stick it out with you, it lost me when it got down to bypassing the standard reason that most people do get hitched - love - and boiled it down to a merger.
Next up, the author discusses the importance of picking a vocation that you can truly be passionate about and one that is not already too filled. This is all well and good if you’re just starting out, but the primary audience for this book is most likely already well established and it’s a little too late to start thinking about changing horses in midstream. I would have liked to have seen more discussion on alternate streams of income that can supplement your existing paycheck.
Frugality plays a big role in this book as most real millionaires don’t live high on the hog. If they did, they wouldn’t be millionaires for long. The problem is most of us already get that. We know that if you spend money like water, it won’t be long before the tank runs dry. That knowledge is as old as the hills and about as useful. It is all well and good to teach reader’s about being frugal and not overspending, but this is a concept that most of us over the age of 30 (again, the intended audience) already get.
Due to this reason, this book is best classified as an interesting volume on how rich people think and it is well suited for those who are just starting on their financial journey. For those of us that were hoping for a book that would unlock the secrets of how these people made their money, it falls a bit flat. It’s still worth the read, but only as a reaffirmation of what most of us already know. It certainly won’t show you how many of these millionaires managed to spin straw into gold, and that is what most of us want to know.
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June 4th, 2008 — Financial Security, Money, Personal Finance, Standard of Living, Wealth, retirement
As millions of aging baby boomers start contemplating how they are going to survive when they’re no longer working, retirement planning has hit an all time high. Whether you’re just starting out in the workforce, or you’re staring 62 in the face and wondering where the money is going to come from, it is never too late to start planning for your retirement.
There are many ways that you can start putting money aside to help you in your later years. First, you’re going to need to figure out how much money you need every single year to survive. Take 10% of that and add it on for emergencies. You’ll need to extrapolate a bit when it comes to how long you plan to live, but most people shoot for at least 30 years of retirement money. So, take that amount per year and multiply it by 30. This is the amount that you’re going to have to put away.
Pretty frightening isn’t it? Now, take that figure and divide it by how many years you plan to continue working. This will give you an idea of how much money you need to start putting aside every year. Subtract any savings or 401K plans that you have and you’ll have the bottom line. As an example, to illustrate this process, let’s say that you need at least $45k a year to pay all of your bills and live comfortably. You’re currently 35 years old and you plan to work until you are 65. This means you’ve got 30 years to save money.
To be on the safe side, we’re going to put away enough to last 30 years. Even if you don’t live that long, you’ll have plenty put aside for managed care or other health expenses that can crop up. In total, you’re going to need to put aside $1,350,000. Add in that 10% cushion and you’re at just under $1.5 million. Ouch! You’ve got thirty more years to save, so you’re going to have to put aside $50,000 every single year to meet your goal.
(Editor’s note added after publication: As pointed out in a comment below, I left out the power of compounding interest… but I also left out taxes and inflation… If you think you could live on 45k a year now you will need to adjust for inflation as well… Personally I think I will have a hard time living on only 45K per year. I don’t think I was misleading, but perhaps I was oversimplifying.)
Unless you make an incredible amount of money, chances are you’re not going to be able to put aside this much money. Even the best 401K’s rarely perform that well. So, in order to make sure that a soup kitchen isn’t in your future, you’re going to need to look into some investments and alternative streams of income. If you don’t have a lot of free income as it is, debt leveraging may be in order.
If you’re not familiar with this term, it basically means going into debt in order to take advantage of opportunities that will create new streams of income. When managed wisely, this is a very easy way to put aside more money. The key is finding the best opportunities or stocks and being cautious at first. With proper management, debt leveraging is in an incredibly powerful tool that can be used to secure your future.
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May 30th, 2008 — Book Review, Money, Personal Finance, Wealth
With all of the hype surrounding Robert T. Kiyosaki’s book, Rich Dad Poor Dad, I fully expected a life changing read that would open new horizons and unlock the mysteries of the wealthy. What I got was a nice little parable with very little actual advice and a whole lot of pep talk. While there is absolutely nothing wrong with getting people fired up about making money, it won’t do them much good if they can’t put the advice into action right away.
My main complaint with this book is that the techniques mentioned in it are really only useful for those who are in their early 20’s and willing to go the long haul when it comes to making money. I think the majority of readers are those who are already established and need to find a way to get more money for retirement or as a way to break free from their dreary jobs. Most of the focus appears to be on ways to make money that are already well known.
We all know that taking money and putting it into high interest bearing accounts will pay off eventually. We all know that the wealthy usually have many assets. What we don’t know is how they get them, how they keep them and how they keep their money rolling in. You don’t play high stakes poker with interest. You have got to be willing to get out there and put your money on the table and take that chance at winning the pot.
While this book is a great resource for teenagers and those just starting out in life, I really can’t recommend it to those who are looking for a path on the way to becoming wealthy. It’s already pretty much an accepted fact that watching your money and living frugally is a good way to save and amass wealth. But how you do get that wealth in the first place?
In order to get money, you’ve got to have money. For most of us, who don’t have a rich dad, that either means waiting for 20 years to have a savings account that we can actually work with, or it means taking that chance and leveraging debt in a smart way. This book was very anti-debt, which is a good thing for some people, especially if they are caught up in bad debt. However, it did not address good debt appropriately enough and the benefits that it can bring if managed correctly.
Most of the rich got that way by leveraging their debt when they first started out. It’s one thing to be born wealthy, but somewhere along the line in that family, somebody had to take that risk that would eventually pay off to secure the futures of their descendants. Leveraging debt to make money is the oldest method of finding financial freedom. I wish the book had gone into more detail on this premise instead of focusing on what most people already know.
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