October 2nd, 2008 — Budget, Debt, Goal, Personal Finance, Wealth, bad debt, good debt
Every year, thousands of people become millionaires, while hundreds of thousands struggle to make ends meet. What is the difference between the two groups? In many cases, it comes down to whether or not you have what it takes to be a millionaire. While this may seem like oversimplification, there is a lot to be said about the mindset that future millionaires have, versus the mindset of the average consumer. Let’s see if you have what it takes to be a millionaire.
1. Do you have a clear financial plan for now, five years from now and in the future?
Many times, people become millionaires because they set specific goals for themselves, and then work hard to achieve those goals. Even if you don’t quite make it to your goals, chances are if you are aware of your financial condition, want to make it better and work at ways to accomplish it, you will be better off money wise.
2. Do you understand the difference between good debt and bad debt?
While some consumers are putting down $5000 on a plasma tv, others are using that same amount of money to put down on a foreclosed property. The first group will end up paying interest on a television that will only depreciate, while the second group has the potential of making hundreds of thousands of dollars with a future sale, or a steady stream of rental income in the mean time.
3. Do you understand the importance of budgeting?
Overspending is an enormous problem and the bottom line is – if you spend more than you make, your chances of becoming a millionaire outside of winning the lottery are slim to none. There is no point in making money if you are spending faster then it comes in. Millionaires learn the importance of saving that money and controlling their expenses, otherwise, they wouldn’t have that million dollars.
You can look at this way. Let’s say that you spend $10k every year on non-essential items. In ten years, you would have spent $100k. Now, take that same $10k, but invest it in property or stocks – in ten years you would likely have much more than $100k at your disposal.
4. Do you understand that “overnight success” takes time?
While there are a few exceptions to the rule, most millionaires spent time getting to that point. Whether it is five years or fifty, becoming a millionaire requires effort, it requires focus and it requires dedication. If you are not willing to put in that kind of work, your chances of achieving that goal are very small.
Start developing the “millionaire mindset” and make those small steps towards achieving your goals. Whether or not you actually do end up making a million dollars, you’ll be working towards developing not only sound financial principles, but chances are you will have more than enough money to remain financially comfortable for the duration of your life.
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July 27th, 2008 — Money, Personal Finance, Wealth, roundup
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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June 20th, 2008 — Book Review
There has been a lot of hype surrounding Douglas Andrew’s book, Missed Fortune 101. Many people gushed that it unlocked the secrets to becoming a millionaire, so I went into the book with high hopes. I was pretty disappointed to discover that much of the advice is already well known and let’s face it, a bit on the mundane side. We all know it’s important to have a 401K, but few of us have the potential to turn that into a million dollars.
While the book does serve as a useful guide for those that are just starting out, it kind of defeats the purpose and the target audience. The title itself leads readers to believe it’s written for those of us that are past the starting years and facing the ugly truths of retirement planning. Unless you have absolutely no concept of financial planning, I’m afraid this book will be a bit of a disappointment.
It is well written and the author does have a lot of enthusiasm, which is helpful considering some of the mundane advice that is doled out. Quite honestly, I felt that the author focused far too much on taxation and although I acknowledge that understanding tax law and avoiding overtaxation is important, it’s certainly not going to turn you into a millionaire. You may save a few thousand here or there, but it’s not the silver bullet that the hype built up. That said, there are a few good tips on how to avoid having your savings funds taxed into oblivion, but again, it seems as though the author was missing the point.
My main issue with the book is that it encourages readers to leverage the money from their homes into “special funds.” Finally, it’s revealed that these “special funds” are nothing more than investment grade life insurance policies. Personally, I believe it’s a bad idea to encourage people to endanger their homes with this type of investment, and quite honestly, the returns are not that good to warrant that kind of commitment.
The author encourages readers to build up as much mortgage debt as possible – which may have sounded good at the time, but as the latest news has proven, was really bad advice. Although he did discuss leveraging that into the investments mentioned above, it’s just not a sound enough premise to warrant anyone rushing out to adopt it. In fact, I worry that readers who took this advice to heart may be facing foreclosure right now.
Overall, while the book was well written, it fell horribly, horribly short of its promise. Perhaps if it had a different title, I would have come away with more praise. As it is, the hype is nothing more than that – empty hype that will get you no closer to realizing your dreams of financial independence. In that vein, it’s really not worth your time and there are far better books that cover the basics of dealing with taxes and finding ways to invest your money.
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