Practical Keys to Amassing Investment Capital
Most parents want to teach their children responsibility - how to become self sufficient and succeed in life (after all, no one plans on raising a dead beat). However, very few actually accomplish this task. Why? Because, as parents, we are limited to the experiences our parents passed on to us; the antiquated notion that "responsibility" is simply getting a job, saving a little money, and maybe purchasing a car or some equally important item. Hopefully these seven rules will open your eyes and help you teach your children to avoid the traps that have stolen financial success from so many people.
Wealth Building Rule 1: Put Off Marriage
Your biggest obstacle to attaining wealth is YOU. Too often, people live their lives in a manner that is not conducive to creating riches and then get frustrated at "the system" when they only really have themselves to blame.
One of the most important financial decisions you will ever make is marriage (more specifically who you marry and when). By putting off the walk down the aisle for a few years, you can save a decade worth of frustration. Your first goal should be to become financially independent, with little or no debt, and have your investments in place. Once you have these three things, your odds of success are drastically improved by beginning your journey on a level playing field (after all, the number-one reason for divorce is financial trouble).
Wealth Building Rule 2: Debt is a Disease
With a few notable exceptions, debt is a form of bondage; a disease that enslaves the borrower. A few years ago, there was a young lady attending college who shot herself because she couldn't pay back $2,300 in credit card debt. Although an extreme example, it is a testament to the power money has over peoples' lives. Imagine your life without owing anyone anything; your car, your house, your education, all paid for in full. Like what you see? When you want it badly enough, you will make extinguishing your debt your number one priority.
Wealth Building Rule 3: If You Don't Like Where your Parents Were at Your Age - Do Things Differently
The old cliché that "insanity is doing the same thing over and over expecting different results," holds just as true today as it did when it was originally written. If you don't like where your parents were at your age, stop what you are doing. During your childhood, they taught you all they knew about money. For many people, these early years established how they feel about their finances today. In order to become financially successful, you must do something different than they did. Otherwise, you will end up exactly as they are.
Wealth Building Rule 4: When you Begin a Job, Look at the Pay of the Highest Employee
Whether you are looking for employment now or are thinking about it sometime in the near future, one of the most important things for you to do is to look at what the top-dog gets at any company for which you are considering working. This will give you an idea of how high you can expect to climb in terms of earnings and promotion. If the CEO is making $30,000 a year, you have no chance to make six figures. Select a job accordingly.
Wealth Building Rule 5: Do Something You Love and Get Paid for It
I remember going into college and being surrounded with people who wanted to be artists, scientists, and businessmen, but instead did what their parents or grandparents told them to do. There is no honor in being a doctor or a lawyer if you wake up every morning and hate your job. Pick a profession you love and you'll never have to work a day in your life.
Wealth Building Rule 6: Understand the Money Myth
Money is nothing more than a piece of paper with the image of a long-dead person on it. When you understand that any power it has over you is derived from your relationship with it, you suddenly become free from the constant pressures and stress of thinking about it. Especially at times such as these, if you are putting money away for ten, fifteen, or twenty years down the road, stop checking your portfolio every day! There is nothing you can gain from it except stress.
Wealth Building Rule 7: Your New Commodity is Not Your Labor, It's Your Ideas
With the advent of the Internet and other technological advances, you are no longer limited to supporting yourself or making a living by your physical labor. The only limit you have on yourself now is your own imagination - your ideas are the most valuable thing you possess. Every man, woman, and child is a salesman for a living; if you don't own a business or investments, then you sell your manual labor to a company in exchange for a paycheck. Change your product. The gap between the rich and poor does indeed grow larger with each passing year, but not because of inequalities or any other such injustices. Instead, it is because the rich understand money and how to use it. Capital is literally a seed; learn how to plant it to produce the best harvest. When you do this, you will rule your finances, not the other way around.
By Joshua Kennon, About.com
12.2.09
Six Steps to Retire Rich
Simple Keys to Ensure Your Golden Years are Spent Comfortably
1. Time is money– start today
The most important key to retiring rich is to start saving as early as possible. Many workers, strapped for cash or eying a major purchase, tell themselves they can make up for lost time by making higher contributions in future years. Unfortunately, money doesn’t work that way. Thanks to the power of compound interest, cash invested today has a disproportional impact on your wealth level at retirement.
To put the matter into perspective, consider two possible scenarios; both assume a retirement age of 65 and an annual compounded rate of return of 10%.
John is 40 years old and invests $20,000 a year for retirement. Charlotte is 21 years old and invests $5,000 a year for retirement. By the time each of these individuals retire, they will have invested $400,000 and $220,000 respectively. Yet, because of the power of compound interest, John would retire with half the money as Charlotte despite investing twice as much! (John would retire with $1.97 million, Charlotte with $3.26 million).
The moral of the story? Stop robbing your future to pay for today.
2. Max out the annual contribution limit on your IRA
When it comes to IRA contribution limits, Uncle Sam’s motto seems to be “use it or lose it”. Workers that haven’t made the maximum permissible contribution to their Traditional or Roth IRA by the cut-off date are flat out of luck unless they are in their mid-fifties and qualify for catch-up contributions.
3. Take full advantage of employer matching funds
Many companies will match up to fifty-percent of the contributions employees make to their 401k and other retirement accounts. If you are fortunate enough to work for such a business (and millions of Americans are), take advantage to the fullest! If you don’t, you are literally walking away from free money.
4. Don’t cash out of your retirement when you change jobs.
If you are anything like the average American worker, the odds are fairly substantial you are going to change jobs at some point during your career. When this occurs, the most foolish thing you could possibly do is to cash out of your retirement plan. Instead, roll over the proceeds into an IRA or your new employer’s 401k plan. In addition to avoiding the significant tax penalties, you will be able to keep your money working for you tax-free. Given enough time (you already saw the power a few decades can have on seemingly small amounts of money), this literally could mean the difference between vacationing in Tahiti and having to take a job at the Golden Arches to supplement your income
5. Avoid IRA withdrawal fees
There are numerous ways to withdrawal money from your retirement account in the event of an emergency. Before you even think about doing so, make absolutely certain that you have done everything required to qualify - otherwise, you will get a very unpleasant and expensive wake up call when you are hit with possibly thousands of dollars in fees and penalties.
6. Expand the Pie
Don't just cut expenses - find a way to make more money! By taking on side work or turning a hobby into a business enterprise, you can create additional streams of income to help fund your retirement. In many cases, this is an excellent alternative to cutting costs because it allows you to maintain your current standard of living while providing for your future.
By Joshua Kennon, About.com
1. Time is money– start today
The most important key to retiring rich is to start saving as early as possible. Many workers, strapped for cash or eying a major purchase, tell themselves they can make up for lost time by making higher contributions in future years. Unfortunately, money doesn’t work that way. Thanks to the power of compound interest, cash invested today has a disproportional impact on your wealth level at retirement.
To put the matter into perspective, consider two possible scenarios; both assume a retirement age of 65 and an annual compounded rate of return of 10%.
John is 40 years old and invests $20,000 a year for retirement. Charlotte is 21 years old and invests $5,000 a year for retirement. By the time each of these individuals retire, they will have invested $400,000 and $220,000 respectively. Yet, because of the power of compound interest, John would retire with half the money as Charlotte despite investing twice as much! (John would retire with $1.97 million, Charlotte with $3.26 million).
The moral of the story? Stop robbing your future to pay for today.
2. Max out the annual contribution limit on your IRA
When it comes to IRA contribution limits, Uncle Sam’s motto seems to be “use it or lose it”. Workers that haven’t made the maximum permissible contribution to their Traditional or Roth IRA by the cut-off date are flat out of luck unless they are in their mid-fifties and qualify for catch-up contributions.
3. Take full advantage of employer matching funds
Many companies will match up to fifty-percent of the contributions employees make to their 401k and other retirement accounts. If you are fortunate enough to work for such a business (and millions of Americans are), take advantage to the fullest! If you don’t, you are literally walking away from free money.
4. Don’t cash out of your retirement when you change jobs.
If you are anything like the average American worker, the odds are fairly substantial you are going to change jobs at some point during your career. When this occurs, the most foolish thing you could possibly do is to cash out of your retirement plan. Instead, roll over the proceeds into an IRA or your new employer’s 401k plan. In addition to avoiding the significant tax penalties, you will be able to keep your money working for you tax-free. Given enough time (you already saw the power a few decades can have on seemingly small amounts of money), this literally could mean the difference between vacationing in Tahiti and having to take a job at the Golden Arches to supplement your income
5. Avoid IRA withdrawal fees
There are numerous ways to withdrawal money from your retirement account in the event of an emergency. Before you even think about doing so, make absolutely certain that you have done everything required to qualify - otherwise, you will get a very unpleasant and expensive wake up call when you are hit with possibly thousands of dollars in fees and penalties.
6. Expand the Pie
Don't just cut expenses - find a way to make more money! By taking on side work or turning a hobby into a business enterprise, you can create additional streams of income to help fund your retirement. In many cases, this is an excellent alternative to cutting costs because it allows you to maintain your current standard of living while providing for your future.
By Joshua Kennon, About.com
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