How Would You Like to Become a Millionaire?
By David Paul
Unless your long term financial plan includes a guarantee that you will win the lottery, what follows is a simple strategy for becoming wealthy. Work hard, spend little, and save a lot...
1. Work Hard:
If you have the benefit of a family where both spouses are working, keep at it as long as your family circumstances will permit. Try and go to school at night for either a degree, or advancement of an existing degree. Education is the biggest differentiator in income, plus you are likely to feel better about your accomplishments.
2. Spend Little:
For two-income households, you have to be disciplined to live below your means. Meaning both spouses contribute the max to a 401k or IRA (reduces current taxes, and earnings grow tax-deferred) and use one paycheck to live on, and the other to invest with outside of a retirement plan for children’s education, or your own growth of net worth. A quick example for each is if you can save $500 per month for 30 years and earn only 5% on the amount, it will grow to $416,000. If it grew at 10% (average return of the stock market over time), the amount would grow to $1.1 Million, or millionaire status! How do you find $25.00 per work day? Pack a lunch, park further from the office and skip Starbucks, Dunkin Donuts, and Tim Horton’s by bringing an extra cup of coffee from home. As recently quoted in Sports Illustrated that the Washington Redskins players on this year’s team are very frugal, "buy what appreciates, rent what depreciates". Meaning buy a house, lease a car.
3. Save a Lot:
Live in a house that fits your needs, not your status, and when you are ready to move up, keep the old house and rent it. The income is likely to be partially or fully sheltered from tax, and the home’s value is likely to grow in value over time while you continue to pay down the mortgage. The saying "it is not what you make, but what you keep", is tried and true for everyone. This will also force you to only buy what you can currently afford.
4. Borrow Smart:
Borrowing money, or debt, should only be used for purchasing appreciating and long term assets. Meaning a house, not a vacation.
5. Shop Around:
Don’t accept the price of anything (although it's hard to negotiate the price of toothpaste at CVS), because life is a negotiation. Get in the habit of asking why, and asking for a better deal for everything. If service or quality doesn’t measure up to your reasonable expectations, then respectfully ask for a discount, refund, or better price on your next purchase of the same thing. We are all conditioned to be polite, and accept what's offered so that we are not offensive, but "if you don’t ask, you don’t get".
My son says that I have too many "isms", but I hope the above provides all of my fellow colleagues at Hamister Group with some simple and easily executable ways to build material wealth for your families the old fashioned way, by spending smart, and saving a lot...