Fortune Watch

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It takes time, sacrifice and consistency to join the million-dollar club

Quit fantasizing about marrying a millionaire, winning the lottery or walking off with a TV-quiz-show jackpot. By making your money work harder and smarter now, you can become a millionaire by the time you’re ready to kick back and trade work for play.

There’s no magic involved in reaching the million-dollar mark. If you set goals, do the research and start investing now, you can hit your wealth-building target on schedule. And you don’t have to be a financial whiz! What are needed are time, sacrifice and consistency.

Time is most significant: The longer you invest, the smaller the amount you need to put away each month to reach $1,000,000. Thus the younger you are when you start investing; the younger you’ll be when you join the million-dollar club. Many of the estimated 8 million millionaires began investing in their teens, and always with a long-term goal. Let’s say you’re 28 years old now, with no money saved or invested and would like to have a million-dollar portfolio of investments by the time you turn 60. You will need to invest $300 a month in stocks or stock mutual funds that have at least an 11 percent annual rate of return. If you increase your monthly investment to $500, you’ll hit your mark by age 54.

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Obviously the answer lies somewhere in the middle– but where? We take pride in making responsible choices for the future instead of thinking only of today, but do you ever feel like you’re going too far? Not appreciating the present enough?

I hear that suggestion a lot regarding how much money frugalites and penny-pinchers spend: that we’re not enjoying life enough because we’re not willing to spend much money. The thing is, I don’t think that spending more money would make me noticeably more happy! I mean, certainly there are some things that I could spend more on and enjoy– probably more expensive vacations, maybe going out to eat more and/or at fancier places– but in general I’m very comfortable with the way things are. I find ways to enjoy myself that are just good values for the money… and if there’s something that comes up that’s expensive but would be really wonderful, I weigh it carefully but am pretty good about letting myself go for it if it’s worth it.

However, it’s the flip side that concerns me. The amount you save is a combination of how much you make and how much you spend, so it follows that to save the most for tomorrow you need to make as much money as you can today. A lot of personal finance bloggers like to stress the importance of increasing your income as much as possible.

For me personally, while I’m not earning as much as I could if income was my only priority but I’m still doing a job I like and one I feel is good for society. The thing is, I’ve never really envisioned myself following a standard “career path”. Yet most of the other options will likely pay substantially less, in some cases perhaps as little as half as much. So the question is, how long should I stay at a good-paying job that I’m fairly but not completely happy with? I definitely want to try other work, but don’t I have plenty of time for that later on?

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Don’t fall behind. Finance charges, interest payments, getting discouraged about your finances… all problems that can occur if you let yourself fall behind. Whether it’s bills, credit cards, or student loan payments, falling behind can be a very difficult problem to come back from. The more you have to pay out in charges, the less you will have to invest in your future.

Set goals. If you don’t know where you are headed, how do you get there? In order to accumulate wealth you need a plan. Write out your goals, a way to achieve them, and you’ll be on your way to an early retirement.

Invest early. The greatest thing you can do to build wealth is start early. Even if you can’t invest much, start with what you can and let your money grow over time. As Albert Einstein said, “compound interest is the greatest mathematical discovery of all time.”

Invest in what you know. Whether you are looking to invest in real estate, stocks, or anything else, make sure you know how the investment works. The great Warren Buffett was often criticized for not investing in technology during the dot-com boom. His answer was simple. If you don’t know the business model, what the company does on a day to day basis, or how it generates revenue now, and in the future, then stay away from it. This principle can be applied to all types of investing.

Don’t do what the crowd is doing. When everyone is starting to get into an investment, that is generally when the smart investors are getting out. If everybody knows a stock is hot, or that their real estate market is booming, it generally indicates a bubble and that it’s time to cash out. Investors make money buying low and selling high. If an investment is hot and lots of money is flowing into it, you can’t buy low.

Don’t try get rich quick schemes. Don’t get greedy. This is easier said then done, but don’t try to gain too much too fast. Building wealth takes time and hard work… there is no easy way to get rich.

Save more. This is another one that sounds pretty basic, but can be difficult to achieve. Often times people want the instant gratification and go out and treat themselves. If you have some money burning a hole in your pocket at the end of the month, save it. Think about how nice it will be when that money is working for you rather than heading out shopping.

In simple economics, there is little distinction between savings and investments. One saves by reducing present consumption, while he invests in the hope of increasing future consumption.Therefore, a fisherman who spares a fish for the next catch reduces his present consumption in the hope of increasing it in the future.

Most of the people probably have savings accounts with ATMs to access their hard-earned cash and be able to store away any extra cash in a place a little safer than a mattress. A few of you may even have some stocks or bonds.

Let me explain why while a savings account in the bank may seem like a safer place than the mattress to store your money, in the long-term it is a losing proposition! If you open a savings account at the bank, they will pay you interest on your savings. So you think that your savings are guaranteed to grow and that makes you feel extremely good! But wait until you see what inflation will do to your investment in the long-term!

The bank may pay you 5 percent interest a year on your money, if inflation is at 4 percent though; your investment is only growing at a mere 1 percent annually.

Saving and investing are often used interchangeably, but they are quite different! Saving is storing money safely, such as in a bank or money market account, for short-term needs such as upcoming expenses or emergencies.

Typically, you earn a low, fixed rate of return and can withdraw your money easily.
Investing is taking a risk with a portion of your savings such as by buying stocks or bonds, in hopes of realizing higher long-term returns.

Unlike bank savings, stocks and bonds over the long term have returned enough to outpace inflation, but they also decline in value from time to time.The rate of returns and risk for savings are often lower than for other forms of investment.

Return is the income from an investment. Risk is the uncertainty that you will receive an expected return and preservation of capital. Savings are also usually more liquid. That is, you may quickly and easily convert your investment to cash.

The decision about which investment to choose is influenced by factors such as yield, risk, and liquidity. Investments may produce current income while you own the investment through the payment of interest, dividends or rent payments.

When you sell an investment for more than its purchase price, the profit is known as a capital gain, also called growth or capital appreciation.

We have all heard the old saying ‘health is wealth’ this I think is perhaps only about half right. If we think wealth is the key to health, then you know you’ve found good wealth to afford the comforts of life, and your worries would take a backseat. Much the opposite would happen if your finances are out of control.

I believe that the ultimate success is defined as staying alive. And the more I think about this, the more I believe it. After all, what do money, power, and good looks matter if you’re dead? For starters, smarter people are likely to have more money.

The first step towards a secure financial position starts with budgeting. You must have a budget to gauge your future positioning. A budget is nothing but an overview on how much you earn, spend, and save. This can be short-term as in case of daily or weekly budgets. It helps you to have an idea about where your money is or will be. Budgeting also helps in achieving long-term goals. For instance, if you fancy owning a Lexus after five years, you should plan to save some bucks from your pay every month and budget accordingly. If you stick to this practice, your desires won’t fail you.

Another must-do en route to financial health is to save. They say if you look after your pennies, the pounds will follow soon. So be penny-wise and start saving early in your career, but save to save future troubles/emergencies. However, this is not to say that you say good bye to fun-factors in life. Indulge in luxuries or occasional extravagances, but save consciously.Don’t remain tied in debt. The sooner you become debt-free, the healthier it is for you. And remember to start paying off the highest-interest loans first. Loan interests are known to break lives, so be aware of the dangers.

Yet another obstacle to a financially healthy future is your credit card. These are such items in your wallet that can drive you to bite off more than you can chew. If you cannot pay your card bills in full, say ‘no’ to credit cards and save yourself a perennial debt-trap.

Of course, we all like to pamper ourselves with a new dress, an expensive watch or a handsome car; but be sure to think before you spend. Do you really need it? If the answer is ‘no’, forget it.

Having said all that, it’s true at the same time, that no matter how much you organize or plan your finances, life throws up unexpected surprises and you’re caught unaware. Maybe you’ve forgotten to consider your emergency house paint or missed an important bill. It’s then that you’d need payday loan online to get the clog out of the wheel.

Wise men would say: keep this as your last option. To sustain your financial health, choose not to go for these high-interest loans.

Does it sometimes seem as though you cannot afford to do things because your financial obligations are holding you back? If you find that you are asking yourself these sorts of questions, perhaps you should take a look at your financial situation and assess whether you are practicing good personal finance management or not. Good personal finance management spends within their income, plan for the future and solve financial problems as they arise. Poor personal finance management pay more, do without and fall behind. If you find yourself in the second category, you can do something about it. You can learn to take charge of your finances by planning your personal finances.

Planning your personal finances doesn’t always come naturally, and even if you’re just beginning to take your financial matters seriously, then you likely need a few personal finance tips.

Evaluate your current financial situation. One of the most important goals for most people is financial independence. Collect accurate information about your personal financial situation. Calculate your net worth which includes the real estate, saving and retirement accounts, and all other assets. This will help you decide how much money you can set aside for meeting future needs and goals.

A basic personal finance tip is to make a budget. A personal finance budget is information made up of your income and expenses and the more accurate this information is, the more likely you are be able to meet your goals and realize your dreams. A personal finance budget should be made for at most one year at a time and include a list of your monthly expenses.

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For many people, the closer they get to retirement, the more concerned they get about whether they have saved enough or not. And it’s understandable. With life expectancy climbing and the ability to not only live longer but to do so with a higher quality of life growing as well, it stands to reason that some people will be a little uneasy when their last pay check gets ever closer. Are you one of those people?

The first thing you should do if you find yourself close to retirement with no savings is to calculate the amount of money you will need during retirement as well as what age you plan on retiring. You will find many resources online that will help you come up with this number such as retirement calculators.

Identify Needs: There are many financial needs to think about when getting close to retirement, from wondering what your Old Age Security benefit will look like. You may even think about what it will be like to live on a fixed income for the rest of your life.

But before you do anything, just relax. Don’t try to think about everything at once. Just because you’re close to retirement doesn’t mean you stop planning. As a matter of fact, it’s a great time to refine your plan, or even put one in place for your golden years.
Now that you know how much money you will need on average you can set some savings goals for yourself. There are plenty of ways you can save money from shopping with coupons to taking your lunch to work with you to not buying a new car every year. Wherever you are spending money and can scale back, do. It will mean the difference between a happy retirement and a stressful one.

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Does your spouse or partner complain that you’re spending too much money? When your credit card bill arrives, are you surprised to you find that you charged more during the month than you thought? Does your closet contain lots of shoes or clothes that you almost never wear? Do you own every gadget known to man (or woman)? Do you come home from the mall with items you had no intention of buying? Do you spend money on things that you didn’t realize you needed until you saw them on display in the store?

If you answered yes to any of these questions, you probably suffer from impulse spending. When people are unable to save money for the things that are really important to them, like a house, a new car, a vacation, or retirement, impulse spending is often the culprit. If you don’t have specific financial goals, it’s more difficult to resist spending money on items that don’t really have any meaning to you.

Once you’re already saving regularly towards your most important financial goals, you may want to have a fund to use specifically for occasionally spending money on unplanned items. Then you can indulge in occasional impulse spending without jeopardizing your financial future.

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Are you short for month at the end of each month? Do you have 5-10 credit cards, all maxed out to the limit? Do you forget to pay your bills on time? If you have answered, “Yes,” to any of these questions, don’t feel bad and don’t worry. I have some tips that can help you improve your financial picture: Create a Bill-Paying System

The first thing you’ll need to do is to go out and pick up some colored hanging folders. If you don’t have a file cabinet, get a file box that you can find in any stationery store or discount department store. They’re very inexpensive. Then, make a folder for each expense. Use one color for your bank statements, another for your utility bills, and another for credit cards. Keep the system pretty simple or complexity could let procrastination) take over.

Each day when your mail arrives, separate it immediately into what you don’t need and want to throw away and your bills and other things that need attention right away. Do the things that are needed and either pay the bill right away or put them in a central place where you can retrieve them when the money is available for paying the bills. This could be the front of a desk drawer, for instance, or even a basket on top of your desk. Just be sure that nothing goes into that basket besides your bills.

Online banking is a great way to streamline the bill paying process. Bank security is top notch, so the question of you having a problem online is really out of the equation. The chances are very slim. So, what you do is you take each bill that you receive and you put the information needed into the online banking account. You don’t have to do this all at once. Wait until your next bill comes in and do it one or two at a time. That way, it seems less daunting, and remember, you only have to do it once. After all the information has been entered, paying a bill becomes as simple as clicking a button, a mouse button, that is.

When you’re finished paying your bills, be it online or off, put the paid bills with the date of payment written on the front, into one of the colored file folders. That way, when tax time comes around, all your financial records will be at your fingertips.

Don’t carry around huge wads of cash or a debit card linked to your bank account, either. If you prefer the convenience of plastic, open a separate bank account and put a monthly “allowance” into it for yourself. When the money’s gone, you’ll just have to wait until next month to get more. This should help you to budget your spending and hold back on those impulse purchases a little.

And if you want to buy something, decide whether you need it or just simply want it. If you think you need it, just walk away and take 25 hours or longer to consider the purchase. Once it’s out of your site, you may find that it’s really a want, disguising itself as a need.

Before you pay any bill, any expense for the month, you should always be paying yourself. Ten percent of your income, every time you get money or a paycheck, should go into a savings account. If you don’t have a savings account, get one and never, ever use it except for depositing. Your savings account is for huge expenses, like buying a house, repairing your car, or retirement.

Put at least one of these tips into practice and see how well it works for you. I guarantee that you’ll be back to try another.

I was involved in a discussion some time back and we were discussing this and all of us thought it was ridiculous that they don’t teach a personal finance class in high school, at least not when we were in school. Is it any wonder that when kids go off to college they rack up so much debt? According to some statistics I read that the average undergraduate has credit card debt!

The logic behind teaching children and teenagers about personal finance is pretty obvious. Just think of all of the finance clichés that you’ve heard: start investing as early as you can, the most important factor in investing is time, don’t get into credit card debt, etc. - all things that are best to learn sooner rather than later.

And because many basic aspects of personal finance currently aren’t taught in school and are left to be learned at home, this current system seems to nurture the fact that wealthy people tend to stay wealthy and poor people tend to stay poor. I don’t think it takes a giant leap of faith to see the possible correlation.

A simple personal finance class with discussions on retirement, the negative impact debt can have on a person, automobile financing, and saving for the future instead of buying for the now should be implemented in every single high school across the country.

The best long term solution is educating people so that they want to save by making financial capability a compulsory part of the school curriculum and embarking on a public awareness campaign to show the potential hazards of not saving.

Did I really need to learn Chemistry if I had no interest in any fields that would need it? I would think that learning how to control one’s money would be of more help to most people. Thoughts? Did you have finance classes in high school? If you did, did they help? I would love to hear about your experiences!