Tips from the Wealthy on How to Get Rich

Jane Young, CFP, EA

Jane Young, CFP, EA

You don’t have to be incredibly intelligent and born into the Rockefeller family to attain wealth.   Below are some pointers commonly shared by wealthy people on how to manage your life and your money to reach financial independence.  There is no magic, achieving financial security involves straight forward, common sense actions to gradually build your net worth.

  1. Write Down Your Goals: It’s great to dream about what you want to achieve but to accomplish something you need to put your goals into writing and create an action plan to attain them.
  2. Control Your Expenses: Take the time to understand and manage your expenses and create a budget that supports your goals.   Spend less than you earn and develop good saving habits.  Keep your expenses in check when things are going well and avoid automatically increasing your expenses as your income grows.
  3. Don’t Buy Status: Don’t buy things to look rich or to impress your friends.  Most wealthy people drive older model used vehicles and live in modest homes.  Use your money to save for the future and spend on what really matters.
  4. Educate Yourself: Getting a good education and selecting the right career is a huge factor in attaining wealth.  A good education can result in a more rewarding job in a field you enjoy.  If you enjoy your work you are more likely to excel and earn more money.  If you are in a dead end job or a career you don’t enjoy consider going back to school to transition into a career for which you have more passion.
  5. Be Patient and Maintain a Long Term Perspective – The key to successful investing is having the patience to ride out fluctuations in the market. Resist the temptation to chase returns and time the market.  Invest for the long term and let your portfolio grow over time.  Stay the course and avoid making decisions triggered by emotions.
  6. Manage Risk and Return – Balance your desire for high return with the risk involved. Maintain a diversified portfolio with adequate short term liquidity to get you through rough spots in the market.   Rebalance on an annual basis to keep your portfolio diversified.  Take a disciplined approach to investing and avoid high risk investments that promise a return that may be too good to be true.
  7. Start your own business – According to Forbes nearly all of the people on their list of billionaires made their money through involvement with a business they or their family had started. Owning your own business may seem too risky but it can provide you with an opportunity for higher earnings and greater control over your financial future.
  8. Avoid Complex Investments – Avoid investing in anything that seems overly complicated or that you don’t fully understand. Complex investments often come with  greater risk, a lack of control, limited marketability, limited transparency and hidden fees.

Smart Financial Moves for College Graduates

Jane Young, CFP, EA

Jane Young, CFP, EA

After finishing school and hopefully landing a rewarding job, college graduates face a myriad of financial obligations and opportunities.   Here are some steps for graduates to get started in the right direction.

Create a Budget and Live Below Your Means – Based on your income, create a spending plan that leaves you with a little extra money at the end of the month.  Your budget should include saving at least 10% of your gross income.  Spend less than you earn so you are prepared for unexpected bumps in the road.  Initially this may involve renting a smaller apartment, living with roommates or driving an older car.  As your career progresses, avoid increasing expenses in lock step with earnings increases.

Establish an Emergency Fund – With the money you are saving, build and maintain an emergency fund equivalent to 4 to 6 months of expenses.

Avoid Credit Card and Consumer Debt – Pay your credit card bill in full at the end of every month.  If you can’t afford to pay for your purchases when the bill arrives then postpone or re-evaluate the purchase.   Avoid or minimize debt on vehicles and other consumer purchases.

Payoff Student Loans – Devise a plan to payoff your student loans.  Consider consolidating or refinancing your loans if it will save you money.  Consider both the interest rate and the duration when evaluating loans.  Generally, you want to pay off student loans in less than ten years.

Buy Adequate Insurance – It’s essential to have good health insurance coverage; if you aren’t covered by your employer you may be eligible for continued coverage on your parents plan.  You will also need good car insurance and renters insurance on your apartment.  Additionally, consider long term disability insurance and an umbrella liability policy.

Contribute to Your Employers Retirement Plan – Many employers offer a 401k or 403b plan to help you   save for retirement using before tax dollars.  At the very minimum contribute up to the match that your employer may provide.

Contribute to a Roth IRA – Once you start earning money you can also save for retirement by contributing to a Roth IRA.  The benefit of a Roth is since you initially invest with after tax dollars, you don’t pay taxes when the money is withdrawn in retirement.   This is a tremendous opportunity for recent college graduates because your money can grow tax free for forty or fifty years.

Travel and Have Some Fun – While you’re young and relatively independent, set aside some money to explore the world or do something adventurous.  Once you buy a house, start a family or assume more job responsibilities it’s harder to get away.

Educate Yourself on Finances – Start reading personal finance books and articles.  Here are a few books to consider; “The Money Book for the Young, Fabulous and Broke” by Suze Orman, “Personal Finance for Dummies” by Eric Tyson, and “The Millionaire Next Door “ by Thomas J. Stanley and William Danko.

Supercharge Your Career for Long Term Financial Security

office pictures may 2012 002Proactively managing your career is essential to your long term financial success.  While traditional financial planning is important, it’s crucial to invest in yourself and your career.  The return you can earn from a serious commitment to your career may be better than any investment return you may reasonably achieve.  Strategic attention to your career can result in increased long term income opportunities, a job you love, job security and resources to build your investment portfolio.

It’s too easy to become comfortable and complacent with your situation and settle for less compensation and job satisfaction than you deserve.   The first step toward supercharging your career is to understand yourself.  Evaluate what makes you happy and where your passions and talents lie. Consider how you can best utilize your skills, interests, and experience. Research potential opportunities in your current field as well as in new career fields.  Information about a variety of careers,and what they pay, is available in the Department of Labor’s Occupational Outlook Handbook www.bls.gov.ooh.  Information on salaries can also be found on www.payscale.com and www.salary.com.

After doing your research and identifying some career opportunities, decide on your definition of career success and develop a plan to achieve this.   Career success is not based on luck but on strategic planning, action and commitment.  Establish some long and short term career goals to keep you on track toward meeting your plan.

To help achieve success, think of yourself as a brand of one.  In everything you do, consider your image and how people perceive you.  You have a reputation to build and maintain which should demonstrate trust, dependability, competency, enthusiasm and professionalism.  Don’t think of yourself as an employee but as a company of one who is working to bring success to your current firm.  This in turn will bring you success.  Be reliable and meet your commitments, proactively resolve problems and look for smarter ways to do business.  Do what is needed to get the job done, don’t lose site of the big picture, and focus on the bottom line.  Work strategically and watch for opportunities to meet the needs of your boss and your team.

Nurture relationships, be a team player, and keep a positive attitude.  Continually demonstrate how you can be of value to your boss, colleagues and clients.  Work in a collaborative manner and help others look good and get ahead.  Develop a strong personal network and find a mentor to assist you with your current job and exciting options for the future.

Proactively stay abreast of industry and technological changes. Seek out opportunities to learn and grow through continuing education and formal education.  You will experience more success if you embrace change and innovation.

Your career and ability to earn a good living can be your greatest financial asset – manage and nurture it to maximize your financial security.

Successful Habits of Wealthy People

Jane Young, CFP, EA

Jane Young, CFP, EA

Many believe that wealthy people are lucky or are born into their wealth but this myth is largely dispelled by research conducted by Thomas Corley.  Thomas Corley, CPA, CFP is president of Cerefice and Co. and the author of Rich Habits: The Daily Success Habits of Wealthy Individuals.  Over a five year period, Thomas Corley interviewed 233 millionaires and 128 people living in poverty.   Through these interviews he uncovered many daily activities that differentiated the two groups.  His research indicates that we have control over our destiny with our daily actions and habits.  It’s not always easy, but we can create our own luck by engaging in activities that will lead to greater financial success.  Over 85% of American Millionaires are self-made and are the first generation of wealth in their families.

Thomas Corley found that good habits are the foundation of success.  He discovered successful people have many good habits interspersed with a few bad habits where unsuccessful people have many bad habits with a few good habits.  Below are some of his findings on habits or daily activities practiced by successful people.

Successful people are goal oriented, 95% write down their goals and 81% maintain a To-Do list.  They don’t procrastinate and are focused on accomplishing things.   They are proactive, take control of their lives, and get things done.  They don’t let events or other people control their priorities.  Unsuccessful people are not goal oriented and can become easily distracted.  They don’t have goals to keep them grounded and focused on the end result.

Successful people eat healthy and exercise, 76% of the wealthy exercise aerobically 4 days per week. They rarely overindulge or binge, if they slip it’s a planned overindulgence on special occasions.  Eating well and exercise improves the immune system and energy levels which results in greater productivity.  Unsuccessful people have no consistent day to day control over their health.

Successful people place great value on relationships.  They are focused on others rather than themselves.  They understand the importance of networking and look for reasons to reach out to their contacts.  They don’t waste time in negative relationships with people who are only concerned about themselves.

Successful people engage in moderation.  They keep their thoughts and emotions in check and avoid obsession, addiction, extravagance, jealousy, envy and fanatical behavior.  People enjoy their company and feel comfortable being around them.  Unsuccessful people are more likely to live in conflict with little control over their lives.

Successful people are constantly engaged in self-improvement.  They watch very little TV and read for self-improvement.  They keep up with changes in their profession and devote time every day to better themselves.

Finally, successful people have a positive attitude.  They are happy, enthusiastic, confident and well balanced.  They feel empowered and take control of their lives rather than allowing outside forces to determine their destiny.  Have you taken control of your destiny?