Earn Money. Spend Money. Save and Invest Money.

Money can be a complicated thing, but many times we just over complicate it. If you want to be successful with money, it’s really comes down to just 3 things. The three things are how much money you earn, how much money you spend, and how much money you save and invest.

If you pay attention to those three “money metrics”, you’ll do just fine. The problem is that most of us don’t pay attention to any of those metrics, and that’s why most of America is broke. It’s also why so many people end up relying on social security.

Even successful career people don’t pay attention to these metrics, and consequently, they end up squandering years of wealth building opportunity. What do I mean? Well, for most of us college graduates, we enjoy seeing our incomes grow substantially from the time we graduate college through the first 20 years of our careers. However, as our incomes grow, so do our spending habits. We raise our expenses to match our income, and there goes our wealth. Bye bye millionaire potential.

I was on that path when I got out of college. I made $39,000 on my first professional job out of college, but somehow I ended up $16,000 in debt. What?! How the hell did that happen? Fortunately, that was my wake up call, and I made some drastic changes. For starters, I got money smart. I learned everything I could about money because obviously I didn’t know jack. I read Kiplinger’s magazine. I read Smart Money magazine, and a host of other things I can’t recall. That was 20 years ago. It changed me. It transformed my financial future. After I got money smart, I decided I wanted to be a millionaire. I was 26 and decided to become a millionaire by the time I was 40. I made it.

The funny thing about goals and plans. They often don’t work out exactly as you plan, but many times you still hit your goal. I hit my goal, but my path was a little different than I planned. That’s okay. For anyone wanting to become a millionaire, the place where we start is often the same. Get money smart. Then pay attention to how much money you earn, how much money you spend, and how much money you save and invest.

These were all keys elements to my millionaire plan when I was 26, and they’re still part of what I teach today. For anyone who aspires to be a millionaire, they apply to you too.

  1. Pay attention to how much money you earn. Always work on ways to increase how much you earn. If you’re stuck in a job that limits how much you can make, you need to look for other ways to make money, and that may include finding a new job. Don’t let yourself get stuck at an income plateau. If you make $50,000 a year, set a goal and look for ways to boost that to $100,000 a year. If you make over a $100,000 a year, set a goal and look for ways to boost that to $200,000 a year. You can do it. Almost anyone can do it.

    Early in my career my goal was to make more, but work less. I started out working 60+ hours a week and making $39,000 a year. I was able to lower my hours down to 45 a week an raise my income to $47,500, but I was stuck at an income plateau. Shortly after that, I changed jobs and saw my income soar into six figures plus. I’m sure glad I made that change. It was a key piece of the puzzle on my millionaire journey.

    My world was rocked recently when I met a new friend. I was about 36 or 37 by the time I had earned $1 million as an adult. It took me about 10 years to earn my first million dollars. Then recently I met a new friend. He rocked my paradigm. He was 22 without a college education when he earned his first $1 million. Ouch. He beat me by at least 14 years.

    Are you “income stuck?” Change it. Get unstuck. Do it today.

  2. Pay attention to how much money you spend. Don’t let your spending habits kill your ability to build wealth. Big ticket items like buying new cars on debt can cost you hundreds of thousands of dollars in future wealth. But bad daily spending habits like eating out can cost you just as much if not more. Take a look at your spending habits and learn to make better decisions. Keep your lifestyle under control until you’ve built your wealth, then you can really enjoy a more relaxed and cushy lifestyle. It’s worth it.

    If you’re not doing a spending plan, do one. Spending plans and budgets are a pain, but the results are worth it. If you’re not the type of person to run a tight budget, then do a “spending audit” and make adjustments. I guarantee you’ll find money (and your future wealth) slipping through your fingers. Do an audit. Find the problems. Make a adjustments. Every wasted dollar you find can help you build future wealth and help you with your millionaire goal.

  3. Be aggressive with your saving and investing. Many of us are so busy living life that we make excuses for not saving and investing more. The reality is so many of us are afraid of what we don’t know that we just avoid it. Sadly, we’re just too lazy to learn more so that we can get comfortable with it.

    Many of the people I talk to are clueless about investing tools, the stock market, or real estate. Real estate and the stock market are two of the primary investing tools available to us for wealth building, but very few of us take the time to learn more about them. As a result, we fail to leverage them, and that’s a perfect recipe to stay broke.

    How much should you save and invest? Well that’s really up to you. If you want to be a millionaire, which is the lowest goal you should set for yourself, you need to account for your age and create your millionaire plan. For most people, $10,000 a year is a good number to hit the millionaire goal in a respectable time, but you still need to account for you age. However, if you want to be an over achiever, keep pushing yourself to do more. Whatever the case is, get started ASAP with whatever  you can do and keep pushing yourself to grow it. Can you do $100 a month this year? Set a goal to double that next year, and then double it again the next year. If you can double that $100/month investment each year for 5 years, you’ll be investing $1,600 a month in 5 years. That’s $19,200 per year! That will add up quickly, and make you a millionaire pretty quickly.

Once you get “money smart” you’ll be better equipped to develop your own Millionaire Plan and build wealth for you and your family. If you don’t have a financial coach, you should get one soon. It’s good to have someone smart to talk with about money and building wealth.

Once you have built your wealth, life gets even more fun. You’ll be better equipped to help other people in need, and it is so rewarding. You can be a millionaire.

Great books/resources to read:
I Will Teach You to Be Rich by Ramit Sethi

Good Financial Cents website by Jeff Rose

 

 

Millionaire or Not. You Can Choose.

Have you ever dreamed about what it would be like to be a millionaire? Well stop dreaming and start doing.

Today 8.5% of American households are millionaires. That’s up from 3.5% in 1996 according to “The Millionaire Next Door” by Thomas Stanley and William Danko. However according to bankrate.com, 76% of people are living paycheck to paycheck and many have virtually nothing in savings. Answer Two Questions: 1) Which group are you in? 2) Which group will you be in 10, 20, or 30 years from today? The millionaire group or the paycheck to paycheck group? If you can’t definitively answer “Yes” to question #2, then it’s time to make a financial change.

With the right knowledge, financial plan, hard work and discipline, you can become a millionaire. Yes. Believe it. You can be financially free. You can be wealthy.

There are two primary views of wealth in America today. 1) I will never be wealthy and 2) wealth is wrong, bad or even evil. Both of these views of wealth are wrong. While some wealthy people are not people any of us would want to be, most wealthy people work extremely hard to build their wealth, and most of them are extremely generous in sharing that wealth. After all, wealthy people can help more people in need than poor people.

In the end, it’s your choice on whether or not you become a millionaire and become wealthy. I’m just here to tell you you can do it, show you how, and inspire you along the way.

 

Can $10,000 Make You a Millionaire?

Lots of people dream about becoming a millionaire and “living the dream”, but only a relative few do anything about it. Today roughly 8.5% of American households are millionaires. While that’s up significantly from the 3.5% in 1996, I personally would like it to be much much higher. That’s why I’m writing this blog. To help make more millionaires and help people enjoy more freedom in their life.

Quite a few people have a warped view of wealth. They either believe they will never have it, or they believe it is bad. Both of those views of wealth are broken. Attaining wealth is a good and worthy goal. And guess what, wealthy people can help more people than poor people can. So if you have a choice of being wealthy or not being wealthy, why not choose wealth?

Now, in talking with many of my friends, I’ve realized that quite a few are just stuck. The idea of being wealthy or being a millionaire is a bit unrealistic to them, as it was for me until I turned 26. At 26, the lights came on, and I set off to become a millionaire. Now, 20 years later after I made it, I’ve come to understand that sometimes all people need is a little prod, a little knowledge, and a plan.

Too many of us spend our income wasting it away on frivolous things. I’ve been as guilty as anyone, but fortunately, I put a ton of money back as well. I started investing at 26. $500 a month into mutual funds and dabbling in stocks like Intel, Dell, Nvidia, and others. I made some decent money for a young guy making $40,000 a year, but I should have and could have done better.

I’m a numbers nerd, so understanding how it all works comes pretty easy for me. Now I want to make it a bit easier for you. Let’s get started.

A Spending Plan (a.k.a. Budgeting)

If you want to build wealth, you have to get your spending under control. Planning your spending intimidates a lot of people. That’s why “budgeting” is such a dirty word for a lot of people.

Now you can do a complicated spending plan if you want to, but a simple one can help get you on track for building wealth. You can count the pennies and nickles later to fine tune your spending plan.

Break your money down into 4 categories.

  1. Living Money: Money that you need to support your basic lifestyle. This includes housing whether you are renting or buying a house, food, utilities, car, insurance, clothing, education, and medical.
  2. Play Money: This includes the things you do to make life enjoyable. Date nights, gym memberships, hobbies, vacations, a four wheeler, a boat, etc. Generally you could call this “the perks of life” category. You have to have some play money in your life of you’ll dry up and become miserable. However, you have to be balanced as well. Put too much money in this category and you’re wealth plans could be toast. Quite a few formerly rich people have put too much money in this category only to see all of their wealth go up in smoke. Don’t make that mistake as you are trying to build your wealth.
  3. Wealth Money: Now as you can guess, this is the most important category for someone wanting to become a millionaire. This is the category that is going to determine if you become a millionaire, and if so, how fast. The more money you can get into this category on your spending plan the better. We use this category in a couple of ways. If you’re in debt, you need to get out as quickly as possibly. Debt will rob you of your ability to build wealth. We use this category to accelerate paying off your house if you want to do that. Third, we use this category for investing. That’s what most of this post is about. Wealth Money.
  4. Other Money: This is anything that doesn’t fit cleanly in one of the other categories. It includes things like birthday gifts, church tithes if you attend a church, Christmas presents, and things like that. Generally things in this category aren’t required to do and the amounts may vary quite a bit. You have wiggle room to adjust things a lot in this category as long as you don’t leave off your mom or spouse’s birthday.

Now I’m not going to cover the spending plan in today’s post. I’m going to only focus on the wealth money part of your spending plan. If you want to be wealthy, you have to put as much money into this part of your spending plan as fast as you can. Wealth can be built really fast if you’re a .com startup like facebook, or it can be built over time. The most common way to build wealth is over time through good financial decisions and investments.

Wealth Money

Wealth Money. So many people miss building wealth because they are busy spending their money on lattes, cable and new cars when they could be building wealth. I like to keep things simple…well, that’s exactly not true. I like complicated things, but sometimes things can be simple. We just over complicate them. Building wealth doesn’t have to be complicated. In fact, it really isn’t complicated. What do I mean?

Take $10,000 for example. It’s a simple number. It intimidates a lot of people. Have you ever held $10,000 cash in your hand? Try it. It’s pretty cool. Once you hold it, $10,000 doesn’t seem like a big number anymore.

Now, if you take $10,000 as your base investment number, what happens is pretty interesting.

  • $10,000 over 20 years becomes $67,275
  • $10,000 over 30 years turns into $175,000
  • $10,000 over 40 years turns into $452,000
  • $10,000 over 50 years turns into $1,173,000
  • $10,000 over 60 years turns into $3,044,000
  • $10,000 over 70 years turns into $7,897,000

These numbers are all based on a 10% rate of return which is an acceptable and available rate of return in the mutual fund and stock market. With the right investment, you can beat 10% and build even more wealth. I like using the 10% number because its simple to calculate, understand and readily available. Let’s go with it.

Now, you may be saying “Where do I get $10,000?” or “Are you kidding? I’m 45. No way I’m going to be wealthy. You just proved it to me.” Scrap those thoughts. Wealthy people all have one thing in common. When they run into problems, they figure out a way to deal with them. So what if you don’t have $10,000 right now, figure out how to get it. So what if your 45, find a way to increase your income and make up for lost time. Heck. Colonel Sanders started KFC in his 60s. Most people are retiring in their 60s. He was just getting started! $10,000 isn’t that much money when you break it down. $10,000 spread out over 1 year is $833.33 a month. Now how can you find $833.33 a month? There are tons of ways. At $10 an hour, it’s only 80 more hours of work a month. 20 hours a week. Or if you work at Costco and make $15 per hour, it’s 56 hours. Find a way. Don’t stop looking until you find a way.

As part of your spending plan, put as much money as you can into that wealth money category. In fact, scale everything back that you can until you hit a really good wealthy money number. If you can’t get to $10,000 year, start with what you can, then work towards $10,000 year as fast as you can. Once you hit $10,000, see if you can multiply it. Can you get to $20,000? Always up your goal. The more wealth money you can sock away, the faster it will grow. The bigger it will grow. Your first stop on this journey is the millionaire milestone. Once you do that, you’ll dream even bigger. You can do it.

Now, your homework. Play with your own wealth money numbers. Take that $10,000 and multiply it. What if you did that every year for 30 years? Well, I’ve already done the work for you and I’m including it in this post. Dream big! The more wealth you create the more good things you can do in this world, and guess what, it’s a lot more fun too when you have some wealth. I love traveling and I’ve got a long bucket list of places I want to go.

20, 30, 40 Year $10,000 Investments @ 10% Charts PDF

20, 30, 40 Year $10,000 Investments @ 10% Excel Spreadsheet

You can play with your own investment planning with this investing calculator at Bankrate.com or this more colorful and simple investing calculator at SmartAsset.com .

You’ve Got Your $10,000 Investment Money

Congratulations. You’ve figured out how to get your hands on $10,000 to invest. Now what do you do with it? You invest it. Where you say? Great question.

You can invest in a multiple of ways, but if its your first $10,000, you should probably play it a little bit safer. Stay away from single stocks. Mutual Funds are a better investment for you. Your first investments should go into your 401k or a Roth investment usually through your workplace. Even inside of those investment tools, you want to make sure you pick the right investments. Again, you’re looking for investing returns of 10% or higher for over 10 years.

Outside of your workplace, you can invest through an financial advisor or you can go direct to some of the best mutual providers like Janus, Fidelity, Oppenheimer or Vanguard. They have research tools that help you select funds. Again, you want funds that return 10% or more over the long haul. That’s averaging 10% growth per year over 10 years or longer. You can also use Morningstar.com to help you with your research.

Find a solid growth stock mutual fund at 10% or more and there you go. You’re off to the races. Oh, and one more thing. Don’t freak out if the stock market and your mutual fund drops. You leave your money in. The people that freak out and pull their money out, lose. Only take money out at retirement (59 1/2 years old) and preferably only when the market is up.

What’s Your Net Worth?

Have you ever asked yourself that question? What’s your net worth? If you haven’t, then you probably should. Your net worth is a good way to tell if you are winning with your finances or not, and it’s kinda fun to do.

What is “Net Worth”?

Have you ever played organized sports? Baseball? Football? Basketball? Soccer? Something else? No matter what game you’re playing, there’s usually a score involved. That’s how everyone knows who is winning and who is losing. And make no mistake, the goal is to win. However, so many of us don’t have a goal for our finances, and as a consequence, we end up losing the game of money. We don’t know what the score is, and we don’t know what the goal is. It’s sad. It doesn’t have to be that way.

Your net worth is a financial calculation you can and should do annually to keep score on your finances. It takes your current assets (things you own) and subtracts your liabilities to give you your “net worth score”. Your assets are the things you own like cash, investments, cars, homes, boats, jewelry, and if you’re in the southern United States, probably a collection of guns. Your liabilities are your debts and money you owe. Subtracting your liabilities from your assets gives you your balance or net worth. If you are in heavy debt, it is quite possible to have a “negative net worth” meaning your finances are worth less than “0” and so is your net worth. While that sounds absolutely horrible, it’s better to know what the score is than to not know. Otherwise, you won’t know if you’re losing the game and what you need to change to “change the score”.

It’s important to check your net worth. I recommend calculating it and tracking it at least annually. This can help to hold you accountable on how you are handling your finances. It’s way too easy to make a lot of money and end up with very little progress by comparison to your net worth.

Way too many people make huge amounts of money and live the rich lifestyle, but never accumulate any wealth. Why? One of the reasons is they didn’t keep watch on their net worth. It doesn’t mean anything if you make a lot of money, but fail to manage it well. It doesn’t make a difference if you make $500,000 a year of $500,000 a month, if you don’t grow your net worth. I know it sounds crazy, but you can make $500,000 month or more and still have a net worth of $0 if you spend all your money and go into debt.

Knowing your net worth can give you a goal to aim at. Do you want to be a millionaire? Do you want to be a multimillionaire? How do you know how close you are to your goal? How do you know how far you are away from your goal? Knowing your net worth can inspire you to stay on track with your financial goals.

I really like this tool from CalcXML for calculating your net worth to help calculate your net worth.

Growing Your Net Worth

As you track and grow your net worth, it’s important you do the right things with your money. Just stuffing it into a savings account isn’t going to cut it. You need to look for good investments that help you grow your net worth. Rental property investments, mutual funds, well selected stock investments, and even small business opportunities like franchises can all be good ways to increase your net worth outside of the traditional J-O-B.

So many of us get stuck in the single mindset J-O-B. I’ve been fortunate to have awesome employment for over 20 years, but I still wish I had spent more time looking into developing multiple income streams. It’s only been in the last few years that I’ve begun developing multiple income streams. Traditional 401k investments have been in my toolbox for 17+ years. I began acquiring rental properties over the last 3 years. I wish I had started sooner. Now I’m looking at small business and other opportunities to grow my net worth.

$0 or Near $0 Net Worth

I have several family members that really don’t get finances and money. If fact, one of them has attended the same financial class 3 times over 15 years. That’s once every 5 years! Want to guess their net worth? -$50,000. Age 42. That’s a very bad situation to be in.

If you owe a ton of money on your house, it can take a huge chunk out of your net worth. Let’s say you have a $300,000 home, but you also owe $250,000. Your net worth is essentially $50,000. But wait, that’s not all. You owe $25,000 on a $30,000 car. You have $40,000 in student loans.

So now we have ($300,000 home + $30,000 car) minus ($250,000 house debt, $25,000 car debt, $40,000 student loan debt) for a net worth of $15,000. On the surface, this person could feel pretty good about their finances. They are living in a nice house, driving a nice car, and the student loan debts are under control. In reality, they’re very poor.

This is the reality for the average American.

Unless you have a number like net worth to keep score, it’s easy to think too broadly as “I’m poor”, “I’m doing okay”, or “I’m rich.” You can have a net worth of $30,000 or -$70,000, both are poor. It’s easy for someone who can pay all their monthly bills to think they are doing okay, but if their net worth is low, they’re really not doing okay. And some people even think they are rich because have a huge income and some nice toys, but their net worth could be $250,000. They’re not rich.

Net Worth Mindset

Developing a net worth mindset can help you keep your finances on track and headed in the right direction. It’s a simple way give you goal to help you cut out the waste. If you know you are shooting for a goal to become a millionaire that’s a net worth score of $1,000,000. It’s a lot easier to make good decisions with your finances. A good financial decision is one that gets your closer to your goal. A bad financial decision is one that keeps you from your goal.

Last night, our family went out to eat. I have 6 children. It’s expensive to eat out. It cost me $80 to eat cheeseburgers from Five Guys. On the way to Five Guys, my wife and I discussed that we can feed our family at home for $25. Eating at Five Guys did not help me build my net worth, but it sure was tasty.

Net Worth Target

I’m a believer that every American can become a millionaire, so your absolute minimum net worth goal is $1,000,000. I was a millionaire at age 40. Many people do it sooner than I did. I’ve met many people who become millionaires in their 20s and 30s.

As you get smarter and more confident in building your finances, your number should be higher. Since becoming a millionaire at 40, I now have aspirations of reaching the $10,000,000 mark and beyond.

Without being too scientific or getting caught up in the retirement planning game, set your net worth target between $1,000,000 and $10,000,000 to start. Sure some super aggressive types will want to set their goal higher. That’s okay, but the average everyday American can achieve a net worth target between $1,000,000 and $10,000,000 if they get serious about their finances now.

Make wise decisions with your money. Build your net worth. Build your wealth. Help others.

 

Millionaire or Not. You Get to Choose.

Over the past 5 months as the new chapter of my life and future continue to develop, I’ve really enjoyed talking to people more about their finances. I guess something clicked in me, and I have more passion for people’s personal finances than ever before in my life. The more people I talk to, the more I realize how much people need help with their money. Even my closest friends and past co-workers need help. Perhaps I was too busy or just too focused on my own family’s needs. Whatever the reason, something has now awakened in me, and I’m excited.

The Millionaire Goal

So now I ask, how many of you have your finances figured out? Maybe you’re doing pretty well, but let me ask you this. What’s your millionaire plan? What’s the date on which you will cross the millionaire threshold with your wealth? Seriously? Have you set a date or year? If you haven’t set your date, then the likelihood of you reaching that monumental goal is pretty slim. I was 25 when I set my goal to become a millionaire at 40 years old. I put together my plan and went to work.

So today, I really enjoy asking the people I meet “what’s your millionaire goal?” It’s fun talking to a young man in his 20’s and sharing my story with them and seeing the lights come on. I dare say its the first time someone in their life has talked to them about becoming a millionaire, and in many cases, probably the first time a millionaire has talked to them.

I find it sad that so many people that I speak with haven’t aspired to reach the million dollar milestone. I guess it shouldn’t surprise me considering my family and life experience. On my mother’s side of the family, my grandmother was a single mother of 5 who eeked out a meager living. My grandfather was somewhat of a small time farmer. On my father’s side, neither my grandmother or grandfather accumulated any level of wealth.

My mother and father managed to pay off their house, but unfortunately lacked any financial sophistication. They were wonderful providers for my sister and I, even managing to put us through an affordable private school and somehow managing to get me through an inexpensive college without any student loans. Quite the achievement, and I’m eternally grateful. However, wealth of any kind eluded them. The question I ask is why?

According to The Millionaire Next Door, 3.5% of American Households are millionaires. Statistically, my grandparents, my uncles, my aunts, my parents, my cousins, my neices, and my nephews all fall into the 96.5% non-millionaire statistic. Why? And why do I, and my family fall in the 3.5%? The answer is relatively simple. Well, at least part of the answer is simple. It’s a choice. Yes, I know it’s a little more complicated than that, but at the core, a 25 year old young man decided he was going to be a millionaire by the time he was 40. It was his millionaire goal.

My Millionaire Plan

At 25, I was just learning about finances. While I was always told to save, I wasn’t shown how to save. It wasn’t modeled for me. In fact, my family was very bad with money, and I need to cut mom and dad some slack. They did stretch their dollars for my sister and I to attend an affordable private school. However, that caused us a few inconveniences. Sometimes the water was cut off. At other times, the power was cut-off. I remember bounced checks trying to pay bills which of course result in returned check fees exacerbating the problem. You could say I learned a lot about what not to do.

At 25, my millionaire plan was simple. Without a mentor, I had to learn for myself. With my DIY lifestyle, I headed to the books store and picked up 6 or so financial magazines. It’s been 20 years, but the magazine I remember most is Kiplinger’s. Kiplinger’s is an investing magazine. It was an excellent learning tool for me. It’s where I learned about the stock market, mutual funds, front load funds, back load funds, management fees, etc.

Armed with my newfound information, and a semblance of a millionaire plan, I set off on my journey. As any DIY person knows, you’re going to experience and learn some things along the way. It wasn’t a perfect plan, but it was a plan. The important thing was, I got started.

My plan at 25 was simple.

  1. Learn about investing in the stock market
  2. Don’t go into debt. Debt is bad. No debt. So I started paying off all my debt as fast as possible. I paid off my computer and credit card fast, then I paid off my 5 year car loan in 3 years.
  3. Keep your expenses low. Really low. My rent was $200/mo.
  4. Invest monthly. My plan had me investing in mutual funds at $500/mo. Personally, I should have been investing $1,000/mo.
  5. Then I set aside additional money for single stock trades. I traded in tech stocks since I was more familiar with them. Cyrix, Dell, Intel, Iomega, and a few others.

By anyone’s standards, it wasn’t a perfect plan, but it got me started and it had a few core elements that should be part of any healthy financial plan.

  1. Debt is your enemy. Avoid debt.
  2. Keep your expenses low.
  3. Invest aggressively.

But I did miss a couple of items that I should have included. If I’d had a mentor, my plan would have been more complete. A more complete millionaire plan would have included things like.

  • Increase your cashflow.
  • Expand your income streams.
  • Develop passive income streams.
  • Diversify.
  • Use retirement accounts for tax benefits.

While this is an extremely simplified look at becoming a millionaire, it does include everything you need to guide you. If you use this as your basic checklist and you build out it out with more detail by “filling in the blanks”, you will be on your way to becoming a millionaire.

So I leave you with this final question, on what date or year will you cross the millionaire milestone? Millionaire or not. You get to choose.

Millionaire Resources

The Millionaire Next Door

Secrets of the Millionaire Mind