Anyone Can Be Wealthy

Do you ever wonder why you should save?  When the thought of you being rich comes to mind do you believe it is not possible?  Many of us loose the hope of achieving something very quickly because we do not have all the information to make informed decisions.  So instead of trying to learn and achieve we just give up.  It does not have to be this way, anyone can be rich. 

Well what if I told you that by saving only $50 a month starting at the age of 25 by the time you hit retirement you would have a quarter of a million dollars?  You can, and it is easy.  Simply open an account with a good mutual fund (It can even be an index fund); have the money automatically deducted from your checking account every month and you are there!  Below are a couple of charts of what your money would turn into!

All of these numbers are done based on a 10% rate of return, which is below the market average for the long term, which is just under 12%.

Save $25 a month

Years	Value	Amount Invested
5	$1,935.93	$1,500
10	$5,121.12	$3,000
15	$10,361.76	$4,500
20	$18,984.22	$6,000
30	$56,512.20	$9,000
40	$158,101.99	$12,000

 

Save $50 a month

Years	Value	Amount Invested
5	$3,871.85	$3,000
10	$10,242.25	$6,000
15	$20,723.52	$7,500
20	$37,968.44	$12,000
30	$113,024.40	$18,000
40	$316,203.98	$24,000

 

If you made the 12% at $50 a month over 40 years you would have $588,238.63.  Now imagine what would happen if you saved more than $50 a month?  Wealth is possible for everyone; the first step is to make the decision to do it! 

Now you may be saying, but I don’t know what to cut back my budget is so tight.  So I thought we could start a list of things that are $25 or less that we spend on and could cut back.

• Manicure
• 4 Latte – (not all of your daily ones – just 4!)
• A movie for two with popcorn
• A new book
• Pizza

 What else can you think of to cut back on to increase your ability to become wealthy?

Learn how to invest

When you Invest Does Not Matter

Investing can be difficult to understand because there are many moving pieces and lots of controversy in what works best.  Just when you begin to think that you understand enough of the basics to begin investing you discover that there is even controversy in when to make your investments.  Do the factors that affect investing never end?

When to make my investment?  Yes, you have the choice of dollar cost averaging, lump sum investing (start of year vs. end of year) or continuous automatic investing and these are just the basic options with nothing fancy added on.  Does this really matter?  Do you need to go out and learn about all the intricate details behind each of these?   

When looking at your physical fitness one of the areas that is important is cardiovascular exercise, cardio for short.  This type of exercise helps with improving the functioning of your heart plus burns calories.  When you first start working out you can quickly be overcome by all the choices for how to perform your cardio.  Do you go for low intensity, high intensity, interval or some other combination and what is this plateau thing that everyone is talking about?  Unfortunately there is not one answer to which is the best all of the time.  Why?  Each person has different goals, and we all have different time frames for accomplishing our goal plus other factors such as how much time we have to exercise on a daily basis.  Instead we need to understand the basics of each style and select the one style or combination of styles that works best for us and our circumstances. 

This also goes for deciding when to make your investment.    Following are three easy steps to follow to help you decide what works best for you.

First, learn enough about each approach that you understand when and where to use it.  By learning that interval training helps the heart become healthier faster you may use that when you are short on time for a workout.  More bang for your buck!  Likewise when you learn that over time the best way to invest your money is in a lump sum at the beginning of the year you can adapt that strategy if your income is structured to have bonus payouts in January.  You won’t be able to make any of those decisions without understanding what each one means for you, so start reading and asking questions about different types of investment timing approaches.

Second, after you understand the basics of each evaluate your situation and determine what you can do.  Although you might want to do high intensity training to get you to your goal quicker, if your doctor has said that you need to stick with low intensity first then that is what you do!  Likewise if you want to lump sum invest, but don’t have extra cash sitting around then you need to start with continuous automatic investing.

Finally, start investing.  Don’t get stuck with paralysis by analysis and not do anything.  You won’t lose the weight unless you do some sort of cardio.  You won’t become rich by not saving any money so at a minimum set up an automatic investing program and get going.        

Don’t use not having a complete understanding of investing as a reason not to invest, you will always find something new that you can learn about and debate about before you begin investing.  Ask for help and get going!  You can always go back and learn the intricacies of dollar cost averaging after you have started investing; the battling sides will still be there.

Impact of Fees on Investments

When choosing an investment pay attention to the fees.  This can have a huge impact on your return.  Assuming an investment of $1,000 that makes $100 (10%) a 1.5% versus a 1% fee is only a difference of 50 cents the first year, but you then have less to invest the next year, so you make less from then on.  Now imagine this on a greater scale over time.  There are great funds for low fees available.   Don’t let fees eat away your returns.

Low fee

Year	Invest	Make	Fee	Net
1	1000	100	1.00	99
2	1099	109.9	1.10	108.80
3	1207.80	120.78	1.21	119.57

High Fee

Year	Invest	Make	Fee	Net
1	1000	100	1.50	98.50
2	1098.50	109.85	1.65	108.20
3	1206.70	120.67	1.81	118.86

Money is Personal

Money is personal; math is only a small portion of it.  Addressing your emotional money issues will make the money easier to handle!

Dividend

A dividend is your share of the income a company makes that you are a part owner in (you own stock or a mutual fund).

Ownership in Company

When own stock you have ownership in the company.  When you own a mutual fund, you own a share of all the companies that that fund invests in.

Money Does Not Buy Happiness Contentment Does

Are you unhappy and just keep thinking if I could earn a bit more money everything would be fine?  Tired of hearing the saying “money can’t buy happiness”?  I wish I could tell you that I am going to tell you that money can buy happiness, everyone else is wrong, but I can’t.  What I can tell you is that if you find contentment with what you have now when more money shows up it does help increase happiness.  But first you must find the contentment.

When you are content money is cool, but not the end all be all.  You spend differently, you invest differently.  It is not about impressing others or gathering things.  Don’t get me wrong, money and things are cool, but when you are content you operate from a different place.  You don’t need to impress others or have more because you are happy with what you have.  So your decisions on what to do with money come from a different place.  According to Tom Stanley author of Stop Acting Rich a better indicator of happiness comes not from more income but on living on less than you make.  I would guess that much of that has to do with those that live on less than they make are more content with life and thus spend money differently.

 So what is contentment? 

 I consider contentment to be:

• Loving who you are today
• Loving what you have today
• Loving what you do today
• Accepting your past as a filled with experiences that are of benefit to you today

Of course we should always strive for being a better person, evolving in our careers, and reaching for bigger dreams but if you cannot say you are happy with yourself now, you can very easily fall into the belief that the grass is always greener on the other side.  This creates a vicious circle of trying to achieve what you think will make things better, getting it and then discovering you are still not happy, thus setting your sites on something else and struggling all over again.

 So how do you get contentment?

This is a journey, it usually does not happen overnight.  You can move down that road to contentment by hiring coaches, counselors and other teachers and by self study, plus tapping into the spiritual and physical components of contentment.  That is a big lot to choose from.  So here are three specific steps to get you down that road:

1.  Start a gratitude journal – every night before bed write down what you were grateful for that day.  It can be as small as a eating a fantastic tasting strawberry.  Get as many things written down as possible.  You will find that after about a week or two your attitude will begin to be more positive about today and yesterday!
2. Select an area you struggle with and get help.  If you struggle to enjoy your daily life because you have no energy, address the fact you need more energy by starting a workout program or eating healthier.  Reach out to friends, family or paid help to get you on the right track; it is hard to change things alone.  Accountability and a different prospective will take you further than you ever thought.  The key to this step is the help part, get help today!
3. Give yourself time and love.  Besides for my years of living a life based on personal growth it took me a full five years of actively pursuing contentment to actually find it.  There were many times I wanted to give up, but I continually came back to the point that I loved myself and deserved contentment.  You do too, so allow for time and love in your journey.

Is this journey easy?  Not always but I promise it is always worth the journey.  Striving for true contentment and everything else get easier – including money.

How to Ensure You Reach Your Financial Goals

Every January I spend some quality time evaluating my finances.  Why?  Because if I don’t then our plans become out of date.  Our financial plans will have been set for a life that was based on who we were and what we wanted a year ago not today’s reality.  A lot changes in a year, and even more changes in five years or more.  If we were still following our financial plans for what we wanted five years ago we would be way off track!

 Have you ever stopped one day and realized that the career you worked so hard for was the wrong one or that you had gotten way off track on your way to the top?  If you’re lucky enough this has not happened, but I bet you know someone who has had this happen.  If it has happened to you, you know that you work hard on a career that you wanted when you were 18.  Over the years you got married, had kids, and lived through many other life changing events.  The once 18 year old is a completely different person today, and might not want the same thing.   By then it is harder to make major changes and start over.

 Our financial plans can have the same thing happen to them.  If we have a plan, we tend to set it in place and then don’t look at them again.  Overtime they become the wrong plans for what we want out of life and we wake up one day and wonder why we did not get to where we wanted to go.  We did not get there because we were following the map from 15 years ago. 

 You can stop this from happening.    Here are three easy steps to help you get your financial tune up started.

 Pick a time for you to do your review every year.  I do mine beginning the last two weeks of December and into January, because it is the end of the calendar year.  This allows me to see the full income for the year which I use to do some tax and investment planning.  You might do it on your birthday or graduation from college anniversary.  It really does not matter as long as you are looking at it once a year.  Pick your time and add it to your calendar. 

1. Set aside small chunks of time to accomplish your review.  To do this right you want to give yourself plenty of time to review everything.  I spend at least 8 hours a year on this and breaking it into small time blocks makes it much easier to stay on track.  Plus then your numbers and ideas do not run all together.
2. Determine what you want to review.  I recommend that at a minimum your review all the investments that you currently have to make sure you still want them, ensure that you have the right allocations on your investments, and make adjustments to get them in line. You should also make sure you still want the goals you are trying to achieve and that you are saving the right amount to reach your goal. 
3. I realize this might be overwhelming at first, so allow yourself the time and space to figure out what you are doing.  We are all still learning everyday and allowing ourselves the time for this will make each year easier and easier.  If in doubt ask for help. 

By taking the time to make sure you are on the right track you will end up where you want and maybe someplace even better.  I promise your future self will thank you.

Protecting and Detecting Identity Theft

Identity theft is sadly becoming a major problem in our society; it is one of the fastest growing crimes.  We hear about it on the news and hear stories from our friends and family, but most of us don’t believe it can happen to us?  We consider it one of the sad things that happen to others. 

According to the FBI one in five families (20% of us) has been a victim of identity theft.  To put this in perspective, let’s compare this to two major cancers that you may encounter.  According to the BreastCaner.org site 1 in 8 women (13%) will get breast cancer.  A man has a 17% chance of getting prostate cancer (zerocancer.org). Both of these are lower than your chances of being a victim of identity theft!   Most of us are more conscious of what we need to do to detect and protect against cancer, but not about identity theft!

Like cancer, identity theft can have negative impacts on our quality of life.  It affects our credit rating which affects our ability to borrow (which depending on what you’re borrowing for is not always a bad thing).  It also drains your free time (and energy) as you end up spending hundreds of hours to clear up the fact that you do not owe the money (which you don’t) with companies that believe you are a dead beat trying to get out of your obligations.      

So how can you detect and protect from identity theft? 

 

Protect Your Information

Protecting your information is a great way to prevent identity theft from ever happening.   Here are some easy to start with tips!

1. Purchase a shredder.  Use it for everything with your information (name, address, anything personal) on it, including any credit card offers that you receive in the mail.  Basically shred anything that you are unsure or that has information that a person can use to build on your credit identity.  When in doubt shred! 
2. 2.      Reduce the number of times that you use your social security number.  If you are wondering why someone needs it, ask and then you can decide if they really need it and you will feel more comfortable with giving it to them.    
3. 3.      Don’t save your credit card information on internet shopping websites.  As you will see below a data breach is a big concern for keeping your information safe.

 

 

Detect Identity Theft

Beyond protecting your identity you also need to actively monitor your credit identity.  Why?  Because sometimes no matter how much you protect your identity it can be stolen due to other people’s or companies lack of data security.  Data Breaches are a major factor in your identity being stolen.  According to the Identity Theft Resource Center (idtheftcenter.org) 2009 (up to December 29) there were 492 data breaches that affected 222,346,827 people!  Some of these were companies that you shop at, but some were also educational institutions and government agencies. 

How do you monitor your credit?  You can check your credit by either hiring a credit monitoring service or checking it yourself.  You are looking for accounts and searches that you did not initiate.  If you do find one, contact the company immediately to sort out the situation.

Credit monitoring services inform you regularly if there have been changes in your credit reports, such as new credit cards opened in your name. They generally charge by the month for this service. Most of these services also come with your credit score if you want to monitor how your score is progressing.

In my opinion there is no need for you to pay a credit monitoring service. You can get your yearly credit reviews for free at https://www.annualcreditreport.com/cra/index.jsp. Through this site, you can get a credit report from any of the three credit agencies. The agencies are required by federal law to provide you with one free credit report per year (credit scores not included – which you do not actually need to monitor for identity theft).  As a result, if you want to check your credit report more often than once a year, you can do it every four months with a different credit agency without ever paying for the service.  

Be aware, however, that the credit reports are free only through the annual credit report Web site, many companies try and replicate the name and service but charge you in another way (typically signing you up for the monthly monitoring).

You are also entitled to receive a free credit report if you are denied credit.  I would not recommend this as the best way to get a free report!

Protecting and monitoring your identity is a new permanent concern for us to add to our list. Add it to your calendar as a reoccurring event and you will not have to worry about if you have done it or not!  No calendar or to do list?  Add it to your birthday celebration, that way you can keep your identity and your day to yourself!

Do you have Financial Balance

What is financial balance?  We all know what life/work balance is, managing the time spent in each area so that you are not depleted emotionally and physically.  Financial balance is the same concept.  You need to strike a balance between saving and spending so you are not depleted financially or emotionally. 

How do you know if you are financially balanced? 

Ultimately you should try to save 10-15% of your income for retirement.  In addition to that you should also save for emergencies, Kids College, cars, and all the other wonderful things that you want to have.  So on the minimum side you should save 10%, on the maximum side that depends on your situation.  Are you trying to save for a down payment on a house?  Do you have everything paid off and the kids are gone, you may want to save much more to reach retirement earlier.  You mainly have to monitor how you are feeling about your money.

Help I’m saving too much!

Saving money is a wonderful and necessary thing.  I encourage everyone to do so!  However it is possible to save too much.  By saving too much you will begin to feel slighted that you are not able to buy what you want or that you are working for nothing.  Saving too much although creates more for the future can create a false sense of scarcity now.  Like when you work too many hours you begin to feel burnt out and undervalued.  While creating a false sense that there is no time that is available for you and your family.   

Help I’m spending too much!

Spending money is also a wonderful and amazing experience.  Unfortunately over spending creates physical stress and problems, actual scarcity and it traps you into a future of financial problems.  Likewise when you work too much your body never gets the chance to recuperate thus causing you harm today and tomorrow.  This can come in the form of insomnia today and heart problems tomorrow.  Not to mention the affects that both have on your relationships, creating conflict about your future and values.

So how do you find financial balance? 

1. Live within your means.  While this does not always create savings, it does eliminate overspending.  If you cut your hours from 60 to 50 you may not completely gain balance in your life, but you will stop the deficit from getting bigger. 
2. Slowly start to increase or decrease your savings.  For most of us this is an increase in savings (the personal savings rate for November was 4.7%).  Even small amounts will help get you started.  Starting with $25 or $50 a month and slowly increasing that over time will get you more savings.  If you are one of the lucky ones that need to increase your spending I also recommend that you start small.  It can be equally as difficult emotionally to spend more as it is to forgo spending more to save money.  Start by adding a splurge a month.  Such as a manicure or an extra round of golf.  Eventually spending will become easier.
3. Give yourself permission to make mistakes with your money.  As you start down a new road to saving or spending remember that it is difficult to make a 100% change overnight.  Just like when starting a new say no to work program it is easy to slip back and say yes to a new project.  Just remember to acknowledge where you fell off, forgive yourself and start at it again.  Do not give up!
4.  Allow yourself the space to deal with emotional issues that arise as you change.  Money is emotional; you have beliefs about money that have been around since childhood.  It is hard to change these beliefs.  Be forgiving of yourself and allow yourself the space to explore the emotions you will better be able to make a permanent change.

Striving for financial balance can help you lead a stronger, happier and healthier life.  So start today by making small changes and see how far you can go!