Tuesday, April 14th, 2009
A number of the people profiled in “Millionaires tell how they did it” made their millions as entrepreneurs. But working for the Man doesn’t mean you have to be a wage slave or resort to buying lottery tickets to strike it rich. The trick is to maximize your income on the job (and know when to move on), make the most of your employee benefits and tax breaks and use that extra money to start investing.
1. Keep your eyes peeled for better ways to do your job. Streamline a procedure, shave costs, create a new profit center, become an expert on a specific topic, volunteer for a company committee — anything that will make you stand out as a prime candidate for a promotion or a pay boost.
2. Don’t be afraid to negotiate. In a study of master’s degree graduates from her university, Carnegie Mellon economics professor Linda Babcock found that those who negotiated their first salary boosted their pay by 7.4% compared with those who didn’t bargain.
3. Get your ducks in a row and your numbers on paper. If possible, quantify how much your efforts add to the company’s bottom line. If that’s not feasible, spotlight your value with comparable salaries for workers in your position from a Web site, such as Salary.com, or from a professional association.
4. Plot your strategy when it’s time to move on. Create a professional-looking page on MySpace that tells prospective employers why you’re an exceptional candidate, recommends John Challenger of the outplacement firm Challenger, Gray & Christmas. And don’t neglect more conventional networking: Join a professional association or show up at school reunions toting business cards.
Milk your benefits
5. Contribute as much as you can to your 401(k) and other tax-deferred retirement plans. You’ll not only build a bigger nest egg, but you’ll also cut your tax bill. In the 25% federal tax bracket, every $1,000 you contribute to a 401(k) trims your taxes by $250. And you’ll save on state income taxes, too.
6. Flex your tax-saving muscle. Contribute pretax dollars to a flexible spending account to pay for dependent care or out-of-pocket medical expenses. If you set aside $1,500 per year and you’re in the 25% bracket, avoiding federal income and Social Security taxes means Uncle Sam will subsidize almost $500 of your expenses.
7. Review your tax withholding. If you’re expecting a refund this spring, you’re having too much tax withheld from your paycheck — and making an interest-free loan to Uncle Sam. That’s no way to become a millionaire. Put more money in your pocket by using Kiplinger’s withholding calculator and then filling out a new Form W-4.
8. Stash savings in a Roth IRA if you’re eligible. Withdrawals in retirement, including decades of compounded earnings, will be tax-free. This year, income-eligibility limits for a Roth increase to $114,000 for individuals and $166,000 for married couples.
Invest like crazy
9. Don’t delay. The quicker you get a jump on putting money aside, the easier it will be to stuff a seven-figure cushion. If you start at age 25, for example, investing $286 per month will get you $1 million by age 65, assuming you earn 8% annually.
10. Invest automatically, either through your employer’s retirement plan or by setting up a regular deposit to a mutual fund or broker. You’ll never miss the money, and you’ll avoid two big mistakes: buying too much when stock prices are high and not buying at all when prices fall.
11. Watch for fund fees. The more you pay, the tougher it is to earn an above-average return. The typical hedge fund, for example, takes 20% of any gains, a huge hurdle to overcome. A better bet: no-load mutual funds with expense ratios of 1% or less. If you trade individual stocks, watch those commissions.
12. Keep it simple. Be wary of get-rich-quick schemes or sales pitches for complex investments, such as oil-and-gas partnerships, that trade on the millionaire cachet to lure investors into buying high-fee products they don’t understand. Most millionaire households accumulate their wealth over the long term by sticking to a regular investing plan in a balanced portfolio.
Posted in Informational, Inspirational, education, success | No Comments »
Monday, August 11th, 2008
Some of you know I have ideas about what I’m going to put on my blog by some of the conversations I have during my daily strolls on earth. Today, I happened to walk upon a conversation about finances and investing today with one of my cousins who was seeking advice from my grandfather.
During our conversation my cousin discussed his investment avenues and he has a portfolio that consists of a 403b & some account he contributes to out of pocket. Basically, he had no idea what he was throwing money into.
His investments were giving him good returns but as with every conversation I bring to you, I realize that a lot of US (yes I’m guilty) are ignorant about things that’re really important to our future. OUR RETIREMENT!
During our conversation, he was only involved in the dollar amount he was getting for the quarter. Instead, he should be concerned with the percentage of his returns. LET ME REPEAT… NEVER LOOK AT THE DOLLAR AMOUNT OF RETURN ON YOUR INVESTMENTS. ONLY LOOK AT THE PERCENT OF RETURN!
Reason being, he got a pretty good dollar amount from his quarterly statement but he was only getting a 5% gain (because 65% of his portfolio is in a fixed fund). He’s 35 and that’s a BIG no-no. The younger you are, take the biggest chances. You have time to recover from something catastrophic.
Use the well adopted rule of “120″ when figuring out what should be allocated where. 120 - your age is the percent of your portfolio that should be in stocks. So by that rule he should have 85% of his portfolio in stocks (or mutual funds). I’d suggest Mutual fund because they aren’t as volatile as individual stocks.
Back to my point of focusing on the percent. Not bragging, but following Dave Ramsey’s advice of picking the 4 best performing mutual funds over a 10-15 year period, I was able to gain 24% last year within my 401k. Within my Roth (I started last year), I managed 15% (ticker:FNARX). This year is down in my 401k as I’m currently posting a -15.7% return (but that’s OK considering the market is down more than that). I look at it as a buying opportunity (as every investor should).
Anyhow, just imagine what his numbers would’ve looked like if he got even a 12% return last year instead of 5%?
It’s not all bad however, I managed to get him to look into a Roth IRA account and I encourage you all to do the same. It should be the first individual investment you guys should make. It’s already taxed since it’s coming out of your pocket. Did I mention that it’s already taxed? Did I? That means that when you turn 65, you can take it all out without taxes or penalty. What about before 65 you ask? What you contribute to it is YOUR MONEY ANYTIME YOU WANT IT without taxes or penalty. The catch is, it’s so good of a retirement plan that it’s capped at $4k/year you can contribute. For you ballers, I’d suggest paying monthly or quarterly instead of contributing all at once in order to average in your buy-in points of the mutual funds you select.
This article took a different turn than what I intended it to so I guess I’ll follow up later on what I wanted to originally write about: Differences in investment options.
Posted in Generate income, Inspirational, Personal debt, education | No Comments »
Tuesday, August 5th, 2008
Next time you see that ‘player of the year’ flawsin’ in that 2005
Chrysler 300 sittin’ on 23’s while he’s pulling it into a parking stall
of a rented apartment hand him this article.
USA Today article on Black Spending Habits:
These are tough economic times, especially for African-Americans, for
whom the unemployment rate is more than 10%. Alarmingly, rather than
belt-tightening, the response has been to spend more. In many poor
neighborhoods, one is likely to notice satellite dishes and expensive
new cars.
According to Target Market, a company that tracks black consumer
spending, blacks spends a significant amount of their income on
depreciable products.
In 2002, the year the economy nose-dived; we spent $22.9 billion
($22,900,000,000.00) on clothes, $3.2 billion ($3,000,000,000.00) on
electronics and $11.6 billion ($11,000,000,000.00) on furniture to put
into homes that, in many cases, were rented.
Among our favorite purchases are cars and liquor. Blacks make up only
12% of the U.S. population yet account for 30% of the country’s Scotch
consumption. Detroit , which is 80% black, is the world’s No. 1 market
for Cognac (Pass The Co———).
So impressed was Lincoln with the $46.7 billion ($46,000,000,000) that
blacks spent on cars that the automaker commissioned Sean ‘P Diddy’
Combs, the entertainment and fashion mogul, to design a limited-edition
Navigator complete with six plasma screens, three DVD players and a Sony
PlayStation2.
The only area where blacks seem to be cutting back on spending is books;
total purchases have gone from a high of $356 million in 2000 to $303
mill! ion in 2002. This short-sighted behavior, motivated by a desire
for instant gratification and social acceptance, comes at the expense of
our future.
The National Urban League’s ‘State of Black America 2004′ report found
that fewer than 50% of black families owned their homes compared with
more than 70% of whites.
According to published reports, the Ariel Mutual Funds/Charles Schwab
2003 Black Investor Survey found that when comparing households where
blacks and whites had roughly the same household incomes, whites saved
nearly 20% more each month for retirement, and 30% of African-Americans
earning $100,000 a year had less than $5,000 in retirement savings.
While 79% of whites invest in the stock market, only 61% of
African-Americans do. Certainly, higher rates of unemployment, income
disparity and credit discrimination are financial impediments to the
economic vitality of blacks, but so are our consumer tastes.
By finding the courage to change our spending habits, we might be
surprised at how far the $631! billion($631,000,000,000.00) we now earn
might take us.
We all send thousands of jokes through e-mail without a second thought,
but when it comes to sending messages regarding life-affirming choices,
people think twice about sharing. So please pass this on.
Knowledge is POWER! Reverse the trend.
Posted in Informational, Inspirational, purchases, relapses | 1 Comment »
Wednesday, July 23rd, 2008
I sometimes get lost in my quest to become debt free and liberate my family from the debt monsters of the world while trying to change my family’s legacy. With that in mind, I’ve never thought about “How much money is enough”, until I checked my email today and saw the article topic staring right back at me.
Needless to say, I clicked the link and within the article there’s a 4 step process to figure out how much is enough. For me, I’m thinking I have a more simple formula.
Short Answer: Being debt free is enough money for me because without debt our lives tend to change. No longer are we FORCED to go to work on dreaded Monday’s. No longer are we bound by legal contracts to credit card, mortgage, and loan companies. Instead we can focus our attention on PAYING OURSELVES (which we should do anyways).
In the previous blog entry I wrote of a goal of mine. To be at a point to where I don’t have to work if I don’t want to. If we pay off our home and her student loan payment, I’ll quickly be at that point. The beauty of it is… after those are paid off, it’s smooth sailing. Income will be just that… INCOME!
But for the lazy (which I tend to be) here’s the 4 steps from the article:
Link
Step 1: List your top five goals or desires.
In contrast with the hundreds or even thousands of cravings and urges you feel each day, your deepest desires may include benefits to others and not solely to yourself, may be characterized by patience rather than a childlike urgency and may carry a sense of profound importance: “I yearn to do or have this before I die in order to feel truly fulfilled.” You may wish to begin by listing all the desires you can in 60 seconds and then select the five which most fit this definition.
Step 2: Put a price tag on each goal.
If your deepest desires include things like buying a home, you (or your financial planner) can fairly easily convert that goal into a monthly or lump-sum financial requirement. But if your goals include states of being — such as a desire to work half time and spend more time with your kids or volunteering for a cherished cause — you’ll need a replacement income source.
For these types of desires, list the amount of annual income you’d need to replace. Our rule of thumb is that you’ll generally need an investment portfolio equal to about 20 times your annual withdrawals. So if you’re hoping to have your investments cover $25,000 a year of expenditures, for instance, you’ll need to have or save $500,000 to cover it.
Step 3: Calculate your “enough for life” number.
By adding up the total of all the lump sums needed, you can calculate how much is enough for you to achieve your deepest desires.
Step 4: Create a financial plan to get there.
If your financial net worth exceeds your “enough for life” number, great news: You can stop worrying and live the life you most want to live. I don’t mean to be glib, but if you know you have enough to take care of your deepest desires, as well as your basic necessities and retirement savings, it may be time to stop chasing each extra dollar. Instead, solidify your sense of abundance by sharing your good fortune with others, through philanthropy (or just plain old-fashioned generosity).
Posted in Generate income, Informational, Inspirational, Personal debt, education, goals | No Comments »
