money management

Are You On Track?

by mike on September 16, 2010

Do you know if you are doing the right things to build wealth?  How do you know if you are on track?  The last several articles, we have taken a look at a book written by Thomas J Stanly and William D. Danko entitled “The Millionaire Next Door”.  It is an extensive study on millionaires and how they became millionaires.  I love reading books and I encourage each of you to start reading them if you have not been.  My goal is to read at least one non-fiction book a month.  Reading books is pointless though if you do not take away something from the book and put it into practice.  I want to discuss my “take-away” from the “Millionaire Next Door” which will hopefully give you a measuring stick for how you are currently doing with money.

1)    It takes time to accumulate wealth.  It is not something that happens overnight.  This is hard for me because I like results and I like them fast.  The key to remember is that in the story of the Tortoise and the Hare, the Tortoise always wins.  Live below your means and consistently invest money instead of consuming it all.  I recommend investing 15% of your income into good growth-stock mutual funds (after you have no debt and a fully funded emergency fund).  Are you living below your means so that you have money to invest?  Are you currently debt-free (other than your house) and investing 15% of your income for retirement?  If not, what do you need to do to get there?

2)    Do a budget.  Millionaires are frugal, they do not waste money.  The best way to be frugal is to do a budget before each month begins.  Mandy and I have done a budget before each month begins, every month, since early 2003.  Our plan is to do so for the rest of our lives.  Are you doing a budget every month, before the month begins?  If not, I will almost guarantee you are wasting money, which is the opposite of frugal.

3)    Spend your time and energy well.  This book made me take a hard look at where I spend my money, time, and energy.  I have to admit with two (soon to be three) little ones and all the other things we have going on, we do not spend a lot of timing planning or looking at our investments.  It is something I should spend a little more time on.  If you are in the position to be investing your money, do you know much about your investments?  How much time do you spend evaluating and, most importantly, understanding them?

4)    Be thoughtful about your vehicle purchases.  The best way to purchase a vehicle is to buy a two to four year old used car.  You do not need to be flashy with foreign sports cars, just an average American-made car.  Sinking a ton of money into something that goes down in value just to impress some people you don’t even like is not a good plan!

5)    Be a blessing to your children.  One worry I have is that as we accumulate some wealth, we will create spoiled brats.  It is important to teach them to be frugal.  Also, it is important to let them try new things and fail.  If you, as a parent, are always insulating them from hurt and failure, they will never develop the courage it takes to be a productive, contributing member of society.  I plan to help our children with education costs, but will purposely not give them money into adulthood in order to support an expensive lifestyle. 

6)    Have the courage to start your own business.  I still believe that most people have it in them to do so, but either do not realize it or do not have the courage to take that first step.  Especially moving forward in the age of technology, the ability for people to reach the entire world offers endless opportunities.  Just find that thing you are good at and passionate about and find a way to monetize it (turn it into an income stream).

            How many of the points discussed in this article are you doing?  Are you on track to become a millionaire?  If so, what do you plan to do with the money if and when you do obtain it?  If not, what is holding you back?  Ask yourself these questions often and start doing things with a purpose.  Your net worth will thank you.

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Money is Like Landscaping

June 7, 2010

Mandy and I had the wonderful fortune of doing some landscape work a week or so ago.  As we were sweating and working hard, I got to thinking about how doing landscaping or gardening is a lot like money management.  First and foremost, most people do not like doing it.  It’s something you need to […]

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