Save and Invest Regularly
Everyone knows to pay yourself first and pay yourself consistently. The more money you can get going into your 401(k) or mutual fund account automatically each month the less you miss it. That $5 starbucks coffee could be a year’s worth of retirement income later in life if invested the right way. Invest in the company’s 401(K) if you have one available at least up to the match amount. If your company matches up to 4% you need to invest at least 4%, otherwise you are throwing away free money. If you are self employed shelter your money in a SEP Simplified Employ Pension or a solo-401(K). You can significantly reduce your taxable adjusted gross income with this strategy. “It’s sort of like exercising,” says Stuart Ritter, a financial planner with T. Rowe Price. ‘You can devise the most optimal splits between cardio and weight training. But if you only go to the gym for six minutes, it won’t really help you that much.”
Invest in Stock
Don’t be afraid to invest in equities. They are the only way not to outlive your money. If you keep your nest egg in CD’s it won’t even outpace inflation. Take some risks and become an owner in America’s best companies. If you don’t know which one to choose, buy the Vanguard S&P 500 no load fund or the ETF the costs are low and you will own the 500 largest capitalized companies in America.
Spend less then you earn-Be frugal
This seems so simple but keeping up with the Joneses can get you into a lot of hot water over time. Create a vacation account so that by the end of the year or the summer when your family is ready to take off for the beach you have the cash on hand and you don’t have to throw it on the credit card. Keep to your budget. If you only have $200 a month allotted for clothes shopping stick to it. Evaluate a needs vs. want list. Do you really need to pay $50.00 for a manicure pedicure every week? Or can you do some services on your own? If you work and you are in front of clients every day, maybe you do need to pay to have your hair colored or highlighted but can do your nails on your own. You don’t need to give up all of life’s luxuries but just evaluate a need vs. want and be conscious of the money you are spending. Don’t be embarrassed to use coupons, shop the deals, shop at discounters or ebay. Don’t be embarrassed to by second hand. There is nothing better than a car with low mileage that you pay cash for. Car payments are your enemy. Cars are depreciating assets regardless of what the “Real Housewives of Orange County” say. Use your brain power and understand that cars are and always have been a depreciating asset. Unless you own a small business and can write off a car payment on your taxes don’t ever lease a car.
Own a home or just own property
There is no better time in history if you have never purchased a home before to get a great price on real-estate paired with the lowest historical interest rates on a mortgage that this country has ever seen. If you live in New York City or San Francisco it may be impossible to enter the real-estate market when a starter home starts at a million dollars. So buy a vacation house in the Poconos or a weekend retreat in St. Helena buy property for rental income in another city like a beach condo and place it with a rental management company or if you’re brave rent it out yourself on VRBO.com.
Become a Landlord and retire on “rental income”
Start with one property fix it up, acquire a new property or multi-family property until you are cash positive on a large portfolio of real-estate.
Let Your Money Work for You
Buy dividend paying stocks. Buy stocks for growth and keep diversification in mind for some safety. Consider a franchise, small business, or limited partnership investment in someone’s business. Like they say about the lottery “You need to be in it to win it” it is the same with “growth opportunities”. You can’t grow capital in real-estate if you don’t own property to collect rents, gain appreciation, have write offs on your taxes etc. You need to always be evaluating deals. If you don’t feel like you’re at that level start small. Commit to putting $50 a month in a no-load growth oriented mutual fund. If you keep your money in cash you may out live your wealth. You have to have the fortitude to take some risk with all or a portion of your money.
Time is your friend (Start Early)
Teach your kids at a young age the value of money. Teach them the steps to invest and save and help them understand the time value of money. It is so easy to become a millionaire if you fully fund a Roth IRA at age 20 and keep doing it year after year. But let’s say your 45 and never heard of a Roth IRA until 2008, you still need to get started with the pay yourself first plan. It gets more difficult to build wealth as you age. You have to commit much more time and much more money annually to even think about hitting that million dollar mark.