Interesting financial article on wealth

[Landrover]

yes sir, I read his first one The Millionaire Next Door and I'm about to start on The Millionaire Mind. I find it helpful to read a portion every time I get the itch for a new truck or a new gun.

OP,
Good stuff... basics that form a solid financial planning foundation.


This may or may not be a sound decision from a strictly financial perspective. There may be other reasons it makes sense for you, but if your mortgage is anywhere near what typical rates have been for years, you'd be better off diverting that truck payment money to 401(k), IRA, and then some fancier options if you are maxing those out, in that order.
You couldn't pay me to buy down my mortgage at 3.00% when market investments can perform at 8% easily... well I guess you could pay me more than 5% to do that.

As you noted, folks have various reasons that make sense to them.

[dustoffer]

I got on the financial planning train in '82 and never got off--still putting $$ in a Roth, but this is my last year of mowing so no more earned income so no more contributions to the IRA.

[EarleyBird]

Good stuff

[TxAg]

Bump. More folks should read the article (and others like it)

[jerp]

"High income does not make you rich." I see this from time to time in my practice. It is kind of shocking when you talk to a guy in his 40's who has been making $300k/year for 10-15 years and has saved almost nothing. When you do a financial statement it is easy to see why - giant house, lake house, multiple vehicles, expensive toys,wife's jewelry, etc. Almost every dollar coming in is going right back out. Being up to your eyeballs in debt happens at every income level. I don't see how folks can live like that - I would not be able to sleep.

[M16]

You couldn't pay me to buy down my mortgage at 3.00% when market investments can perform at 8% easily... well I guess you could pay me more than 5% to do that.

Interesting. Do you guarantee an 8% return?

[TKK]

"High income does not make you rich." I see this from time to time in my practice. It is kind of shocking when you talk to a guy in his 40's who has been making $300k/year for 10-15 years and has saved almost nothing. When you do a financial statement it is easy to see why - giant house, lake house, multiple vehicles, expensive toys,wife's jewelry, etc. Almost every dollar coming in is going right back out. Being up to your eyeballs in debt happens at every income level. I don't see how folks can live like that - I would not be able to sleep.

I am the OP - agree with you totally. I have done financial planning for 37 years.I have seen clients who make 300,000 plus who could not write a check for $10K. That is just being irresponsible.

What I have learned over my 37 years is this - there is NO cookie cutter way to be financially successful. Every persons situation and needs are different. But for me there are a few "rules" that can make a huge difference.

1. Pay yourself first - withhold a percentage (10-15% if possible) of your pay check into some type of retirement plan - IRA, 401k, Mutual funds - start early and leave that money alone. Do not pull some out for a vacation. It is sacred money.

2. Many folks focus on taxes and investment return. Those are important but even MORE important is systematically putting money away and leaving it alone. A 10% return on no money equals nothing.

Compound interest over time is the most powerful financial tool available. Everyone would love a windfall but for 99% of people the way to be financially successful is a slow and steady, long term approach.

3. Tax deferral is powerful - if you earn a dollar on your investment and 15 to 39% of it goes to the government each year, you will NEVER recover that money. If you keep all of your investment returns to be reinvested via tax deferral, then ALL of that money remains with you and not the government. Think about that. So any tax deferred investments you can find will treat you well over a lifetime.

4. Borrowing money in the right circumstances is not always bad. If you have the cash to pay off any loan you make but you can use someone else's money at a 3% cost but make 5% on your investments then that is called arbitrage. Use others money to make money. Credit cards do not fit in this example. However a home mortgage at 3% when you can earn money at 5% is not necessarily a bad deal.

5. Back to number 1 - if you save a percentage of your income over 30-40 years you will end up doing just fine in retirement. The secret to investing and retirement is "there is no secret" - it is simply common sense.

My 2 cents worth

[jerp]

Great post TKK. At the other end of the spectrum from my previous post, you also see older folks who although they had middle-income jobs, they always saved diligently, lived within their means and let time work for them.(investment wise) They have no problem living comfortably in retirement. The longer life spans we see today has changed the game. In my dad's generation you retired at 65 and likely died within 10 years or so. Now, you are faced with needing to save enough over your working life to support yourself for another 25-30 years.

[TxAg]

^^^ my uncle is an oncologist. Last year he told me that half the doctors he knows couldn't write a check to cover $5,000...they were stretched way too thin.


I agree with the above, but would recomment 10-15% be upped to 20% or more. The worst that could happen is you retire that much earlier.

[Black Ice]

Got to spend it sometime!


Sent from my iPhone using Tapatalk

[Landrover]

"High income does not make you rich." I see this from time to time in my practice. It is kind of shocking when you talk to a guy in his 40's who has been making $300k/year for 10-15 years and has saved almost nothing. When you do a financial statement it is easy to see why - giant house, lake house, multiple vehicles, expensive toys,wife's jewelry, etc. Almost every dollar coming in is going right back out. Being up to your eyeballs in debt happens at every income level. I don't see how folks can live like that - I would not be able to sleep.

It is sooooo true! It would scare me to a early grave honestly.

[millman]

Good read, I am still scratching my head on #10 but everyone to their own. I will let my attorney hash all that out when the family is spreading my ashes.

[12RingKing]

I am the OP - agree with you totally. I have done financial planning for 37 years.I have seen clients who make 300,000 plus who could not write a check for $10K. That is just being irresponsible.

What I have learned over my 37 years is this - there is NO cookie cutter way to be financially successful. Every persons situation and needs are different. But for me there are a few "rules" that can make a huge difference.

1. Pay yourself first - withhold a percentage (10-15% if possible) of your pay check into some type of retirement plan - IRA, 401k, Mutual funds - start early and leave that money alone. Do not pull some out for a vacation. It is sacred money.

2. Many folks focus on taxes and investment return. Those are important but even MORE important is systematically putting money away and leaving it alone. A 10% return on no money equals nothing.

Compound interest over time is the most powerful financial tool available. Everyone would love a windfall but for 99% of people the way to be financially successful is a slow and steady, long term approach.

3. Tax deferral is powerful - if you earn a dollar on your investment and 15 to 39% of it goes to the government each year, you will NEVER recover that money. If you keep all of your investment returns to be reinvested via tax deferral, then ALL of that money remains with you and not the government. Think about that. So any tax deferred investments you can find will treat you well over a lifetime.

4. Borrowing money in the right circumstances is not always bad. If you have the cash to pay off any loan you make but you can use someone else's money at a 3% cost but make 5% on your investments then that is called arbitrage. Use others money to make money. Credit cards do not fit in this example. However a home mortgage at 3% when you can earn money at 5% is not necessarily a bad deal.

5. Back to number 1 - if you save a percentage of your income over 30-40 years you will end up doing just fine in retirement. The secret to investing and retirement is "there is no secret" - it is simply common sense.

My 2 cents worth

Sounds like concepts in Rich Dad, Poor Dad

[Doug Roberts]

http://www.businessinsider.com/thing...ple-2017-4/#-2

That was a very nice read, thank you.

[60 Deluxe]

I had some good advice early on in life about handling money. Knowing what is a rip off is a huge step ahead. My belief is that smart choices are a lot more valuable than financial planning. In fact, looking back on the financial planning that we did and adhered to for several decades did not pan out and was somewhat of a joke. I have read several books over the years and am amazed that they guys are getting rich from selling a system that is mostly just common sense. But, some people did not get good advice early in their life so it is good that they can buy it in books or a program. Just listening to Dave Ramsey for a couple of months is a valuable learning experience.