Found Money:
How To Generate Quick Cash In An
Emergency
Make Small Cuts for Huge Savings
Tilt the wheel of
creating wealth in your favor.
Naturally, spending less is one way.
However, to be sure to make your money
work harder for you—set goals to make
certain it happens.
Many have wondered
what can be the foolproof way of
creating wealth. Is it to buy top paying
Internet stocks or to work for a tech
startup that offers you valuable stock
options? Is the trick to count every
penny or is the road to wealth paved
with risk? Do you have to be especially
smart and well-connected? Alternatively,
is becoming wealthy a matter of luck?
The answer is:
There is no one, true road to wealth,
and all of the above have created wealth
for more than just a few notable
individuals. Nevertheless, you can put
the odds of creating wealth on your side
by following a few simple precepts.
1. Spend less
than what you earn.
This can be the
most overlooked scenario, because many
people believe it’s a matter of cutting
back on your current standard of
living—a strategy that’s far too
difficult for many people. Yes, you can
affect your personal balance sheet by
spending less money eating out or on
entertaining out. Making a pot of coffee
at the office instead of buying a $3
espresso will make a small difference in
your cash flow. Nevertheless, the
biggest difference will be made on the
income side of the ledger.
If you wish to get
on the right road to saving, stop
looking at your budget as a pie that
must be cut up into various size
pieces. Instead, of trying to figure
out how the different pieces will cover
your expenses, concentrate on how you
will expand the size of the pie. Yes,
you could ask your boss for a raise. At
the same time, figure out how you can
begin to earn more money on the side.
Start thinking about how you will
sweeten the existing pie.
Think about how
you’re spending your time, as well as
your money. Perhaps instead of taking
the family out this weekend, you could
earn an extra $80 by becoming a waiter
or bartender. Instead of taking the kids
shopping at the mall, you could work as
a salesclerk earning some extra cash.
If you don’t wish
to work every weekend, think about
working every other weekend to start.
Instead of paying for a baby sitter
while you attend a concert, take care of
a few other children on Saturday or
Sunday, freeing working parents to do
their errands. When it comes your
weekend to work, do a switch. This will
save you time and money.
Then, instead of
spending the extra money you earn from
your part-time work, you can invest it
so the money can work for you. When you
do this, you will learn to appreciate
your free time that much more.
2. Make your
money work for you.
The ultimate secret
to financial success lies in having your
money do the work, so you can relax.
This requires accumulating enough
investment dollars so that the growth
and earnings can free you from the need
to work even harder. The last thing you
will want to be doing is punching a time
clock.
Plenty of very
wealthy people continue on working
simply because they enjoy what they’re
doing so much. They also redefine work
to include managing their money. For the
wealthy, the two can go hand in hand.
Every where you go
you will hear, “I never get to the point
where I won’t have to return to work
because I can’t afford to set money
aside today. These people overlook the
power of compound interest.
Every worker with
earned income is now entitled to open a
non-deductible IRA or, even better, a
Roth IRA. The maximum $3,000-a-year
contribution works out to a cost of
$57.69 a week. Any hard working American
is capable of achieving this goal.
Moreover, a $3,000
annual investment in a Roth IRA, growing
tax-free at the historical average of
10.6% for the stock market, builds to
more than $500,000 in 30 years. If you
start in your twenties and put $3,000 in
that same Roth IRA every year, at 10.6%,
you could have a nest egg of nearly,
$5.2 million at age 70, according to the
MSN Money’s Savings Calculator. Even
with an 8% annual return, you’ll end up
with $1.9 million.
3. Be sure
your money is working for you, instead
of against you.
Your money can work
very powerfully for you if you make the
right decisions and implement a plan of
regular investing. At the same time,
wrong money decisions will place deep
potholes on your road to success.
The classic example
is credit-card debt. Consider the
example of a person who charges $2,000
on a credit card at 19.8% interest and a
$40 annual fee. If you make only the
minimum monthly payments (and many
people do just that), it will take you
31 years and two months to pay off the
balance! Moreover, along the way, you’ll
pay an additional $8,202 in finance
charges. This is absurd logic!
What could possibly
be so important to charge today that it
puts you in debt for a period far longer
than the object is likely to last?
(Sure, a mortgage lasts 30 years, but
the interest is deductible and your home
should grow in value over that time.)
Most things that you want to charge on
your card have a far shorter life. For
many, they can do entirely without that
one purchase.
If you’re already
in debt, if you would only double the
minimum monthly payment, you could be
out of debt in less than three years.
Paying down current debt is the smartest
way to start on the road to financial
freedom.
4. Keep a
tight clasp on that wallet
When you take a
close look at your paycheck, you’ll
notice many deductions before you get to
the amount you can cash or put in the
bank. Surely, there are deductions for
Social Security, federal, and perhaps
state income taxes.
It’s money that’s
out of your paycheck before you have a
chance to even make decisions about it.
Money set aside for wealth building
should be treated in the exact same way.
If your company offers a 401(k)
retirement plan, make sure you sign up
for the maximum possible contribution.
It will be taken out of your paycheck,
each pay period, automatically. (And if
your company matches all or part of your
contribution, failing to sign up is like
walking away from free money!)
If you didn’t have
a chance for automatic deductions to a
company savings plan or even a U.S.
Savings Bonds payroll deduction plan,
then you’ll have to create your own
automatic savings plan. Ask if your
company will deposit your paycheck
directly into your bank account—or
promise yourself to do it the day you
receive the check.
Then sign up for an
automatic monthly deduction plan with a
mutual fund company to create regular
deposits into an IRA. You can even set
up an automatic deduction for U.S.
Savings bonds at its Web site. The whole
point to this is to get the money out of
your checking account as quickly as
possible, before you see it and spend
it.
5. Create
money savings and investment goals.
Would you like to
have $1 million by the age of 40 or 50
or by the time you retire? Sure you
would!
Begin by setting
your own goals. Never set a goal you
can’t control. Your targets can’t depend
on your boss giving you a raise; they
must be reachable by your own efforts.
You might need to invest in yourself by
acquiring more education or training so
you can qualify for a job that pays
more.
You might need to
take more risk in your investments or in
your lifestyle by taking on a second job
that pays commissions instead of a fixed
salary. Evaluate the risks involved, and
understand that by putting the odds on
your side, you can get a larger return.
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