In the modern world of social networking, texting and the internet, it is easy to begin to think that the new ways of saving and building wealth must be different from the tried-and-true methods that have worked for the rich for centuries.
There are always new ways to generate income. However, if you really want to get ahead you won’t be looking for get rich quick. You can find that on the internet any day and it usually results in your being separated from more of your money.
Where I come from, the American dream is home ownership. Buy a home. In fact, I once had a boss who believed you should buy a home you absolutely couldn’t afford so you would have to force your income up, up, up to be able to stay in the home. In 2009 it looks like a lot of people have had that theory. Obviously, that is not the way to get wealthy today.
Consider this: It’s easy for someone who is rich. They have enough for the down payment on a big house. They have enough to pay cash for an automobile if they want to do so. But think about this. Rich people take money and purchase assets that – on their own – purchase more of the same asset in the future. You see this in the stock market where stocks that produce dividends end up purchasing more of the same stock at absolutely no cost to the owner of the original stock.
The middle class takes money and purchases a big house or a very nice and new automobile. Liabilities that will weigh you down and improve the chances every single day that you work for your money. You should instead consider turning the tables and getting your money to work for you.
Make sure you build a correct emergency savings fund (we recommend 15 to 18 months of expenses – the first six months should be liquid in an FDIC-insured money market savings account; the rest should be in certificates of deposit. We recommend you NOT purchase CDs longer than six months). See bankrate.com to see current interest rates and FDIC-insured banks.
Checking accounts are money laundering accounts for other people’s money. If you leave money in this kind of account, it will soon belong to someone else. Consider any excuse you can use on a regular basis to push money out of checking and into a savings vehicle.
You can (and should) consider a payroll deduction for automatic savings. Getting started now, you will see savings build faster than you think. If you don’t start, you will be in the same position – or worse – soon. Why not give yourself a lift with automatic savings.
Finally, look for passive streams of income or additional ways to increase your $ so you can invest. You can do this with Vanguard or another mutual fund company.
In the old days, people had nothing to fall back on. Times where different and grandma lived with you because that’s what people did. Society has changed. Social Security came along. Well, you’ve heard the rumors that it will be dead by the time you want to take your first check. So, the 401k came along. Of course, if your company offers one, you should be using this vehicle for retirement. However, the rapid changes in our society and in the global economy mean that you should not be relying only on Social Security and a 401k. You should also start a Roth IRA or individual IRA. Remember: steady saving and investing mean that you will strengthen your financial position going forward.
What’s worse than being young and broke? Being old and broke. Don’t let it happen to you. Set some goals. Review your expenses. Look for inventive ways to save and move money from checking to savings. Save automatically with a 401k and IRA. Make sure you build your emergency savings fund.
Do these things and you will look back at how wise you have become.
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