Category Archives: Wealth

Getting Rich On An Average Income

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It’s much easier to become a millionaire if you make over $100,000  but what about someone making an average household income (less than $50,000)?

I think the majority of people believe that it’s not possible to become rich on such a small income, but it is and here’s how:

Minimizing Housing Costs

Instead of renting an apartment or house, offer to share an apartment or house with a friend for 1/2 the rent it would cost to rent a place by yourself.

So you would normally spend $1,000 a month on rent, but instead you’re splitting the cost of rent with a friend.  This act enabled you to put $500 a month into safe mutual fund or ETF  for a total investment of $6,000 a year!  After 10 years, the money you save in such investments will be as follows:

Realistic
Growth Amount Interest Annual Simple
Year Saved Rate Interest
1 6,000 6% 360
2 12,360 6% 741.6
3 19,102 6% 1146.1
4 26,248 6% 1574.86
5 33,823 6% 2029.35
6 41,852 6% 2511.11
7 50,363 6% 3021.78
8 59,385 6% 3563.09
9 68,948 6% 4136.87
10 79,085 6% 4745.09
Aggressive
Growth Amount Interest Annual Simple
Year Saved Rate Interest
1 6,000 9% 540
2 12,540 9% 1128.6
3 19,669 9% 1770.17
4 27,439 9% 2469.49
5 35,908 9% 3231.74
6 45,140 9% 4062.6
7 55,203 9% 4968.23
8 66,171 9% 5955.38
9 78,126 9% 7031.36
10 91,158 9% 8204.18

 

Using the Realistic Growth Model above, we can see that after 10 years of  using this technique, we would have saved almost $80,000.

At this point, I would take half of that money and buy a multi-unit rental unit.  I would then live in one of the units and rent out the other units.

At this point, I’m now a landlord, and I still have almost $40,000 for other types of investments.  After one year, I can determine if being a landlord is for me or not.  If I don’t like it, I’ll sell it all and put the money in financial investment like stocks, bond, mutual funds, etc.

Saving:  $6000 (this varies greatly depending on how many people are in your household).

Minimizing Food Cost

Instead of buying expensive or highly processed foods,  why not make eggs, beans and vegetables as a main stable of your food consumption?  Eggs and beans are excellent sources of protein, and very healthy for you to boot.  I also have a can of peanuts that I munch on for snacks.

You can save a lot of money by growing your own vegetables (and canning them for the winter months).  You know exactly where the vegetable came from, and since you grew them, you get exactly what you wanted.  No worries about insecticides or some bacteria tainting them!  Both cheaper and safer is a winning combination!

Listen to an mp3 player or an audiobook while you work.  That way you can enjoy your time tending the garden while you weed, plant, etc (a win-win)!

As a supplement, why not try some extreme couponing too!

Saving:  $3000 (this also varies greatly depending on how many people are in your household).

Buying Used or Bargain Needs

Instead of buying everything new, look on Freecycle.org first, then Craigslist!

You want to watch movies or listen to CD’s?  Borrow them from the library (if one is close by).  If you have internet access, go google what you want to listen to, or play the type of music that you want to listen to on www.Pandora.com.  You can watch movies online via hulu.com! Obviously there are also other options…  Google them using keywords phrases like “free online movies” etc…

Skip unnecessary monthly costs that add little value!  There is really no need for cable TV, or even a land-line if you have an internet router (go with MagicJack, or even Skype).

Savings: $1,000 (this varies too much to predict, so I pick a low number).

Retirement Accounts:

If your employer has a 401(k) take advantage of it!  The amount deposited is tax-deductible!  Try to at least save 10% ( or at least $5,000)

If you employer doesn’t have a 401(k), put that $5,000 into a Roth IRA!

Summary

Without even cutting into vacation spending, We are able to save $10,000 and with retirement contributions another $5,000 for a total of $15,000 savings.

So with what I mention above that’s $15,000 a year that we could be saving on our way to becoming rich.  If you continue to keep focused, it would be fairly easy to become a millionaire in a bit over 30 years.

Best of luck to you,

MR

Creating Investment Income Milestones Update

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Last year, I decided to use milestones as a way of tracking my investment income stream progress.  I’ve used milestones as a way to help focus on paying down my mortgage.  The advantage of using such milestones is that it provides an extra incentive to accomplish a given goal (in this case increasing my income stream from investments).

For my milestone marks, I use the following table:

       
  Levels Amount Milestones  
  1 $5,000  
  2 $10,000  
  3 $15,000  
  4 $20,000  
  5 $25,000  
     

Level 1

I’m haven’t completed level one yet, but I’m pretty close to half way there.  Level 1 is especially important to me, because once that goal is met, I’m planning on using that money for funding the kid’s sports programs and activities.

Level 2

Once I conquer level 1, I plans on using the next $5,000 for 1 good vacation once a year.  I don’t think I can afford overseas vacations on just $5,000 though, but it should get me some very good vacations in the US.

Level 3

Once I hit this level, I’ll use it just as an enhancer.  The money from this level would be used to have even better vacations and to continue to support sports programs that my kids are in.

Level 4

This level should be used for providing entertainment for the year.  I would be used for going out to eat, movies, trips to the zoo and other similar fun things to do.

Level 5

Level 5 and all levels above this level would be used to accelerate the grown of dividend stocks.  This is my going for gold level, where my main goal is to accumulate more money.

While these levels are subject to change, this is my plan for now.  I think it’s a good one, time will tell.

Cheers,

MR

Enhancing My Local Community, If I Were Rich

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I wrote about If I Were Rich Today! almost a year ago, and while the post is still true today, my thoughts about the effects of being personally rich would affect my community.

If I were rich today, I would try to make a larger impact within my community.  Not necessarily for fame, but to make it better for all of my neighbors and the community in general.

One of the main things that I would do is create funds to help certain areas in the local community where I live.  But the funds would be different in that the principal would not be touched.  Instead, just the interest and dividends would be used to help certain programs and goals.  That way, the funds would get bigger each year as other community members contributed to the principle base through an annual fund-raiser.  Of course, I would seed such funds with the initial investment of monies!  I would have such funds for such things as school sports and special programs offered as classes (perhaps an aviation class would be nice).

I would also put more time into getting to know the other contributors in my local community. Perhaps even creating a special group to try to think about community problems and opportunities.  I believe such a group could enhance the entire community in general, and create some great programs to make the place better all around.

All of the community enhancements and community funds would be possible if I were rich!  Being rich would give me the resources to contribute back to my local community (and perhaps even some of the surrounding communities if I were rich enough).

Being rich would enable me to have a level of freedom that I cannot fully understand currently.  It would be a world where I wouldn’t have to work for money anymore because my money would be working for me.  This, in turn, would mean that I could help others in my local community by enabling me to provide more time focusing on current problems and opportunities within the community.

How would you help your community if you were rich?

MR

How Many Millions Does It Take to Feel Rich?

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Money Surprise

When I was a teenager, I though that it just took a million dollars to be rich.  Perhaps it was back then (barely), but now according to 42% of millionaires, it take a cool 7.5 million to feel rich!

I’m bummed!  10 years ago, I thought that if I were able to grow my money to 1.6 to 2 million dollars, I would be rich!  Not Buffett or Gates rich, but still very well off! But consider this information I read on Yahoo.com’s site called “U.S. millionaires say $7 million not enough to be rich”, I’m not even close!

More than four out of ten American millionaires say they do not feel rich. Indeed many would need to have at least $7.5 million in order to feel they were truly rich, according to a Fidelity Investments survey.

Some 42 percent of the more than 1,000 millionaires surveyed by Fidelity said they did not feel wealthy. Respondents had at least $1 million in investable assets, excluding any real estate or retirement accounts.

So according to the survey of over 40% of those who are multimillionaires, it will take at least $7.5 million dollars to be considered rich.

I’m afraid I’m going to be short by at least 5.5 million…

Unfortunately, there is a reasonable probability of inflation running rampant, and so there is a good chance that these millionaires may be correct.  So what is a person to do?

  • Read 7million7years.com site, according the blogger he was able to make 7 million in 7 years.
  • Be extremely frugal.  A great site to refer to for this route is the blog site earlyretirementextreme.com
  • Perhaps another route would be via investments.  In this case consider the advice at BuyLikeBuffett.com
  • Maybe lottery ticket is a viable options after all?  (Just kidding).
  • Work 2 or 3 more jobs?  Possible, but a bit demanding…

To be honest, I’m not really sure how to get up to the 7.5 million dollar level.

What do you think would be the best possible way to get to the elusive 7.5 level?

-MR

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