Tag Archives: building wealth

Tools To Help Me Become Financial Independent

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In theory, I should be able to obtain at least 1 million dollars 10 years from now.  As long as I stay frugal, and invest using principal of dollar cost averaging, and occassionally rebalance my portfolio (this is currently my biggest weakness), then I should be able to conquer that million dollar milestone.

How did I start believing that I could achieve financial independence? 

I started by reading “The Millionaire Next Door” when I was young and just starting college.  The problem with the book (at least the edition that I read), was that the numbers were a little dated, but the principals still rang true!

What is helping me focus on my goal of becoming financial independent?

  • Automated investments.  Using this technique, I’m saving for my Retirement and my kid’s future college expenses.
  • Statistics on the rich and the bell curve distribution of wealth in American…  This feedback helps me gauge whether I’m behind or doing okay.
  • Spreadsheets to track my progress.  Today, there are online site that can accomplish this now, like www.mint.com and www.networthiq.com.  I also keep a milestone spreadsheet just for motivation.
  • Quality books like “The Millionaire Next Door”.  Examples of the wealthy in “The Millionaire Next Door” gave me hope.  After reading this book, I realized that one don’t have to be born into wealth to achieve it.  In the past, I read about the exceptions, but I always thought that I’d have about as much a chance of getting rich that way as I would getting rich via winning the lottery…, pretty slim.  “The Millionaire Next Door” gave me hope and enabled me to Believethat in it was possible after all!
  • Picking the perfect risk model for my core investments (especially those in my 401(k)).  Although, I still do play with a little bit of cash in speculative investments.
  • Saving more than 20% of my salary.  It takes a little bit of sacrifice now to payoff later.

What tools are you using to obtain the financially independent goal?

-MR

Wealth Tip #3: Be Cheap, Don't Show Off

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Frugal is a new word I started hearing in the last 5 years. Before that word became popular, frugal people were lumped together will people that were mostly called cheap.

And this brings me back to my rich friend Jay (I mentioned him in Wealth Tip #2).  Now, you might think since he is worth over 7 million dollars, that he would have the best of everything… but he doesn’t!

 Perhaps you might hear about his fancy vacations, after all, he’s been to the following places:

  1. Alaska cruise
  2. Mexico
  3. Hawaii
  4. Ireland
  5. Las Vegas

What you don’t realize is that he gets most of those vacations from rewards via his credit cards, or through prizes offered from suppliers for buying their product.  Even when he is on vacation, Jay and his spouse buys cheap, and even stocks the refrigerator at the resorts they stay in.  Yes, during vacation he will play golf, but usually it’s at a cheaper course (golfing is an activity he has picked up during the last 10 years).

He does have newer cars, but they are domestic SUVs that are used for his job.  Even though they are typically bought new, he’ll hold onto them for at least 5 years.

Does he tips well?  Not really, usually if he likes the service he’ll tip 15%, but if the service is crummy, expect either a 10 or 5% tip (in cases where the service is really bad, no tip at all, but this is rare).

With as cheap as he is with everything, you’d expect him to be cheap with charity too, right?  Wrong, he give over 10% of his gross wages to the church, and is generous with his family and friends.  Ironically, while he is giving thousands away, sometimes his jeans will have holes in them (albeit small ones and in good taste).

When he does eat out, it’s usually one of the cheaper meals on the menu.  I’ve never seen him eat a porterhouse, or New York Stripe steak.

So, what have I learned by observing his spending behavior?  Being Cheap (or really frugal), is part of the wealth building equation…  My friend has increased his lifestyle a little more over the years, but he still lives more frugally than my poorer friends. 

If he can do it, then so can I!