11/9/2012 1:23 AM ET|
10 money tips from 5 millionaires
People who manage fortunes have some wisdom to share with those of us who don't -- especially if we hope to have more money someday.
It turns out that millionaires are just like us -- they just have a lot more money. When asked about their secrets to success, they don't cite anything magical or rare, but rather the steady application of wise investing strategies, hard work, and, believe it or not, a degree of frugality. Here are 10 secrets of millionaires' money management:
1. Start early to avoid financial pitfalls. Adrian Cartwood, the author of the blog 7million7years, made his fortune by living frugally while he built his technology-related business. People often get into trouble, he says, by racking up personal debt early on, which is big drag on their earnings. "Learn how to live within your means and how to delay gratification; these are the habits that you need to maintain on the way up, so you can keep your millions when you get there," he says.
2. Believe that you can do it. Before investing in real estate and becoming a millionaire, Alan Corey, the author of "A Million Bucks by 30," read as many biographies and autobiographies of millionaires as he could find. He says he was searching for a common characteristic that could help him in his own quest. "What I found was they all had an incredible self-belief that they would be financially successful," he says. Corey says embracing that level of self-confidence helped him get to the top.
3. Articulate your vision for success. According to Jen Smith, creator of the Millionaire Mommy Next Door website, saying "I want to be rich" is too vague. Instead, she recommends imagining what your ideal life as a millionaire will look like. Smith offers this example: "I want to have $2 million invested so that I can live off of the interest. Then I will quit my job so that I can volunteer, travel, learn to play tennis and watercolor, and enjoy picnics at the beach with my family."
Smith's vision involved becoming financially successful before becoming a parent. She cut out images from magazines of beautiful places she wanted to visit and people doing fun things and put them near her desk to help her keep that vision in mind.
4. Insure against life's risks. Bankruptcy is often a result of divorce, a death in the family, or a disability that renders someone unable to work. Conversely, protecting against those risks through insurance protects wealth. In "The Quiet Millionaire," financial planner Brett Wilder writes that many people either fail to get adequate insurance or pay too much because they don't understand it.
5. Work hard -- and you'll get lucky. In his book "Think Like a Champion," Donald Trump attributes his success to his hard work, which to outsiders often appears to be luck. But Trump says luck comes from working hard. "If your work pays off, which it most likely will, people might say you're just lucky. Maybe so, because you're lucky enough to have the brains to work hard!" he says. That same concept, of course, was advocated by Benjamin Franklin in the 18th century.
6. Practice smart budgeting. Smith recommends tracking how much you spend each month, something she does religiously. Every month, she downloads her transactions into a spreadsheet to keep her spending on track. Smith also says that, as prosaic as it sounds, maintaining a good credit score is essential to becoming and staying a millionaire. "A good credit score can save you thousands of dollars over the course of your lifetime," she says.
7. Do what you love. Sure, a career in finance might come with a hefty annual salary, but you probably won't excel at something you don't enjoy. That's why Corey recommends going into the field that you find yourself reading about in your spare time. He asks, "Do you read fashion magazines? Get a job in fashion. Do you read gossip blogs? Get a job in celebrity-based enterprises. Do you read Car & Driver? ESPN.com? Yahoo Pets Forum?" Even if the field doesn't seem lucrative, there are ways to make it to the top -- something that's more likely to happen if you love it.
8. Decide how much money you really want. For many people, $1 million won't be enough. "For most Gen-X and Gen-Yers, retiring with a couple million when they are 65 won't be anywhere near enough to maintain even an average lifestyle, because that little pup called inflation is constantly nipping at your heels as you try to run towards building your own retirement nest egg," says Cartwood. A more reasonable goal might be $3 million -- an amount that Cartwood considers the minimum to be a "bare-bones millionaire" these days. Consider your ideal lifestyle and what you would like to be able to fund. A mortgage of a certain size? Exotic vacations? College tuition for your children? Having a concrete goal makes it easier to get there, says Cartwood.
9. Go against the grain. Corey recommends making investment decisions based on the exact opposite of what everyone else is doing. When stocks are down, anyone buying can get them at a discount. Corey's rule of thumb doesn't apply only to stocks. "Buy a foreclosed house, fill it up with roommates, and you can get a pretty good passive income," he suggests.
10. Live below your means. Even Eminem, a celebrity and millionaire, scales back his purchases out of concern for frugality. London's Independent newspaper reported that several years ago, as Eminem considered buying a $15,000 watch he liked, he started worrying that he should save his money instead. Eminem reportedly said, "I don't want to run out of money; I want my daughter to be able to go to college." And so far, at least, Eminem hasn't fallen victim to the financial challenges so many other stars, from Aretha Franklin to Annie Leibovitz, have faced.
On the same note, Smith says even though she's a millionaire, no one would know it -- and that's the point. She recommends saving at least 10% to 25% of your income. She also suggests avoiding buying "status" items, such as fancy sports cars or mansions. After all, bling doesn't make a millionaire -- in fact, too much of it can prevent you from ever becoming one.
More from U.S. News & World Report:
VIDEO ON MSN MONEY
News Flash to all the whiners who have posted:
It doesn't matter who won, Obama or Romney; the bottom line is Social Security will soon run out of money. Plan for it now by saving a set amount each month and living below your means. It's not that hard! I am 40 yrs old and don't even figure Social Security into my retirement plan. Time for all of you to do the same.
Don't expect someone else to take care of you when you don't plan ahead. The country's "social safety net" is not meant for free-loaders, but that is what has been happening over the last 20-30 years. Unfortunately it is our kids and grandkids that will suffer the most, not us. We are some selfish SOB's
How about a dose of reality?
There are still too many unemployed and under-employed people. It's hard enough to survive for some, let alone saving up for retirement. Of course they WANT to.
Many of us are being RESPONSIBLE Americans by paying our bills and doing what we can to get out of debt. Unfortunately for many, that means there's not much left over to save.
Although some mentioned what was in the article, some did not....
Yeah Eminem, could have bought the Watch..Don't think he did?..Wanted his kid to go to College.
It's easier to be a Millionaire...If your Daddy,gave you a big leg up,like Trump..Also easier if you declare bankruptcy enough to keep it..And beat your bagholders out of money..slick.
If it takes 3 mill to more or less scratch the Millionaire Code, most of us will never make it; I've been wondering for a long time where that line was drawn.
Emulating Millionaires is a wise choice; Thinking,investing and saving big(frugality) usually does pay off. Those are choices we all have if we can get started down that path first...
Unless you live amongst millionaires, somewhat true don't show off to others that are not...It makes them unhappy and they won't care for it....Actually no ones does.
Like the Roulette table that pays 35-1 on a single cover spot...Covering only Red or Black is a 50-50 shot....With the 36 reds and blacks...Never forget the 0 or double 00...
Covering the splits,quads or lines and sections, pay less; But at least you may get to play longer??
The same applies to investing in the Markets,,,Diversifying and Fundamentals are key..
Mostly all good advice. However, instead of "budgeting", try "journaling". Keep track of everything you spend for a week or month. You will see things you should be cutting back on, you won't need to invent a budget. Repeat the process regularly, maybe weekly every quarter and monthly once a year.
A budget is just like a diet--you deny yourself until you can't stand it and then you go back to your old habits, either in binges or just giving up. Journaling is better.
Journaling while investing pays off also....Shows weak spots in your investments...
Whether you are a Self lead investor or you have a Broker or FA on the payroll..
The main reason I left that World and we do it on our own.
He had been living beyond his salary. Divorce didn't help him either.
Ever go to Vegas to play Roulette? If so, how well did you fare placing single chips on whole numbers? You likely went broke before you hit it big. Strangely though, the guy next to you played 16 chips at a time and often on the junction between numbers. He won often, just not in super large pay-outs. There isn't a difference between Roulette and Market Gambling once you can afford to spread your business across the board. In fact, once you achieve a high enough cache, you can stop participating in the real world and rely entirely on the returns off your spread.
There's only one problem... in the REAL world, you made yours off the cumulative efforts of others in a prosperous economy and are gambling in markets supported by false legislation- the Gramm Leach Bliley Act and there are so many of you that the whole global national to local economic structure is on the verge of collapsing. Authors of articles like this need to chased down and beaten. We don't need more pariah taking from a system that is gravely imperiled and mainly by pariah who already take too much from the system. Tell me why we have funds, fund managers and a healthy Wall Street while Main Street is so broken?
Wise people with commonsense work to earn and invest where they can realize returns that benefit them. The markets are completely false and fraudulent. Every stock is trading 10 to 100 times what it's true value is. Do you really think an office suite in a major city filled with paper and button pushers who imports (drop-ships) and relies on non-affiliated sources to sell it... has a viable stock value? How about a Goldman Sachs? A bank-by-treacherous-appointment that is completely responsible for compromising our homes and the credit on them. Is it supposed to be publicly-traded? Organized "funds" buried 2/3 of our currency in bad Euro Bonds. Is that a good thing?
At least Roulette is based largely on random chance. Organized finance is not. It's based wholly on the continual flow of incoming cash from weak-minded fools. It's a huge multi-level marketing scam that is destroying America. Retiring "well" involves living well for decades, earning and re-investing earnings in your local, state and national economy to ensure you CAN live well for decades. If you don't re-invest, you erode the infrastructure until it becomes pretty much what we all endure today.
There is no such thing as a good financier. Banks are broken. Close them, reconcile them, regulate them, bar any existing personnel from returning to the industry and re-open them to service needs within a state, never a national pariah again. Recover ALL careers. Sever Human Resources from non-Founder big businesses and stop pariah from blockading jobs because they can. America is in need of a One Stop Job Shop and banishment of networks like alumni societies. You went to get an education, a degree isn't a ticket to terrorize others. Paper and button pushing are Minimum Wage jobs. Traders to retirement fund managers are killing us. It's YOUR money, YOU make your own investment decisions. Simplify the premise, don't install a layer of pariah and expect performance, it breeds corruption. It has since the Dawn of Man.
"ST. LOUIS (AP) - A coal producer owned by a longtime critic of President Barack Obama's energy policies will lay off nearly 160 workers at Illinois and Utah mines, blaming the freshly re-elected president for a "war on coal." Ohio-based Murray Energy Corp. said in a statement supplied Friday to The Associated Press that it would give pink slips to 102 workers at its West Ridge Mine in Utah and 54 at its underground mine in the southern Illinois town of Galatia. Both mines are run by Murray Energy subsidiaries. Murray did not specify when layoffs will take place or the total number of workers at each affected site. The company refused an email interview request, saying only that "unfortunately, we will be forced to make even more layoffs, none of which we want."
The announcement's timing — just days after Obama's victory over Republican Mitt Romney — was anything but coincidental. Robert Murray, the company's chairman, CEO and founder, had backed Romney, who proposed rolling back some restrictions on power-plant emissions and positioned himself as a supporter of the coal industry."
I JUST WANTED TO REACH OUT TO ROBERT MURRAY... I will give you $1 for your pathetic and poorly-run rock-digging business that obviously isn't yielding ANY profit to you. When you put making obscene money ahead of keeping families stable-- SOMETHING ROMNEY DIDN'T GET EITHER... you need to be bought out, thrown out (of America) and discover quickly that your pompous ego is not tolerated anywhere else on Earth. How DARE you call yourself American?
#8. Proof that some millionaires are morons. How can everyone in the U.S. or the world retire with 3 million? If they did how much inflation would that be moron? Would that not be the exact same amount as they have right now if you (the upper 1%) did not make more then they (the lower 99%) did? YES IT WOULD.
The whole point of the advice they give is to get ahead of 95% of the people and get to that point where is becomes easier and easier to make more and more money. Below that point it is HARDER to make money. There is a curve and if you can get ahead of it life becomes a cake walk.
In the real world with our current tax code it is easier to make more money the more money you have instead of being harder like it should be. If it becomes easier and easier to make more and more money what stops them from acquiring it all?
How can my investments compete with theirs? If I save 10k a year and invest it versus Mitt who saved 10 mil or so and also invests it IN THE SAME EXACT THINGS meaning we get the same ROI of 50% for example. I would earn 5k and Mitt earned 5 mil. If this was repeated for 10 years how the f*** can I ever catch up with Mitt? I CANNOT, stop expecting me to chase after carrots that I will never catch.
Most inventors get chit too btw. The company that buys or makes that invention/product makes all the money in most cases. The people the already have money make even more money...and we wonder what is wrong with our economy.
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