Steve Martin once delivered an opening monologue for Saturday Night Live in which he answered the age-old question "How can I be a millionaire?" His answer was fairly simple and straightforward, "First? get a million dollars." If at this point you can't help but feel that Mr. Martin performed an extraordinary feet of oversimplification that night, then I urge you to read on, and hopefully, by the time you finish this essay, you'll be convinced that becoming a millionaire isn't nearly as difficult as everyone makes it out to be. Through a simple three-step process which I will lay out clearly, the keys to the millionaire's club will be shown to be available to anyone willing to merely reach out and grab them.
Before you begin any financial strategy, you must realize that there is a vast difference between what you earn, what you own, and what you're worth. The amount of money that you earn from going to work everyday is known as your income, and has relatively little to do with your financial status. The sum of the value of all of your possessions is known as your wealth, and is a closer guideline. Net worth is the real gauge of how close you are to becoming a millionaire, as it is the value of all of your assets, subtracted by your total debt. Now that you see that having a large income is not the end all guarantee of financial security, let's move quickly to what you can due to get that million dollars that Mr. Martin so accurately described as the first step to being a millionaire.
The first phase in your journey involves understanding that time is of the essence. For those who start investing at an early age, the power of compound interest turns time into their greatest ally in wealth-building. Once you have been investing for long enough, your investments will begin to consistently, and eventually rather impressively, outperform your paycheck. This is true no matter what level of income you have already achieved. If you have an annual salary of $50,000, and invest only 10 percent of that each year, earning a 10% annual rate of return on your investment, in 25 years you will have amassed over half a million dollars. At this point you will be earning over $50,000 each year in interest. Continue saving at that rate for another 10 years and you will find yourself earning $150,000 annually in interest. 10 percent of your income may seem like a lot, but if you can find an investment which directly debits the money from your paycheck each week, you will be surprised to find yourself able to live without it.
Another way to ease the pain of that 10% decrease in take home pay is to use part or all of it as an excuse to lower your tax burden, which I will discuss later. Now that you're salting away 10 percent of your income each week, and can't possibly imagine affording anymore, let's talk about how you can make one of your largest living expenses work for you rather than against you. I am of course talking about the money that you spend providing shelter for yourself and your family.
Owning a home is the single largest investment that most people will make in their lifetime, and that is why moving from renter to home owner is your next step on the road to becoming a millionaire. The growth in the value of real estate in this country makes owning a home not only a wise investment, but also a hedge against inflation While many Americans pour their money into renting a house, effectively flushing it down a toilet they don't even own, you should be using yours to cover the mortgage payment of the most profitable purchase you'll ever make according to some financial experts. While it's true that owning a home does come with certain expenses which a landlord normally covers for those who rent, the tax advantages which you receive for paying the interest on your loan help to offset your out of pocket expenses. The less money you give to Uncle Sam, the more you have available to turn into improvements which increase the value of your home, as well as to put into your other investments, such as a 401k plan at work, or an IRA.
The final step in your quest to become a millionaire is to make sure that as much of the money you earn as possible is there for you to invest. That means giving as little as possible to your greedy Uncle Sam. There are two simple ways to beat the tax man, thereby increasing the amount of money available to help build your net worth. Pretax investment vehicles, such as a 401k, traditional IRA and 529 college savings plans, allow you to lower the amount that your employer deducts from your weekly paycheck to cover your state and federal tax liability. The only drawback to these types of investments is that once you pull the money from the account, taxes are due in full. You do however get the benefit of watching your money grow tax free for years, which allows the concept of compound interest which I discussed earlier to work harder for you than it would if your money was in a traditional savings account.
A traditional savings account is one of the worst investment vehicles available. Along with the comparatively low rates of interest which savings accounts earn, any money that you do earn is subject to annual taxation. To avoid paying taxes on the money you withdraw once you become an independently wealthy millionaire, you should set up a Roth IRA. A Roth IRA is funded with after tax dollars, which may leave you wondering how that helps you avoid paying taxes. The fact is though, that in a Roth IRA, all the money you earn is yours to keep. Uncle Sam can't take a penny of the money that you accrue in interest, meaning in the long run, the tax advantages are far better than any other form of investment.
I've just shown you in three easy steps how you can take advantage of the unseen forces of the financial world to grow your net worth at an alarming rate, now all that is left is for you to follow my advice and wait patiently for compound interest to work its magic. By avoiding taxes to the greatest extent possible, turning you home into an investment, and most importantly of all, not waiting to start saving, you too can be a millionaire. What you do once you get that million dollars is up to you.
Michael Moore is a successful author who provides information on home loans and home loans.
Lincoln Stretch rentals Alsip ..When I look around at all of my friends, and... Read More
1) Pay off your loan, credit and store card debt... Read More
As you sit in traffic, inching along between irate drivers,... Read More
Top Investment PerformanceThroughout history, many coin collections have produced substantial... Read More
Whether an established conglomerate or a fledgling company, a business... Read More
What is the difference between wealthy people and poor (even... Read More
Let me ask you a very simple question. Do you... Read More
A mole travels one road, according to the way nature... Read More
Have you stopped to realize that although you go... Read More
At any time in history, no matter what the current... Read More
Endowments and endowment mortgages have received a lot of bad... Read More
Not Enough Money?I believe that most people haven't got enough... Read More
Every day you work is one day closer to your... Read More
It's the beginning of a brand new year: a time... Read More
Time and time again entrepreneurs are losing out on getting... Read More
It all begins with a simple calculation.You are home on... Read More
Retirement Planning the Offshore Way Why do so many of... Read More
OK, this article will start with the cheapest piece of... Read More
It is with great pleasure of having you here at... Read More
Here are some thoughts about the morphing of thought and... Read More
SCENE 1: Pharaoh has just woken up from a very... Read More
"It's the business of your life?and you're the CEO!" Gala... Read More
"If you know how to spend less than you get,... Read More
Yesterday we learned that 74% of all wealth is created... Read More
You can't build a house from the roof down, and... Read More
Western Springs shuttle limo ..Feng shui coins can allow you, among other things, to... Read More
OK, this article will start with the cheapest piece of... Read More
For most of us, the idea of retiring simply on... Read More
Most people want to get to the end of their... Read More
Uncle Sam and his band of merry-men, better known as... Read More
Top Investment PerformanceThroughout history, many coin collections have produced substantial... Read More
Do you like so many others feel, that even if... Read More
In most societies, we are raised to believe in the... Read More
Building wealth is as simple as saving a little bit... Read More
"The quickest way to wealthThat I've found to be true;Is... Read More
Some people in this world are thinking that their poor... Read More
Money is probably the most challenging thing for many people... Read More
Self-Made Millionaires are not smarter or better than you. They... Read More
There is perhaps no more important decision than to take... Read More
It's no secret that the market goes UP...the market, goes... Read More
There could not be a better time to mull over... Read More
AS THE MARKET FLIES HIGHER, GOOD BUYS ARE BECOMING HARDER... Read More
Is the ghost of "Money Past" haunting you? Do you... Read More
Author: James Walsh ISBN: 1563431696: Publisher: Silver Lake PublishingIn... Read More
Wealth Secret 1 - Decide Your Outcome Right Now.Unless you... Read More
It's the beginning of a brand new year: a time... Read More
Six out of six people who were asked to list... Read More
Wealth - an abundance of values. Each of us determines... Read More
You can learn the secrets of world monetary flow if... Read More
Let's quickly review the principles discussed in the first part... Read More
Wealth Building |