Yesterday MSN had an article about five ways to become a millionaire. Their advice was to ----
----Drum Roll--- save early and often. Duh! Anyone that even begins to understand interest understands that compound interest is the easy way. What the hell do you do if your aren't 18?
Now for some tough straight talk. There is no free ride to any goal. The main reason you have goals is to lift your vision out of the day to day mundane crap and to focus on the future.
One of the comments on the article was that after being told to invest in 401Ks, one person said isn't that where everyone lost so much money? No, only the stupid ones. I for one have a 401K that is valued at what it was plus some small interest from a couple of years ago. Only the growth 401K I started a couple of years ago lost money. I want to point out that it didn't lose any of my money, only the paper profit it had made. In fact, it went down to almost exactly to the amount I invested and now has turned around and made back 25% of the paper profit. There are government bond funds out there that will return your money in a slow steady growth pattern. If your are nearing the end of your investing period, the return of your money is damn sure a lot more important than the return on your money. My investment in the growth fund is limited to less than 10% of my total. Diversify stupid. A scheme like the Madoff Ponzi scheme might have cost me some money but it darn sure wouldn't have wiped me out.
Real Estate - If you have some ability to fix up houses, you can generally buy fairly cheap, rehabilitate and rent with the goal of paying off the property. Our rentals didn't start making real income until we paid them off as I retired. Now they are returning a nice profit. Yes, there are days when the renter has to have someone hold their hand and come over to fix the garage door. There are times like today when our young tenant stops by to tell us she is moving to Texas. Now the decision is should we rent or sell? Either way, we aren't throwing bunches of money down a well or hiding it under our mattress. I vote for selling and paying off the small note on the last property we bought. This is one area that The Money talk program and I disagree. I will borrow money to purchase real estate when I have a good plan. I like to invest borrowed money on the basic property and my money on the improvements. I like to think my part of the investment is the part that makes the property really shine and thus be worth more. That is where the value of the property really increases and thus the value of my own investment increases at a higher rate. Somewhere in there, Barb always starts paying things off as fast as she can and secures the value of our total investments.
Debt - Is there anything more sweet than paying off a mortgage? I have managed to do that twice in this lifetime on our principle residence and a lot of times on rentals. The real nice thing is that we have built up our emergency fund and can buy a used car without talking to the finance company to help us pay for it. Once you get ahead of the debts, and have income left over when the first of the month comes in, you too will understand that the boat, a lake house and the new cars might feel good but nothing like the paid off debt.
Careers - yes, I understand that in today's world, there are few places that you can make a living and have a long career. Generally those places don't pay all that great and you might have to tighten you belt from time to time. Put together a couple of those careers and in the end you will have a foundation to buy butter for your daily bread when you retire. Teachers, firemen, police officers and Civil Servants are a few of the careers where you can put together a nest egg for retirement. If you can't save there, put money into your own 401K (Roth if possible)
My final word is that once you master the income and outgo part of money, you can then manage your money. Until you do that, the tail will continue to wag your dog. Once you understand what it is you need and what is is you are making, you can begin to separate needs and wants. Now get out there and earn money and help us bring back our economy to be the strongest one in the world. It doesn't matter what happens in China if you are in charge there.