During my time in college I took many finance and business classes in order to graduate. Some of them were helpful and some were just there for me to take, pass, and move on with my life. I will always remember the words of one of my finance professors on the first day of class. He asked the class what are the three fool proof ways to become wealthy. So I thought I would share my professor’s insights with you all because its always good to learn more about how to become wealthy.
The first foolproof way to make money is by marrying into money or by inheriting money. We see often or hear about children with large trust funds and inheritances turning 18 and have sudden access to large amounts of money that was set aside for them or dictated by a will. We also see families acquiring wealth from deceased wealthy family members.
The second way to be wealthy is to be extremely lucky. This includes winning the lottery, investing in a fairy tail stock (that brings you millions) or having a million dollar idea and executing a business perfectly. Now this does happen every once in a while but the chances seem pretty slim for the average person to find such luck.
The first two ways seem like they carry a low probability for most of us and I would like to think people these days still get married because they love someone rather than trying to marry someones bank account.
But….the third way we can become wealthy in our lifetime is to always remember one rule. If you always spend less than you make or spend less than you are able to afford you will surely be wealthy. This concept is so simple yet so many people in all parts of life have such a difficult time understanding that, in order to have money, we have to hold onto it and not spend it.
This brings me to a good point. Millennials in our generation have a tendency to spend money like crazy whether its at the bar, on food, clothes, accessories, or phones etc. A lot of this stuff far surpasses our basic necessities. Most of the time we are not getting any kind of return on our money financially and a diminishing return on the thing that we buy.
So if you plan on being wealthy or want to start, just remember one rule, spend less than you make.
Stay tuned for the next article as we break this down more for better understanding….
Recently, while attempting to tackle a vast amount of credit card debt, I came across the much-needed concept of Budgeting. Budgeting is an unusual verb that is not often used in this generation, I too was a little lost. Especially after spending way too much last year on bars, food, beer, lunch, dating and anything else that drains your wallet. I felt like I hit rock bottom financially. I realized I had spent way too much money on too many perishable goods and services. This was a sign I needed to take better control of my financial habits soon or else this terrible pattern was bound to continue.
When it comes down to it budgeting means control, and control is a product of knowledge. Back when I was spending too much, I was lacking knowledge. Financial knowledge about where I was and what I was doing with my money. That was my biggest problem. I wasn’t thinking about how all of my expenditures were adding up. I would always think I had more money in my account than what was actually there, forgetting about the small things that I had bought for lunch or at the stores after work. Note: Small amounts add up the quickest! So after my card declined a few times I finally forced myself to take control. My first attempt to regain control was an approach any millennial would do in this day—turn to technology. Technology in the form of Mint.com
Mint.com is a budgeting website and application that you can easily download onto your phone, laptop, or other smart devices for free! Mint.com provides personal budgeting tools that allow users (your futures selves) to add all of your financial accounts and display all of your balances simultaneously. This is done in a similar way to an instantaneous balance sheet showing your personal assets and liabilities. I was able to add all of my loans (school and car), bank accounts (checking and savings), credit cards, 401K, and even my brokerage account on Mint.com. At any given time you can view your exact net-worth down to the penny. With Mint.com I am able to see my balances and account activity anywhere I go. This application provides an accessible display of my spending habits in the form of helpful visualizations.
The best part about this service is the categorization tool and the budget planning aspects. Within the site I am able to see all of the purchases that I make on my various credit cards and withdrawals from my accounts in real time. I also have the ability to put these purchases into specific categories to see where my money is going every month. Using these categories I am able to customize personal budget plans. I therefore am able to manage the amount of money I am going to spend on certain necessities such as alcohol, fast food, work lunch, breakfast etc. Mint.com service will even send my cell phone alerts when I am spending too much or have gone over my set budget. These budget limits also tell me if I am saving the appropriate amount so that I am able to pay my loans and credit card bills on time.
This service helped me tremendously with my spending habits and keeping my debt under control. I highly recommend this service to anyone and everyone who wants to be proactive about their financial budgets! See Mint.com for more information and remember, knowledge is power when it comes to taking control of your finances.
Below are some relevant screenshots of Mint.com.
As a Millennial myself, I know that there is one aspect of life that we are always thinking about, and that is the present; the now, the YOLO, and the ‘if I have cash lets blow it now’ mentality because why not? I’ll just figure it out later. Well this may be all fun and games, but there is something you can do. Something that will allow you to feel justified about spending money freely like this, and that is setting yourself up little-by-little for the future.
As a kid, whenever I received any amount of money, whether it was an allowance or a paycheck, my dad made sure that I always put a portion away in savings for the future. At the time, this seemed like a cruel punishment, but he wanted to ensure that I would have money set aside for college when the time came. Upon receival, I was always inclined to blow this money on candy, electronics or the latest trends, but I am really glad that I did choose to save. When I was finally ready to go to college, I had a large lump sum saved in a separate bank account that was allocated to help me avoid copious student loans.
This same concept can be applied to your 401k. If you are able to put small amounts of money away, you can retire comfortably, with 40ish years to really live your retirement out to the fullest. Many companies in corporate America offer 401k plans that can even MATCH your contribution by up to 4-6%. In the long run, this is HUGE! This means that whatever money you put into your account, up to 4-6% of your salary, your employer could match about half or all of that amount. This means that you could have the potential to double the amount you ultimately save in the early stages and create a snowball effect of interest and returns.
So let’s do some more math here.
According to my 401k Calculator:
Say you are currently making $40,000 per year, and your salary is expected to grow 3% every year (inflation, promotions, job changes),then if you are putting 10% away every year ($4,000: Year 1), after 40 years you will have amassed an amount close to $2,100,000. Much of this money will be relegated pre-tax, meaning you will have more money available to put away that doesn’t have to go to taxes. The best part of this deal is that with this example, almost $410,000 of this amount will be FREE MONEY, money you get from a good Rate of Return (RoR) and/or employer contributions. So everyone, please take my advice and ask your company or current employer about the 401k plans they offer. Please take advantage of these! Your future family and self will thank you. I promise.
Thanks to BankRate.com the screenshots can be found below.
Images from Tumblr, Bankrate.com
Approximately one month ago, I had a big decision to make. Do I pay a professional or do my own taxes. After about 3 seconds I knew the answer was clear. It’s like I had forgotten that I just graduated from business school with a major in finance. When people hear the word taxes many tend to cringe because of thoughts of endless paperwork and boring meticulous detail. Thankfully this isn’t 10 years ago and technology has advanced tremendously. We have TurboTax at our fingertips, and for all of you who don’t know, even a child can use this product. It makes doing your taxes as easy as those computer games they make for 5-year olds with the colorful pages and big text.
Here are a couple of reasons to do your own taxes.
- The software is easy to use, TurboTax does a great job making their product as unintimidating as possible.
- You are more aware of your own money, how much you are making and how much you are saving.
- Understand more about politics and where your money is going, if you don’t like how much you’re paying; make sure you vote in the next election.
- Saving money. Why pay your local accountant $150-350 when you can use turbo tax for free; if you qualify for the free version. If you make more than $55k, the other version will run you about $90.
- 1-step closer to becoming financially independent and more of an adult.
- The more you know about taxes the more you can benefit from deduction such as student loan Interest, job hunting costs, and moving expenses.
As a young millennial, most of us will be filing single with no dependents. This means that for most of us our taxes will be simple and less complicated than our parents. We can see our deductions and get every penny that is ours in our tax return. The average tax return is just shy of $3,000, which is a pretty big incentive to just get them done.
It may be tempting to just spend this money on frivolous toys such as a new laptop, expensive sunglasses, shoes or bottle service, but I would recommend investing in your student loans, credit card debt or investing for the future. With interest rates and loans as high as they are it’s almost as if you’d be paying yourself more.