I Will Teach You To Be Rich And Get Ready To Invest

I Will Teach You To Be Rich And Get Ready To Invest

 

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Week 3: Get Ready To Invest

Open your 401(k) and Roth IRA -- even with just $50

 

I am reading I Will Teach You To Be Rich by Ramit Sethi.  This book provides a 6-week step-by-step guide to getting your finances in order to become rich. 

Week 1 focused on optimizing your credit.
Week 2 focused on opening and optimizing your bank account.
Week 3 focuses on teaching you to get ready to invest.

This chapter will discuss why you should invest and the best way to start investing your money and how to set up the process in a week.

THE WHY
A millionaire is not a person who makes $1 million or more per year.  A millionaire is someone who's net worth is $1 million or more.

On average, millionaires invest 20 percent of their household income each year.  Their wealth isn't measured by the amount they make each year, but by how much they've saved and invested over time. 

Investing is the single most effective way to get rich!

THE HOW
Step 1: If your employer offers a 401(k) match, invest to take full advantage of it and contribute just enough to get 100% of the match.  This is free money and there is, quite simply, no better deal.

Step 2: Pay off your credit card and any other debt (excluding any primary home loans you may have outstanding).  If you can't pay this off immediately, set up a plan to pay off your debt within a specific amount of time.

Step 3: Open up a Roth IRA and contribute as much money as possible to it, up to the maximum allowed by the Internal Revenue Service.

Step 4: If you have money left over, go back to your 401(k) and contribute as much as possible to it, up to the maximum allowed by the Internal Revenue Service.

Step 5: If you still have money left to invest, open a regular nonretirement account and put as much as possible there.  Also, pay extra on any mortgage debt you have, and consider investing in yourself: Whether it's starting a company or getting an additional degree, there's often no better investment than your own career.

*Please note that my philosophy varies slightly from what Ramit suggests in his book.  My how, which takes into account Dave Ramsey's Baby Steps, would be the following.

Step 1: If your employer offers a 401(k) match, invest to take full advantage of it and contribute just enough to get 100% of the match.  This is free money and there is, quite simply, no better deal.

Step 2: Pay off your credit card and any other debt (excluding any primary home loans you may have outstanding).  If you can't pay this off immediately, set up a plan to pay off your debt within a specific amount of time.

Step 3: Open up a Roth IRA and contribute as much money as possible to it, up to the maximum allowed by the Internal Revenue Service, but no more than 15% (minus the % you have already contributed to 401(k)) of your income.

Step 4: If you have money left over, go back to your 401(k) and contribute as much as possible to it, up to the maximum allowed by the Internal Revenue Service, but no more than 15% (minus the % you have already contributed to 401(k) and Roth IRA) of your income.

Step 5: If you still have money left to invest, open a regular nonretirement account  and put as much as possible there.  Also, pay extra on any mortgage debt you have, and consider investing in yourself: Whether it's starting a company or getting an additional degree, there's often no better investment than your own career.
              5a: If you have children, open an ESA or 529 plan to save for their college education.  If not, skip to 5b.
             5b: Use all extra money to pay off your home early.  If you don't have a mortgage, skip to 5c.
             5c: Open a regular nonretirement account and put as much as possible there.  Also, consider investing in yourself: Whether it's starting a company or getting an additional degree, there's often no better investment than your own career.


BUY BOOKS HERE:

I Will Teach You To Be Rich by Ramit Sethi

The Total Money Makeover: A proven plan for financial fitness by Dave Ramsey

I WILL TEACH YOU TO BE RICH…..Starting Today!

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I WILL TEACH YOU TO BE RICH…..Starting Today!

 

Okay, okay!  WE will teach you to be rich….starting today!

My co-partner in crime is Ramit Sethi, the author of the New York Times bestseller, I Will Teach You To Be Rich.  While he has authored the book, I will be doing the reading.  I will be breaking down theories and steps in the book, as well as providing real life examples and cute little antidotes.

 

SPOILER ALERT:

The key to being rich (according to Ramit) is to set up accounts at a reliable no-fee bank and then automate savings and bill payment, then know a few things to invest in and let your money grow for 30 years.

 

MY TAKE:

It takes a bit (lot) more than that and I will make sure to bring up any areas that Ramit tries to tip toe over.

 

I WillTeach You To Be Rich is broken up into 6 weeks of topics, followed by a set of action steps.  At the end of the 6 weeks, if you follow all of the action steps, Ramit promises that you will be well on your way to being rich…..if you are consistent and faint not.  :-)

 

By the way, this is my November/December read and I will be going through and completing all 6 weeks of action steps by the end of the year.  Feel free to join me each week while I discuss the topic and action steps towards richness, indeed.

 

WEEK 1: OPTIMIZE YOUR CREDIT……CARDS

While there are experts out there (Ahem…..Dave Ramsey) that believe that debt is against the bad and that you avoid it and a credit score at all costs.  My beliefs are more in-line with what is taught by Ramit.

If you do not know how to responsibly use debt, avoid it like a plague (or get some discipline).  However, if you are have the discipline to use your card prudently and to pay off your credit card every month, it can actually be a benefit. 

Even if you have the money in your account, who wants to have that ridiculous hold that hotels put on your account when you use your debit card to reserve your room?  When you rent a car, who wants to pay that ridiculous insurance, when there are really good credit cards out there with exceptional coverage?  When you buy an expensive product and something goes wrong, who wants to wait for the bank to put the money back into your bank account?  Who wants to pay for an extended warranty, when there are credit cards out there who will give you an extra year or two, just for making the purchase on their card?  If I can save major money by utilizing the benefits that only credit (not debit) cards provide and I know that I am going to pay the full balance off that month, I choose credit.

To optimize your credit you must do the following…..THIS WEEK!

1.    Know what is on your credit report and know your FICO score.

a.    Go to http://www.annualcreditreport.com and receive a copy of 1 (or all three) of your credit reports for free.  Make sure that they are accurate.  Work to remove all negative credit history over time.

b.    Get your credit score.  You can purchase it from MyFICO and other websites for a nominal fee, but I would suggest getting it for free.  I monitor my credit score through Credit Sesame, Credit Karma and one of my credit cards.

2.    Set up your credit cards

a.    Do you have an active credit card?  If not, do your research and get one (unless, of course, you fall into that undisciplined category).  If no one will have you, find a good provider of secured credit cards that will report your payment history to the credit agencies to help you build credit.  Otherwise, find a card with the most benefits that will fit your lifestyle.

3.    Make sure you are handling cards effectively

a.    Set up auto pay to pay off the full balance each month.  Split the payments to match your paycheck schedule, if necessary.

b.    Get fees waived and negotiate a lower APR, where relevant.

 

c.    Become familiar with the benefits offered by your card and make good use for them, when needed.

4.    Make a plan and start paying down debt (if applicable)

a.    I am a fan of the Snowball Method (as suggested by Dave Ramsey).  List all of your debts from smallest to largest.  Pay the minimum on all the debts, except the smallest debt.  Based on your budget, pay an additional amount on this debt each month.  Once that debt is paid off, move to the next smallest debt.  In addition to the minimum due that you had already been paying, roll the amount that you were previously paying on the smallest debt over to the next smallest debt, and so on and so on, until all of your debts are paid off.

b.    In addition to the snowball method, I am also a proponent of the Snowflake Method.  If you get a side hustle, if you find a penny on the ground, if you get a bonus check or tax refund, etc., etc……apply that extra money to the lowest debt.

*   Personally, we have paid off all of our credit card debt and are currently working on obliterating some rather stubborn student loans (long story…..don’t want to talk about it).  Once that is complete, I fully plan to work Dave Ramsey’s Baby Steps as outlined in his Total Money Makeover book.  We never stopped our 401k contributions, as he suggests, but that is because I did not think it was the best plan of action.  However, that’s another story for another day.

 

I encourage you to go through the 4 steps listed above with me.  Let’s try to get rich together and if it doesn’t work for us, we can all blame Ramit Sethi.

 

BUY BOOKS HERE:

I Will Teach You To Be Rich by Ramit Sethi

The Total Money Makeover: A proven plan for financial fitness by Dave Ramsey

 

 

 

Want to be a Millionaire? Start Here!

*The below passage is a composite of information retrieved from Dave Ramsey and the author of The Millionaire Mind, Dr. Thomas J. Stanley. 

I was actually doing a 10-day reading plan on what the Holy Bible says about money.  Today's topic was all about integrity and how it plays a large role in the lives of those who have lasting wealth.  It also talks about the role that integrity plays in all areas of your life, not just finances.

When I truly looked at my life....When I truly looked at the life of those around me, both personally and in the public eye, I can truly say that this philosophy holds true. 

There is a definite correlation (my husband's statistics class is having an effect on me) between LASTING happiness/success and integrity.  I know several people who have made loads of money, moved up quickly in business and have acquired what appears to be a great family unit.  Those that lacked integrity have always fallen in the end.  They've gotten demoted, lost their families, gone to jail, become mentally depressed, etc.

Integrity is not all about being a 'good person.'  Frank Lucas (American Gangster....duh) was a great person, if you look at how he fed the poor people in Harlem and employed people in various businesses around New York and New Jersey.  He took care of his mother and made sure that all of his family wanted for nothing.  However, his integrity lacked.  Sure, he cared about his family.  Most of the other 'good' things he did were mainly used as a means to cover up his lack of integrity.  In the end, Frank Lucas' entire empire was taken down and he spent many years of his life behind prison bars. (This is an extreme case, but this philosophy holds true in less dramatic situations as well....think along the lines of the mistress, the adulterer, the person who doesn't pay tithes because they have too many bills, the person who does the least amount of work to be viewed as 'doing their job' at work, the person who steps on whomever is in their way in order to get to the top, etc., etc.).

I am far from being rich and not even close to being a Millionaire, but I do attribute the things that I do have to my level of integrity.  I also attribute my deficiencies to the areas where I lack integrity. 

So much was going on in the beginning of 2014 that I never took the time to sit down and map out my goals for the year.  Despite a few setbacks, I was able to have a very successful 2013, achieving almost every goal I set out to achieve (some things are just out of our hands and must be turned completely over to God.)  I've decided that in 2014, I would like to work on my integrity.  With a daughter on the way, I really want to be an example of how a woman should be.  I want her to grow up loving and admiring me, not just because I am her mother, but because I am strong, driven and truly a woman of integrity. (see commentary below)

In his book The Millionaire Mind, Dr. Thomas J. Stanley studied the habits of several hundred individuals with a net worth of at least $10 million. He really wanted to find out what makes the typical millionaire tick and uncover any common characteristics that contributed to their wealth.

As he examined the results of his interviews and surveys, Stanley found a definite connection between personal integrity and financial success. In fact, he ranked integrity as a prime predictor of wealth potential - even higher than an individual's chosen business or industry.

In other words, integrity matters!

The reason so many people struggle with building wealth is that they also struggle with integrity. They lack a basic commitment to honesty. That's a strong statement. In fact, it may be so strong that you think it doesn't apply to you. But if you're breathing and if your heart is beating, you have wrestled with being completely truthful at one time or another - and some of those struggles probably had something to do with money.

Simply put, there are two ways to make money and build wealth. You can rely on dishonesty, or you can stay completely committed to integrity.

Dishonest money may seem to come more easily, but it never lasts. It dwindles away like sand running through our fingers. But honest money, gained through hard work and investment over time, grows. It provides security - not to mention a clear conscience.

Given the current harsh economic conditions, it may be tempting to compromise integrity for short term gain.

In the long run, however, economic gain is easier and more psychologically rewarding if one is truthful.  Millionaires rated integrity (being honest with all people) as the number one factor out of 30 that explains their economic success.  Note that these 733 respondents represented the top 1% of the wealth holders in America.  Jon, one of the respondents and a wealthy entrepreneur, attributed much of his success to what his father taught him about integrity: Never lie.  Never tell one lie.  If you tell one lie, you will have to eventually tell fifteen more to cover up the first lie.  In turn, each of these 15 requires 15 more or 225 lies and on and on.

Integrity matters - in your finances and in every other part of your life - because a moral breakdown is not a victimless crime. Dishonesty will deeply wound you and those around you. Unless you hold yourself to an ultra-high standard, you will walk through life with an emotional and spiritual limp.

Fortunately, it's not too late to correct course. If you've skimped on integrity in the past, now's the time to come clean - to yourself, to others and to God. Repair that chink in your armor today.

Remember, integrity matters!