This one belief is probably keeping you from being rich

Do you find it hard to save $$?  

Why is that?  Well on the surface the answer is pretty easy “I don’t have enough money left after my expenses”.  I hear you.  However, I think deep down your subconscious beliefs are what really keeps you from saving.

So here you are staring at that nice new golf club/TV/killer purse/Wii/etc and $500 are just burning a hole in your pocket.  You know you should save that money but your subconscious is telling you that if you stash away that $500 they will just go in a black hole never to be seen again.  

You then talk yourself into it by thinking “pleasure now, or pleasure later when you retire and are too old to enjoy it anyway…”    Sound familiar?

Most of us have been conditioned to think that saving means stashing away money and never seeing it again.  I think most of you know it by the name of 401k. We know our savings are growing (hopefully) but somehow it just doesn’t feel like real money.

Here’s an idea: Invest in vehicles that pay you now.   Huh?

If you had a $25,000 investment making you a 10% dividend you’d be pocketing $2,500 a year, every year.  Think about that.  It’s like getting a $2,500 bonus check year after year for not doing anything.

If you know that every $500 you invest will pay you $50 back every year would you be more inclined to invest?  That golf club doesn’t look that attractive any more does it?

What's Better, to Save a Dollar or Earn a Dollar?

Would you rather earn a dollar for your products or services, or save a dollar when buying or not buying something?  Sure this seems silly but the implications and ramifications of this question extend beyond just one dollar.  

Lets say you save a dollar.  Ok that's one dollar less I would've spent. Simple. 1$ = 1$.

Now lets look at earning a dollar.  I have one more dollar in my pocket right?  Well, actually no.  That dollar you earned is actually taxable.  You'll have to pay income taxes, social insecurity taxes, fica, etc.  Your dollar earned is actually worth only $0.80 or so.

Now instead of a dollar make it $10,000 or $100,000.  It makes a big difference eh?

ps. The trick here is earned.  There are some ways you can make a dollar without paying taxes or at least deferring them indefenitely.

Never ever ever finance a car

Lets get straight to the point. Cars should only be bought with cash. Financing is for wimps. Ok I’m glad I got that off my chest. Now let’s elaborate.

I can hear you now “But I only have $5,000 in savings and that nice BMW I want is $35,000…” Well my friend in that case look for a nice $5,000 used Corolla. That’s what I did. Actually I bought it from my sister but still I’ve paid cash for my last two cars.

So whats the harm in financing? That if have to finance it then YOU CANNOT AFFORD IT! First of all simple math will show you that you end up paying almost double financing than if you paid it cash. However, that is not even then real damage. The real damage is the opportunity cost. You cannot afford to eat that cash flow now and sacrifice future returns.

Lets do some simple math. $3,000 down on a $35,000 car financed at 6% for 5 years yields a $618.65 a month payment (ignoring insurance, registration, etc). Instead, lets invest that $618 a month and lets say it earns 8% return, at the end of five years you’d have $45,408.69! Lets say you keep that up for another 20 years and you’d have a nice $364,014.61 in your bank account.

That nice $35,0000 car actually cost you $360,000 in the future. And that’s why my friends you cannot afford it!

A Journey of A Thousand Miles Starts With One Step

Have you ever been to the mall and looked at the red dot on the directory that says “you are here”? Well this is it, my first official post and the you are here sign.

You need to know where you are if you want to get a clear idea of where you’re going or where you want to go. In the world of personal finance and wealth, that would be your net worth. The road to wealth begins with knowing this seemingly unimportant number.

If you can measure it you can improve it. I started tracking net worth a few months ago and it was an eye opener for me. I started noticing trends and how certain actions affect my net worth. Now it’s like a game to see how much I can improve my net worth each month. Net worth is truly my score card on how I’m doing on my path to wealth and financial freedom. Trying to accumulate wealth without tracking net worth is liking trying to lose weight and never checking the scale.

$133,015.71. This is my net worth as of today. Pitiful I know. I’ve been on the workforce for about 12 years so that’s equivalent to saving $ 11, 084.64 per year. However, because of interest the savings contribution was actually less, a lot less.

Where do I want it to be? 1 million dollars. What’s my time frame? I’ve set myself a time frame of 5 years to accomplish this goal. Let the games begin…