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Showing posts from 2022

Buy according to your values to become rich

As I have said many times before, those of us who are not trust fund babies or have won the lottery, there is only one way to accumulate wealth:  by saving .  In other words, you have to live below your means and invest the remaining funds .  Where else will the money come from if not from spending less than you earn? How to shop according to your values? One of the things that I notice among most of my friends and family members who have no wealth (other than a little bit of equity in their homes, in case they have not tapped it to pay for even more home improvement or for a vacation or wedding ) is that they literally spend every penny they earn and they always have the cleverest response if you ask them why they need something.  If it is a bigger home, it is because they are having yet one more kid or the kids want more room, they keep buying bigger cars just to fill it up with their kids and their friends, their phones are upgraded every two years because they are trapped in the

Aim for wealth because you value security and peace of mind

If you ask me what is the best thing about having a lot of money or being a millionaire , it is that I do not have to worry about paying my bills or that I would not have enough to retire .  In other words, what money does is to free you up, it gives you choices, and it allows you to go to be every night without having to worry which bills need to be paid and how I will come up with the money. It was in this context that I was thinking about how some people dislike savers like me by calling us greedy or misers , because they value showing off more than sleeping in peace.  I don't care if you are not impressed with my 5-year old cell phone or a 2015 Toyota RAV4 or that I am barely ever eating in a restaurant .  However, I love the fact that no matter what I always seem to have money to feed my family, my bills are always paid on time, and I have no bad debt . So as you are thinking about building wealth and accumulating savings for your retirement , don't be greedy nor compare

Happy couples have joint accounts

Because my wife and I do, I talked previously about the wonders of having a joint bank and retirement account as a couple .  I also saw recently an article in WSJ on the topic, and Julia Carpenter writes, "Couples who combine bank, credit-card and investing accounts are happier in the long term and find that pooling resources helps clear the path to traditional money milestones such as buying a house and saving for retirement, studies have found." I would agree with her conclusion.  I also read some comments and there are widely different opinions on this, but someone asked if it could be that couples in happy relationships are more likely to combine their finances, rather than combining leading to happiness. In my own family, I have seen all sorts of arrangements.  And it is not about the generation either.  Since my grandma and mom did not work, they did not have separate finances.  My siblings, though, all have separate finances with their spouses.  My wife and I, on t

When is a good time to retire for millionaires?

A lot of people assume that if you are a millionaire, you don't have to work any more and retire right away to live happily thereafter.  Yes, we are all confused about who millionaires are and what does it mean to be wealthy like that.  That is what I used to wonder myself when I was just a regular guy with just a few thousand dollars of savings in my bank account as a man in my late 20s. Here is the reality, though.  I am sure that many people who have no retirement savings or only a modest amount of tens of thousands of dollars or even low hundreds of thousands of dollars will say that I am one of those spoiled, rich people who should be happy to have so much money.  To me that is beside the point.  My reality is that my wife and I have a certain lifestyle, as modest as it is.  We have just one car , 6 year old cell phones , we cook nearly all our meals at home , hardly any subscriptions , etc.  We still end up spending close to a hundred thousand dollars each year living a midd

Should I get out of the market when market crashes?

The year 2022 has not been kind to investors.  After the boom during the Covid-19 pandemic when he had massive drops and then a boom like no one had imagined, many tech or growth stocks have lost massive value.  Even otherwise solid companies like Amazon, Tesla, Apple, Facebook/Meta, etc. have lost a lot of value.  In times like these, particularly if you entered the market during the pandemic (meaning at or close to the peak), it is tempting to think that the market is rigged/broken and "not for me."  This is the biggest mistake you could make. Let share this chart with you then.  This shows the market's performance between 1982 and 2022.  Indeed, there have been drops, but what do you see over the long term.  Nothing but growth.  In fact, when you look at real estate, gold, etc., they don't appreciate like the market does. So what is the secret to investing? For me, it is all about keep investing no matter where the market is going .  I entered the stock market clos

Importance of discipline in creating million dollar wealth

Previously, I have discussed the importance of patience in becoming a millionaire .  As a self-made millionaire couple (granted our student debt was small because of scholarships and cost of college being a lot low in prior to 2000s), our wealth has been a result of simply investing each year the money that we had left over after saving, for example, by cooking nearly all our meals at home . So, what does discipline have to do with it? If you are wondering that, the answer is that based on my conversations with friends and family members who are not millionaires and some of them have actually had higher total incomes during the two decades that it has taken us to become millionaires, my understanding is that they always have an excuse for spending.  The car is too small for their family, they need a bigger house because of having another kid , they need a new grill/TV/ phone /handbag, etc.  Saving is the last item on their list, taking care of their needs and wishes is a higher prior

The good versus bad debt

Let me share my philosophy on debt.  Many experts often recommend paying for everything in cash, never to use credit cards, and tell you not to buy anything unless you have the money to pay for it in cash.   A smarter way to benefit from debt So for my wife and I, the only debt we currently have is a mortgage.  You might wonder that if we are millionaires, why don't we just pay off our mortgage, as many advisers suggest?  Well, this is the reason: our mortgage interest rate is just 3.5% for another 21 years, while the average return in the stock market is about 8%.  In other words, a bank is giving us liquidity so that we can make an extra 5.5% interest by simply being responsible. You can apply the same logic for any debt that has a relatively low rate of interest.  So, if a car comes with 0% financing, unless you can negotiate a much lower price (rather hard to do with those car dealers), it is much better to take that free money, rather than pay it all in cash. A similar smart s

Couples, combine your finances and bank accounts, to become a millionaire

One of the main reasons married couples have higher net worth than cohabiting couples is because they are more likely to have common goals for saving and retirement . To get started with combining your finances and financial goals , start with a joint checking account.  Whether only one or both of you work, until you pool all your financial resources, you are really not really in this together.  Having separate accounts and sharing expenses as if you are merely conducting transactions with others, means that your marriage will also be transactional and that will impact how you feel about wealth creation. My wife and I have always had a joint account and we simply pool all the money that we make.  Then we spend it as needed.  If there is something that she needs only for herself (we count items like clothing, makeup, etc. for her and gym fees for me as essential family expenses rather than discretionary expenses), for example, she wants to gift something big to her friends or family m

Get married to become millionaires

I have discussed why having a simple wedding is key to becoming a millionaire , a study by the Federal Reserve caught my attention.  As of 2019, the median net worth for cohabiting couples age 25 to 34 was $17,372, a quarter that of the $68,210 for married couples of that same age range, according to data from the Federal Reserve Bank of St. Louis. Fewer couples are getting married but they are living together and even raising families That is why it is troubling that their net worth is a quarter of what it could be if they were married.  So what could be the reasons.  Having been married for 20+ years, this is what I can hypothesize: When couples simply cohabit, if they feel like it, they can simply pack up and leave.  A married couple has to actually divorce, meaning interactions with lawyers, accountants, and maybe someone from their church (if they belong to one).  This forces them to work through their problems rather than end their relationship, which also means that they end up

Folks, it takes patience to become a millionaire

As I discussed in my post on imagining yourself to be a millionaire , the reason it was so hard to do was that you have to imagine that small amounts of money that you are investing each year will eventually add up to a million bucks .  So way back in 1998 when I first signed up for my employer's 401(K) plan and contributed my first $12,000, with the ups and downs of the stock market, in the first few years it did not seem like much.  However, because of the tax breaks available, the desire to save for retirement, and a passion for economic security, we just kept saving whatever we could and invested it in our retirement plans and some years we had money left over since we maxed our contributions, so we invested it in a brokerage account, mostly in ETFs . How long did it take us to become millionaires? Well, it is hard to really come up with a precise time, but in 1998 we opened our first brokerage account and also signed up for my employer's 401(K) plan.  Prior to that, though

How to visualize being a millionaire?

I'll be honest.  In 1994, when I got my first corporate job after graduation, all I could think of was building a cushion of savings so that I would not feel stressed if I got laid off or needed to pay for an emergency for me or my loved ones.  In a few years, my girlfriend and I were living together and while we together brought in about $100K a year, between apartment rent and paying for two cars, we were left with little.   How smart of me to make the maximum 401(K) contribution! That said, the only thing I was definitely doing was making the maximum contribution of $12,000 to my 401(K) because I did not want miss out on the match from my employer.  At that time, I did not think it was a big deal, but in retrospect, it was the wisest decision of my life.  While I have strong roots in Math and understand the concept of compounding, trust me, it was difficult to visualize that it will eventually work and one day at some point of time in the distant future I will be a millionaire.

When can someone call themselves a millionaire?

If you are an aspiring millionaire , you obviously want to know what will really make you join this very exclusive club of millionaires .  So here are many ways to look at it. Net worth millionaires This is the most accurate way of looking at who is really a millionaire and this is how financial planners and advisors look at it.  Naturally, the banks, other financial institutions, and the government will also use this definition. Net worth = Assets - Liabilities Assets are things that you own.  For example, cash, stocks, valuables, gold, home/real estate, jewelry, etc. Liabilities are items like debt and other commitments like child support, alimony, etc. If you live in a home worth $100,000 (that is assets) and your remaining mortgage is $75,000 (this is your liability), the home will contribute $25,000 to your net worth. Now, this is a technical definition, but the one definition that I like is often used when you want to become a professional investor (e.g. you want to invest in sta

How do millionaires spend their money?

When I was not a millionaire, I used to think that the rich simply spent their money on finest things.  After all, we always had to compromise by opting to buy lower priced products.  And in the media, we always saw the celebrities, in particular, with the most expensive cars, clothes, homes, etc. Of course, then you read a book like The Millionaire Next Door (a book that came out in the late 1990s, and while a lot of information is outdated since the dollar amounts are less relevant today and lot has changed, it is still a great book to learn some of the principles of creating wealth), and you realize that the super-rich millionaires did not drive fancy sports cars or waste their money on handbags with logos or show off their money by having the most expensive smart phones.  Instead, they lived below their means and never wasted their money to impress other people with the stuff they could buy. That is why a story that former CEO of GE, Jack Welch, told resonated with me.  He once sai

Investing 101 -- the very basics of stock market investments

This post is for those aspiring millionaires who want to get rich but do not want to learn about stock market investing.  I realize that it can be hard and confusing to study how Wall Street works, learn to review financial statements, listen to management's calls with investment banking analysts, and be able to make sense of investor presentations. So can one invest in the stock market without learning about the stock market? Absolutely.  As long as you have the capital to invest, and if you absolutely do not want to learn anything, but still want to take advantage of what investing can do to your savings, try these tricks: Invest in exchange traded funds (ETF) .  Do not invest in mutual funds since their fees are very high.  In other words you pay a mutual fund manager whether their work makes you money or not.  The fees for ETFs are a lot lower since no one is picking stocks for you.  It is just a basket of stocks and an algorithm trades automatically without much human involve

Savings from cooking at home all the meals to become a millionaire

I like to believe that a man or a woman should be even to feed oneself by cooking a proper meal.  Thankfully, we live in a world that we do not need to engage in farming or raise/hunt animals -- there are people who do it for us better and cheaper -- but it wouldn't hurt to actually know farming, raising cattle, and hunting.  After all, we need to eat well in order to live and food is something we need at least three times a day. Why is food more expensive outside the home? It's not the ingredients, folks!  These businesses use the cheapest ingredients they can find; it's the labor.  By cooking your food, they are adding value, and since labor is far more expensive in America than stuff, you will pay a lot more.  That is why, even when my wife and I have a gourmet meal at home with champagne or French/Spanish/California and using grass-fed/organic meats/vegetables/cheese/butter and so forth, we have done the Math and we find that it is about 20% the cost of going out.  And

Is Amazon Prime necessary if you are really trying to save money?

I do not have Amazon Prime At the same time, I opened my Amazon account in 1999 and have been shopping regularly since then.  The reason I do not have Prime membership -- call me a cheapo if you wish but I would rather be a millionaire -- is that it is one recurring expense each month and I hate to pay for things that I can do without.  Imagine paying $14.99 (October 2022 pricing) or $139 per year, which you could invest in the stock market instead? I am being told that I am an exception.There are as many as 165 million Americans with Amazon Prime accounts -- it means that once we exclude children, almost everyone who shops online already has this fixed expense. How do I manage without Amazon Prime? Easy.  Plan ahead.  Remember that prior to 2005, Amazon Prime did not exist.  So people like us simply shopped in such a way that we waited till the order was large enough to be eligible for free shipping.  For us, the habit has simply continued.  I still wait for my order to exceed $25 and

Own your damned house, people, if you want to be rich

My story of home-ownership Like many folks who did not have a trust fund (I am thankful to my parents for raising and educating me but they were never in a position to give any more money than that), my wife and I when we first started to live together, we rented an apartment in Connecticut.  In those days in the late 1990s, the rent was about $900/month for a 2-bedroom unit.  We lived there for over two years, and when we added up how much we had paid the landlady over that period, our jaws dropped.  Nearly $25,000.  Wow!  That was a lot of money.  Yes, we had a roof over our heads, but that is also so much money. So when I got a job offer in Massachusetts, and we had to move, my wife said that let us simply buy a home.   How we bought our first home? We looked around and found our dream home.  However, we did not have enough money and since this was 2001, the banks were very liberal.  They did not insist on 20% down payment and just asked us for 5%.  So we bought a median home around

Why do some people criticize the rich as greedy?

One of the challenges that I have faced as an upwardly mobile man is that many family members and friends time and again, sometimes making it appear as a joke or light talk, made me feel that I am greedy, stingy, cheapo, lacking fine taste, and unable to enjoy life.  And there is one common feature of these people:  THEY ARE POOR. Now, you can understand why these people criticize hardworking people like me, who analyze each situation so that we own only one car , we maximize the time that we use our cell phones , and avoid wasting money on things like expensive weddings . So why do these people say such negative words and refuse to respect us? Because they are jealous.  They envy the diligence of saving and discipline that couples like us have.  They are shocked that we always seem to have money for everything and that they are destined to retire in peace while they are always freaking out about paying their bills and do not know what will happen if the economy goes into recession or

To become a millionaire have the simplest wedding possible

How many of you hope to retire as a millionaire?   Well, if you are reading this, chances are that you do aspire to become a millionaire and retire in comfort.  You really wish that you would not have to worry about money at a time that you may be unable to work, if needed.  I have discussed how simple money saving techniques like owning just one car instead of two or stretching the life of your cell phone can add up to tens of thousands of dollars over time , but there is one thing that has the most profound impact on you retiring as a millionaire but so many people don't do it. Get married but have the simplest wedding If you were to ask me, well, in addition to saving diligently through 401(k) and IRA, investing extra money in another brokerage account, owning a home, and living modestly, you can add one big contributor: my wife of over 20 years and I simply went to an office in Las Vegas and walked out with our marriage license.  We had a nice meal later that night.  And by th

How long to keep a cell phone?

If you are wondering what does being a millionaire have to do with mobile phones, please bear with me.  While it is hard to find accurate estimates, but CNBC estimates that on an average Americans spend about $125 a month for their cell phones after accounting for the cost of the monthly plan, taxes, and the amount that goes each month to pay down the cost of the phone.  Think about it!  It is a cool $1,500 a year for simply being able to stay in touch with loved ones, get directions, search online, etc. How much do I spend on a cell phone each month? Well, I am a cheapo when it comes to spending money (and that as you may be learning by now is the secret to my being a millionaire ).  When Xfinity Mobile launched a cell phone plan, they want you to sign up for other services from them like cable TV, Internet, home phone, etc.  We were already their customers, so for us, it was not even an issue.  Initially, they gave us 100 MB a data for free and there was no other charge, except for t

How many cars to have when working from home?

When my wife and I started to work from home (WHM), one of the things we did was to downsize to one vehicle.  Now if you are wondering if that would cause problems, yes, it did.  There were a few occasions when both of us needed to have transportation and we were both used to having our own rides, but eventually, we figured it out.  These occasions were to rare that it was better for us to rent a car or use a taxi (when we first started in early 2000s, there were no rideshare services like Uber, Lyft, etc).   Benefits of having one car in the family Trust me, it brings down the cost of transportation by half.  You are not paying for ownership or lease, no need for insurance, and definitely no repair when you don't have the second car.  We estimate that it has put hundreds of dollars extra in our savings for just a little bit of aggravation in form of planning ahead and occasionally renting a car to get things done. I am convinced that managing with just one vehicle may have added t