Formula to Wealth

[Monadnock]

To be wealthy, you have to bring in more than you spend out. A lot more, by my definition of wealthy (which I am not).

I think to do that today, you must possess something people are willing to pay for, either a skill, or some type of property, or an invention/idea.

Working for the man doesn't usually cut it, unless you are in some professional field. Even then, dual income may have to be part of it.

I'd say set a deadline to become wealthy, or possess enough dough to retire happily. 401k's and safe long term investments may be part of that. Your primary residence is another. If you can pay it off in 20 instead of 30 yrs, that's a plus too. An extra mortgage payment a year can get you there.

 

[michaeledward]

Good debt is an oxymoron. Debt is bad. Period.

Debt erodes wealth. Debt does not build wealth.

With this, I disagree. I believe a college education will significantly contribute to one's income side of the equation. And, college education is rapidly becoming the most expensive investment one will make.

It is unrealistic to think that you can pay cash for this asset. While you may be able to save a couple of grand to buy a car every few years, using the same tactic in education (pay for each class in cash, as you go) would extend the process over too many years to realize a benefit.

I believe college loans are a good reason to enter into debt. (Assuming you complete a degree program).

Real Estate is usually an appreciating asset. The value of a home tends to increase over time. Accepting some debt to acquire real estate can be a good thing.

Additionally, because of the current structure of our economy, one dollar, ten years from now, will be easier to acquire and worth less, than one dollar today. If I can pay for an asset with dollars in the future, it is less of a burden than paying for an asset with dollars today.

Being aware of these facts, and realistic about how to acquire assets can present us with examples of "good debt".

 

[Kacey]

I agree with the definitions given of good vs. bad debt - with education and real estate debt being prime examples of good debt.

I own a house... okay, the bank owns my house at the moment, but nonetheless... I was able to purchase my house only because I was in the financial position to acquire that type of debt. There is no way in hell I could have saved enough money - while paying rent - to buy a house. I started with a condominium through a first time buyer's program, for $3000 down, and then I lived in it for 6 years, while it appreciated and I paid the mortgage - easy enough, at the time, because the mortgage payment, even with the association fee, was less than I'd been paying in rent, and I used the difference between the mortgage payment and the rent I'd been paying to make improvements in the condo, which added to its value. At a time when it was a buyer's market in houses, but a seller's marker in condos, I sold the condo and bought a house. Now, I'm not paying the house down as quickly as the condo - the difference in the payments is too great - but on the other hand, I haven't paid rent in 10 years; instead, my housing payments have gone to an appreciating asset, which is tax deductible as well, with the goal of having the house paid off before I retire, greatly reducing my need for retirement income. On top of all that, my housing payment is relatively stable over time, and, as my income increases, is a shrinking portion of my income.

If I were to believe that all debt erodes wealth, I'd still be paying rent, which would increase, rather than remain steady, over time. All debt is not created equal - but while having housing debt does not particularly bother me, I avoid short-term debt - especially credit cards - like the plague. I have credit cards, but I only use them for emergencies, until I can get the money out of my emergency fund, which is carefully set up to not be immediately accessible, so I don't use it indiscriminately.

 

[Eternal White Belt]

I believe a college education will significantly contribute to one's income side of the equation. And, college education is rapidly becoming the most expensive investment one will make.

It is unrealistic to think that you can pay cash for this asset.

I believe college loans are a good reason to enter into debt. (Assuming you complete a degree program).

Being aware of these facts, and realistic about how to acquire assets can present us with examples of "good debt".

Which is why I said - if you MUST acquire debt, pay it off as quickly as possible.

It is not unrealistic to pay for an education with cash. All it takes is a little planning and investing. More and more people are paying cash for their purchases these days. Just take a listen to Dave Ramsey's radio program. I only get to listen for about 20 minutes on my way home from work, but there are at least one or two people every day who call in to tell Dave they are DEBT FREE (may or may not include the house). Check out his radio program, or read The Total Money Makeover and Financial Peace. Dave's kool-aid be goooooood! :ultracool

 

[Rich Parsons]

Greetings All,

What do you think is a formula to wealth? (assuming you didn't win the lottery, your not a trust fund baby, and nobody you know is wealthy).

Which vehicle would you prefer:
College education?
The higher the degree the more you get paid, plus it opens doors of opportunity.

Real Estate?
Flip, fix it up, hold and let the value go up over time, tax shelter, rent it out, Roth IRA or 1030 exchange.

Stocks?
playing the market by purchasing stocks during corrections and using stops to put some financial brakes on.

Doing what you love?
Teaching, performing, writing, creating, traveling, eating, etc (running a website..hehe).

Paying yourself 10% first?
Saving up for investments.

Maybe use them all. Any other vehicles you can think of?

Here is my Plan take it for what it is.

1) I max out my 401k.
2) I carry only the minimum debt i.e. house and vehicles - No credit cards
3) I maintain a spreadsheet (* when I started the pre-made ones did not do what I wanted *). The Spreadsheet covers everything my check and all the taxes I pay and inputed income to my cas expenses. I even break out my cash expenses to where I spend it, such as lunch money or gas (* use a credit card that gives good discount now and pay off monthly *) and going out. I do it by the day of the week to keep track if I have a spenidng habit issue. I also keep track on money spent on martial arts.
4) I pay myself a reward for saving. I will occasionally buy a pizza or set up to buy something nice such as a gun or some other toy.
5) I spend money on what makes me happy
6) My furniture is used.
7) My TV is from 1981.
8) I have Cable (* I really like sci-fi and others while I am sick and cannot read while on cold medicines. *) Also for internet.
9) I do not have an iPod
10) I do not have all the latest technology - yet others could as it might be what makes them happy. For me it is martial arts and my convertible and motorcycle
11) I went to school to have a job that pays well.
12) I work hard to maintain that position to maintain the income and the above plans
13) I shop well - meaning I look for stuff that lasts and is at a good price
14) I ask family for clothes as well as this is useful items for me and I do not have to spend the time and money buying it myself. To me it really is a great gift even though some think it is boring.


It is good to have a plan.

It is good to be able to execute that plan otherwise the plan is no good for you.

Start small for if you do not start it will never happen. i.e. take half of your raise for saving and the rest to reward yourself. After a couple of years this will give you a few percentage points into your 401K or IRA's.

What gets me as stated by others are those that have no money, but have the newest shoes and clothes and go to the bar a couple of times a week and the coffee shops ..., .

The phrases "I have to have ..." or "We Need ... "Just look at how much money I have saved ..." (* This said after buying lots of stuff you will never use on sale. And yes this did happen me *)

The Big Divorce is horrible for credit and assets, but I am recovering, so if one is serious it should be accomplishable.

Good Luck


PS: There was a study about education levels and the amount money spent on the lottery. The higher the education the lower amount spent. NOTE: I will spend some sometimes for group stuff at work or when it is outrageously high. A dollar or two once or twice a year.

 

[Hawke]

Here are some books I thought are worth mentioning with links to Amazon so you can get more info:


The Richest Man in Babylon
by George S. Clasen


The Greatest Salesman in the World
bu Og Mandino


Unlimited Power
by Anothy Robbins


Think and Grow Rich
bu Napolean Hill

 

[hong kong fooey]

myself I would go for the college education. nowadays it's really hard to get a good paying job unless you have a degree at least thats what it seems to me. for instince right now I work for 8.50 a hour if I had gone to college I would be making a whole lot more