Treece Blog: Frying up a nest eggWritten by Dock David Treece | | firstname.lastname@example.org
Everyone wants to be rich, but few are willing to learn how and do what it takes. Instead, many people who had every opportunity to accumulate a great deal of wealth, are agonizing over retirement or struggling to make ends meet.
Before we discuss some very simple tips that will put readers on the road to riches, consider the following: How much money will pass through your hands in your lifetime?
The best way for a person to approach their finances is like a corporation. Any good company keeps track of every single cent coming in or going out. Readers should do the same, and one of the best tools for doing so is by keeping a ledger.
A ledger, despite the intimidating name, is really relatively simple. Readers can use software applications like Quicken, or just keep everything on paper (this should sound familiar to anyone who’s seen “The Untouchables”).
When constructing a ledger, there are three important things to note: who was on the other side of a transaction (who you paid or who paid you), what you were paying for, and how much money changed hands.
On a piece of paper, each time you make or spend any money, you want to note all of these things on a single line (putting the date of each transaction is also helpful), along with a balance running along the right side, which should tell you how much money you have at any point in time.
Once you keep track of your money, where it’s coming from and where it’s going, it’s a great idea to occasionally study your expenses to see where you’re spending most of your money. Look for areas where your spending might be excessive.
One big area to watch is entertainment, which is often full of small costs – a drink out here, a movie there – that add up very quickly. Also, be very conscious of how you use credit cards. For normal everyday purchases (dry cleaning or meals out), don’t put charges on your card that you can’t pay off at the end of the month. If you have big purchases, like new car tires, understand how much you’re going to be charged in interest and work religiously to get your balances paid off as quickly as possible.
The next step is to create a monthly budget, complete with anticipated outlays in different areas, from car insurance to groceries; but keep it within your means. One thing you will find is that after you’ve kept track of your cash flow for awhile, a budget can be extended into the future by forecasting future expenses. For example, if you know that you have big expense coming up next month, you can budget for it now rather than having to scramble to come up with cash later on.
It’s important that, once you get a grasp on your spending and where all your money is going to start setting goals for yourself to retain a certain amount of your income for savings every week or month. If this requires cutting back on spending in some area, consider it. More likely than not, it just requires being more conscious of spending.
Just as important, when you save some money, do yourself a favor and put it away someplace where you won’t be tempted to spend it, like a savings account that you refuse to let yourself dip into.
Remember the old saying, “out of sight, out of mind.”
Once you build up a good amount of money, start talking to people who can help you manage it so that it can grow even faster with interest. There are different types of people to fill this job, from, but you should take time in choosing one, the same way you would pick a doctor. Though advisers often have different requirements for minimum investments, some will work with as little as $10,000.
Going back to the question posed at the beginning of this article, if you make $50,000 per year, that’s about $37,500 per year after taxes. Working for 30 years at that salary means that, during the course of your working life, more than a million dollars will pass through your hands ($1.125 million). The challenge is not how to make more money (though that can certainly help), but how to keep as much as possible from slipping through your fingers.
Dock David Treece is a stockbroker licensed with FINRA. He works for Treece Financial Services Corp. (www.TreeceInvestmnets.com) and also serves as editor of the financial news site Green Faucet (www.GreenFaucet.com) and as a business commentator for Toledo Free Press. The above information is the express opinion of Dock David Treece and should not be construed as investment advice or used without outside verification.
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