Wealth: Where Does It Come From?

It may not be an easy job for some of us to accumulate wealth. We also worry about how to grow our wealth and then preserve it, keep it, so it will last as long as we need it to. A number of obstacles in our way: cost of living increases, as well as unexpected costs - emergencies, a large number of and increasing taxes, as well as inflation - taxation of another kind. These are some of the major obstacles keeping wealth out of reach for some.

Fact: Asians on average save 30% to 40% of their incomes while American's save a negative amount (at the time of writing this article it is a negative 4%), spending their whole life in debt. Building Wealth is all a matter of placing a priority on saving, and investing, rather than spending away your wealth. Debt makes you a slave where you hand over your hard earned money to someone who is only getting richer. It is this cycle you need to stop!

Many advisors keep repeating, the earlier you start saving the easier you will be wealthy and the more wealth you will accumulate, but few ever listen waiting until half their life has passed them by before starting to save or investing leaving them short when they are ready to retire.

It isn't sufficient to put your money into a savings account and forget about it. Investing seems to be a difficult concept for so many people, and yet there are people who seem to defy the odds and are able to build wealth without any expert or someone else doing it for them. All it takes is some education, but people avoid it as if education ends the day they graduate from school and there is no reason to ever pick up another book.

To help you do it yourself, I recommend Andrew Tobias’ book, "The Only Investment Guide You'll Ever Need", and Ric Edelman's book, "The Lies About Money: Why You Need to Own the Portfolio of the Future".

Andrew Tobias' book is short, easy to understand, written in a witty style. Tobias spells out everything you need to do it yourself in order to grow and protect your money. He is also extremely conscious of expenses and how they affect the final outcome. He has suggestions for low cost methods of investing, whatever your age or financial situation.

Ric Edelmans book is easy to follow in an easy to read style. He makes comparisons, gives advice all the time educating you about the history of investing which leads the reader toward an investment strategy. It also has just enough wit sprinkled throughout to keep the reader from thinking it is cut and dry. A very informative author.

I wont say that either book is all encompassing when it comes to investing, saving money, reducing expenses – especially taxes, and all the various ways of preserving the wealth you worked hard to build. They are still excellent books in any library. No one book can possibly cover everything having to do with money, no one would read it, it would be far too long. That’s where this website takes over and breaks up information into smaller articles. Also, I highly recommend my newsletter where I answer peoples questions or concerns.

Once finished reading either book and you’ve begun applying what they taught you, pass it onto to your children, teaching them what you have learned. They will not only learn more about savings and investment but implementing what they have learned at an earlier age is very important. It has been proven that the earlier children learn about money, begin saving and eventually begin investing, the more wealth they can accumulate, so long as they remain debt free.

Two ways of wealth preservation: Invest in a way to achieve maximum returns in order to grow your nest egg as large as possible. Second, manage your money better so when the time comes when you retire your earnings are the same as or exceed withdrawals, or you will run out of money.

Savings accounts will not achieve any appreciable growth, often not even earning enough to stay ahead of inflation. This is due to the low interest rates they pay savers, while banks earn 20 times as much or more. Taxes and inflation also eat away at earnings. This also goes for money market funds and CDs, but still they are investments you should use for your emergency fund or as a form of ready cash.

An ideal way to invest would be 35% to 60% of your money in a no-load mutual fund or other low cost mutual fund. A Roth IRA for your retirement investing as a way to reduce taxes in retirement because all the money a Roth earns is tax free. The remaining portion should be invested in bonds, foreign companies, DRiPs [Dividend Reinvestment Plans/Programs] and with some in cash – mutual fund, CD or both. I am in favor of investing in many ways to spread out your risk, reducing potential loss and still see your investments grow.

In the history of the stock market, taking into account stock market crashes, the stock market over the long term always produced the best returns on investments even when adjusted for inflation. Even if you are retired you should keep at least a portion of your investment in stocks. If you don't you may find that you will outlive your investments. Just because you are retired does not remove your responsibility from managing your investments. As a matter of fact, you will have more time to research investments to do a better job, and you will be able to spend the time mastering the basics making sure your nest egg outlasts you.

An example of someone who is on his way to building wealth, and becoming a millionaire is Andy.

This story comes from Money Track. Andy, a 27 year old, can become a millionaire. He started out with $11,000 in credit card debt. He is a full time college student and works part-time, living paycheck-to-paycheck. He decided he no longer wanted to live in debt and so cut up all the credit cards he had, put all of his things in storage and lives in his truck. He chose to sacrifice today, giving up many comforts many of us take for granted, which help him to stay focused and become debt free. He has the right temperament with lots of patience, and discipline. He pays cash for everything. That is what will allow him to become a millionaire.

Paul B. Farrell, author of "The Lazy Person's Guide to Investing: A Book for Procrastinators, the Financially Challenged, and Everyone Who Worries About Dealing with Their Money", recommends the following: Start when you are in your 20s, the earlier the better, saving $150 each month investing it in a Roth IRA which will turn you into a millionaire by 65. Save this amount for 8 years then let compounding take care of the growth while you put money aside for an emergency fund and buying a house. When enough has been saved go back to investing in other ways; for the kids college fund, including funding your retirement. Paul Farrell calls his method Coffee House Portfolio investing.

Everyone can build wealth, its just a matter of wanting it and having the focus, drive, discipline and temperament to do it. Sacrificing something today, now – also known as living simply or a frugal life – will only teach you things you wouldn’t learn if you had the money all along or lived beyond your income using credit cards.

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