Category Archives: Calculators

6 Ways to get Rich

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Lately, I’ve been listening to this audio book called the “Automatic Millionaire” by David Bach, and let me tell you that it’s awesome. I recommend this audio book to everyone, it’s a great read/listen, whichever you prefer. So while I was listening to it, I noticed some cool things that I thought I wanted to share with you.

When it comes down to it there are 6 approaches to wealth. Here they are.

  1. Win it. For example, the lottery. Did you know that over 500 Billion dollars have gone into the lottery business since the early 70′s when the lottery was first started? Imagine if all that money was put into an investment account, there would be over trillions of dollars right now. This is not a realistic approach but it happens to the very few. Do you know anyone who has won the lottery? Probably not, so I wouldn’t recommend waiting around for this one.
  2. Marry it. Wouldn’t it be great to marry your self into wealth? But lets face it, it’s not that easy to marry for money. Not only is it not easy to marry for money but “when you marry for money you pay for it for the rest of your life”. Good luck with this one.
  3. Inherit it. Now inheritance is actually a real approach to gaining wealth. Within the next 15 years, we’re going to see over 15 trillion dollars transfer from one generation to the next. But I mean, who wants to rely on their parents to past away so that they can get their money. No one I know, hopefully no one you know either. If you are fortunate enough to have your parents or family members leave you something after they pass, you can be grateful but don’t depend on it. Not a good way to live and you don’t want to rely on this for your retirement.
  4. Sue for it. Why work when you live in a country that pulls in 90% of all lawsuits made in the world? Just sue your way into wealth, right? Wrong. Again, you don’t want to rely on something like suing someone to get rich. This is not a real approach to wealth.
  5. Save for it. For all the little things we spend our money on like fast food and starbucks, this alone over a long period of time could end up to be a considerable amount. Say you spend on average roughly $10 for lunch and starbucks. Over a year it’s $3,650 and over thirty years it comes to 109,500! Now imagine you put this money away in the stock market in some kind of an index fund, which historically averages about a 10% return. Using this compound interest calculator, you would end up with 660,443.50! Isn’t this amazing? So yes, your daily fast food and starbucks is costing you over half a million dollars. This is also known as the Latte factor.
  6. Earn it. Yes, you can earn your way into wealth. Although the automatic millionaire has many great tips on how to accumulate wealth, the main concept of the audio is to pay your self first. What does it mean to pay your self first? It means that when you get your paycheck, before you pay anything or anyone, including the government, you make sure to pay your self first. When you automate this process electronically, it’s very easy to do because you don’t have to do it manually and the great thing is it doesn’t require motivation or work once its all set up. This is why out of all the 6 approaches, this is the most promising. As Bach mentions in the audio, you can start paying yourself as low as 1% of your gross income. Then over time, slowly start to increase your percentage and you won’t even notice it.

Just to let you know, I’m not getting sponsored or getting paid for saying any of this, I just want to share with you how much this program works.

So ever since I started listening to this audio, I made everything automatic and so far it’s doing great. As of now, I am automatically paying myself 20% of my gross income each paycheck. I stated out with 10% but then realized that I can afford to do 20%.

Having this process automated is the main key. Since it’s automated, you don’t have to worry about keeping your self motivated and that’s a huge factor, especially for me. Lets face it, it’s really hard to stay motivated 24/7 and thinking about finance day in and out. Another thing is when you have this process automated, once you have everything setup, you don’t have to work at it. Everything is automatic! It’s working for you while you’re not thinking about it.

The thing is, most of us know the concept of paying yourself first, but no one ever executes them. In his book, he pays down solid principles and honestly tells you that it’s not a get rich scheme. That it takes years for it to work. But its a solid plan that I think is guaranteed to work. What I like about the book is that it’s really simple to understand and easy to follow. If you have the chance, go check the book out for your self. It’s definitely worth the investment.

Start saving for retirement asap, compound interest says so.

So here is the scenario:

Person A is 20 years old and has nothing start off with since he’s fresh out of school. But he has a decent job and he able to invest 100 dollars a week. He does this til the age 60.

  • Starts with $0.00
  • Invest $100.00 a week ($4,800.00 a year)
  • Interest rate going at 10%
  • 40 years to invest

Person B is 40 years old and has waited this long to wait to start saving for his retirement. He has some money saved up and is able to put down 15,000.00 dollars to start off with. Also, since hes much older, he makes more than person A and is able to put 200 a week. He does this til the age 60.

  • Starts with $15,000.00
  • Invests $200.00 a week ($9,600.00 a year)
  • Interest rate going at 10%
  • 20 years to invest

Lets put these numbers in the compound interest calculator I found in MoneyChimp.com and see how we do. 

So here are the charts.

Person A: 20yearoldinterest.JPG

 

 

 

 

 

 

 

 

Person B:40yearoldinterest.JPG

 

 

 

 

 

 

 

 

As you can see, although person B invested 15,000.00 more than person A, he still has no where near as much as person A when it comes time for retirement. The difference comes to a total of $1,631,152.20! This is all because person A decided to start 20 years before person B. Now that’s the power of compound interest baby!

I don’t think there is a “right” age to start saving for retirement but I do know that there’s no such things as starting too early. Most people think to themselves, “Retirement is long ways from now and I can afford to wait another year…”. Well if you keep thinking in that mentality, you’ll find yourself in person B’s shoes and miss out on millions of dollars.

As for myself, I don’t have a retirement savings account yet but if everything goes according to plan, I will by the end of this month. :) We’ll see.

How much is your home worth?

One of my goals is to be a home owner within the next 4 years. As of now I’m not too sure where I want to live yet but where ever it is it’s probably not going to be here in Maryland. Houses here are super ridiculous and not worth it. I think the average house here is somewhere around 375-450k. Now if I head somewhere south, maybe like Florida, the cost can get as low as 175-250!

In the meantime, I’m going to start saving up for that down payment and I can start on that as soon as I get my credit neighborhood.jpgcard paid off. Looking at my current situation, I think I will be able to beat my clock counter and be able to have it paid off sometime in Mid February. How did I do it? Well, there were some unexpected income that I will receive within the next month. I will get a refund check from my school that will be at around 1450 and my tax refund will be somewhere around 2500 to 3000. Aaaand, my friend who owed me about 1300 will be able to pay me off with his tax refund. So I think I should be in good shape for now.

Anyways, I was browsing through Yahoo’s Real Estate section and came across this neat calculator. It’s pretty cool because it shows you an estimate not only for your house but also the other houses around your neighborhood. You can check out the calculator by clicking here.

I also found some interesting facts about some price values of popular homes values.

The Brady Bunch House estimated at 972,428

Osbourne MTV House estimated at 12,177,002

Charmed House estimated at 980,748

Beverly Hills 90210 House estimated at 1,184,579.

What’s interesting about this is that the 90210 is referred as the postal address but actually their zip code is 91001 and is not in Beverly Hills but rather in Altadena. Kinda funny eh?