Miscellaneous Essays

Wealth Building for Beginners (Even if You Are Not Young Anymore)*

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3.-Your Invitation to the “$150,000 Club”

In the last installment https://www.markford.net/wealth-building-for-beginners-even-if-you-are-not-young-anymore-2 of this series, I told you how I got started on my own wealth-building journey. I hope it amused you. Looking back at it now, I can see that the ratio I kept between foolish and sound habits was about 2 to 1. But that was enough. I hope it comforts you to know that you can do most things wrong (as perhaps your parents and teachers always reminded you was your habit) and still become as wealthy as you need to be!

The second thing I did was to introduce you to a very simple and crazily powerful wealth secret that most high earners never follow: As your income increases (and it will!), you must resist the urge to ratchet up your spending accordingly.

And thirdly, I shared with you one of the most important insights about wealth that I ever learned. Luckily for me, I learned it when I was still relatively young. (In my early thirties.)

That insight was this: You need a lot less than you probably think to live a rich life: A lot less wealth. And also a lot less yearly income to acquire that wealth.

As for income… If you can get your income above $150,000 a year and simultaneously curb your enthusiasm for expensive toys, your chances of one day retiring wealthy are about 99.9 percent.

As for how much “money” you’ll need to sock away… A very rough number would be about 12 to 15 times the amount of money you’d need right now to lead a rich life.

If you can get your income up to $150,000 or beyond (and as I will show you that is quite easy to do if you are willing to put in the right sort of time) and if you can save 20 percent to 30 percent of that (which is very possible if you manage your finances as I’ll suggest), you will arrive one day at a net worth of between $3 million and $30 million.

And that – if you know how to spend your money – will be enough to provide a great, rich life for you and your family.

Before we move forward on that, you have to answer one question…

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Miscellaneous Essays

How the “Big White Lie” of Investing Almost Cost Me My Retirement

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Originally published in the October 2011 issue of “The Palm Beach Letter“

I consider myself to be an expert of sorts on retirement. Not because I’ve studied the subject, but because I’ve retired three times.

Yes, I’m a three-time failure at retiring. But I’ve learned from my mistakes. Today, I’d like to tell you about the worst mistake retirees make.

It’s a very common mistake. Yet, I’ve never heard it mentioned by retirement experts. Nor have I read a word about it in retirement books. The biggest mistake retired people make is giving up all their active income.

When I say active income, I mean the money you make through your labor or through a business you own. Passive income refers to the income you get from social security, a pension, or from a retirement account. You can increase your active income by working more. But the only way you can increase your passive income is by getting higher rates of return on your investment (ROI).

When you give up your active income, two bad things happen:

First, your connection to your active income is cut off. With every month that passes, it becomes more difficult to get it back.

Second, your ability to make smart investment decisions drops because of your dependence on passive income.

Retirement is a wonderful idea: put a portion of your income into an investment account for forty years, and then withdraw from it for the rest of your life. Once you retire, you won’t have to work anymore. Instead, you will fill your days with fun activities: traveling, golfing, going to the movies, and visiting the kids and grandkids.

It’s a great idea. But it never actually worked.

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Miscellaneous Essays

Obama Versus Romney Who Will Win? And Does It Matter?

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Over the past several weeks, readers have expressed their interest in the upcoming presidential election and its impact on America’s future. More particularly, many readers see this election as a contest between freedom and capitalism and some newfangled version of socialism… and they are worried that if Obama wins, they will become a lot poorer.

Well, here’s what I think. As far as your financial future is concerned, it doesn’t matter who is elected. Despite differences in ideology and rhetoric, our next president will take essentially the same path in terms of “saving” the economy.

I’m not saying that there is no difference between the candidates’ economic views. Obama wants to redistribute wealth. Romney wants to diminish social spending. But neither of them will make much long-term headway at realizing their ambitions. What they will succeed at is what both Republicans and Democrats have been doing nonstop since World War II: expanding the federal government by increasing its debt.

I’m not an economist. In analyzing our country’s economic policies, I take a businessman’s perspective. Businesses have many goals, some altruistic and some selfish, but they are all ruled by the logic of the balance sheet. Without a positive balance sheet, no business can last.

The Economy Is Out of Control

Our economy, I’m sure we can agree, is in ruins, and our federal government has unprecedented levels of debt. On top of our outstanding debts, we keep spending more money than we’re taking in. But only a partisan fool would suggest that this is due to Obama. The national balance sheet was already $9.9 trillion in the red when he took office. He has done a good job of pumping that up to $15.9 trillion. But had McCain been elected in 2008 we would be in roughly the same place.

The reason for that is simple. Every modern-day president knows that his only chance of being elected or re-elected depends on the economy. If the electorate believes that the president is “doing a good job” with the economy, it will re-elect him. If it believes he has made things worse, it will elect his opponent, who will be arguing that he can fix it.

But today there is no way to fix the economy.

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