Jeanne Sahadi has a tendency to bring people back to reality, and she does so nicely with her latest commentary, the Not-a-millionaire guide to financial security.
She points out that getting rich is pretty difficult unless you’re an investment banker or venture capitalist. If you try to live like you’re rich before you are, you’ll run into problems accumulating wealth. Do you have kids? Climbing the financial ladder will be much more difficult. If you insist on living in an expensive location, you’ll have even more problems gaining an upper hand.
Even if being rich may not be a likely goal, financial security is easier to attain. Here are her tips:
- Build a cushion. I’ve said many times, building an emergency fund should be the first thing one considers. In most cases, your emergency fund should have a sizable cushion even before accelerating payments towards debt. Take a small amount from your paycheck each week to fund the account in a high-yielding account like the ones at any of these banks, and add your bonuses and gifts directly to the emergency fund goal.
- Live on less than you make. If you’re spending more money than you’re earning—like I was doing for a few years when I commuted 90 minutes each way to a non-profit organization that paid peanuts—you’re taking a step backwards each hour you work. Maximize your income and minimize your spending.
- Adopt a pay-go, pay-off strategy. I wasn’t familiar with this term, but I follow this concept. Simply pay your credit card off in full each month. Large purchases—like furniture for filling a new apartment or house when you move out on your own for the first time—can be made with the store’s 0% interest offer, but you have to be very careful. One misstep and they will charge you back interest.
- Take cover. Health insurance may be an expense, but it is necessary. Also look at short-term disability insurance. Term life insurance (7 to 10 times your annual salary) should be considered if other people rely on your income. Jeanne recommends renters’ insurance, although I admit I’ve never had it. Your car insurance should include liability coverage as well as collision.
Most of us are not going to be rich in our lifetime. Yes, with some discipline you can become a millionaire in 30 years, but I’m sorry to report that in 2036, one million dollars won’t be so impressive.
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Yes I agree with you, Jeanne Sahadi does a good job at bringing people back to reality.
I think her tips are generally good for people who care about balanced life.
Thank you for sharing them with me.
Flexo,
I just have to speak up on this one. I do not agree with her article. All the points in her piece have merit but her headline is not true.
Most everyone in the US has the ability to be “rich”.
If you want to be rich then get your advice from someone who IS rich. There are far too many people who are self proclaimed ” how to be rich” prophets who are really false prophets.
I have struggled with my waist line all my life. For me to write an article about how to be fit and healthy would be well…silly.
Just as some “journalists” who prognosticate about wealth are perhaps just as silly.
Please don’t take me wrong. I am not pointing at you. I applaud what you are doing and enjoy watching as you learn about financial matters and then in turn share that with your readers.
However, if 10 years from now, you are prognosticating and not moving forward financially, then I would verbally spank you too.
Our country is full of millionaires. Many of them have worked hard and long to accomplish the things that they have.
Bottom line? If you want to be rich…find someone who IS rich to help you along with some good advice.
I am quite certain that Warren Buffet would back me up on this one! I am also quite certain that Warren Buffet would never write a piece with that heading.
Love ya man…keep up the good work!
I think it might be difficult to become rich if you don’t take your finances into your own hands. If you’re expecting to get rich by listening to a financial advisor and not doing your own homework as well, you’re in for a big surprise. But if you learn to manage your money yourself and use input form athers as advice to evaluate rather than “this is the way to do it” then you put yourself in a much better position to be rich.