Sunday, January 2, 2011

Be Happy – Be Wealthier.

In this blog, previously also, I had made my submissions about wealth. With the time passing, the importance of money power is increasing day-by-day and every one needs to get his income up and up continuously. In this run, we are sometime loosing our ethics too as the gap between rich and poor is also increasing. The facts of one economy show the following scenario. Other economies have somewhat the same pattern.
  • The top 10 percent of Americans now earn around 50 percent of their national income.
  • The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.·
  • As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.
  • 83 percent of all U.S. stocks is in the hands of 1 percent of the people.
  • 61 percent of Americans “always or usually” live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
  • 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.

The Rich Americans

The rich Americans, those who have achieved true financial success and belong in the top 10% of wealth of all US households, can be broken out in the following categories:

The Upper Middle Class

This is the group of households who are one level above middle class. This group lives comfortably, but not in opulence. They make up the largest portion of rich Americans, as shown in the statistics below:

1. Average Income: $146K

2. Discretionary Income: $100K – $124K

3. Average Assets: $2.3 million

4. Number of Households: 6.3 million

5. % of US Households: 5.7%

The Affluent

The Affluent live quite comfortably, but they still need to watch their spending. They are close to achieving financial independence, but most still have to hold a job or run a business to maintain their standard of living:

1. Average Income: $235K

2. Discretionary Income: $125K – $249K

3. Average Assets: $3.1 million

4. Number of Households: 2.5 million

5. % of US Households: 2.3%

The Supper Affluent

The Supper Affluent live a truly rich life and can afford a luxurious lifestyle. Most are financially independent and work only to add fulfillment to their lives or to maintain the status that comes with their positions of influence:

1. Average Income: $427K

2. Discretionary Income: $250K – $499K

3. Average Assets: $6.0 million

4. Number of Households: 1.4 million

5. % of US Households: 1.4%

The Wealthy

The Wealthy! They are the richest of the rich. To this group money is not an issue. They can afford the best that money can buy. This is a class of its own, reserved for those that have either inherited wealth, or acquired it by being at the very top of their fields, in the arts, sports or business:

1. Average Income: $1.57 million

2. Discretionary Income: $500K+

3. Average Assets: $12.2 million

4. Number of Households: 677,000

5. % of US Households: 0.62%

The groups of households above are the most financially successful in America.

Now, we can have a look on the world economy. According to Forbes, as of March 2010, the world had 937 billionaires to its credit. If you go through their working style, you will find that these people would have a few things in common besides their wealth. There's a lot of "new money" among billionaires, and many of them have similar habits that helped them amass their fortunes.

The above are the facts about the levels of richness, internationally recognized. However, it is not necessary that they may have your personal recognition. You can differ from your own point of view.

How much money do you need to feel rich?

Wealth is a subjective concept, but one thing is universal in most definitions: being able to live a comfortable life without having to work. "I'd like to have enough money so my family and I wouldn't have to work anymore or worry about the necessities, and maybe travel a bit," said Deborah Veale, a Southern California resident visiting New York City. Veale said she'd need about $10 million to consider herself set.

One woman from Seattle put it at a "couple thousand dollars a month." Another from New York City wanted a billion (although she'd still fly coach.) Experts peg the figure to be somewhere around $2 million to $12 million in savings. On the high end of that range, a single person living in an expensive part of US (say, New York City), wanting to retire at 35 would need at least $300,000 a year to feel rich, according to Steven Kaye, president of Watchung, N.J.-based wealth management firm American Economic Planning Group. He based that number on real-life figures his clients tell him they need.

A yearly income of $300,000 would allow for taxes, a $3,800-a-month apartment (the average price in Manhattan), and a monthly spending allowance of around twelve grand, he said. Not too bad, especially since you could do this all without a pesky job.

To generate $300,000 a year beginning at age 35, you'd need a nest egg of just under $12 million. That assumes a conservative investment portfolio generating a return of 5% a year, an inflation rate of 2.5% a year and Social Security benefits of $25,000 a year starting at age 62.

Over time, the shape of your nest egg would resemble a bell curve, growing in the early years, and then declining as inflation required you to withdraw more money to maintain a lifestyle equivalent to $300,000 in 2011. The $12 million would finally dwindle to a meager amount when you turned 100.

If you live in a low cost part of the country, $100,000 a year should be enough, said Kaye. In that case, you would need savings of about $4 million to retire at 35. But if you're willing to stay in the workforce until age 65, a mere $2 million would be enough.

Jon Duncan, a financial planner at Tacoma, Wash.-based Seneschal Advisors, gave numbers similar to Kaye's, and agreed that for most people, the figure would be somewhere in the multi-millions.

"I'm from an era when we'd talk about millionaires and say 'Whoa, he's got it made for life,'" said Duncan. "But that's not the case anymore." Indeed, few experts think a million is enough to quit your day job.

Keeping Up With the Joneses

Of course, there are other ways of determining wealth besides just what you'll need to live well in retirement. Although decidedly not recommended by financial planners, one is relativity. Basically, you're rich if you're making more than your brother-in-law. That appears to be how the government measures affluence. The administration wants to extend tax cuts for all but the wealthiest Americans, which it defines to be those families making more than $250,000. But that only includes about 2% of the population, according to the Census Bureau.

Kaye cautions not to confuse wealth with income. Some people can make a million a year, but be spending a million and a half. They are not rich, said Kaye. "Income relates to lifestyle," he said. "Wealth relates to balance sheets."

You too can learn how to become rich and more rich if you consider the following and take action accordingly. The results of your efforts depend upon the zeal and sincerity you apply to them.

1. Entrepreneurism

Seven of the top 10 billionaires from Forbes' 2010 list are self-made. This club of clever elites, includes Bill Gates (net worth, $53 billion), who started the Microsoft company in 1975 while still in his junior year in college at Harvard University.

Gates may have been in the right place at the right time in terms of developing computer software, but he also made the decision to strike right away, rather waiting even to graduate. His timing and hard-driving pursuit of success in his business helped plant the seed for what would become one of the world's largest and most successful companies.

2. Frugality

You might assume that a billionaire's drive stems from a luxurious lifestyle. However, some of the world's richest people ascended to their positions thanks to their ability to watch the bottom line.

Take Warren Buffett, for example. His $47 billion fortune put him at No. 3 on Forbes' 2010 list of billionaires, but this ultra-rich investor's success can be partly credited to his frugal lifestyle. From a very young age, Buffett was making and investing his money. By the time he was 26 years old, he had already made and saved the modern-day equivalent of more than $1 million. This allowed him to start his own investment partnership, which eventually allowed him to invest in and take control of Berkshire Hathaway. And the rest, as they say, is history!

3. Vision

Most billionaires have a vision of what they think the world will be like in the future -- and how they can capitalize on it. Take Sergey Brin and Larry Page, cofounders of Google. They fittingly tied for 24th place on the Forbes' 2010 billionaire list, with $17.5 billion each to their names. This pair saw the possibilities for the internet as a tool for opening up the world of information to people, so they started a company, Google, based on a superior search engine that would help this vision become a reality.

Launched in 1998, the company has since become the world's most popular search engine and has radically expanded the internet's scope; the cofounders' wealth has expanded right along with it.

4. Risk-Taking

One thing virtually all billionaires have in common is that they are willing to take a leap of faith in their pursuit of success. For some billionaires such as Bill Gates or Lawrence Ellison [software giant Oracle founder, this might be dropping out of college to pursue a business opportunity. But some billionaires have been known to push the stakes even higher -- like George Soros (net worth $14 billion).

This renowned investor and hedge fund manager is known as the man who "broke" the Bank of England by making a multibillion-dollar bet that the British pound would decline in value. It did, earning Soros more than $1 billion in a single day.

5. Patience

Not only do billionaires tend to be able to pounce when the moment's right, they also make patience a habit. After all, sometimes it takes a while for a good idea to pay off.

Ever heard of It was founded by former Wall Street executive Jeff Bezos in 1994. The now-major company started in Bezos' garage, with only a few employees. Bezos is now the CEO of the largest online retailer in the U.S., with a net worth of $12.3 billion in 2010. However, it took seven years before the company turned a profit, which it eventually did in fourth quarter of 2001. It was a major coup after the dotcom crash, which left many wondering whether an online business model was viable at all. Bezos believed it to be so, and persevered until the world was ready to embrace online shopping.

The Millionaire's Mindset

When your grandparents lamented that a dollar just isn't a dollar anymore, they weren't just bellyaching. Inflation attacks the value of a dollar, reducing it as time goes by so you need more dollars as time goes on. That is one of the reasons that $1 million is often thrown around as a retirement goal. Back in 1900, a $1 million retirement would include a mansion and a bevy of servants, but now, it has become a benchmark for the average retirement portfolio. The upside is that it is easier to become a millionaire now than at any time before. While you won't be buying islands, it is still a goal worth shooting for.

No one said that creating a billion-dollar fortune was easy. In fact, many of the world's billionaires share key qualities such as vision, patience and an incredible fortitude in the face of risk. Luckily, these billionaire habits are tools that are available to everyone, free of charge, and could help you move take a few more steps up your own wealth ladder.

You too can become a Millionaire. How?

a) Stop Senseless Spending

It's easy to spend your way out of a fortune. Fortunately, the opposite is also true - you can save your way into your first million. Most people working in North America right now will earn well over $1 million during their working lives. The secret to saving $1 million lies in keeping more of what you earn. Just as extending your earnings offers a unique perspective, doing the same with your spending sheds a ghastly light on the waste. If you spend $5 every day of your working life on coffee, snacks, etc., you lose $73,000 of your lifetime earnings, making it that much harder to hit the $1 million mark in savings during actual working period of your life. Save it and get your target more easily.

b) Prune Your Purchases

When you do have to spend, try to get the most utility, not simply the most you can. The difference between great value and utility is a fine line. Buying too big house or too costly a car comes from confusing the two. If you shop for what you need and buy it cheaper than you'd planned, that's a great deal. By keeping the end use of large purchases in mind, you can avoid this drain on your cash. Before paying more than you can afford, remember that Warren Buffet, a man who constantly jockeys for richest person on earth, still lives in his humble Omaha abode.

c) Target Your Taxes

Another leaky hole you need to plug is the parasitic drain of big government. While you are expected to pay your taxes, it's the right of every taxpayer to try and reduce their tax bills to the absolute minimum allowed by law. Increasing your tax awareness means making taxes a quarterly chore rather than an annual scourge. Keeping abreast of allowable deductions, changes to your withholding and changes in tax limits will allow you to keep more of what you earn, so that you can put that money to work for you.

d) Crafty Compounding

Time is on your side when you've got compounding working on your savings. The earlier you start saving and the earlier you get your savings into a financial instrument that compounds, the easier your path to $1 million will be.

e) Build Through Your Boss

If you're looking to save $1 million dollars for retirement, look no further than your boss. With matching contributions, your employer can be your best ally when it comes to building up retirement funds. If you think you need to squirrel away 20% of your income for retirement and your boss puts up 6% in matched contributions, then you're left with a much more manageable 14%. Even if you are your own boss, there are still options under SEPs.

f) Ramp-Up Your Retirement Savings

Rather than letting your boss's contribution lessen your load, try to put a little extra into your retirement plan whenever you can. Automating your account contributions will make setting your money aside that much easier. That said, making extra contributions a priority will speed up your journey to $1 million and make your golden years that much more golden. You don't have to eat cat food to do this, just keep your retirement in mind when you've got extra cash on hand.

g) Incremental Investing

If you've got your retirement portfolios where you want them and are ready to start a pure income portfolio, then incremental investing is an excellent way to begin. You don't have to jump into the market with your life savings to make money. Even relatively small amounts can result in decent returns. The important thing to remember with your income portfolio is that capital gains taxes will be applied yearly to any income you pull out. Again, improving your tax awareness will help reduce the bite, but it takes time and knowledge to make one million solely from a taxable portfolio. Still, it has been done and will be done again.

h) Dare To Diversify

If your portfolio is made up entirely of American companies or is even all held in stocks, then you may need to diversify. In the first case, more and more financial activity is out there in the wider world. This doesn't just mean investing in emerging economies like China and India that are producing huge gains, but recognizing that there are companies in Europe and Asia that are just as good (maybe better) as investments in the U.S.. Diversifying also means not putting all your money into one type of asset. Being a financial omnivore opens up that much more opportunity in times of growth and makes certain you won't go hungry when one source dries up.

i) Reconsider Real Estate

Owning real estate provides equity and diversity to your investments. If you own your own home, then paying your rent builds up equity. If you invest in real estate, then someone else's rent builds up your equity. Real estate investing isn't for everyone, but it has built fortunes for many savvy people. Owning your own home, however, is usually a good idea regardless of your opinion on real estate bubbles. Peter Lynch, one of the greatest stock investors of all time, believed that you should own your first home before you buy your first stock.

j) Increase Your Income

There is nothing terribly romantic about becoming a millionaire while working a regular job, but it is probably the avenue available to most people. You don't need to start your own business to pull in a high income, and you don't even need to pull in a high income if your saving, spending and investing habits are sound. Asking for a raise, upgrading your skills or taking a second job will add that much more to your savings and investments and subtract that same amount from the countdown to your first million. If you are entrepreneurial at heart, starting a business on the side can actually decrease your overall tax bill, rather than putting you in a higher income tax bracket

k) The Three Ps

Persistence, patience and purpose are common traits that you'll find in every millionaire from John Jacob Astor to Bill Gates. Even though inflation has brought the value of $1 million down from its lofty perch, you still need these traits to reach it. Why isn't everyone a millionaire? Maybe because it is easier to spend now, buy big and put off saving and investing than it is to sacrifice to reach the goal of becoming a millionaire. Using the tips given here can help you on your way, but you have to be brave enough to take the steps - first, final and all the hard ones that lay in between.

Be Happy – Be Wealthier.

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