Gain From Rich Advice
While many people work to make a living, many more aspire to become wealthy on their own. That leap from wage earner to money accumulator can be daunting.
Catherine McBreen and George Walper, authors of "Get Rich, Stay Rich, Pass It On," researched families that made it and concluded that the move is quite doable.
Here are key steps:
Get out of the rut. Shed all your credit card debt, which is likely carrying a double-digit interest rate.
Then diversify your assets with marketable securities, life insurance and annuities. Resolve other financial loose ends as well, McBreen says. "Keep investing your 401(k) plans and figure out if you have enough saved for your children's college costs," she told IBD.
The one debt that's acceptable is your mortgage, experts say. Indeed, buying a home is helpful in rounding up funds you'll need to buy other real estate. Owning your primary residence lets you build equity that you can use to purchase rental properties, for example.
Keep your day job. Mike Summey, author of "Weekend Millionaire Mindset," says to keep working while accumulating wealth.
If you're into real estate investments, that should be an extra stream of income. "The key is doing it right and not getting in trouble like many people are doing it right now," Summey told IBD. "Start with a single family home, because it's the safest and easiest to finance and the easiest to get out of."
McBreen says finding a rental property is different from hunting for your primary residence. "It's all about the numbers," she said. "You don't have to fall in love with it."
Find communities full of renters, McBreen says. "Look for people who transfer in and out of areas because they work at the companies in the areas, college towns where students rent, and where elderly people have to rent," she said.
Scout opportunities. Keep your ear to the ground for new ideas. McBreen says you can get involved in businesses related to your expertise to minimize risk.
"We know of a doctor who got involved in new equipment for delivering anesthesia," she said. "He understood what he was involved in; he was an expert."
Sometimes new ideas are found in filling a need in which you're not involved, McBreen adds. "Maybe you've noticed your neighborhood could use a dry cleaner, but you don't know the first thing about running one," she said. "But you know the need is there, so you're willing to invest money to get one opened."
Live frugally. Accumulating wealth means you're going to have to avoid spending on things you don't really need. Summey says he's been a saver since his teens.
"I made a habit of not spending everything I made," he said. "Later, I forced myself to live on 80% of my net income. It was doggone tough in the beginning, but I put it aside with the intent to invest. In the beginning, it was nothing more than a savings account."
Experts agree that significant wealth accumulation doesn't happen overnight.
"Most research shows it's a long-term process," McBreen said.