Millionaire Logic

I’m a little behind on my writing.  I have been looking for a new job and busying working on my business.  I hope to keep up my writing as time goes on.

I had read an article a few month’s ago about building a ‘financial dream team.’  The author was talking about how the smartest investors and some of the world’s wealthiest men have teams of people that are just as smart if not smarter than them as part of their life’s.

I firmly believe this!  No matter what your business is or what you do, there are people that you need to help you be successful.  Whether that be a financial adviser/planner, accountants, lawyers, tax consultants, etc, for a small business you own or even an individual.  It is key to have these people as part of your ‘dream team’.

I believe that there are times that it is worth paying someone for a service that you can do yourself, lets use taxes as the example, since its that time of year.  ANYONE can do their own taxes!  But can they do them well and correctly, to maximize their deductions and return?  For most people using Turbo Tax is enough, or even using Turbo Tax and then having an accountant to double check the work.  But for some people it most defiantly becomes important to have an accountant helping with taxes and tax planning.  For example, some that has multiple LLCs and a full time job.  Someone who works part time and also owns an S-Corp.  Most C-corps have accountants.  Every situation is different and has different needs.

As individuals sometimes its hard to determine what we really need.  When trying to decide if you need a Lawyer, Accountant, Tax Planner, etc, ask these questions and make your decision:

• Is the person ’smarter’ than me?  Do they know about something that I do not? (IE: Intellectual property law?)
• Will I benefit from hiring them? (If it costs me $1000 for a $200 return, its probably not…)
• Can I write it off?
• Can I learn it myself?
• Can I do it another way?

• Leave a comment...

I have decided to spend some significant time working on an invest strategy as well as financial plan for 2008 and beyond.

A few things that I had to take into consideration: I’m getting married in June, I’m trying to find/buy my first home (condo), I currently live in a large city and the cost of living is high, and the market is in the tank (which is actually awesome).

I read many blogs and news sites on a regular basis and I try to read books when I have time. I think that this is a key part to coming up with a personal financial strategy. No plan will work for everyone, but there are many principles that you can learn and adapt to each person’s unique place in life.

The one thing that I have found to be the most common piece of advice from those that are wealthy, the blogs I read, the books I read, and the people that I know is: PAY YOURSELF FIRST! THIS IS SO SIMPLE! Pay yourself first, pay yourself first, pay yourself first… If you do this you will be wealthy.* This is obviously not 100% true but it is the best place to start.

Now, let me define the difference between being wealthy and rich. This is a principle that I adopted from Robert Kiyosaki’s book Rich Dad, Poor Dad. The way that he defines being wealthy is having assets that pay for your living expenses. Meaning that if you spend $2000 a month for your place of residence, food, gas, etc., you need to have assets (investments, property, etc) that are producing at least $2000 a month. If you can say this then you are wealthy, regardless of net worth. Rich is then defined by each person for themselves, whatever you want over being wealthy.

There are many different investment vehicles that can provide income on a monthly or yearly basis.  Owning property, dividend yielding stock, bonds/cds, cash in an interest gaining account, but which of these are the best and how do we get them?  This is another part of the strategy.

As well as age, I am relatively young to be working on a plan like this, which is a strong advantage, in my opinion.  Time is our most valuable asset.  Just do a little research on compounding interest and you’re quickly understand why I think that time is our most valuable asset.  Each person needs to take into account their age as a key factor into their financial plan.

So what is my plan?  Its very complicated because of my personal goals/dreams, my finance’s goals/dreams, where I am currently (net worth, job, city, etc), and many other things that have an affect on my finances.  I have a multichannel investment plan.  This includes a 401K, Roth IRA, Long Term Investment Account, Short Term Investment Account, Automatic Investment Account, as well as Checking/Savings Accounts and company Checking/Savings Accounts for my S-Corp.

Sounds like a lot, but overall its pretty easy to manage.  And the basics of the plan are very simple, SAVE UNTIL IT HURTS.  Here is the basic breakdown of my plan:

401K - contribute as much as the company will match, I am trying to avoid the common 401K issues that I have heard about and read about so this money is in a 40/60 split between company common stock and Fidelity’s Contrafund
Roth IRA -  make at least a $1500-2000 contribution each year(if more so much the better), this money is invested into American Funds mutual funds
Long Term - this money stays in this account until I’m at least age 35 (the only withdraw will be toward a down payment for a condo), this money is currently invested, and will continue to be, in strong companies that pay dividends
Short Term - ‘Vegas’ Money, as I call it, this is used for speculative buys and trading
Automatic - I just opened this account, it allows me to have a re-occurring dollar based investment happen, with a low commission (weekly/monthly or yearly).  My plan is to start with around $100-200 a month into a dividend yielding stock and see how that grows.

Checking/Savings accounts are used to pay bills and for extra cash.  As for the S-Corp that money is for the company, part of my plan is to grow my company into more of a revenue source.

These are my plans for the first half of 2008.  I am finalizing these plans on paper because that is the only way that I can keep myself accountable.  I am also starting on the plan for July until the end of the year, this is after I get married and I’m sure everything will be changing…

• Leave a comment...