It has been a while since we had a conversation about money, so it's time to revisit this very important topic. I discussed money concepts in a previous blog post on July 2nd called Financial Literacy - “Let’s Talk About Money.”
“I'm not talking about rich I'm talking about wealthy, wealth is empowering... wealth can uplift communities while she is passed down from generation to generation...rich you can lose with a crazy summer” - Chris Rock
For the rich it's all about income. According to Forbes, through the end of 2016, Allen Iverson had lifetime earnings of $200 million, Nicolas Cage had lifetime earnings of a $150 million, Lindsay Lohan had lifetime earnings of $20 million, Curt Schilling had lifetime earnings of $115 million, and MC Hammer had lifetime earnings of $50 million. You might be thinking, “That's very interesting, but what's the point.” Well, besides being celebrities, what else do they all have in common? The answer - they all declared bankruptcy! That’s right. After earning all that money - they went broke!
On the other hand, for the wealthy it's all about what you do with your income. There was a popular book written a few years ago that discusses this topic called “The Millionaire Next Door” by Thomas J. Stanley and William D. Danko. They found the typical millionaire couple to be in their late 50s, married, had children, they had college degrees, and they were typically self-employed business owners. They like to live below their means, they are conservative with their money, they invest heavily in education for their children, and they typically invest nearly 20% of their household income each year. They typically dislike profligate spending, they leave little margin for error, and they dislike laziness and excuses. Typically they have accumulated enough wealth to live without working for as much as 10 years and they are first generation affluent - they did not inherit their wealth. Over 80% worked their way up.
As we have discussed in the past, to accumulate wealth one needs to beware of little expenses. As Benjamin Franklin said, “Beware of little expenses. A small leak will sink a great ship.”
Every purchase has an opportunity cost. And according to Charlie Munger, “The bigger the purchase, the bigger the opportunity cost.” Even Milton Berle seemed to understand the concept when he said, “It’s amazing how fast later comes when you buy now.”
So, in closing, to accumulate wealth one needs a plan. Remember that a goal without a plan is just a wish. Planning to help you achieve your preferred future is what we do. Please don't hesitate to give us a call.
Until next time, Cheers!