Grant Cardone on Money

There are three things that people generally think of when it comes to money:

1. How do I get more of it?
2. How do I manage it so that I keep keep it?
3. How do I get it to grow?

The median income today is somewheres just under 42,000. Whether you are making $19,000, $42,000 or $250,000 a year, you will be facing the same three above questions. Regardless of what you believe, your income level does not necessarily ensure that your money will accumulate. Certainly the more you make the easier it is to save but its also easier to spend.

Most of us will not win the lottery or have a rich family member leave us with some significant inheritance. Most of us can not just go out into the market place and double our income. So whether a person builds substantial wealth in their lifetime will be left up to the decisions they make and the actions they take. Anyone can achieve their financial goals if they have a plan, use discipline in executing that plan and take actions in accordance with a financial destination.

This article is about what has worked for me regarding how to manage what you do make. I started my financial plan at the age of 26 years old. If you’re young, time is on your side and building a millionaire net worth is very achievable regardless of your income. Read on for some tips on how to build your wealth.

Stop Senseless Spending
This applies to everyone, especially those in the higher income brackets. While those making 30,000 to 100,000 think all their problems would be solved if they were making 250k the reality is that until a person quits senseless spending they will not create true wealth. While you will see the very wealthy wasting money today that is not what they did yesterday to create their wealth and to be in a position now to purchase whatever they want.

To create real wealth you must quit spending your future wealth on goods and services that you don’t need today. You aren’t just wasting money you are spending those funds that are going to make you a millionaire. If I told you that “new-hottest-latest” phone that you were going to spend 200 dollars on today to replace that phone you have that is perfectly good would cost you 2000 dollars would you buy it. Well… the truth is that a person could set themselves up on just avoiding 200 mistakes.

Did you know if you started an account with $200 and then saved $200 a month every month for the next 30 years and it if that money earns 8% a year you would accumulate $295,642. That wouldn’t make you a millionaire but it would get you going in the right direction. If you took the same idea and started with 5000 dollars and added 500 a month you would build a savings of 784,388 dollars.

Even relatively small expenses, can really add up – and decrease the amount of money you can save. I drink 4 dollar coffees everyday, but I did NOT do this while I was creating my wealth. At 4 dollars a day you would have an extra 120 a month, or 1440 a year. While it may not seem like a lot, those coffees, while I love them, will cost you $176,178 over thirty years. Do you love them that much?

It is not the big expenses that typically keep people from building wealth but rather the under 20 dollar daily expenses that keep them from ever saving. Larger expenses just further aggravate the situation; those things that you had to do even though you knew it was unnecessary. (For related reading, see Squeeze A Greenback Out Of Your Latte.)

I love to spend money and don’t hesitate when I have it. See, I have already taken care of my savings and ensured my financial future. But until I was able to do those three things, 1) have the money, 2) taken care of my savings, 3) ensure my financial future, I wasn’t spending too freely in relation to my income. In addition to the daily unconscious errors people make with money, then add the idea that if you only make one $2000 purchase mistake each year over the next thirty years you will have wasted over $600,000 that could have gone to savings.

It is important to realize that it’s usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must first decide they want to create financial wealth and 2) adopt a financial plan in order to do so and 3) discipline yourself daily to execute your wealth building program.

This means that people who are looking to build their nest eggs need to make sacrifices somewhere in order to get something really good later! This doesn’t mean that you shouldn’t go out and have fun, it just means that you may need to learn how to have fun without wasting your future finances. When I was 25 years old I decided to convert the cost of alcohol to a savings account. A martini is 10-14 dollars in most parts of the country and only two martini’s three times a week equals 240-360 a month. Add a tip and the fact that you almost never drink alone, then interest charges on your credit card and then the fact that you will probably do something fairly stupid after a couple of martinis and you are further adding to the problem. I quit the martini’s and started a martini savings account and put in 250 a month. Now after almost 25 years that money is equal to 75,000 if it earned no interest and 236,000 if I was smart enough to just earn 8%. I might not have been James Bond but remember Mr. Bond didn’t pay for his martinis either.

Fortunately, particularly if you start saving young, saving up a sizeable nest egg only requires a few minor (and relatively painless) adjustments to your spending habits. (For more insight, read Under 30 And Financially Secure In 10 Steps.) But regardless of your age it is critical that you redirect money you are already spending and put in places that will be secure and never used until much later in life!

Fund Retirement Plans ASAP
Most financial planners suggest the following; when individuals earn money, their first responsibility is to pay current expenses such as the rent or mortgage expenses, food and other necessities. Once these expenses have been covered, the next step should be to fund a retirement plan or some other tax-advantaged vehicle. This is not accurate, as your first responsibility should be to putting money aside for yourself and creating wealth. If your last name isn’t Visa, Mastercard, American Express, Pacific Gas, ATT, Ralph’s Groceries then why would you pay them and never have paid yourself. My last name is Cardone and before I pay all these people not related to me I pay me. I put my future financial security first and pay the rest later. Pick some amount you can easily put aside whether it 30 dollars or 300 dollars and write yourself a check to that account. DO NOT TRY TO SAVE MONEY BY KEEPING IT CO-MINGLED WITH MONEY THAT YOU WRITE EXPENSES FROM.

Retirement planning is an after thought for most people and especially many young people. And you don’t need a 401(k) and/or a IRA to make sure you get this done! And I would actually prefer that you don’t have it in the 401k or IRA unless the company is matching. We will cover 401k is a later article but briefly most people that contribute to 401k are not being responsible with that investment as they have no clue where it is, what it is invested in, who is managing it and how it is doing! (Click for an alternative to the 401k)

Time is the great power when it comes to creating wealth so the earlier on in life you start means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later. (To see how this works, check out Why is retirement easier to afford if you start early?)

How much difference will funding a vehicle such as a Roth IRA early on in life make?

If you’re 23 years old and deposit $3,000 per year (that’s only $250 each month!) in a Roth IRA earning and 8% average annual return, you will have saved $985,749 by the time you are 65 years old due to the power of compounding. If you make a few extra contributions, it’s clear that a $1 million goal is well within reach. Also keep in mind that this is mostly interest – your $3,000 contributions only add up to $126,000.

Now, suppose that you wait an additional 10 years to start contributing. You have a better job and you know you’ve lost some time, so you contribute $5,000 per year. You get the same 8% return and you aim to retire at 65. When you reach age 65, you will have saved $724,753. That’s still a sizeable fund, but you had to contribute $160,000 just to get there – and it’s no where near the $985,749 you could’ve had for paying much less. The point is start now!

Improve Tax Awareness
Sometimes, individuals think that doing their own taxes will save them money. The reality is when you do your taxes you do not want someone or even yourself to just report what was done but you want to know what you are allowed to write off, how you can reduce your tax bill and do so. It is not real that you are going to give a tax company or an accountant your records and they are going to figure out smart ways for you to reduce your tax bill. You have to know the law and those favorable and legal ways in which to reduce your taxes. I personally have never met an accountant that looked for ways to reduce my taxes without me knowing how to do so myself. One year a law was passed to allow me to buy a SUV and write off up to 50,000 in that purchase. My accountant didn’t call me and tell me that, I was tax aware and did so. Having a home run business is a great way to reduce taxes and you must make yourself aware of this as reducing taxes is a way to save money. Be tax aware and take advantage of the many deductions available to you.

Renting Versus Buying
At some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren’t sure where we want to live for the longer term, and that’s fine. While many suggest that renting is often not a good long-term investment because buying a home is a good way to build equity. I don’t agree with this as owning a home should never be considered an investment, rather a place to live. I would rather see you buy a rental property and rent it out as the renter will pay the debt down, and regardless of whether there is ever appreciation or not the cost of mortgage, the taxes and the expenses of the property will be paid off by the renters and equity will automatically be created.

Others suggest that it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.) (For more insight on weighing this decision, read To Rent Or Buy? The Financial Issues.)

Buying Expensive Cars There’s nothing wrong with purchasing a luxury vehicle and I hope that each of you can own whatever car you desire but the reality is most people are driving more than their net worth. I didn’t buy a luxury car until I had money in my savings account way in excess of the cost of the vehicle and then didn’t buy the vehicle but leased it so that I could write off the expense of it. However, individuals who spend an inordinate amount of their incomes on a vehicle are doing themselves a disservice – especially since this asset depreciates in value so rapidly.

Don’t Underestimate the Value of Money
You are capable of saving money and deserve to do so and while it will not make you happy it will give you one less thing to worry about. Anyone can save money and it doesn’t require intelligence but just a desire and discipline to do so. You are selling yourself short if you don’t take the time to do this.

The very best way to save money is do everything you can to increase your income. There are so many ways to do so today. A fixed income salary regardless of how high it is limits you and so you always want to look for ways to increase your income through multiple flows of income. That does not mean you have to get a second job, all though it could, it means you look for new ways, new products, and new opportunities in addition to the one your primary pay comes from to increase your income. Maybe you do the books for a company and then spend an hour a day on the phone selling their products for which you get a commission. Always keep your eye out for other opportunities and get involved in other ways to increase that flow. Work hard and find ways to enrich your employer who will certainly compensate you for your increased production. No company will prevent you from helping them sell their product. There is no better way to increase income than through SELLING. THIS IS IS THE ULTIMATE AND ONLY SECRET TO FINANCIAL SUCCESS. Get my book, Sell To Survive as it will show anyone in any field what it takes to successfully sell yourself, your ideas, your dreams and your products!

Bottom Line
You don’t have to win the lottery to create a net worth of millions. For most people, the only way to achieve this is to save it and then have those savings grow. I am not suggesting you live like a pauper to build an adequate nest egg and retire rich. If you start now, spend wisely and save diligently, your million-dollar dreams will be reality.

Tags: accountant, American Express, food, Grant Cardone, James Bond, luxury car, Mastercard, Ralph, USD

Category: Career, Money