How Most People Miss Their Chance to Be Wealthy

by Vincent King · 75 comments

As Dave sat down to work on his bills Monday morning, he found out how badly he was mismanaging his money.

Dave wasn’t mismanaging his money like everyone else. Dave was different. He wasn’t throwing away money on the lottery or going on wild shopping sprees for fancy cars and electronics he couldn’t afford.

Dave is different because he’s 30 years old, with no kids or debts, and an extra $4,000 a month. It’s hard to feel sorry for Dave, I know, but let’s look at what he could be doing better.

Right now, Dave’s missing an opportunity to become very wealthy and have a retirement he can enjoy. If he doesn’t use his money well, he’ll be stuck working past the ripe young age of 59.5, just like the rest of us.

So what should you do if you have too much money each month?

Build an Emergency Fund

If Dave’s smart, he’ll start stashing a few months’ pay for an emergency fund. At minimum, he should have three to six months of living expenses saved.

To do that effectively, he’ll need to tally his monthly bills and living expenses, then factor in eating out and entertainment. He can add an extra thousand dollars as a cushion, then multiply that number times six to reach his emergency fund’s grand total.

Once he’s done that, Dave should move on to longer-term savings.

Max Out Your 401K

Once he’s built his emergency savings, Dave should consider maxing out his 401K contributions for the year. For 2013, it’s $17,500. So, to find out how to max his contribution, he’ll need to divide his salary by $17,500 to find out what percentage he needs to tuck into his 401K. After that, he’ll need to work with his HR department to adjust the totals on his paperwork.

What if your employer doesn’t offer a 401K, or you’re self-employed? You can still contribute to your own 401K. It’s called the Solo 401K. Your contributions will be maxed out at $51,000 a year ($56,500 for age 50 and older).

Start a Roth IRA

After maxing out his 401K contribution, Dave will want to extend his other savings into a Roth IRA. The maximum yearly contribution is $5,500. If he exceeds the yearly income for that, he can move into a backdoor Roth contribution via his Roth custodian.

Invest in Index Funds

Next for Dave’s active savings are index funds. Index funds are set up on an index market like the S&P 500, and they perform at market value. This means that they never outperform or underperform the market.

These are great investments, because they don’t require the same hefty fees as actively-tracked investments. They’re long-term performers, so they’re usually established and left alone, unless something drastic happens in the market.

Of course, there’s no reason that Dave couldn’t start splitting his $4,000 extra and contribute everywhere at once. But this is a less confusing, step-by-step process — and with $4,000 extra to stash, it won’t take Dave long to reach his emergency fund goal.

And lastly, you’ll probably note that this is an aggressive plan of attack to fund his retirement at the normal retirement age. He could very well up the ante and retire early, or fund some businesses that could net him an excellent return.

Where else would you invest if you had too much money each month? 

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{ 75 comments… read them below or add one }

fredjohnson August 26, 2013 at 8:27 am

Is this story fictitious or real? Anyway, I’m lucky to make more money than I need. Somewhere around $70k a month before taxes. Taxes take almost 40% of that amount, so in this tax bracket you cannot ignore them. I can live on about $80k a year including a $3100 monthly mortgage pmt. Retirement plan is maxed out and 1 yr of emergency money sits in short term bonds. The excess is put in index funds. Also, 10% of all after tax income is given to charity.

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Pslulz September 5, 2013 at 9:31 am

fredjohnson,
You should let me do your job for 1/2 that much money and get another job making 70k a month. Then you can retire even sooner. It’s a great plan. Don’t overthink it, just hit me up and send me $35k for my first month of work.

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David September 24, 2013 at 9:15 pm

More than you need is quite an understatement if it’s 10 times more. Nobody actually ‘needs’ 800 some thousand a year to live on. I make less than 10% of this and I also make more than I need.

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paulson November 7, 2013 at 10:05 am

IN FACT , EVERYONE NEEDS TO MAKE AS MUCH as they can as the leftists aim to steal it from you

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john April 7, 2014 at 5:18 pm

Amen Paulson!!

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Paul December 10, 2013 at 10:34 am

Fiction, you will never get the returns they promise

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mary December 30, 2013 at 10:13 pm

What do you do to be earning 70k a month? You are the epitomy of the american dream!!!!

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Dave X February 8, 2014 at 12:14 pm

That’s a typo, Mary. It should read $7,000 per month. Any dude making 70K per month has no reason to post on this blog

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yours truly August 28, 2013 at 6:15 pm

Sounds viable. I’ll forward it to my single, well compensated male friends, and go back to working until I’m dead like 79% of the rest of America.

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CHUCK September 20, 2013 at 4:23 pm

Most people miss their chance to be wealthy becuase they dont make enough money for any sort of upward mobility, and the rich bastards they work for are GROSSLY underpaying them.

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Joxer the Mighty November 13, 2013 at 6:12 am

Great idea, blame someone else.

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Carol Johnson January 25, 2014 at 9:14 am

The CEO of J. P. Morgan just got a 74 percent raise!!

How much do you think those who work for him got? Do you think they got a 2 or 3 percent raise from their already reduced salary which is lower than they made 20 years ago because inflation and wage cuts which the corporations keep asking for while you wait for ever on the phone or at a store for some information or help./

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Ipp December 18, 2013 at 9:13 am

Very True!
Well Said!

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Don December 24, 2013 at 9:01 am

Chuck – if your skills are such that you are working at the whim and payscale of someone else who makes money off of underpaying you, then you are in a losing game. Most people are in this position, candidly, but they don’t have to be with a little research and some hard work. Find out where the money is in your line of work. Find out the education/skill requirements. Make a plan to acquire the education/skills. Acquire them, and demand more money, or leave to another firm who will pay it.

It’s easy on paper, sure, but it’s a simple plan that works if you have the diligence to carry it out. Most won’t, but those who do will win.

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Mark March 11, 2014 at 1:22 pm

@Don, thank you so much for reiterating what I have been trying to tell many for years. YOU do not have to setttle and work for someone who maximizes his/her earnings on your minimal wages. DO SOMETHING ABOUT IT!!! If you do not have the education background, thats fine, so take a strategic risk with something you’re good at and believe in, and go the entrepreunerial route. At worst, if you do not succeed, at least you tried something rather than reading about others on a blog /article who did and you’re ticked off at the over-paid boss. Thanks again Don as your post was right on!

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john April 7, 2014 at 5:16 pm

Without the rich bastards they would have no job because they are too stupid to create a business.

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Bert Shuert September 21, 2013 at 3:38 pm

I want a copy of above article on how to be wealthy!

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Know One of Consequence September 23, 2013 at 7:57 am

MOST people will NEVER MISS THEIR OPPORTUNITY to BECOME WEALTHY because they won’t make the kind of money required to become wealthy. Who has an extra 4k a month laying around after taxes? This article is obviously for those who earn well over 100k annually. (by my calculations some where near 170k assuming “Dave” lives off of 54k annually) Fred, you make more in a month than 75% of the population in a year. You claim you can live off 80k. Good for you. That’s 10.5% of your gross income. Why don’t you be a little more generous with your “charitable” donations? If you have so much left over why not give 20%? It doesn’t seem like it will change your life-style.

Chuck – If you feel underpaid, get a different job. Educate yourself, find a way to be at the top. Find something that you have a passion for and do that. If you don’t have passion for what you do you’ll be like the vast majority of us. We have jobs not careers. It takes a great deal of courage and at times – exhausting work to become a 10%-er. Quit thinking about what you don’t have or more-over what others do. News flash – the world isn’t fair. Eat or be eaten.

Yours truly – I’ll meet you at the grave site brother…

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Johnny November 16, 2013 at 6:14 pm

I used to, then Obama was elected. Now I make unemployment. Until last month, I’d been steadily employed since 1988.

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What? November 26, 2013 at 11:03 am

So, Johnny, you say that you make unemployment, and that Obama’s election was the direct cause of your misfortune. You don’t give details, but I’ll tell you that Obama’s first election was quite some time ago. Also, his reelection was pretty far off as well. I’m finding it hard to see the connection.

I think we should all be thankful that the Great Recession didn’t turn into the worst depression since the 1930′s, and possibly even worse than that.

People complain that the debt is high, and that Obama is the cause of it. Just remember, before Bush came into office, we had a sizable budget surplus under a Democratic president (with a similar Democratic and Republican split congress).

During Bush Jr.’s reign, we doubled the national debt. Unfortunately, instead of saving our money while Bush was in office, and paying down our debts, we spent our way into a recession. Now that we were in a recession, these Tea Partiers thought it was a good idea to restrict government spending and not increase taxes. How do we pay off the debt if things like Medicare, social security, defense, and the like are not being defunded? Would you like your Social Security defunded after paying into it all these years? Would you like to lose unemployment benefits when you lose your job? Would you like to not have medical insurance when you get older and retired? All these things were agreed upon that would better our chances of living the American Dream without snubbing our noses to our grandparents and those unlucky enough to temporarily lose their jobs. Welfare is a very small portion of the deficit, and is actually used sparsely enough to not be abused too much. And although, I’ll agree, it should probably be rethought, we “only” spent around 5% of our budget on deadbeats and freeloaders. That’s 5% of our 3.5 trillion dollar budget, not 5% of our 16 trillion dollar GDP.

Let me ask you this: How do we pay off our debt without raising taxes? We don’t want to raise taxes and acknowledge the huge mistake we made by electing Bush twice (and, now, electing Obama twice, although he was probably the lesser of the two evils). We want our kids and their kids (our cute little grandkids) to pay off our huge mountain of debt with the sweat off their (our children’s and grandchildren’s) backs. Where were the Tea Partiers when Bush was spending money like a drunken sailor, championing a bill for Medicare Part D? I know I was pissed when I saw that Bush was erasing the surplus faster than we could print greenbacks. Yes, yes, it was all in the name of global war on terror (that only we were really fighting, or at least spending huge sums of money towards).

Companies like Halliburton got rich off of our “6-8 week” war in Iraq. Contractors making $400-$500,000/year (yes, that was the top range, but salaries of $300,000/year were common), and there were a lot of them making that much money. Everyone, from bus drivers to kitchen workers, were making at least $150,000/year, so you can imagine what medium to high skilled labor was making (some would argue that “high-skilled” labor in Iraq and Afghanistan was relative). Where did these people making all this money go after the war or when they’d had enough of military ridiculousness? Back to the U.S. to spend it back into the economy? No, it was spent in Thailand and the Philippines on retirement homes, where they could live like kings. Trillions of dollars being transferred to other countries in the name of this invisible war on terror. Did you see the giant buildings erected in Iraq, that the contractors and military personnel knew weren’t going to be used by us? After we withdrew, Iraqis went in the fully furnished cement fortified buildings, and picked it clean.

Do you know how expensive it is to erect a building in the middle of a war zone, half-way across the world? 10-100 times the cost of a similar building in the U.S. And these building were designed to withstand a mortar or rocket attack, which made them that much more expensive. These buildings had to house all these U.S. gov’t contractors making huge sums of money, the kind of money the average American can only dream about. Yes, there were risks to life and limb to mostly “justify” these salaries, but did we really need to be there in the first place? Was that the most effective use of our treasure?

Just think if that money was spent in R&D, domestic defense, infrastructure, and/or education. Do you think we would have had another recession, or, if we did, do you think it would have been as bad as the one we are still trying to recover from?

Not to get on a tangent (too late?), but…

Our rights were eroded with the passage of the “Patriot Act”. It should have been called “The Erosion of American Freedoms and Liberties If You Vote For This You Are A Traitor” Act. I challenge all of you to reread “Animal Farm” by George Orwell. It was published in 1945, and is as relevant and prophetic today as it was back then.

Reclaim the U.S. Constitution, pay down our debts through reduced spending and higher taxes, reduce the size of the government, invest in science, infrastructure, defense, and education, and we will become a much happier (and financially sound) society.

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rob ronzio December 4, 2013 at 8:18 am

There was no budget surplus before Bush because Clinton borrowed money from the Social Security funds and never paid it back. There still was a national debt under both Clinton and Bush. Obama has quadrupled the national debt.

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FreeMarket Freddy December 9, 2013 at 11:59 am

What? your moniker should be Doh!

We can retire the debt by cutting the budget on what needs to be cut while at the same time reduce tax rates to GROW the economy. Obama has been at the helm since 2008 and the economy is at a crawl (Yeah— go ahead and blame Bush). Let’s reduce the corporate tax rate and allow the funds corporations are holding overseas to return home to be taxed. Give the corporations an incentive to return the funds here and invest in the USA. Businesses/Entrepreneurs need incentives to grow and hire additional employees. Higher taxes reduce their incentive to reinvest in their business.

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Jeff Roe January 13, 2014 at 12:03 pm

“cutting the budget on what needs to be cut while at the same time reduce tax rates”…

Great thoughts, and would work, but will NEVER happen with Libs in control of ANYTHING. Until America wises up it’s higher taxes, more handouts (leading to even more taxes), and larger government (yup, more taxes).

Higher Taxes: Libs answer to every problem on the planet.

Good luck with all of that.

Matt September 24, 2013 at 11:19 am

I used to make about $20k to $26k/yr about 8 years ago. I bought a house when I was 22 and paid it off when I was 30. I’m 32 now, learned about making money online (not that scammy stuff but real sales, and it took me 12 years to get to this point so I’m telling you how to do it).

So with no installment debt, I figure I could live on a bare minimum of 10k/year, but probably typically spend about 20k/yr. I think I’ll be making about $75k this year before taxes. Im in a situation now where I have money to invest, but still trying to figure out the best way to go about it. I’ll go a few years like this, and then open a store, have someone work for me, pay them pretty good (give then an inventive to do a good job) and spend my time sourcing product, possibly using that as an excuse to travel.

Nothing about what I do is very difficult, but it does take dedication and effort. Make the customer happy and you will be rewarded, but if you are like most people and put only the minimum effort forward, you won’t get far.

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thom October 15, 2013 at 1:16 pm

Not sure what you’d eat, drink, or drive, or live under on 10K / yr but I have three more years on paying off the house, so see some serious relief on that but taxes alone are like rent, and always go up, not sure I want to eat Top Ramen for dinner every night, and after paying for insurances and transpo, so yeah, in the 20-25k range of basic somewhat comfy living; however, setting up a busisness to feed my travel fetish, dang, why didn’t I think of that.

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Robert October 2, 2013 at 1:30 pm

Stay single and don’t booze… new reality for guys who want to ever be free from wage slavery.

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Rob October 9, 2013 at 3:01 pm

That is the absolute best financial advice ever!

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Bob December 24, 2013 at 3:01 pm

You can get married, to a financially wise person, but never, EVER have children. They will drain you dry and prevent your upward mobility the rest of your life. The worst possible financial decision anyone can possibly make is to have children. They are the worst sink holes for your money you will ever find. Worse than any bad investment. The numbers do not lie.

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Brent October 3, 2013 at 7:16 am

So simple, yet so few with put for the effort….

The formula to financially security is…

Savings, Compound interest and Time.

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Michael October 8, 2013 at 7:59 pm

Can someone explain to me the sentence “If he exceeds the yearly income for that, he can move into a backdoor Roth contribution via his Roth custodian”
What is a backdoor Roth Contribution?

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MoneyNing October 9, 2013 at 9:50 am

A backdoor Roth contribution is to contribute money to a non-deductible Traditional IRA with after tax dollars and immediately convert that into a Roth IRA, thereby making it equivalent to a Roth contribution in the first place.

There are nuisances to worry about like money already in existing Traditional IRAs being taxed when you convert though, so you should research carefully on all the little gotchas before attempting such a move.

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vcmg October 14, 2013 at 2:40 pm

MoneyNing:

A taxpayer’s total IRA contribution cannot exceed $5,500. Period. Back door Roth? Once you have contributed $5,500 to your Roth, your contributions are over for that year.

Also, index funds always underperform the market because of the cost of running the fund. It may be a small cost, but they underperform.

Don’t hold yourself out as an expert unless you are.

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Nicole November 4, 2013 at 1:32 pm

Vcmg: Not true! My husband and I both maxed out our Roth contributions at $5,500 this year…AND we rolled over about $30,000 from one of our old 403(b) plans. True, we will have to pay taxes on the $30,000 this year, but we’re in our 40s, and the money will grow for decades tax-free.

We’ve rolled over 401(k)s and IRAs for the past several years totaling well over $100k. (And we have always contributed the MAX to our Roth IRA’s as well).

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Rich November 6, 2013 at 9:43 am

Well paid individuals cannot contribute directly to a Roth IRA (or any deductible IRA) due to income limits. The backdoor conversion is where you first contribute the $5500 to a non-deductible IRA, then immediately roll it over to a Roth IRA. The catch is that rollovers apply to the aggregate of all non-deductible IRAs, so capital gains taxes may apply.

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Ted Shepherd November 16, 2013 at 8:24 pm

You wrote “Also, index funds always under-perform the market because of the cost of running the fund. It may be a small cost, but they under-perform.” For a prime example, that small cost is 0.05% for the Vanguard Index 500 Admiral Shares. That is $50 per $100,000 per year. You are correct, of course, to say the cost is “small” but without giving a number that word could be misleading.

Five dollars a year for management of ten thousand? Not significant.

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Liana Emanul November 12, 2013 at 9:41 am

Why would you put after tax money in an account and then move them to a Traditional IRA that is untaxed money and will be taxed when you take it out? It is something that does not sound right to my slow Transylvanian brain. Why save save save…. to enjoy sitting in a nursing home like a mummy? Please visit a nursing home and think about enjoying life a little here and now.

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Rob Frankel October 26, 2013 at 7:18 pm

The one truth I’ve discovered is that very few people have ever become wealthy working for someone else. Sure, a couple of lucky employes fell into the Microsoft, Apple and Facebook manholes, but there aren’t too many of those.

The sooner you start your own enterprise, learn the ways of navigating the IRS and accept the fact that “doing what you do” doesn’t produce nearly as much as “hiring people to do what you do,” the sooner you’ll begin to build wealth.

And one more thing: I’m amazed at the number of people I meet who fear success. You’ve got to get over the fear of making real money in order to enjoy it.

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Don December 24, 2013 at 9:08 am

Excellent post. I applaud those who start their own businesses. It’s not enough to just know your craft (or business), but to know how to evaluate, hire, and manage a staff, and to know how to manage the money. This is why most small businesses fail, so those who are successful should enjoy the fruits of their labors and risks.

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Larry Ripley October 29, 2013 at 11:56 am

One makes the assumption that all folks equate wealth with $$. I am 48 retired and we live on $2965 month. Covers all our bills with a bit left over to have some fun. I no longer have to punch a time clock and I couldn’t care one wit on having credit cards, brand new cars, brand new house I can’t afford. Cars are both paid for, house is paid for, NO credit cards….no more job at 48…that is true wealth folks!

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Samuel Johnston October 30, 2013 at 4:22 pm

I have never met a “Dave”, but I have read this nonsensical advice a thousand times! At age Thirty most Americans are just lucky to not be living at home.
I am Sixty Nine, my parents had no money (lived on Social Security) and I have been pretty comfortably retired for a decade. How?
1. Stay healthy. Nothing else matters as much!
2. Get married, stay married, and make certain that your spouse works as hard as you do – and for the same goals
3. Forget the six months salary in the bank plan. Start saving and investing for retirement now!
4. Borrow, cut spending, or whatever, but never, NEVER, touch your retirement money.
5. Enjoy, celebrate your life at every opportunity. The only thing you really have is this moment.
6. Ignore the self help advice industry.

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Missy November 4, 2013 at 8:30 pm

And I will add to your list:

7. Run away from any MLM company!

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parbunkle November 7, 2013 at 9:52 am

Everyone has the opportunity to be rich. Most don’t make it because they make the wrong decisions in their lives. Simple as that, the right decisions can be made because you’re smart, you’re wise, you’re lucky, or because you’re attractive. It’s like roulette, all you have to do is bet on the right numbers. Trouble is, how to tell which numbers will be right. Easy to blow it at any of a thousand steps.

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Jim November 10, 2013 at 11:53 am

First off, you have to want to be rich. I mean, really want it. Second you have to get off the middle class bandwagon. People don’t get ahead because the minute they get a job they want a big house in a suburb and a new car. They want other people to think they are successful even though that success is a debt fueled fantasy. Live below your means. Buy a duplex and rent the other half. Live in an apartment and save for a huge down payment on a house. Buy used cars. Nevermind boats, jet skis, etc. Rent them once in a while if you really need to. Stop blowing money at Outback, Carrabas, Red Lobster, etc. If you really want to eat out you can find much cheaper places. Find your entertainment in nature. Parks are cheap. Clubs and VIP rooms are ridiculous and over priced. Just a bunch of nobody’s buying the illusion of being somebody. Real VIPs don’t pay to be in the VIP room. Getting rich working for others is hard. But if can be an education that pays you. Want to start a restaurant? Work at one first. Most people who go to college will wind up working for someone else at a job they hate. They’ll make just enough to pay off the mortgage, car note and credit cards. When you start your business be ready to fail. Failure is your biggest teacher. Americans are generally taught to believe the world is a nice, fair place where everybody wins and everyone has a good heart. Failure will teach you the truth. Once you get failure out of the way you will be on your way to success. This is one reason people never go for the brass ring. They’d rather be mediocre and live in the illusion that the world is a “nice” place. To be successful you need to realize what a hard, hard place the world is. Doesn’t mean you have to be miserable or cynical. But it does you mean you have to be strong and willing to accept the ugly side of humanity. Life is suffering, uncertainty and tragedy. If you accept this you will be able to truly live. But if you cling to the idea that life is about security, comfort and stability then you will always be a slave.

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chalupo November 13, 2013 at 2:49 pm

That’s one way of viewing things.
But certainly not the only one :)

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NPDang November 13, 2013 at 4:55 pm

Jim hits it dead on the spot.

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Don December 24, 2013 at 9:47 am

Agreed. I wish families had more Jim’s at the helm.

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NNoh November 13, 2013 at 4:53 pm

This.

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MoneyTree November 19, 2013 at 1:31 pm

Forget jobs and savings and stock markets. Those are for suckers.

Money DOES grow on trees. It’s called food. The rich buy the trees that produce the food that the poor buy. Buy enough “trees” and you never have to work for “food” again.

This is a spin on the Rich Dad philosophy that the rich buy assets (things that put money IN your pocket) and the poor buy liabilities (things that take money FROM your pocket).

There are many ways to earn enough to retire early. The truth is that anyone with normal intelligence, strong desire and a library card can “retire” from the world of employment by age 25.

One way is to learn how to buy multi-unit income-producing residential real estate like trailer parks and apartment complexes. There are many ways to buy these with no money down (you’ll need desire to self-educate yourself by reading how others do it).

Once you buy a large enough property there is enough income to pay a manager to run it and enough left to pay all property expenses and your personal expenses too, freeing you to “retire.” Properly-run properties (more self-education needed) provide a controllable monthly income that frees you from having to save 40 years to amass enough to retire. You can “retire” as soon as you buy one property. As long as you expand your definition of “retire” to mean 95% passive income, freeing you from any schedule so you can spend 95% of your time however you like.

Working a job for decades and scrimping and saving in this world of inflation, taxes, manipulated markets and thieving brokers and bankers is the absolute WORST way to create income and try to get rich. Yet people like this author continue to promote it as “logical and rational and attainable.”

BS. It’s just stupid, eats your life and is unattainable for most people. Jobs are good for learning new skills, but horrible for earning income because employees are taxed at the highest rates and salaries mostly lose ground to inflation.

With REAL inflation now running nearly 10% (www.ShadowStats.com) there is no way your income will ever keep up with inflation. Any “savings” in 401Ks, or gains in stocks will lose all their purchasing power long before you are eligible to spend “your nest egg.”

NOW is the time to retire. Two to four months of self-study and self-reading and conversations with people who have already succeeded is all you need to start trying to buy one property that is large enough (30 units of more) to allow you to retire NOW. This gives you CONTROL. If inflation starts to ravage your income, you can raise rents, lower expenses or buy another property.

This doesn’t mean you become a slum lord either. You provide clean, functional, affordable housing at market rates as a service that people willingly buy. Without you and your properly running properties, people might be forced into crappy properties with lesser owners. You provide a needed service, are rewarded fairly for it and are serving humanity in a way that allows you to sleep well each night.

Humans are capable of attaining much more. But it starts with realizing you must become your own expert and then go out there and self-educate yourself (college is another horrible cost-benefit scam) to become that expert. If you want to become one of the 5% who are financially secure, you have to ignore what the “normal” 95% say and start listening to that 5% who have achieved what you want.

Decide what you want and go directly toward it. That desire, partnered with self-education and ACTION, will be enough to reveal each step along the way. Take the first step and the next will be revealed. You can do this. You are meant to be financially free.

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Jennifer December 13, 2013 at 2:29 pm

Propaganda. You can always tell by the Motivational Speaker rhetoric at the end.

Serious people don’t write like this. Read some real economists, and serious commentators, and consider your own inclinations. They do matter. You will be working 8 -14 hours per day for decades, after all

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MoneyTree December 13, 2013 at 3:00 pm

It’s not propaganda when you reach financial independence yourself, which I did. When you reach financial independence you want to help others reach it too. And you certainly want to help people avoid working for decades when you see bad advice. I worked in jobs and must-be-there-businesses for decades before I learned what I posted above. So I know that of which I speak.

I’m not selling anything. I’m just trying to save people having to work a job for decades when they can gain financial independence in months (not years) of serious self study. Can everyone do it? Nope. Can the motivated do it? Yep. There are better and easier ways to retire NOW, without waiting decades.

I did. So I stand by my post. Only a lack of financial education requires anyone to work “8-14 hours per day for decades.” In my world, that is about the WORST route to wealth and highly unlikely to succeed. It angers me that lives are being made more difficult by this advice that ignores inflation, broker theft, manipulated markets and at least $85 billion a month being counterfeited. Any “gains” will still lose all their purchase power, so what have you gained? Now calculate your time. What are decades worth to you?

My advice was sincere and from the heart and without motive other than to help. If you want to be financially independent, don’t listen to the advice of anyone who isn’t.

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William Doores March 3, 2014 at 8:08 am

Right On!

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Genie Coats February 1, 2014 at 6:23 pm

Moneytree, your reply was great, if you would write a book, it would be great! Thank you for your comments. Genie Coats

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William Doores March 3, 2014 at 8:11 am

Right On Jennifer! I posted to the wrong comment previously.

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BeeKaay March 3, 2014 at 11:04 am

Unfortunately, your method requires people to have jobs to pay you the rent you’re collecting. You know, that thing you’re trying to avoid in the first place.

So if you’re depending on your own job, you’re a sucker, but if you’re depending on SOMEONE ELSE’S job you’re a brilliant money maker.

Right. I don’t buy that for a second.

“Yeah but, I can kick out the bum with no job and get another person in there with a job”

Not if the economy is in the crapper with the labor force participation rate dropping like a rock. And the more vacant apartments you have, the more work you have to do to find decent people to rent.

I’ve seen lots of real estate flippers who bought properties for a song. Then were desperate for money because they BORROWED MONEY to get them. Then became horrible landlords unresponsive to their tenants repair needs. Way to go! I avoided those apartments like the plague. I’d rather pay rent to real landlord than to a real estate speculators like you :)

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MoneyTree March 3, 2014 at 1:25 pm

BeeKaay,

All you did was list all the reasons why YOU can’t do this. Argue for your limitations and you get to keep them. It’s your life, you get to choose if you’re going to defend it against creating a better life. Looks like you have.

And… if you read my two posts above, you’ll see I’m advising people NOT to be slumlords and I am not. I’ve been a park owner over 10 years so I’m not a speculator either.

There is information you do not have and I have shared some of it freely with you and you have chosen to attack it. Ignorance has a price and that price is poverty, or a life with fewer choices and less freedom.

And in a collapsing economy where the dollar is worth-less every day, there ARE ways to hedge your exposure to tenants losing jobs. I have that covered too but that is beyond the scope of my posts here. It’s wise not to assume you’ve detected a flaw in a successful way to retire before you know all the info. Based on your mindset, you’re too full of what you think you know to learn anything new. Your anger and snarkiness reveal a dark soul that assumes i posted this to hurt people. I posted this to HELP them. For FREE. Without selling anything.

What I posted here works very well for me. It allowed me to retire at age 52. It would work for people 22, 32 or 42 just as well. I’m trying to save people having to work a job their entire lives. What are you doing? Telling them it’s impossible, so just suck it up and surrender your life? That’s motivating.

Are you financially free yourself? If so, what’s your plan, Scooter? If not, why should anyone listen to your advice if you haven’t succeeded with it yourself?
MJ

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runkman March 26, 2014 at 4:41 pm

Hi MJ,

I appreciate your posts here. I own a business related to the property management industry, and I was wondering if you’d be willing to share more details either in these comments or privately. My email is runkman9@gmail.com. Based on my experience in the industry, it feels like owning an apartment complex would be a lot of work, even with a management company, and not necessarily super lucrative.

I’ve heard other people say that one should invest in multifamily property as a way to generate ongoing income with little work, but it just seems like the reality is probably much more mundane. I mean, it’s a business like any other. You can’t just do nothing and have tons of money rolling in. You will always have issues to address, management to oversee (in some way), money to invest in things like capital improvements, the mortgage to pay, competition, insurance, and a million other things.

How much time do you put into your business each week/month? What do you consider “retired”? Do you have any other source of income?

What are some reasons I should invest in multifamily real estate instead of into my own existing business?

Could you tell us a bit more about your story? How you went about purchasing your park (or whatever you own), what you did before, how much money you needed to buy it, how you learned what you needed to know, how much work it was then, how much it is now, and so on. Again, I’d love to correspond with you personally via email.

I can guarantee you I’m not a spammer or anyone who would bother you. I’m just a family guy who owns a business and wants to retire as soon as possible and do other things.

Thanks.

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MoneyTree March 26, 2014 at 6:06 pm

Hi Runkman,

I’m happy to answer your questions privately and will send you an email.
MoneyTree

joe November 20, 2013 at 4:47 am

The best way is to rob a bank in the USA because crime pays.

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William Doores March 3, 2014 at 8:14 am

State Pen is a wonderful way to spend retirement. Why didn’t I think of that?

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mk December 5, 2013 at 7:56 pm

Joe- I think trying to find change for an ink stained $20 bill will be hard.

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et December 8, 2013 at 4:46 pm

Roth IRA, or any others are a complete sham promoted by the financial industry.
What happens when the tax rate goes up in the future, which it will-there goes your gains.
Called safe and protected they are far from that.

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Dan December 12, 2013 at 3:28 pm

Roth IRA before maxing out your 401k!

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Jennifer December 13, 2013 at 2:27 pm

I only recently found out that the S & P 500, from January 2000 to the present, has NOT even kept up with inflation. If you had put $100K into the S & P on the first trading day of 2000, you would not have broken even in nominal dollars until the summer of 2012, and would not have broken even in constant dollars at all.

I admit it. I was surprised. Several of my more financially astute friends knew. Yet I suspect that most people haven’t a clue.

It takes more than this cookie-cutter recipe to become wealthy — though the advice for someone 30 and under may be passable. How about if you were saving for college? If your child entered kindergarten in 2000 and you invested via lump sum instead of careful and highly disciplined averaging and rebalancing (and this is hard work), you might be in trouble right now. Thirteen years is a long time to be under water in real dollars. College has not gone down in price during that time.

Also, as concerns this little vignette — I’m guessing from his earning power that the fellow has at least a BA in a STEM field, and more likely an advanced degree, and no college loan debt. Well, THAT represents about 80% of all young adults . . . right? Pfft!

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David Ning December 14, 2013 at 11:24 am

There is no doubt that stock valuations are volatile, and that is why a prudent investor should also hold some bonds. But do note that even 100% equity investors who stayed the course in 2000 had dividends the whole way and that alone has drastically increased the total return over the years. If you simply bought the Vanguard S&P 500 index fund on 1/1/2000, you would have been whole sometime by 2006 (in nominal terms) and as of Dec 2013, you would be up 70%+ from 1/1/2000. It’s still not the best 13 years by far, but better than keeping with inflation.

Also note that January 2000 is when the S&P 500 was priced at pretty much the highest level of all time versus the respective company’s earnings in history because the stock market was absolutely going gangbusters the few previous years. So, if investors were invested in any way before 2000, they got some of those gains too.

It’s true that many people would have invested a lump sum right at the very peak, but they could have invested at any other time too. Move the time frame two years either direction and the results are much different. Invest a lump sum of $10k in 01/01/1998 and you’ll have more than $24k. Invest in 01/01/2002 and you’ll have more than $19k.

And plus, the reality is that most people don’t have a lump sum to invest, and do so periodically whenever they have cash. A periodic investor like you and I actually made out better with the volatility of the past decade if we could stay the course than if the equity markets simply slowly increased from January 2000 levels to the level we are currently at because some of our contributions was invested when the indices were much lower.

Yes, the stock market is volatile, but stay the course and you’ll do okay.

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William Doores March 3, 2014 at 8:25 am

I agree David. I did not start investing until 2007 and I have invested primarily in dividend funds and I am very happy with the returns.

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William Doores March 3, 2014 at 8:21 am

Where else would you have invested your extra dollars to beat inflation during that time frame, savings accounts?

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Sarah December 19, 2013 at 6:29 pm

MoneyTree – Helpful advice. Thank you so much!

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Sam Abad December 22, 2013 at 12:59 pm

MoneyTree rocks! Thanks for your advice and forget the naysayers! You are right on and thanks for sharing. May the wealth follow you and yours.

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mitresaw January 1, 2014 at 4:08 pm

Well folks, that’s all very interesting. Dave has a problem we all would like to have. I see that part of becoming wealthy is having the mindset. The amount needed to be considered wealthy is subjective, so some may be rolling in green but that wouldn’t be enough for others. Would it be fair to say that wealthiness requires an extra commitment to money management beyond hard work?

We might accept that American schools acculturate students to be good employees, but Moneytree suggests that appealing to human necessity and satisfying those requirements is one true avenue to wealth without that commitment to work for somebody else. We begin to see that we must search our income for excess funds which we can then invest in equity, which ever stocks, bonds, mutual funds, real estate investment trusts, real estate. small business, etc. Then we need to protect those assets from the ravishments of inflation and taxes. I like Kiyosaki’s renditions of rich dad’s admonitions about developing multiple streams of income. Now we’re back to the mindset of wealth, that you have to work to manage these tools.

Thanks to all that contributed to the comments.

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Barnt January 21, 2014 at 5:19 pm

Dave has $4,000 extra a month?? And he’s only 30? Why not make this article realistic since there are very few 30 year old’s making that much “extra” money each month. Try this again with $400 dollars extra and make a case for it. Otherwise, this article is not useful for anyone.

Me? a 32 year old with a low six-figure salary, but nowhere near $4,000 extra a month. Why? Student loan debt (MBA), mortgage ($2,800/month), and saving for a wedding. And yes, I do max out my 401K at $17,500 a year.

Wealthy, hah! Maybe in 30 years. But nothing like Dave. Dave sounds like a real G. That is to say, unrealistic. Try again Vincent.

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Dave January 30, 2014 at 2:14 pm

Sounds like a great life if you never want to marry or have kids-be rich and be alone!

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larry February 3, 2014 at 9:38 pm

Know why people never get rich…b/c they make stupid decisions that build no wealth (or take away from wealth building oppts)….ie, people who can least afford it, buying none essentials….cigerettes and alcohol. Or, if they get the slightest winfall…instead of buying a CD or laying it into a tangible investiment that appreciates in value, they buy a $2000 car stereo, or the chrome rims, or bling out teeth. Or they spend $10 a week on lottery tickets, instead of putting that money into a small savings account.

So, no matter your income level…if you make stupid decisions…you only have yourself to blame!

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Money man February 6, 2014 at 9:18 am

If you want wealth, get offline and go sell something!

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Anna March 2, 2014 at 3:00 pm

The partisan stuff on this forum makes me laugh. I had my first layoff in 2008 under Bush. My second layoff came in 2013 under Obama. Seriously, folks, playing Democrat versus Republican is very 1990s.

We relocated for my new job and my husband and I both make more than we need? Why? With my previous IT job, we were able to make due with one car because I worked at home. We haven’t had car payment in 8 years. During that time, we took our “car payment” money and paid off our credit cards. We didn’t pay for extras like Cable TV, we cooked and entertained at home a lot. We put a lot of cash into savings.

By the time my layoff happened, we have an emergency fund. With the relocation, even with what my employer paid me to relocate, we have wiped out our savings. But the bonus is very little went onto credit cards. We were able to carry our mortgage plus rent on our apartment. Our house is to be sold soon (we had to put money into it to get ready to sell). We’ll be able to weather this storm and start boosting our savings again.

We have to start reorganizing our priorities. Unlike what the debt industry wants us to believe, we can’t have it all. Or at least have it all at the same time. We picked an apartment that let us walk more and is 1.5 miles from my work. My husband now works at home. We save a ton of money on gas. He’s in grad school, so we spend a bit more on food now. But we are still without cable, living in less of a house/apartment than we can afford.

Decide what’s important to you. Cut the fat. Once you make small cuts, you’ll be amazed at what opens up to you in opportunities for spending less money. But don’t let it become all about the money. Upsize where you enjoy it – Downsize where you don’t care. Those are decisions and choices only you can make, because the answers will be different for every person.

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William Doores March 3, 2014 at 8:50 am

Good advice!

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