The Millionaire Guru

I recently gave a brief summary of the Individual Retirement Accounts, also known as IRA’s and explained that to become a millionaire, you must learn to invest your money and watch it grow. One of the best tools to help you become disciplined at doing so is an IRA.

The two IRA’s that most will encounter in their lifetime are the Traditional IRA, and the Roth IRA. These two accounts have different tax consequences and both have advantages that will encourage you to invest, step back, and allow your investments to grow until you are at or near retirement. The monies will help you live your golden years with more monetary security and you will be able to enjoy some of the finer things that you have earned.

The Traditional IRA allows you to invest and your money will grow tax deferred. What this means is that as your investment grows, you do not have to pay federal taxes on this growth until you start to withdrawal the funds. To encourage you to keep the funds growing, the federal government penalizes you a 10% fee is you take monies out of your account prior to age 59 ½, plus you then have to pay the percentage of taxes owed on this income. The penalty helps to encourage individuals from removing funds from the IRA, which in return allows the funds to grow for a substantial amount of time. Depending on your income, some individuals may not be allowed to contribute to a traditional IRA with tax deferred dollars. You must first consult a professional such as a financial advisor, or bank to get the updated details.

A simple example of contributing to a Traditional IRA and the advantage of doing so is if you wanted to contribute $1000.00 to the IRA account, if you qualify to do so, you would be allowed to deduct $1000.00 from your total income when paying federal taxes. If you fall into the 25% tax bracket, you would be saving $250.00 on your taxes at the end of the year. This allows you to put more money away at the very beginning of this investing. Once the money starts to grow, you do not pay taxes on the earnings until you start to withdrawal the funds, which again have great tax advantages.

A Roth IRA takes monies that you have already paid taxes on, allow you to invest this money with no federal tax consequences, and no penalties as long as you leave the money invested until the age of 59 ½ years of age. You can watch your money grow, and at your retirement, you can take the money out tax-free. What a great opportunity!

The Federal government also allows for some withdrawal of this investment with no penalty. After a set number of years, you can take out your original taxed investment that you have already paid taxes on, without penalty. There are rules and regulations involved in the early withdrawal, and you would have to get the advise of your tax accountant or financial advisor.

If you want to be a millionaire, you want to start investing in IRA’s. Your money will grow much faster, and it is a safe way to get started on the road to financial success!

To become a Millionaire you must learn to invest your money and watch it grow. One of the best ways to do this is to maximize your investments in an Individual Retirement Account, also know as an IRA. There are several IRA’s available and the first step is to understand the difference between them. I’ve listed below the five most common, with a brief description of each.

Roth IRA: Contributions are made with after-tax assets and all transactions within the IRA have no tax impact. Withdrawals are usually tax-free.

Traditional IRA: Contributions are often tax-deductible, and withdrawals at retirement are taxed as income.

SEP IRA: A provision that allows an employer (typically a small business or self-employed individual) to make retirement plan contributions into a traditional IRA established in the employee’s name, instead of to a pension fund account in the company’s name.

SIMPLE IRA: A simplified employee pension plan that allows both employer and employee contributions, similar to a 401(k) plan, but with lower contribution limits and simpler and less costly administration costs. Although it is termed an IRA, it is treated separately.

Self-Directed IRA: A self-directed IRA that permits the account holder to make investments on behalf of the retirement plan.

IRA’s all have tools that help you make more money on your investment by deferring or eliminating taxes, but they have rules that penalize you if the investment is withdrawn before a certain age. The Federal government established these IRA’s to encourage citizens to save for their retirement, which would help individuals once they become seniors and may be on a limited budget. Taxes on early withdrawals make you think twice before taking the money out of the IRA accounts.

Now that you are aware of Individual Retirement Accounts, you will want to decide which one works best for you and try to maximize on this investment. You will be amazed how much more money you will have and the earlier you start, the sooner you will reach your Millionaire goal!

In the Real Estate market, there is the potential to make a huge amount of money if you educate yourself on the market and know when to buy and when to sell. I purchased my first real estate in 1986. I was twenty-five, single, and knew that at some point in my life I wanted to build a house to live in. My first real estate investment was a two acre cleared piece of land in a rural area that many of my friends lived. What was once mostly farmland had now become desirable residential properties.

I paid $17,000.00 for this land, and what I thought was going to be my new home someday, ended up being a great investment. Within six years from my purchase, I was married, had purchased a home, and decided that I would no longer need the land to build on. I had acquired my real estate license and sold the property for almost double what I had spent. Using “The Power of 72”, I received an 11% return on my investment, which made me very happy.

Next, I took the monies from the land, and purchased an investment property at the shore. The real estate market was down, and prices had been falling for a year. This is the best time to buy real estate. Many think the best time to buy a property is when the market is up. Just like the stock market, the best buys in Real Estate can be made when the market is low.

The property I purchased was rented for the summer and my wife and I could not have access until the fall. This disappointed us, but I was excited that we would be receiving the rental income for the summer, which was substantial. I took the rental income and applied it towards paying off my primary home. Within three years of purchasing my primary home, it was paid off. I still owed a mortgage on my investment property, so I started to pay that down also.

I rented the shore investment property for two more years and my wife and I decided that we were spending more time at the beach and this was where we wanted to liver permanently. We sold our primary home and made living at the beach a dream come true.

By 1998, our primary home was almost paid off and we decided to buy another property at the shore. The investment idea behind this was to purchase a property that we would allow us to open a business at the shore, but also have a few rental income units. The real estate market was just starting to pick up. Interest rates were about 9%, so we purchased a property that would allow me to chase a dream of being my own boss, and also have some rental income.

We owned and operated a business for three years and found that the market had skyrocketed to a point where we found we could make substantially more money by developing the business property than to run the business. We developed the business property, sold off one half, lived in the other side, and sold off our primary residence. By doing so, we made more money than I had my whole career. Just by investing in Real Estate.

Real Estate has been very good to me. With wise choices, real estate can get you to the “Millionaire” status and help you achieve your needs and goals!

In a previous article, I explained that to become a Millionaire you would want to invest in one of three venues: The Stock Market, Real Estate, or owning your own business. I would like to give my personal experience in all three. This article will focus on the Stock Market, but please look up the articles on “Real Estate” and “Owning your own Business”.

I started investing in the stock market when I was twenty-one years old, back in 1983. At that time, I did not know a lot about the stock market and most people had no investments in the market. It was just about that time that pension plans started investing in the market and mutual funds started to be formed.

If I had known then what I know now about the stock market, I would have invested everything I could in the market. At age twenty-one, I was very conservative and young, and the stock market did not mean much to me. I would occasionally purchase some stock, but most of my money went into CD’s because I knew they were safe. At that time, CD’s were earning about 6%, which I thought was fantastic. Little did I know that the stock market over many years would average several points higher than my CD’s, and with the knowledge of “The Power of 72”, this would have made a significant difference.

I spoke with my first financial advisor in 1987, which convinced me to invest on a weekly basis with some stocks that had a great history of paying out conservative amounts of money and had the potential to grow. Being young and leaning towards the conservative side, I started investing and watched my money start to grow, but not enough to get hooked on investing in the market.

It was not until 1993 that I talked to another financial advisor who had called me from an inquiry I had made about investing on the TV. At first I did not want to be bothered, but the advisor convinced me to spend an hour with him so he could explain what “American Express Financial Advisors” could do for me. My wife and I agreed to meet with him and after an hour, he me not only convinced to invest with his firm, but also had me excited in doing so. He re-introduced to me the “Power of 72” with many examples and felt comfortable that with our age and salaries, we could become financially secure before our retirement. That was the starting point where I would track my investments and do financial statements quarterly to see how our assets have grown.

Since 1993, I’ve been with the same financial institution and have been very satisfied. I allow the professionals to make well-educated suggestions on where my money should be invested and how to make the best of these investments. Because my portfolio has grown to a substantial amount, my advisor now works on a commission of a percentage of my growth per year versus receiving money on buying and selling. This gives my broker an incentive to make as much as he can for his clients because that is what pays his salary.

The bottom line here is to use the stock market as one of your tools towards being a millionaire. What percentage is totally up to you and your comfort zone, but I strongly advise you to get a financial advisor that has your best interest at heart.

Wealth comes with time. Everyone thinks that putting a few dollars away each day will never amount to a large sum of money. “The Power of 72” articles shows that you can become wealthy by investing a small amount of money each day. The fact is that most of us have a problem putting a few dollars away each day. That is unless you have it automatically invested from either your paycheck or bank account.

Most people will find that money that they never see is never missed. If you have a retirement plan at work where you can automatically have a deduction taken from your pay check, by all means, do it. This way you will never see the money and it is automatically invested for you on a paycheck-by-paycheck basis. If you are investing it in a retirement plan, the money you contribute grows tax-free until you take distribution, which can save you thousands of dollars by delaying paying the taxes on your investments.

If your employee does not offer an automatic deduction for a retirement plan, you can start one on your own. Your bank or financial advisor would be happy to help you with setting up one of many IRA’s. Once set up, you can have a set amount of money to be taken out of your bank account each week and invested in an IRA.

With both employee IRA’s and also IRA’s you set up yourself, your money can grow tax deferred or tax free, depending on the IRA, up to the time you start to withdrawal your money. There are certain rules you must follow, but the most important on most IRA’s is that if you need the money before you reach the age of 59 ½ years of age, you could be penalized for an early withdrawal.

The best advise I can give for you, as a person who is going to save and gain wealth is to start saving today and have the monies automatically taken from your salary or bank account. This allows for an automatic savings and the money invested will never be missed. As time goes by, you will be watching your money grow and you will want to increase the amounts you invest. With time and a small amount of savings, you to can become a millionaire.

To become a Millionaire, where you actually earn the money as compared to winning the lottery or inheriting your parent’s estate, you have to be self disciplined and educated on how and where to invest. Investing in a saving account or even CD’s where the interest rates are low will not help you reach your goal unless you have a career where you are making a very good income.

The three most common avenues to follow in investing for your future are: Stocks, Real Estate, and owning your own business. These three options, over years of investing and re-investing will help you become a Millionaire. You may choose one, two, or all three avenues to help you reach you goals. I actually used all three to help me achieve my financial situation, but depending on your situation and how much time and effort you want to spend, you will find which of the three works best for you.

In today’s society, everyone is invested in the stock market. Whether it is in a pension plan, IRA, or individual accounts, most people have some interest in the Market. When I was young, only the rich invested in stocks. It was not until about the early 1980’s that the stock market gained in popularity. The stock market is the least time consuming of the three ways to invest for a great return.

Buying and selling real estate can be very rewarding because you are actually working with a tangible product. There are several ways you can invest in the real estate market. Some are as simple as buying stocks in companies that develop real estate, while others takes labor to refurbish properties for rent or resale in the future. With good investing, real estate can pay back a very substantial return on your investment.

If you ever had the desire to own and operate your own business, you may have what it takes to be a self-employed entrepreneur. Those who are successful with owning and operating their own business, can see the doors open to the Millionaire status faster than the other avenues, but there is also more risk and hard work involved. The failure rate for businesses are high, so you have to educate and investigate your idea before taking the plunge into your venture.

Investing for your future needs to be taking with caution, but you must also feel comfortable with the decisions you make. Before starting, look at all the options and educate yourself. This will help you decide on the path you will want to follow. Please read the articles on each option above. These articles will help you start the education process and may help you avoid mistakes or problems I have personally encountered.