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How Building Wealth Changes your Life

We’ve talked about it many times here on our blogs, that saving money is extremely important for many things, including giving you financial freedom. What most people who take our advice find is that, once they actually start putting aside a large chunk of change, and building up their wealth, many new opportunities come into their life, and their outlook changes quite drastically

Interestingly, spending money on everything in sight loses its appeal. It’s not that you won’t want to buy anything, but just that accumulating wealth will actually give you the same satisfaction that purchasing things used to give. The fact is, if you measure your wealth by how large your portfolio is, and how much income your assets are generating, it means that you’re much closer to being able to not work anymore, or at least work only when you want to. For many, that reality is much more attractive than, say, the latest piece of tech or a new set of golf clubs.

Having a large amount of money in savings, an IRA, 401(k) or invested in a well diversified portfolio will also give you a taste of financial freedom before you actually become completely free financially. For example, if you have enough savings and investments, you can weather many different kinds of storms, including being able to start a new career if the one you currently have makes you want to jump in front of a bus.   Relatively small expenses like having to replace your car or get a new roof on your home won’t be nearly as stressful either.

Being able to invest more money with a financial firm will also make it less costly to grow your assets. For example, if you invest at least the minimum in a specific share class, Vanguard will offer you funds with smaller expense ratios. As your assets continue to expand you’ll find that many financial firms will offer tax preparation software and financial plans at no cost, as well as cheaper trades. Even better, if you work with a financial advisor who gets paid a percentage of assets under their management, there’s a good chance that they’ll offer you lower fees.

Lastly, when you get to the point where retirement is looming and you’re wondering whether or not you should continue working for an extra year or two, you’ll have the financial ability to make that decision with a lot less stress because you’ll know that, even if you walk away from that steady paycheck, you’ll still be able to support yourself and your lifestyle. If you do decide to work longer, the chances are much better that you‘ll be happy at work because you will have made the decision to keep working, not your bank account.

What wealthy women do differently than wealthy men

Today’s blog is a little bit different than usual. We’re going to be taking just a quick look at how women differ from them when it comes to creating wealth, based on recent research. It might not help you in your financial affairs, but it’s quite interesting.

The Forbes list of billionaires has 1645 people, 172 of whom are women. Of that 172, 32 of the women are “self-made” and the rest made their money either from marriage or an inheritance.

This begs a number of questions, including how come there aren’t more women billionaires, given that women have made such great strides overall in the rest of the economy? Also, is there a difference in how men and women create wealth?

A recent study from Spectrem Group asked millionaires, both men and women, about the factors that led to their extreme wealth and the results suggest that, when it comes to creating that wealth, the perspective that women have, as well as their experience, is quite different.

For example, when it comes to building wealth, most women will cite family connections and astute financial advice, as well as frugality. On the other hand men talk more about running their own businesses, taking risks and even a bit of luck.

When it comes to frugality for example, while just over 75% of men cited it as one of the reasons for their wealth, almost 85% of women did, nearly 10% more. Decisions made by financial advisors were cited 46% of the time as opposed to 34 by men, and 11% of women cited family connections as the source of their wealth as opposed to only 7% of men.

Interestingly, when it comes to the “luck factor”, over 40% of men said that it had a lot to do with their wealth whereas just over 30% of women claimed the same.

Spectrem Group, is a wealth building research firm, and their President George Walper says that, when it comes to wealth, women face much different obstacles then men, and many different factors

“Because of the unique financial challenges women face, such as salary inequality, that can impact retirement savings, they are more likely than men to credit frugality,” he said. “Men, on the other hand, are generally less risk-averse and more aggressive investors than women and more likely to pat themselves on the back for risk taking.”

Walper also added that, when it comes to taking credit for their wealth, many more women will give the credit to their financial advisor than men will. Most wealthy men tend to take credit for the investment decisions that they made themselves rather than give it to someone else.

It just goes to show that, when you finally become a wealthy person, make sure to thank the little people.


Is there anything a taxpayer can do to avoid the Alternative Minimum Tax?

It’s estimated that nearly 4,000,000 American consumers will get stuck paying the Alternative Minimum Tax this year, more commonly known as the “dreaded AMT”. According to the Tax Policy Center, that means approximately $6,600 in extra tax costs on average.

Unfortunately, there are still many taxpayers who don’t even realize that there’s a two tax system in the United States and that, depending on several factors, they will have to pay whichever of those two tax amounts is higher.

The good news is that a certain portion of your income is exempt from the AMT.  Married couples, for example, receive around $80,800 for the full exemption and, for single taxpayers, it’s approximately $51,900. Unfortunately the “AMT exemption” will, as your income gets higher, be phased out, meaning that single people and married couples earn between $200,000 and $500,000 are the ones that will more than likely be facing the tax this year.

What “triggers” put you at a higher risk of facing the AMT?

Many of the deductions that you might qualify for on your “regular” federal income tax return are allowed with the AMT, including personal exemptions, standard deductions and also deductions for state and local income taxes.

For example,  when you live in a state where state and local taxes are high and you normally would take a big deduction on your regular taxes, or when you end up having many miscellaneous deductions or have several children (which usually means a number of personal exemptions), these deductions are instead adjusted downward or, in some cases, eliminated entirely when it comes to calculating the AMT.

Unfortunately, if you normally take these deductions, the AMT liability may be triggered by them. There are other “triggers” as well including exercising, but not selling, your stock options, reporting on your taxes that you have a large investment expense and also claiming accelerated depreciation on something. You could also put yourself at risk for the AMT liability if you use a home equity loan or line of credit for anything other than actually improving your home.

What can be done to avoid the AMT?

Frankly, you need to be careful when bunching your itemized deductions if you’re a borderline candidate for the AMT because they might end up losing their value. Shifting some deductions to a year when you won’t be subject to the AMT is what most tax expert advise, if possible.

Unfortunately, many upper middle-class taxpayers may not be able to do much if they are firmly in the “AMT zone” except prepare to pay higher taxes.

How to Get the Most Out of Your Tax Return

Tax time is a stressful time of the year, no matter who you are or what you may owe. It is complicated, anxiety-inducing number crunching that everyone except for accountants dreads and tries to put off when it comes time.


But you can get great benefits from your tax returns, and if you know what you are doing, can see a great return on your taxes that you can put towards that big purchase you’ve been eyeing. Here are a few tips.


Talk To An Accountant

Instead of trying to do your taxes on your own and saving a few bucks this year, talk to an accountant. They can point you in the right direction and maximize your deductions and more, so that when it comes time, they can find a great chunk of money that can come your way in the form of a return.


Plus, they know their stuff inside and out, and a good accountant can ensure that you won’t miss anything on your taxes, or be penalized for any misfiling or late filings. In short, an accountant can make your life much easier for just a few hundred dollars in investment.


File Early

File early and get it out of the way! Don’t wait until April 15th to file your taxes. Instead, quit dreading the day and get it done early and easily with no problems in January or February.


Plus, when you file early and get an accountant, you can be sure they are available for work in January or February. Too many people dump their taxes all on their accountant in April and expect them to be ready then; avoid that trap by getting it out of the way, for both you and their sanity!


Look For Deductions Before You File

Check out what you are purchasing, spending money on, and investing in, and find out if there is something you can add to your list that will qualify you for a deduction. If you go through the year with the right mindset on taxes and deductions, it becomes much more obvious come tax time what you are allowed to deduct and what can benefit your overall tax burden.


Remember for Next Year

Don’t forget everything you did right this year, just to screw it up again in twelve months! If you like the service you got, use the same accountant next year. As they become more familiar with your situation, they can greatly help you with any finance-related questions that may come up through the year, and can work wonders for you come tax time when it rolls around in a few short months.


How You Can Save on a Rental Car

The average traveler is under the very false impression that car rental prices and car rental companies are pretty much all the same. With that false pretense they also believe that shopping around is not only unnecessary but also a waste of time.

That couldn’t be further from the truth however as rates can vary greatly from 1 company to the next depending on where you rent and where you’re going. If a rental car looms in your future then read on as we take a look at some excellent tips for saving money on your next rental.

One thing to keep in mind; generally speaking, car rental companies reward people who make it easy for them as far as the renting procedure is concerned and definitely make it hard for people that don’t.

Tip 1- Never agree to let the car rental company fill your tank when you bring it back empty.  They normally charge 20 to 30% higher for the same gas that you could pump in yourself around the corner. Instead always fill it yourself before you drop it back off unless they make an excellent offer to fill it for you for less (which rarely happens).

Tip 2- Always take a look at the ‘fine print’ and look at the additional charges before you make a decision.  A ‘great deal’ can begin to look mighty average once a ton of extra charges and taxes are tacked on.

Tip 3- Don’t rent at the airport.  The ‘airport charges’ that can and usually are tacked on can increase your rental fees by 25% or more!  Better to take a shuttle to the car rental place near the airport as most have them for free.  An extra ride in a fee shuttle bus can save you gig bucks.

Tip 4- Don’t let them hype you into taking extra insurance.  The simple fact is this; your auto insurance will cover you while you rent.  The amount of extra money you will pay for insurance is ridiculous and the odds are super slim that you’ll ever need that extra coverage.

Tip 5- Ask to rent a subcompact car. The chances that they will have one when you arrive to rent (no matter where you rent) are low because nobody likes to rent subcompacts and the rental companies know this. If they don’t have one they’re obliged to give you an upgrade to whatever they have which could mean a 1 or 2 car class upgrade for you for free.


How Overspending can Destroy your Budget

One of the easiest concepts of budgeting and creating financial wealth is that you need to make more than you spend.  That concept, however, is one of the most difficult to follow for many people. The reason is that they don’t know the real factors that encourage their spending and, because of this, they overspend and create debt.

Overspending is not a good habit, to be sure, and so knowing what the factors are that cause this negative habit can be the key to controlling them so that you indeed start spending less than you make and start building wealth.

One of the biggest reasons that people overspend is that they have easy access to credit and credit cards. If, for example, your credit history is good getting and using a new line of credit is incredibly simple. The problem here is that credit cards mask the debt that they create with small monthly payments. It’s like getting free money but not earning it, and the penalty comes when you get in over your head and start having to pay exorbitant credit card fees and overdraft charges.

Having easy access to your cash is also a dangerous proposition and can lead to overspending of an even worse type. It used to be that when you got paid you had to go to the bank, deposit your check, get some cash out and then pay for everything else with checks.  Today with debit cards and direct deposit you can have access to everything you have in the bank from practically anywhere at any time, and this can lead to temptations that few people can handle.

Two others that are a budget killer are temptations (and giving in to them) and spending to feel good. Both of these are seemingly innocuous but can have a hugely detrimental impact on your budget.  For example, going out to the bar with your buds after work and spending $50.00 on your credit card is easy and fun but, when the bill comes due and it’s more than you have, you’re not going to remember the fun you had just the debt that you created.

If you want to stay on budget and create wealth you need to curb overspending at all costs (no pun intended).  It’s the one sure way to stay on track or, if you can’t control it,  get derailed quickly.


Build Wealth one Step at a Time

There is no one single rule which will help you sort out your finances and be prepared for the future. Instead, you need to follow a series of steps and strategies to put positive financial plans in place and then stick to them, like the following.

Step 1 – Cut spending

Step one of your wealth building strategy should be to curb your spending. You can’t save for the future or invest in opportunities if you don’t have any spare cash to do it with. Therefore, consider these money saving steps:
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Wealth 2.0: Wealth in the Information Age

There is nothing more demoralizing than a small but adequate income.
– Edmund Wilson

With the world still recovering from what some are calling an economic meltdown, personal finance has never been more important. Only 1 in 20 people will retire financially free. The other 95% will depend on their family or the government.

But with government debt fast approaching £1 trillion in the UK and $14 trillion in the US, is that a safe bet? It’s time we took control of our lives. Fortunately, Rich Dad is here to show us how.
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Wealth and Stock Market Predicting

A couple of interesting items popped on the scope today. First, is it possible to predict longevity? Well apparently you can when you correlate longevity, wealth, and health. According to one recent study,

[S]cientists have gone a step further, finding a specific hormone that links wealth with a longer life. The hormone is called DHEAS–or dehydroepiandrosterone sulfate–a natural steroid produced by the brain, adrenal glands and sexual organs.

Those with higher levels of DHEAS tend to exercise more, have more hobbies and have closer relationships with friends and family. They also tend to live longer.

I think this is one of those chicken before the egg scenarios. Did the wealth, and time to take care of oneself, cause the hormone or did the hormone cause the good health which caused the wealth? Or something like that.

And speaking of predictive models, did you know that Twitter has a “mood” and that it may be able to predict stock market swings?

Researchers are busy mashing together algorithms to take advantage of the Twitterverse’s stock market predictability.

One algorithm, called the Google-Profile of Mood States (GPOMS), records the level of six states: happiness, kindness, alertness, sureness, vitality and calmness.

So these guys [smart, nerdy guys wearing glasses] took 9.7 million tweets posted by 2.7 million tweeters between March and December 2008 and looked for correlations between the GPOMS indices and whether Dow Jones Industrial Average rose of fell each day.

Their extraordinary conclusion is that there really is a correlation between the Dow Jones Industrial Average and one of the GPOMS indices–calmness.

Unfortunately, there’s no definition of calmness though, apparently, there are degrees of calmness.

Read more about the wealth hormone or Twitter and stock market swings.

Grab Your Wealth

We live in precarious times when as it relates to our incomes, investments, and—ultimately—our livelihoods. So, how do we make sure our wealth, now and in the future, doesn’t slip through our hands?

We must first acknowledge that our wealth is our responsibility. Once we take responsibility, then we must go out and seize it.
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