Are You on Your Way to Being Wealthy?

CATEGORIES: Investment Planning

Post by Vered DeLeeuw*

When people ask me to recommend a great investment book, I almost always suggest they start with “The Millionaire Next Door.”  It’s not really a book about investing – it’s a straightforward personal finance book with a simple message: If you live below your means and save aggressively, you too can become financially independent, even if you were not born with a silver spoon in your mouth.

I agree with the book’s premise, and I have a real life proof that it works: my own parents. They started out with literally nothing. My mom grew up poor. My dad came from a wealthy upper middle class family, but had received very little financial help from his parents – they always believed he should work and build himself financially.

So he worked. My mother did too. They both worked hard, saved aggressively, and refused to get sucked into an expensive lifestyle and into competing, or keeping up with the Joneses. Indeed, one of the most important observations in the book is that most self-made millionaires consider financial independence as more important than acquiring social status through spending.

It’s not that my parents didn’t enjoy life through all these years of working hard, living below their means and saving. The book’s critics often claim that the book promotes an anti-social lifestyle of secluding oneself and hoarding money, but this is not true at all. My parents traveled extensively, entertained friends and family, and spent money on the things that were important to them. They did not, however, live in a big house or replace their car every year. They never borrowed, except for the mortgage on their home, which they have repaid in full in 15 years.

Now, in their early sixties, they are financially independent. In fact, my father was able to fully retire at the age of 55.

But why are we discussing personal finance issues, and money beliefs, in an investing blog? Sure, we discuss investing all the time, but one needs to have money in the first place in order to invest it. You can dream about winning the lottery or hope that your startup will be the next big thing. It happens. But in the vast majority of cases, it’s not about a “big break,” but more about saving day by day and month by month. And once you begin saving, you’ll have money to invest – that’s when services like Jemstep can help you invest wisely.

Of course, we live in a culture that promotes the exact opposite of living below our means. There’s a lot of pressure to live way above our means, and to finance the difference by borrowing. This irresponsible borrowing had led to the Great Recession, and in a way, that recession has taught us that borrowing in order to live beyond our means might not be such a great idea after all. Frugality is now more desirable, even a trend. But will it last? Only time will tell.

As a society, we have grown accustomed to assume that if one appears wealthy, one is indeed wealthy. But in many cases, those around us that lead a lavish lifestyle are financing it with debt. They are not truly wealthy, because their “wealth” will evaporate if they lose their job. Many are not investors either, because they don’t have money to invest – rather than save money in a tax-friendly 401(k) or IRA, they are spending their income on over-consumption. The truly wealthy often don’t appear to be so – they live below their means, save aggressively and invest wisely. And because of the magic of compound interest, the earlier you start, the higher your chances of eventually becoming financially independent.

Are you on your way to being wealthy?

*Vered DeLeeuw is a freelance writer and blogger. She writes about a wide range of topics, including personal finance, real estate, marketing and self-improvement, and is a frequent contributor to the Jemstep blog. Vered lives with her husband and two children in the San Francisco Bay Area of California.

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The team at Jemstep is dedicated not only to helping you make better investments, but also to enlightening and educating you about financial markets and responsible investment decision-making that will help you achieve your financial goals faster.

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19 thoughts on “Are You on Your Way to Being Wealthy?

    • Absolutely true the bible says what does it profit a man to gain the whole world but to lose his immortal soul? instead of looking at life as merely this short time we spend on earth, we should be asking ourselves where do we want to spend eternity in Heaven or Hell?
      if you understand those implications you soon realize that what Jesus said is true; it is much wiser to spend your time using  your wealth here on earth by building the kingdom of God and thereby building up the kingdom of God where neither moth, nor rust nor thieves may break in and steal your wealth, but store it up in heaven where you will have eternal rewards that can not be taken from you. Jesus is the best financial investment counselor I have ever heard of. No surprises there….. 

  1. I don’t get it. Everyone touts the magical “compound interest”. With it stuck at 1% for the last X years, it’s hardly a factor. 70 years to double your investment ONCE. Nowhere near the 5-7 years in the 80s when interest rates topped 10%!!

  2. If you are only gaining 1% per year, you’re not investing in the right things. check out some dividend-paying stocks and you’ll do much better, or invest for growth, or go for a moderately aggressive mix. If you are too conservative, inflation will eat your investments alive.

  3. Bunch of rookies posting here. I’ve been investing, living beneath my means since 1973 and will retire in 2012 at 57 with no bills, $1 million in assets, military pension, fed civil service retirement at 62 and social security to come. Either you planned to fail or failed to plan. Not me, I’m looking forward to all my free time starting in 2013. Anyone can do it if you have a plan and stick with it. Retire early or work until you are 70, your call.

    • People like Al who are “triple-dipping” Federal retirement plans are bankrupting this country. 

      As for Al himself, in 10 years, I think he’ll see cuts in the pay of one or more of those pension plans.  Right now, he arrogantly thinks he’s got the world in a bottle.

      • No, people who have worked all their lives and earned federal retirement are not bankrupting this country. People who refuse to get off their couch and get a job, and accept government assistance, even tho they are able bodied individuals, are bankrupting this country.

    • No man knows the future, I hope you die in 2013, then you will appreciate saving for nothing, because none of us are God and none of us have any guarantees on how long we will live. This scenario is no more absurd than the man who saved and planned for nothing but on the day he dies, he wins the lottery but will never get to spend it! Making assumptions is foolish, the bible states that no man knows the future only God, much wiser to put your faith and trust in God rather than your own plans or in money. Realize you can do nothing unless God allows it, because you are not in control even of your own life, only very limited choices that God allows you to make. 

      • Here’s a scenario none will like but all may have to swallow: The Eurodollar crashes and takes the US Dollar down with it 6mos. later. The paper currency and bonds all fail and become worthless. Precious metals and diamonds are the only thing that maintain value but the US gov. forces all owners of bullion to turn in their gold and they reissue it later backed by new currency like they did during the last depression. The only owners of precious metals are those who have in in the form or art or coins. The gov. does not want to get into a pissing match arguing over value on these collectibles so does not try to force confiscation..Millions lose homes because they can not pay mortgage debts and taxes with precious metal coins and gov. and banks refuse to take worthless dollars.This is exactly the scenario predicted by Anderson Williams (see Alex Jones talk radio Dallas Texas about (Illuminati-es-secret-organization) plan to bankrupt USA and cleanup financially for themselves afterwards).Fed Reserve is neither federal nor a reserve merely counterfeit agency that was created during Wilson’s presidency as a means of allowing the world bankers to bankrupt the USA and take total control of our country by controlling the money supply).The USA government could use the bankruptcy of the dollar as a means to cancel all previous debt, and reissue a new currency backed by either gold or oil.(OIl companies are now in a rush to develop gas deposits in USA N and S Dakota as well as Alaska, and cut off dependence on all middle east oil.) Pressures will continue on USA because China wants to make their currency backed by gold, and wants to have their runimbi currency the next “world reserve currency like the dollar is today).Any personal plans you have for your money can be destroyed overnight by the economic disasters that are coming.The bible says to put your faith in God not man and not money.Look up for the believers in Jesus, your redemption draweth neigh (Kings james english for jesus is coming back get ready to go!)

      • Since you like to speak for God, I am assuming that you are familiar with the Bible. True, it tells of the rich man who builds bigger barns then is called by death.  But…there are many stories which encourage saving ‘for the lean years’ (and believe me, they are coming to a debtor nation, and a nation of debtors!)
        Your comments infer envy and a lack of preparedness. Hoping this man will die sets you at odds with the Creator and Sustainer of life.  Beware and if you are honest with yourself…repent.

      • What an incredibly dimwitted comment you’ve managed to concoct. We know the chances of a 57 year old man living to 70 are more than 85%. So what you’re saying is, if there’s a 85% chance of him benefiting from retirement, and 15% chance of him not, he should OBVIOUSLY choose to spend all his money rather than save, JUST IN CASE the 15% scenario happens. If he followed your advice of not saving and instead living paycheck to paycheck, he would have 100% chance of working his entire life. He would NEVER be able to retire because he never saved any money he made.

        I’m going to say something not quite so horrible as you said to him. I hope you LIVE to be 200! Instead of being smart and saving up to retire around age 60, you would instead save nothing, just in case you die early. You will work every day of your life and I’m sure work gets a lot harder after you reach 100. Rather than sacrificing a very small portion of your income in your youth, you end up in a much worse situation by not planning for the future.

        Having said that, you really think just because you didn’t get to spend every dime you had, it goes to waste? If he dies prematurely, his $1 million in assets will be transferred to his spouse (with no estate tax I might add) and can be used for the benefit of his children of grandchildren. You have a very flawed understanding of money. You seem to think that simply because you leave behind some portion of money that you didn’t get to spend on some fancy car or device you don’t even really need, that it is going to waste.

        As for your constant references to God, I understand that religion places no importance on statistics or logic. But the fact that a scenario has 85% chance of happening, but you consider it “foolish” to assume it will happen just indicates to me your lack of basic critical thinking skills. Good day to you sir, and let’s hope your God can forgive you for telling a man that you hope he dies next year.

    • Well done, Al.   One thing I would advise you to do, though.   Take a 2 week vacation and stay home.   That’s what retirement feels like.   At the end of that, you will know if you are mentally ready to retire.  

    • Many who have guaranteed income from government jobs, military pensions love to boast these days…how much wiser, smarter they are and have been…I noticed you began by calling people “rookies” who have not made the choices you have.  I know many hard working giving , sacrificing people who have lost businesses, homes, had to care for elderly parents, been devasastated by illnesses, surgeries, children returning home with their children, losses and tradgedies that were not “planned”…For being in the Military and supposedly having seen much misery and “Man’s inhumanity to Man,” you seem to have none of your own….much like Ebenzezer Scrooge you have wealth without compassion…I pray God will grace you with a visit from three ghosts…you could use it.

    • How appalling…and I am from a Military family. Having “served” I am amazed at your cold disregard for the suffering of others. Braggart.
        I notice you begin with the slight “rookies”…How very childish indeed.It is interesting that many who are receiving guaranteed government or military pensions,these days, seem to enjoy boasting and glorying in what, they feel, are or were their wiser, smarter choices. They also seem to enjoy rubbing it in peoples faces as you are. And you are probably content with the idea that that 70 year old or 80 year old “rookies” who have lost everything and need to work at Wal-Mart will continue to contribute his or her taxes to allow  for your government pension to be paid on their backs….till they die I suppose. You could be passing someone’s Dad or Grandfather, maybe even a Vet in your Hawaiian shirt and sunglasses oblivious to their personal pain and loss. Shameful. In this terrible Great Recession and economic collapse, so many have suffered. I know good hard working sacrificial people who have lost businesses, homes, jobs, retirement funds, cared for elderly parents, had children move back with their children, been stricken with illness and disease, surgeries, and incredible tragedies that have devastated their lives and these certainly were not “planned. I have two Grandfathers who lost their family businesses in the Great Depression.  One became the janitor at the church to care for his family, the other lost his store and went back to the Coal Mines to die of Black Lung. They are my heroes.  
      You must not be familiar with Charles Dickens. I am reminded of Ebenezer Scrooge who gained much in wealth yet had no soul of compassion…I pray God grant you  a visit from three ghosts…you, sir, most certainly could use it.

  4. Vered,

    Like rh already suggested, your title has no connection to what you wrote. That automatically makes the article itself a failure.

  5. “Magic of Compound Interest” That was true when interest rates were 7-10%, but todays interest rates don’t come close to keeping up with inflation, which will get much worse as Bernacke continues to print money day and night……. 

  6. The truth expressed in this article is not new. It’s a review of the ancient story of the “Ant and the Grasshopper” (written about 500 BC). Make sure your children know this story well. As they get older make sure they know and practice it’s true meaning. If they do they will never have financial troubles.

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