Wealth and how to manage it

I have long held and will continue to hold to the notion that wealth is not just about money, but I do recognize that money certainly is an important component of wealth. Most folks want more money. Billionaires want to be multi-billionaires or maybe even trillionaires. Millionaires want to be billionaires and minimum wage workers typically seek a better job or at least a pay increase. Such is the nature of the human condition. What I am about to discuss will not in itself transform anyone to millionaire or billionaire status but it can very much help your overall financial condition. There are many ways to grow wealth but what follows can improve everyone’s financial condition regardless of where it may be at the moment.

First of all tithe to thyself. With every pay check or should you be self-employed with receipt of every penny of revenue, immediately take ten percent and put it not in a bank account but rather in a good mutual fund. Most of the leading stock funds are currently yielding above 15%, way more than any bank account. Sometimes this can be done as a 401{k} or a HR-10, thereby creating for yourself a further tax advantage. But with or without tax advantage open a mutual fund account and deposit 10% of everything you earn into that fund. Need some help selecting a fund? Okay check out what US News has to say right here.

Yes mutual fund returns will go up and down somewhat over time but the good ones, and that is most of them, will always beat a bank yield.

I am also talking here about your net income. True you will have income tax and social security tax taken from your paycheck but don’t be fooled. The amount of social security payment you will someday receive will never be enough for a happy retirement. I also know that a typical person age 20-something has virtually no real concept of retirement but 100% for sure absent premature death you will eventually get there. The question is will getting there be a happy experience or one filled with stress caused by inadequate cash flow? By tithing to yourself you will be taking a huge step forward towards assuring a brighter future for yourself.

Then the is the matter of credit card debt. It is brutal. Today virtually all credit cards will charge 24% — sometimes even more — on any unpaid balance. Oh and running those balances up is just oh so easy and the credit card companies know that. So there you are in watch store and before your eyes is a truly beautiful Swiss watch. The regular retail price the sign says is a whopping $10,000 but today only it’s on sale for a mere $6,500. That is a 35% savings and your credit card has a limit large enough to handle the transaction so why not? The interest alone on that transaction if not paid in full at month’s end is a tidy $1,560. But it gets worse because that $1,560 is added to your overall balance. So let’s say your minimum payment is $200 a month and you make that iminium payment but of that $200 payment $130 goes towards interest so your total balance is reduced by only $70.00. Oh and don’t worry, keep making those minimum payments and your credit card company will cheerfully raise your credit limit so that you can dig ever deeper in debt.

These credit companies are very smart. They know for example that a certain percentage of people will get so overwhelmed that they will file bankruptcy, thereby fully cancelling the debt. But most folks will not file bankruptcy but will simply struggle along keeping their balances high and over time giving up thousands maybe even tens of thousands of dollars in interest payments.

Yes, of course there are legitimate times when most folks need good credit. Buying a home or a car are typically not cash deals. But current mortgage rates are around 4% NOT 24% and even car loans rarely exceed 9% so the amount of interest bite is far smaller with such big ticket items which ought to give you some cause for thought.

Why? The answer is simple. Most folks need a car and want a home. But what is most often bought with a credit card is discretionary in nature and not essential. It is that spontaneous purchase that cranks up that credit card debt and begins the process of exhausting ever larger portions of your income. Want to live better — STOP IT.

Yes there are many advantages to having a charge card. For one thing a quality charge card can be very protective of your money. But please note I am now talking about a charge card and not a credit card. What is the difference? With credit cards you can run up a balance and pay it down with huge interest over time. With a charge card you can charge a purchase but you must pay the full balance due every month. Yes, that does require discipline but it also eliminates interest payments.

One of the very best charge cards I am familiar with is the American Express card. Yes there is an annual fee but that fee is far less than typical a interest payment on more common credit cards. Also American Express has a rewards program and frankly admit I don’t fully understand its full measure.

What I do know is that not infrequently purchases I make on Amazon with my American Express card end up costing me nothing thereby creating a benefit well beyond the annual fee. No interest charges and frequent benefits well in excess of the annual cost and one other important thing, it has happened on occasion when I have an issue with a charge. American Express has always resolved it immediately and to my full satisfaction.

And NO this is not a paid ad for American Express. But yes using that American Express card does require real discipline or you can get yourself in some trouble when the amount due for a particular billing period exceeds your ability to pay. Knowing that makes you think before you buy and that is yet another great benefit.

Do just these two things, tithe to thyself, and get rid of your credit card debt and over time your financial condition will improve dramatically. Yes it will be hard at first but then all things worthwhile take effort and focus. Doing this will absolutely improve your wealth and that fact will over time significantly enhance your level of happiness.

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