Reject Status  -  Embrace Wealth

Question: I'm trying to figure out by how much my 401k will grow over time, or for that matter even the exact amount to expect from a bank CD that I'm thinking about buying. Any easy ways to figure this out?

Answer:
If you want to see an excellent site that provides calculators to help answer your questions, check out www.moneychimp.com. To answer your questions directly, we'll use a couple of hypothetical examples. You can change the inputs accordingly.

Please click here to follow along with MoneyChimp's financial calculator.

To answer your questions, your...read more

Question: There's been a lot of news about a large bank failure, IndyMac bank of California, and its takeover by the FDIC. Is it possible to have more than $100,000 in one bank and still have all the money insured by the federal government?

Answer:
The typical quick answer is that deposits are only insured up to $100,000. However, there are some nuances to the rules that actually allow a person to have more than $100,000 deposited in a single bank . . . and he or she may find that all of it is insured by the federal deposit insurance corporation (FDIC)...read more

Question: What are the benefits of U.S. savings bonds?

Answer:
Although the typical investor may find clear advantages of holding "series I" savings bonds to offset the negative effects of both taxes and inflation, anyone interested in saving for a child's college expenses may be particularly interested in U.S. savings bonds. The following advantages are specifically meant to be contrasted against what investor/taxpayers do not receive with bank savings accounts (including CDs).

1) Income Tax Advantages (click here for more on this topic):

• Taxes may be deferred indefinitely on...read more

Question: What are some quick ideas to ensure wealth building?

Answer:
Here are some very basic ideas that help build wealth every day:

1) Without fail, save an absolute minimum of 10%, and ideally 15% of monthly pre-tax (gross) income.

2) Invest the savings in retirement accounts, an emergency savings account with 4 to 6 months of living expenses (in case of layoff or major medical emergency), and...read more

Question: I have read somewhere that among America's millionaires there is a disproportionate number who are small business people. Why is this so?

Answer:
Unlike most top executives of very large corporations, the small business owner (SBO) has his or her own capital at risk in the business… and it is often the SBO's life savings at stake. Tom Stanley and William Danko published a financial classic in the mid-1990s, The Millionaire Next Door. Millionaire revealed that approximately two-thirds of non-retired millionaires were SBOs.¹ The fact that...read more

Q. How Does a Middle Income Earner Get Rich Faster than a High Income Professional?

A. The average American household in 2004 saved less than 1 percent of pre-tax income, according to the United States Federal Reserve Board¹. You need to fully appreciate what an astonishing figure this is. In the mid-1980s, the average household saved approximately 11 percent of income; that is, only 20 years ago the typical household had a savings rate 10 times better than now.

Among the conclusions drawn from this sobering information is that the average household in the mid-1980s was...read more

Q. Besides saving and investing, what are some other steps that a person can take to build up financial power?

A. Some people are born to wealth; and many of those who are born to it take up an inordinate amount of the media’s attention. For the overwhelming majority of Americans however, financial power is not handed out at the dinner table. Your challenge is to make your own financial power, even if you have to do so incrementally.

The discussion below is not meant to encourage anyone to take out loans or otherwise seek out debt via credit cards. However, for those people who do borrow, the items demonstrate some of the better approaches to take when...read more

Question: How much should I plan to spend on a mortgage?

Answer:
First and foremost, you should make that decision based upon objective guidelines. Warren Buffett will tell you, don’t ask your barber whether you need a haircut. In the same vein, don’t ask a real estate agent, or anyone connected to a lender how much you should borrow or “can qualify for”. Anyone who will benefit from the size of your loan/purchase price of your home is inherently disqualified from giving objective advice.

Even where objective information may be found, it may be tainted as well. Today, the ...read more

Q. How can young adults establish a very strong credit record?

A. Multiple factors comprise a credit score. Payment history is an important one; however, the length of time that an account has been open, total amount of debt owed, the total number of credit accounts that are open, the amount of available credit, the length of time with the same employer, are some of the other factors that can help or hurt a credit score.

Here are some of the ways that people cripple their credit:

• Late 30 days or more on a bill; the longer a person is delinquent, the worse the score gets. That is, 60 days late is worse than ...read more

Question: How are my taxes affected, depending on where I live in the U.S.?

Answer:
Imagine that a couple earns $65,000 per year. Are they middle-income? If they live in Kansas City, Missouri, then they would earn fully 40 percent above middle income for that area. Alternatively, if the couple lived in Alexandria, Virginia, then they would earn fully 30 percent below middle income. In an exceptionally odd twist of fate, Congress, through the auspices of the U.S. Tax Code, implicitly treats all taxpayers as if they live in the same metropolitan area; and therefore, the cost of living is treated as the same for ...read more

Question: What are some physical defects that can seriously undermine the purchase of a home?

Answer:
Certain physical defects can be considered as absolute deal killers, unless you have very specific knowledge and proven expertise in remedying these issues:

-- signs of mold. Mold is one of the select few things that can render a home 100 percent uninhabitable. Mold spores most often show up in very humid climates and in dark places. So, for many unsuspecting home buyers, mold may be lurking in the basement of a house. As most know, ...read more

Question: Do people waste their time saving for a down payment when they are paying rent in the meantime?

Answer: Certain implied assumptions are built into this kind of question. Some of those assumptions are:

1. Housing values in the zip code where you want to purchase are rising.

2. You lose money by paying rent…

3. The advantage of a lower interest rate (obtained because you have a full 20% down-payment) is...read more

Question: How does a regular person gain wealth? I don’t make nearly enough money to get rich.

Answer:
The first step is to decide that no co-worker, acquaintance, friend, or relative is worth impressing with material articles. (Feel free to impress them with your sense of humor, or giant heart). This means that if you have the wherewithal to conscientiously reject "material status", then you can find ways to cut spending. Although there are many ways to cut spending, some that may help immediately are: buy discount clothes, discount coffee, discount cars, and a discount home. With no one to impress with material objects, you can...read more

Question: “How much money should I be saving to invest”?

Answer:
It is generally recognized that people should be saving at least 10 percent of gross income for the purpose of investing. Gross income is “pre-tax”; whereas Net income is “after tax”. If you want to live a truly financially-secure existence, then saving 15 percent of gross income is the better goal. These numbers are premised upon the idea that the savings rate is maintained year after year over a period of at least 25 years. If you save 16 percent for ...read more