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Getting rich slowly or die trying first

Wed Jan 24, 2007 12:01AM | By Tony

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When I came to this greatest country in 1989, someone whom I met on the way to Chicago, told me, he was thinking about getting a degree in Accounting. I was puzzled since I knew him as not exactly a bookish type. Money hungry for sure, we all were, but Accounting ..., so I asked him why?

His exact words were - we have no clue, no slightest idea on how the monies are being made here, how they change hands, and what all those people living in huge mansions by the lake Michigan and driving very expensive cars are doing. Certainly, he went on, they are not engineers, scientists, not even doctors.

I didn't have a slightest of what he was trying to say, thinking the fella just mumbled. He never made it to accounting field, and I don't know where he is now. But only years later, I realized how right he was. Only after getting in the mortgage business, in the late 2002, I myself started to see a very tiny bit of "how the monies are being made here, how they change hands".

Why I am saying all this? Because I have met so many people born here and immigrants as myself, who don't know what is going on. Getting rich slowly isn't going to work, friends. Cutting coupons out, saving on Starbucks, and making extra $200 a month in interest after you take cash from 0% interest credit card and put it into CD or money market earning 5%, is a nice pocket change, but fundamentally, it isn't going to change anything.

To put it simply, being frugal is OK, but it will hardly help. Define what being rich means for you. Define your goals. Stop listening every guru who is only after your money. Learn a few fundamental things on how to manage the major expense - your mortgage. Get to understand, that you need much, much more cash than you spend, if you ever going to make yourself simply comfortable, forget rich. Get another job - the best one in mortgage or real estate. Try to understand how your income taxes are calculated, and why you are paying that much, or why you are refunded so little. Then you can afford starting saving on lattes, put cheap gas into your car and skip changing oil every three months or three thousand miles.

Here is another story, an acquaintance of mine. He is 48, may be 49 years old, makes about $69,000 a year, wife makes about $40,000. Two kids, a decent house with a $160,000 mortgage, some $20,000 in debt, virtually no savings except his 401K. Eats out every week in a major way, something like $80 to $100. Buys lunch every day, another $40 to $60 each week.

He went to Fidelity to get that 401k in order. He came back in shock, as some 25 year old kid from Fidelity told him, that he would need roughly $1.7 million USD to retire at 67, if he intends to live till 85 or so. For this, he needs to put away $5,000 each month growing on average at 9%. At this I started laughing - he takes home about $4,000 after taxes and his wife does around $2,600.

I didn't mean to be mean, I just couldn't help myself. Here is the middle management type, his wife works for a major insurance company, and are basically penniless. And there are millions like them.

I told him to stop fretting, stop eating out, stop buying lunches, and get a second job. Something meaningful, like becoming a loan officer or a realtor. He looked at me as I was trying to poison him and very slowly at that. Said that after the Super Bowl XLI, he may start thinking straight, but only if the Bears win. Poor guy will never understand "how the monies are being made here".

I told him then, he can work as a pizza deliveryman evenings and weekends to generate some extra cash to fund his retirement. Hell, that's how I started.

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