Читать книгу Smart is the New Rich - Christine Romans - Страница 7

The first key to building wealth is to live below your means. The money you don't spend you put to work. For many years, it was the American way to spend more than we earned, using credit to pay for the rest. Millions of Americans burned through their money, justified by the false assumption that the price of their home would rise forever. Easy credit made people feel rich. When the recession hit, these spenders took the biggest hit financially. Today, smart is the new rich, and being smart begins with a budget. Even the word budget makes most of us cringe. It's a loaded word, full of limitations, that we think is more suitable for older generations. But a budget is the money version of a healthy diet. Once you identify the empty calories in your budget, you'll feel better and more focused.

A budget is simply a plan. And it's the nonnegotiable habit for growing wealth. Patrick O'Connell, executive vice president of the Ameriprise Advisor Group, works with thousands of financial advisers across the country. “The price of success is paid for in full in advance,” he tells me. Having a budget and saving money every month is paying yourself first.

“We see many millennials interested in building wealth who have to start building the savings plan first. Pay yourself first, and work the expense base off the remainder,” O'Connell says. He likes to start with these three steps:

Three Steps to Building Your Budget

1. Identify how you are spending money now.

2. Evaluate your current spending and then set goals that take into account your long-term financial objectives.

3. Trace your spending and make sure it stays within your guidelines.

Often, we feel as though we have a general idea of how much money is coming in and going out each month. But you've got to put down on paper every penny.

Financial expert Stephanie Genkin, a Brooklyn-based independent fee-only planner who advises millennials, says it's always possible to become a saver.

“I worked with a young woman who had no debt but liked to treat herself to expensive new clothes and books every month. We talked about what it would be like for her to scale back on her spending in order to put away a little money each month for retirement and a rainy-day fund. I got through to her by telling her what her life might be like 10 to 20 years from now without savings. She now contributes 3 percent to her 401(k) and automates a fixed amount of her paycheck to a savings account.”

There are helpful online tools and budget apps like www.mint.com to analyze your habits and craft a budget. Check out your bank or credit union website for tools to use for budgeting, tracking your spending, and automatically paying bills. Websites for money managers Fidelity and Ameriprise Financial have helpful tips for organizing which bills to pay. It's incredibly important to really know how much you are spending each month in every single category. Only then can you spend less than you bring in and grow the difference.

I grew up with a frugal father, who had very simple rules about money that he often boiled down to entertaining little rhymes, one of which is the basis for every budget: “Keep your burn rate less than your earn rate.” It means spend less than you earn. The budget helps you figure out how.

To get started, you need to ask yourself a few questions.

• Does your income money last as long as the month?

• Are you spending more than 28 percent of your take-home pay on housing costs?

• If you live at home, are you saving a little each month for a deposit on an apartment?

• Are you carrying a balance on your credit cards?

• If so, how many months will it take to be credit card debt–free?

• If your phone breaks, do you have money to get a new one?

• Your best friend from childhood just announced a destination wedding. Do you have the money to make it (not to mention the bachelor/bachelorette party)?

• If you have a job, does it offer a 401(k), and are you contributing enough to get the company match?

• Do you have three months' living expenses handy in case of an emergency?

Take note that I didn't even bother asking the age-old financial adviser question: At what age do you want to retire? That's because (1) it's nearly impossible for any young generation to really get their head around this question, since it's the last thing they think about; (2) forced savings plans like 401(k)s and IRAs (more on these in Chapter 8) help address the retirement issue; and (3) there are more pressing financial decisions facing millennials in the near term. Beyond the aforementioned “I have to pay for a new phone” dilemma, there are a host of other costs millennials have to prepare for, notes Ameriprise's O'Connell.

“Buying homes, selling homes, cars, children, weddings – you name it. So think about medium term financial goals and start building momentum. The first $5,000 or whatever your goal is to accumulate is the hardest,” says O'Connell. “After you reach that first goal, it becomes easier. So you want to focus on a strong financial foundation.”