Simple Steps to Wealth

Last year, a colleague of mine gave a speech where he explained that we would need $1 million to retire. At the time, I thought he was crazy. I knew that there was no way I'd ever be able to earn enough to save that kind of money. At that point in my life, I didn't even see the point in saving money because I thought that even if I saved $400 a month for the next 40 years, I would still have nowhere near enough money to retire. If that was the case, why save at all, except for emergencies and major purchases? So that was all I did.

Fortunately, I started reading books about wealth building shortly thereafter, and I quickly learned that saving $1 million by the time I was 65 was not only a reasonable and attainable goal but one I would probably be able to exceed. I learned that through both the everyday choices that you make in how to spend your money and learning a bare minimum about investing, almost anyone can have a comfortable retirement and even live comfortably along the way. In case you haven't yet had the same epiphany that I've had, I'd like to give you some simple, practical steps that you can take that will not only help you become more comfortable financially but just as importantly give you the confidence that you can do it.

First of all, don't ignore the small stuff. The kind of toilet paper you buy says as much about you as the kind of car you drive. At Trader Joe's, you can get 12 rolls of toilet paper for $3.50. I have yet to find a better deal or even a comparable deal at a mainstream store, even Target (though warehouse clubs might be cheaper). Looking for small savings on everyday purchases will add up to significant savings over the course of even one year, let alone over the course of a lifetime. In addition to finding out which stores have the lowest everyday prices on the items you most commonly buy, keep your eyes out for sales and coupons, and stock up on items you purchase frequently when you're able to get them at a discount instead of waiting until you need them and are willing to pay the highest price. Learning how to save money on the small stuff will increase your confidence in managing your money. Also, saving money is generally even more effective than making more money because you don't pay any taxes on the dollar you save when you use a coupon, but you pay as much as 50 cents on any extra dollars you earn.

Second, don't ignore the big stuff. It doesn't matter how much money you save on the small purchases if you don't put that money into a savings account. It's common knowledge in finance circles that you should save a minimum of 10% of your income in order to be financially successful. I've always taken that to an extreme and tried to save 33% of my income. When I only made $900 a month, I lived off of $600. If you don't think it's possible to save 10% of your income, or if you aren't sure how to save as much as you'd like to, just ask me or any financially savvy person you know. They will probably not only be able to help you with minimal effort, but really enjoy doing it. There are many simple ways to cut your ongoing expenses that will make it quite painless to save that extra money each and every month. As you watch your bank balance grow, you'll gain confidence that you can be one of the haves rather than the have nots. While you're at it, make sure to put your savings in an account that earns real interest, like a money market account or an online savings account. Right now, you can identify these accounts because they are paying upwards of 5% interest while bank savings accounts are paying less than one tenth of that. Two accounts I like and can vouch for are Fidelity's money market account and ING Direct's savings account.

Third, educate yourself. It's actually very easy to learn the basics of sound financial management and investing even if you are not a math or business-minded person. If you're reading this article, you're already on the right track! Several books that I recommend are The Secrets of Wealth by Fabio Marciano, The Only Investing Guide You'll Ever Need by Andrew Tobias, and Mutual Funds for Dummies by Eric Tyson and Jim Collins. Also make sure to educate yourself about credit cards, because this is one of the most common areas where people can get into serious financial trouble. It's actually possible to make a lot of money off of credit card companies if you know how to play your cards. Credit card companies are constantly giving out incredible bonuses for signing up for their cards. But whether you're trying to qualify for one of these promotions or whether you're just trying to avoid finance charges and interest, it's important to understand how credit cards work and how to avoid becoming a victim. Once you are armed with a basic knowledge of personal finance and credit card management, you'll feel like money controls you--you'll know that money is something you control.

Most people think that the wealthy own expensive things and drive fancy cars. But the true hallmarks of a millionaire are an online savings account, a well-used library card, a cabinet full of cheap toilet paper, and a wallet full of coupons. You can do that, right?

Is Craigslist Worth the Hassle?

Many folks swear by getting free or cheap stuff on Craigslist, but for me, it just isn't worth the hassle. This is partly because I live in a large city and most of the items listed on Craiglist at any given time will be a) already taken or b) too far away to be worth the effort.

I think that the kind of person who is most likely to have success on Craigslist a) owns a pickup truck or other large vehicle (for large purchases) b) is strong and has access to extra help (again, for large purchases) c) lives in a small city, d) has lots of free time to stay on top of ads and pick up merchandise, and e) is not picky.

I've gone to look at a couch I saw on Craigslist before and found it to be a real waste of time. The couch looked much nicer in the photo than it did in real life so I wasted about an hour driving back and forth to go look at it.

Ebates, Fatwallet, Citi Dividend Mall, and Airline Merchant Networks

Whenever you make a purchase online, it's a good idea to see what sorts of bonuses or discounts you might be able to get. By first visiting sites like Ebates, Fatwallet, Citi Dividend Mall (for Citi credit card holders) and the various airline merchant networks you can earn some cash back or frequent flyer miles on a surprising number of purchases. Many merchants are featured on all of these sites (such as The Gap) but some are only featured on one or two (such as Tiger Direct) so I find that it's helpful to look around.

When you sign up for Ebates, you'll get $5 cash back credited to your account, which you will receive after earning $5 more in cash back. I've made $60 in cash back from Ebates this year, in part because I was able to earn credit for some larger business purchases. Sometimes you'll find killer deals on Ebates. For example, I used them to try My Wines Direct and got $10 off my purchase plus 7% cash back.

FatWallet also provides a $5 incentive for signing up and works similarly to Ebates. However, I prefer Ebates because they get your cash back to you faster.

The Citi Merchant Network allows you to increase the power of you cash back credit card. I currently have the Citi Dividend card that gives 5% cash back on gas, supermarkets, and drugstores (unfortunately, this card has been discontinued so new applicants cannot get it and I'm sure they won't renew mine when it expires next year). By first going to Citi's website, signing in, and then clicking on a link to the merchant you want to shop with, you can get 5% cash back on all kinds of retail purchases (the offers vary; not all are this high). Airline merchant networks work similarly.

The key to all of these sites is the clickthrough. You must always visit Ebates/Fatwallet/Citi Merchant Network/airline merchant networks first, sign in, then click on their link to the store you want to visit in order to get your cash back. Some programs post your rewards sooner than others--you may see your reward in as quickly as a couple of days or as much as a month. I always worry that my bonus won't come through, but it always has.

I've tried to be thorough with this article, but if I've missed anything or there's anything that's not clear to you, please leave me a comment and I will get back to you asap. I would love to teach you how to get these deals.