Money Money Money Makeover

Feel Like a Million Bucks with a 9-Step Financial Makeover

By: Mike Peterson

There’s something very powerful about the idea of a makeover. It’s so easy to give in to the idea that a new hairstyle, different shoes, or even redecorating your living room for spring can transform you into a new person. A better person. A happier person. The media understands this: Flip on the television or scan the magazine rack at the grocery store checkout line and you’ll see a variation on the same theme. Women (and men, too) smile at the cameras and proclaim that a new car or home appliance or wardrobe has changed their lives. New stuff = New life? It’s a little more complicated than that.

We live in a spending culture. It’s no secret that most Americans are desperately unprepared for retirement, but many still choose to live beyond their means. And, while buying an expensive designer outfit or a 52-inch flat screen television might feel good in the moment, that kind of spending is what keeps so many of us from achieving true financial freedom. The old saying goes, “money can’t buy happiness.” It’s true. You can’t spend your way to a more fulfilling existence. But, money can provide you with a secure future – if you learn to handle it the right way, it can buy you peace of mind.

It’s time for a different kind of makeover: a Reality Millionaire™ makeover. Being wealthy isn’t about flaunting expensive cars and clothing. It’s not about having the biggest house on the block. If you want to be a millionaire in the future, you’ve got to start acting like one right now – and that means spending less and saving more. Start your Reality Millionaire™ makeover today with nine easy steps:

1. Pull out Your Parenting Skills
Managing money is a lot like raising a toddler. You have to keep track of where your money is and what it is doing at all times, even if you’re busy doing something else. If you invest in the stock market, you have to keep a close eye on the health and well being of your investments. Smart millionaires don’t dump a lot of money into something – stocks, bonds, a new restaurant enterprise – and just walk away. Without constant supervision, your money can get into trouble. Don’t leave it unattended.

2. Know Where Your Money is Going (and Who it’s Going With)
It happens to everyone: You pull $50 out of the ATM machine, and – poof – it’s gone. You sit down to balance your checkbook and find $200 unaccounted for. It’s not enough to watch your big investments; you have to keep a close eye on those little, day-to-day purchases, too. A few trips to Starbucks, a magazine here, a movie there – keep track of your expenses and find out where you can cut back. Living like a millionaire doesn’t mean throwing your money around without a care in the world. The truly wealthy can account for every penny of their spending. Make it a habit.

3. Budget, Budget, Budget
The key to building wealth is writing a budget and sticking with it. Sit down with your bills, mortgage, and monthly expenses and figure out exactly how much money you need to live comfortably. Make money-saving lifestyle changes, like cooking at home instead of dining out or running in the park instead of joining a fancy health club. And, remember to pay yourself first: Any millionaire-worthy budget includes a healthy contribution to savings.

4. Pay off All of Your Debt
I can’t stress this enough. There’s no excuse for debt. If you don’t have any debt, good for you. Keep it that way. If you do have debt, start paying it off. Now. You can’t save for the future if you’re still paying for the past.

5. Compound Interest is Your Friend
Compound interest is interest paid on the original amount deposited and on the additional amount accrued. And it’s worth it. Just to give you an example, if at the birth of your child, you put $5,000 in an account earning 10% compound interest, by the time your child is out of high school, she will have over $30,000. That’s enough to send her to college, to help with a down payment on her first home, or to pay for that big wedding. And, if your child left the money untouched, she’d be a millionaire at 60.

6. Don’t Pass Up That 401(k)
There is no reason not to take advantage of your company’s 401(k) retirement plan if they offer one. A percentage of your salary is contributed each year, before taxes are taken out, and your employer will often match a certain percentage of funds as well. That money gains interest over time. Not only will you have some money saved for retirement in the future, you’ll also reduce your taxable income right now. It’s a win-win situation.

7. Get an Individual Retirement Account
Like a 401(k), you can have a percentage of your annual income automatically deposited into a separate savings account, and it’s not subject to income taxes as long as you leave it there. Though it will be taxed once you withdraw it, by the time you do you will probably be in a lower tax bracket, saving you money. Your IRA fund can be in a bank, or in stocks, bonds, and mutual funds.

8. Or, Open a Roth IRA
A Roth IRA is similar to a regular IRA only with more conditions to be met. Your eligibility is based on your income, and is different for singles and married couples. In 2008, the maximum amount you can contribute each year increased to $5,000. Contributions to a Roth IRA are not tax deductible; however, earnings and withdrawals are not taxed.

9. Be Patient With the Stock Market
It’s the ultimate get-rich-quick story: A friend of a friend of your cousin’s became a millionaire overnight through a lucky investment in the stock market. Sure, it happens. So does winning the lottery, but you can hardly call that sound financial planning. The stock market is a complex game that involves guaranteed rise and fall. It requires patience. The market on average has gone up over the last 50 years. Resist the urge to sell at the first sign of a price drop, and you can slowly build a balanced portfolio – and future wealth.

A Reality Millionaire™ makeover is the first step to future wealth and financial security. When you use your money wisely, your money will work for you. That’s a great feeling. Like anything else in life, managing your money is about balance – and I don’t mean just the balance in your checkbook.Pay yourself first, get out of debt, and start investing. After that, it’s okay to treat yourself every now and then, but don’t get carried away. Remember: Showing off your wealth doesn’t make you wealthy –you can’t spend your way to fulfillment.After all, would you rather look like a million bucks, or actually have a million bucks? 2004 - 2008 - Reality Media Inc.

 Mike Peterson is the author of Reality Millionaire: Proven Tips To Retire Rich, and the President of Reality Media Inc. an organization that has assisted thousands of individuals and families with their financial situations through seminars, and educational products. For more information, to buy the book, and for free consumer resources that will help you achieve your Reality Millionaire™ makeover, visit www.realitymillionaire.com