Want to be a millionaire?
Of course you do. More important, you actually may be able to do it.
The biggest obstacle, however, is that most people want to become millionaires overnight, whereas actual millionaires usually are made over decades. That requires discipline, something you can't buy late at night for three easy payments of $19.95.
The key is to recognize that making a million is as much about making choices as it is about making money. Time and self-control can have a bigger impact on your net worth than what you earn each month, and the more you have of each, the better your chances of building a fortune.
So how do you do it? Here are some wealth-building basics used by the millionaire clients of five Omaha, Neb., financial planners.
Without a strategy to reach your goals, good financial fortune probably will elude you, said John "Buzz" Garlock, senior vice president of RBC Dain Rauscher in Omaha, Neb.
"Apart from an inheritance, the lottery or marrying well, there aren't any sure ways to get rich quick," Garlock said. "You need to have a plan."
He said people must be flexible with their plans and willing to change course as life changes -- due to children or health issues, for example. You also may need to recalibrate your investments as the outlook for markets changes over time.
For some, developing a plan may reveal that it's necessary to defer retirement by a few years or to lower expectations, said Jeff Sharp, investment adviser for the Silverstone Group. Because increased longevity means retirements last longer, Sharp said he tells clients to save at least $240,000 for each $1,000 in monthly retirement income they desire.
It's a rule of thumb, but the figure helps clients recognize how far off their goals might be, he said.
It helps to have a high salary if you hope to amass a fortune, but the attributes that make people into millionaires have more to do with their spending and saving habits than their job titles, said Jim Lammers, a certified financial planner for Securities America.
"They have the discipline to avoid the consumer traps that are out there," he said, "such as overdraft protection, revolving credit and paying the minimum (on their credit cards)."
Using debt to buy appreciating assets such as a home is generally good, he said. Using it to buy a flashier car or a flat-screen TV is just mortgaging one's retirement years -- at a very high rate.
The surest way to wealth is following a regular savings plan, said Bryan Johnson, head of private client services at Wells Fargo.
"One of the main things -- participate in your employer's 401(k) plan," especially if the company offers matching contributions, he said.
"That's one way to expand your savings rate without using personal dollars."
Such plans increasingly offer a wide array of investment options, including international stocks and real estate, that will allow investors to diversify their investments, a strategy that increases potential returns while decreasing potential risks, Johnson said.
For those who have the foresight to follow the "save more, spend less" philosophy from an early age, amassing $1 million or more is relatively easy. But if you're starting late and trying to catch up, it's even more important that you save first and spend what remains, because ... each passing year makes it harder to catch up.
"There are a lot of baby boomers who have not thought about saving for retirement," Sharp said. "They have a short window of maybe 10 years they can save for retirement. They need to maximize their saving rate for that time."
Garlock added that for investors starting later, but who still have a long horizon, taking a more aggressive approach also can help them catch up, although it increases the volatility of the investments.
Lammers has a stock tip that he said has helped a lot of his clients become millionaires: Don't listen to stock tips.
"It's amazing how people will rely on information from a cocktail party or a brother-in-law," he said.
He and Philip Mead, a chartered financial analyst at Feltz WealthPlan in Omaha, Neb., agree that investors need to build a well-diversified portfolio so they can get good growth without taking on excessive risk or having to do a lot of trading, which can rack up fees that eat away at their money.
"Buying and holding across a broad asset class system produces superior results given a significant time frame," Mead said. "Being diversified, you're giving yourself the best opportunity over the long run to minimize risk and get your investments to perform."
Sharp said there is another road to becoming a millionaire: Start a business. It has more perils, but also can generate greater wealth, said Sharp, noting that the majority of his ultra-high net worth clients -- those with $10 million or more -- own or are partners in a company.
"For an employee to be disciplined and save, it's just a challenge to accumulate as much as $10 million. If you own a business, you take on more risk, but there's a significant reward if the business pans out," he said.
Is $1 million enough?
The millionaires club is still a pretty select bunch, with just 8.3 million on the planet, according to the 2005 World Wealth Report from Capgemini, a global consulting firm.
But for many Americans, $1 million may not be enough, especially if they hope to maintain their standard of living over a 25- or 30-year retirement, Mead said.
"The baby boom generation facing retirement -- it's a really active generation," he said. "They don't want to just move down to Florida and sit in the heat. They want to do stuff in retirement, and that stuff costs money."
And, as Johnson noted, inflation means that younger people will need to save more than $1 million, possibly much more, to buy the same amount of stuff.
For example, today's 25-year-old would need $3.2 million to buy at age 65 what a retiree could buy with $1 million today. A 35-year-old would need $2.4million.
So start saving already!
Source: Omaha World-Herald.
