Raising A Millionaire: Weekly Digest

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Raising A Millionaire: Quote of the Week

"Our greatest glory is not in never falling, but in getting up every time we do."


Raising A Millionaire: Article of the Week
Must-Do Items for 2007

There's no shortage of advice on the hot investments for 2007, but as far as I'm concerned, the best financial moves you can make are not about the outlook for corporate earnings growth or capitalizing on geopolitical trends.

Far more important is how good a job you are doing at taking the best care possible of yourself and your family.

Here is my checklist of must-do items for 2007:
  1. Lose your balance.
    The credit card bills for the holiday season have rolled in along with them remorse for many.

    I have always considered the beginning of the year to be the most financially dangerous; it's when so many of us set in motion decisions that can either save us or sink us. The most pivotal decision is what to do about those credit card bills: pay them off completely, or just pay the minimum due and start running a month-to-month balance.

    This is your big moment to do what's right, not what's easy: Find a way to pay off the bills completely. It sets you up for a much more prosperous 2007 and beyond.

    Not only will you avoid the high interest charges, but you'll have made the most valuable of resolutions: Choosing to be powerful over your money, not vice versa. That sense of accomplishment and control will have an incredible effect throughout your personal and financial life.

    Wondering where to come up with the money? Well, if the interest rate on your credit card is higher than what you earn on your savings account, I say tap the savings.

  2. Make sure you rate high.
    Everyone loves to talk about what is going on in the stock market, but I have yet to hear anyone boast about their great bank savings rate. However, not paying attention to what you earn on your savings is a costly mistake.

    First, do you even have a separate savings account, or do you just let all your cash sit in your checking account? Most checking accounts that bother to pay any interest on your balance offer a lousy rate -- less than 1 percent on average -- or require you to keep too high a balance to qualify for a decent rate.

    Meanwhile, there are plenty of savings accounts -- especially at Internet banks such as EmigrantDirect and HSBC -- where you can earn about 5 percent right now. That's too huge a difference to ignore.

  3. Win the match game.
    About 20 percent of people eligible for a company match on their 401(k) contributions don't invest enough to qualify for the maximum match. That's equal parts misguided and tragic.

    No matter what's going on in your financial life, it makes no sense to turn down this great deal from your boss. Make sure you invest enough in your company plan to snag the maximum company match.

    Consider this: If you turn your nose up at the opportunity to get an annual match of just $1,000, over the next 10 years you could be throwing away not just $10,000 of retirement money, but more like $100,000 or so.

    How's that? Well, if you manage to earn 8 percent on the company match, and after 10 years just let what has built up continue to grow for another 25 years, that's what the value of the company match could grow to. I'm assuming you and your family can't afford to ignore six-figure payouts.

  4. Face your mortality.
    What's mortality got to do with prosperity? Everything, if you love your family.

    I know this isn't exactly a favorite topic of conversation, but if you have any dependents -- be it young children, a spouse, or older parents -- you want to make sure they're provided for even if you die prematurely.

    If you're at a stage in your life where you have yet to build up sizable assets, the simple solution is a term life insurance policy. I mean it when I say it's simple: Term life is easy to purchase and incredibly inexpensive. A 40-year-old, non-smoking male in good health can buy $1,000,000 of coverage for just $100 a month or so.

  5. Stop kidding around.
    This one is for the parents of young children. If you want your kids to grow into happy and responsible adults, you need to take the time to teach them about personal finance. Don't assume they'll just learn as they go, or get instruction in school.

    I often hear from young adults who feel let down by their parents on this front; the kids end up running up huge credit card debt in college because they had no clue what was going on, or they panic when they learn Mom and Dad have "paid" for everything by going deeper and deeper into debt themselves. These young adults now face the reality of having to support not just themselves, but also their parents.

    The single best gift you can give a child is to teach them the incredible value of living within your means. This doesn't have to be a downer, and you're not being mean. You are, in fact, liberating your kids -- they won't grow up to have a screwed-up approach to money that leaves them deep in debt and deeply depressed.

    One of the smartest financial moves you can make is to give them a credit card education. If you have a solid FICO credit score -- above 720 or so -- then I recommend adding your teenager to the account as an authorized user. It's their training wheels in the world of finance.

    Let them use the card, and involve them in the bill paying; literally have them sit down with you when it's time to send in the payment. Explain the dangers of falling into the minimum payment trap, and the cost of paying high interest on an unpaid balance. They may not thank you in 2007, but in years to come I guarantee they'll thank you for giving them the tools to be financially smart and secure adults.

Raising A Millionaire: Other Articles

How Much Do I Need to Save? - A lot of people have heard about the "three to six months of living expenses" rule, but do you know about the exceptions?

Saving Options - Learn about your options: money market accounts, certificates of deposits, Treasuries, bonds, and more.


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