Do you want to build wealth? The way most Americans build wealth is no secret: Save. Invest. Repeat. Keeping your wealth is a different story. One way to keep it is to buy a home. If you want to buy a home, AND have liquid assets for retirement, you’ll need to work hard, take some risks, and have a plan that you actually follow. You may not become a millionaire until you are in your 40s, 50s or 60s, but these secrets work. Follow these guidelines and … then share them.
1. One spouse – People who get and stay married tend to be much wealthier than never-married singles.
Married people by retirement age have nearly 10 times the financial assets of singles according to a study by the National Bureau of Economic Research. Divorce can dramatically shrink your wealth. While the mega-rich may be able to divorce and remarry with little cost, dividing assets can be very expensive for everyone else. As stated in research by Jay Zagorsky at Ohio State University, “normal” people that go through a divorce experience an average wealth drop of 77% (!). STAY MARRIED.
2. One house – Every time you sell a house and buy another, you’re giving up a chunk of your wealth to realtor commissions, moving expenses, mortgage loan costs and possibly additional taxes.
Trading up also means staying in debt longer if you get a new 30-year mortgage loan. Each time you sell a home you are responsible for the realtor sales commissions of up to 6% of the sales price. Moving costs can add up too. If your home has substantially appreciated, you also may owe capital gains taxes on the sale. The first $250,000 of home sale profit is exempt for singles or $500,000 for couples. Instead, if you stay in your house, the property taxes will only increase slightly. Buying a new house that is twice the price of your old one will increase property taxes much more. STAY PUT.
3. Paying off a single mortgage – Paying off a loan over time can leave you with an incredible amount of equity and very low housing costs.
Approximately 20% of homeowners do not have a mortgage. Once retired, a reverse mortgage is an option to give you potentially thousands of dollars each month to spend as needed. STAY THE COURSE.
4. Refinancing to a shorter term or lower interest rate – It can leave you with more equity and lower monthly expenses, keeping more money in your pocket or savings account.
During the last 30 years interest rates have steadily fallen, so refinancing to secure a lower rate has been a big savings to most every homeowner. Take the opportunity to shorten the term to 15, 10, 7 or 5 years to pay it off sooner. Call 714-310-4162 or email the Mortgage Fee Coach for options. REFINANCE WISELY.
5. Widely diversified investment portfolio — Safe investments don’t build wealth. Millionaire portfolios tend to be widely diversified with investments in stocks funds, bonds, cash and real estate.
Take risks, but do not gamble at investing. Returns on Treasury bills and bank accounts insured by the Federal Deposit Insurance Corp. (FDIC) do not keep up with inflation, which is losing you money. Most popular, according to the 2014 CNBC Millionaire Survey: Vanguard index funds. DIVERSIFY INTELLIGENTLY.
6. Education is a must – 9 out of 10 millionaires have a college degree and over 50% have a professional or graduate degree.
College can be expensive. But today more than ever, there are many ways of getting an education at lower costs through grants, scholarships, state schools and online classes. Nine out of 10 millionaires surveyed by BMO Private Bank in 2013 had a college degree. For comparison, just 36% of people ages 25-29 had college degrees in 2015 and only 9% had graduate degrees, according to the National Center for Education Statistics.
In the 2014 CNBC Millionaire Survey, 80% of the responders stated that wealth inequality was due in part to wealthier families’ greater access to education. If you are a parent, encourage your child to go to college. Also, you can offer to help pay for it, but not at the expense of your retirement! PROTECT YOUR RETIREMENT.
7. Hire a financial adviser – 7 out of 10 millionaires used financial advisers. Don’t do it yourself.
According to millionaires surveyed by the Spectrem Group in 2014, 7 out of 10 used a financial adviser. Financial investing takes time and hard work. The primary benefits are: creating a savings plan, improving knowledge of investing, having access to a wide range of investment opportunities, boosting returns, peace of mind and being able to delegate to experts. Financial advisers invest based on information, statistics, investment models and research. Balancing risk is very important too.
Financial advisers are far more likely to help you build your wealth than your own efforts to pick stocks, since most investors fail to beat the markets. You don’t need a room full of advisers, attorneys and tax professionals, but expert guidance is available by many companies and in many forms. Workplace 401K fund options and meeting with the financial adviser on how to invest is a great way to start. Automated withdrawals and investments from your paycheck is a perfect strategy. Keep a balanced portfolio and meet with an adviser every year to review your goals and dreams. SEEK HELP!.
8. Lower your taxes – By hiring a professional and experienced tax preparer, you can help decrease your taxable income by taking advantage of possible personal and business deductions.
If you have a big tax bill, that is good because you are earning plenty of money— but you certainly don’t want to over pay! Tax preparers save their clients’ time in preparing taxes, but they often help cut your tax bill, and the savings could be put into some investments and earning money instead. They are also up to date on all the tax deductions. And, they help save you from poor investments, such as variable annuities to defer taxes. Your tax preparer should be able to explain the gains and losses from investing in any unique items such as land, art, coins, movies, etc. HIRE EXPERTS.
9. Keep driving your existing car – Cars depreciate approximately 10% per year.
Millionaires own relatively simple cars — often domestic sedans and pick-up trucks, and they don’t lease or buy a new car every 4 years. Do what the millionaires do: “Leggo” your ego and drive happily in the 200,000 mile club. It’s a great feeling. Save your money. Invest it to appreciate versus depreciate. DRIVE SMART.
10. Hire Mortgage Fee Coach – By using the services of the Mortgage Fee Coach, you can save thousands in loan fees and hundreds in monthly payments.
In 5 minutes the Mortgage Fee Coach can determine if you are using the best quality, lowest rate, and best program lender. Our average client saves $10,000 on their loan, versus finding a lender on your own. CALL US.
The Mortgage Fee Coach can help you to achieve the lowest mortgage rates and fees possible. Call us at (949) 484-6332 OR email to dan@mortgagefeecoach.com if you have questions. The first 15 minutes is FREE.