Your Blueprint For Retirement by Teeka Tiwari

Wednesday, December 30, 2009

At no other time since the 1970s has it been so in vogue to be frugal. An entire generation of Americans will leave this decade behind, indelibly imprinted by the trauma caused by their over-spending.

Exercising fiscal caution and self-restraint are no longer the social taboos that they once were in the 1980s, 1990s and '00s. The good news is that this is the very skill that one needs in order to become rich.

Outside of those with trust-fund-fueled wealth, I've never met a rich person who didn't get there by spending less than what they earned.

Just by changing this one thing in your life will get you on the road to creating a tangible net worth for yourself.

It sounds so simple -- almost too simple.

But you know what? Life really isn't that complicated, and making money isn't that difficult once you have the basic principles down.

It's That Simple ... and Just as Hard to Get Started

Spending less than you earn is rule No. 1. You've got to get this one wrestled to the ground first.

Sadly, most of the Western world's population will absolutely refuse to do this. And you can't really blame them because, everywhere you look, you get bombarded with images and programs that promote a utopian world of effortless and consequence-free consumption of luxury goods.

Our first step is to wake up from this media-fueled hypnotic dream. Learn how to channel your desire to spend your hard-earned dollars into fueling your wealth-accumulation goals rather than your wealth-dissipation goals.

That's easy to say and very difficult to do.

Going against the crowd is always a challenge but, if you don't do it now, you will be doomed to an old-age fraught with financial terror and humiliation.

You've got to find a way to make that real for yourself. Do what you need to do to motivate yourself to make that lasting change to your spending habits.

A Creative Visualization Exercise

Imagine your income as a great river and, instead of pouring those life-giving waters over fertile fields of investments, you simply dump it into the open sea.

That's exactly what you do when you overspend. You siphon away the future life-giving potential of your income.

Once those dollars are spent, they are never, ever coming back again.

But a dollar invested will come back in the form of investment returns again and again and again. In time, those returns will be greater than your income.

Start Saving Your Savings

Clothes, furniture, vacations, restaurants, fancy cars, timeshares, vacation homes, remodeling projects, alcohol and cigarettes all need to come under the axe. These are areas where you can save a ton of money.

But, you may ask, where's the joy of living without a bottle of Jack and carton of Marlboros?!

I feel you; I really do. It's a simple decision called delayed gratification.

The question to ask yourself is, "Do I take a little deprivation now in order to never experience deprivation again in the future? Or do I take no deprivation now and nothing but deprivation in the future?"

It really comes down to those two choices.

I used to read articles like this as a teenager and scoff at the author. "But I make a ton of money" I would think to myself. "Why do I have to be cautious in my spending?"

It wasn't until a decade later that I learned that what you earn is immaterial if you consistently spend more than you earn!

I call it high-functioning poverty, when any speedbump in your earning ability essentially puts you in the poorhouse.

I'm telling you, friends -- it's no way to live.

Your Roadmap to a Financially Healthy Retirement

The way I see it, there are five keys to wealth-building:


1. Spend less than you earn.

2. Expand your income; work diligently, and continue to get better at what you do. Do more than what you are paid to do and, soon, you will be paid more for what you do. Meanwhile, your saved money/investments will be growing, providing another income source.

3. Get clear as to exactly how much money and the type of lifestyle that you want, and when you want it. Visualize yourself already in possession of that wealth and that lifestyle.

4. Successfully invest your surplus earnings -- 12% per year is enough to fund your retirement over a 20-year period; 20% per year will make you rich. Find a safe way to run your money at a high rate of return. (Read more on this below.)

5. Make your wealth last -- withdraw no more than 40% of your net annual gains each year to live on after reaching your principal and/or time frame goal. Alternatively you can withdraw 2%-4% of your total account value per year as retirement income.


Remember, saving your money is only part of the recipe; it's not enough to bake the whole cake. You've got to find a way to make your money grow by at least 12% per year and, preferably, by 20%-plus.

Find Your Favorite Ways to Make Money -- There are Plenty to Choose From!

There are many ways to do this: mutual funds, stocks, options, Exchange-Traded Funds, real estate, buying and selling collectibles and/or employing an excellent money manager.

You name it; there is always a way to make money.

The key here is not to be afraid to just let your savings sit in a money market account until you've become very sure and very confident of how you will grow your money.

Take the time to become an expert in managing your own money.

You've got to find a wealth-creating endeavor that speaks to you and your interests. Again, it could be investing in real estate or stocks, or buying and selling vintage Rolexes on eBay.

Turn an Income Stream into a River of Profits

Think about this as one example. If you bought just one income-producing property this year, then another income-producing property every three years after that, you'd have 11 income-producing properties after 30 years.

At year 30, the first house would be paid off and, every three years thereafter, another house would be completely paid off.

The income from 11 houses plus 30 years of accumulated equity will fund your retirement for the rest of your life, and it will do so with dignity. You'll be filthy rich with a great big fat monthly income.

Real estate investing offers one of the most-accessible ways to create a massive ongoing income stream as well as large net wealth.

But its not going to just happen for you without a ton of work. And that's the ugly truth of it.

(To learn more about real estate investing, Tycoon's resident real estate expert Ethan Roberts has a ton of great information for you on our Web site. Click here to access his article archives.)

Anticipating Your Heart's Desires Can Pay off in Spades

It takes effort to get rich -- lots of effort, inconvenience and self-sacrifice.

But once you've put your work in, you reach a point where the income from your wealth-producing efforts begins to eclipse the income from your job. And this fuels you to do more as your dreams starts to become a reality.

You find yourself infused with more energy than you ever thought you could experience. You become possessed by an overriding determination and will to win.

It's a truly glorious feeling!

So there you have it; my New Year's gift to you -- a blueprint for wealth-creation and a dignified retirement.

But remember, don't beat yourself up if you don't have it in you to do what it takes to get rich; not many people do. It takes focus, self-sacrifice and a STRONG VISION to get and stay rich.

When you are ready to make that change, the opportunity will still be there ... just don't take too long! The quicker you start, the quicker you'll be able to kick back and enjoy the fruits of your labor.