It might seem a little funny to be reading something about wealth on a cheesy web site by somebody you've almost certainly never heard of. I'm certainly not a wealthy guy, at least by the measure most people would use. So, what makes me think I'm qualified to expound upon this topic? Simple... I'm on the path to wealth. Not necessarily hundreds of millions of dollars (would be nice, but isn't likely to happen... I'm not a genius, nor am I ruthless, nor am I this driven Type A personality who works three jobs 20 hours a day), but "wealth" as in taking care of all of my obligations, having a safety cushion, preparing for retirement, and enjoying my life.

So, what is the secret? The secret is, there is no secret. This is simple, easy, common-sense stuff, but sometimes it needs to be spelled out for us. We live in a consumer-driven, materialistic society that actually discourages true wealth creation. And before you stop reading in disgust, thinking that this is going to be some hippy left-wing happy-happy joy-joy nonsense about having nothing and living off of the free abundance of Dumpsters... it is not I am all about profit, capitalism, earning money, investing, etc. The basic tenets of acquiring wealth are:

• Spend less than you earn
• Establish a budget, and live within it
• Save
• Get out of debt
• Invest wisely
• Don't look for the quick road to riches
• Live well

Let's discuss...

"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

This is a basic, universal truth. Someone who earns minimum wage and who saves $5 per paycheck is wealthier than someone who earns $300,000 per year and spends every cent. True, the fellow with the six-figure income might have a lot of cool things, but that isn't wealth. Wealth will allow you to accumulate nice things, but this man hasn't used wealth... he's used debt, and is now frantically servicing that debt. It is not uncommon to find people with six-figure incomes who are living paycheck to paycheck. This theme is touched upon in The Millionaire Next Door.

I cannot recommend highly enough that you read George Clason's The Richest Man In Babylon This book does a wonderful job of demonstrating this principle in the form os parables.

4. Get out of debt - I put this third, and not second, for two reasons. First, it will be nearly impossible to eliminate debt until after you have your budget in hand. Second, having savings will act as a cushion against accumulating more debt, and a psychological boost... seeing your savings start to take root and grow will become a reward in and of itself, and will help discourage spending on things that do not improve your life with someone else's money that must be repaid with interest.

So, how does one eliminate debt? We all have it. But why? There is "good" debt, and there is "bad" debt. "Good" debt is something that will materially improve your life... an investment into an appreciating asset, an income-producing asset, or a primary residence. A quick word on this... your house is not an asset!!! Historically, it appreciates in value, but it does not generate income. You pay every month, over and above the mortgage... property taxes, upkeep, occasional repairs, additions, etc. I treat it as a category of it's own, because being a property owner is a good thing. One day, the mortgage payments will end, and your cost of living will decrease. But far too many people have viewed their home as an "investment", and the TV is flooded with shows about "leveraging your equity"... basically, treating your house like a piggybank, and pulling cash out. This is the biggest trap in the world... every dollar that you pull out is simply more debt. There is nothing "magical" about home equity. Utilizing it is slightly less expensive in the short-term than a credit card, as the interest rate is almost certainly lower and the interest may very well be tax deductible. But your mortgage is something you want to go away, not last for years longer. Home equity is something to tap in an emergency, not on a whim.

Got off on a bit of a tangent there. Back to debt... most people have all sorts of oddball debts. Credit cards, student loans, car payments, maybe that trip to the emergency room, etc. All of that debt is an anchor weighing you down. It costs real money to service that debt every month. That's your hard-earned money, going to a bank or other lender for the use of their money (this is why we save, to not have to pay to use money, or even to charge others to use our money! ). So, how to get rid of it?

There are two general schools of thought on this. The logical method, which results in the greatest savings to you, is to list all of your debts in the order of their interest payments... the 29% credit card is first, the 12% auto loan is second, the 6% student loan is last. Make the minimum payments on the auto and student loans, so as to not accumulate late charges or additional fees, and pay every cent possible towards the credit card. Once the credit car is paid off, apply that money to the car loan until it's gone. Then apply all of that to the student loan and retire that debt. This method makes the most financial sense, as you minimize the amount you're paying in interest. However, there's another way, as illustrated in Dave Ramsey's Financial Peace. His way is to list all of your debts from smallest to largest. pay off the smallest debt, move on to the next, etc. This way, you will probably pay more than you absolutely have to, but you'll get the psychological boost of killing off one of your debts as quickly as possible. Instead of beating away at a monstrous amount that never seems to go away, you get a nice rush of seeing one of your payments vanish forever, and all of that money then goes into attacking another debt. You see progress.

Another thought on debt... especially these days, I cannot miss the numerous commercials proclaiming that "You have a right to settle your debt for less than you owe! Cut thousands off of your credit card bills!" and similar nonsense. You most emphatically do not "have a right" to settle for less than you owe. Not morally. Our legal system provides huge loopholes for people to walk away from debt, and I believe that's wrong. There are situations where an enormous debt is incurred through no fault of your own, usually a catastrophic medical bill. My response to that is, you should have catastrophic medical coverage... insurance that only kicks in after, say, $10,000 Such coverage is fairly inexpensive, as they do not pay for day-to-day medical bills. But when you charge something on your credit card, or buy a car, you are giving your word that you will repay that debt. It is your moral obligation to do so, even to your own personal detriment. Your primary obligation is, and should be, to provide for your family. But, when you have debt, that means a roof over your heads, nutritious (not fancy) food in your stomachs, and clothes on your backs. That may seem "unreasonable" or "unrealistic" to you. Put yourself in the lender's shoes... what if you lent money to someone, whom you later saw going about their life with fancy toys, and when asked to repay you, says, "Oh, I can't afford to". Even if the lender is "rich", or a huge bank that can "afford" the loss. If you can shirk this moral obligation, you will never truly be wealthy. Bankruptcy is an absolute last-ditch way to discharge your debt. Bankruptcy used to be an enormous social stigma in this country... someone who had effectively welched on their debts was a pariah, and they felt enormous personal shame. Today, it is a little thing, of no real consequence, something that is even planned for by some people who will max out their credit cards knowing that they're not planning on paying. This is the type of moral corruption that has rotted out much of the heart of our society.

There are two basic types of savings... short-term, and long-term. In the last paragraph, I gave some examples of short-term savings. This is money that you can access immediately, or within a reasonable period of time. For example, perhaps a CD is going to mature in 4 months. As long as you have enough money on hand to get through the next four months, you will then be able to access the money from that CD without a penalty. A 24 month CD is still a short-term investment (to me, at any rate), but I hope I've given you a general idea. A long-term investment is something you aren't counting on any sort of immediate payoff. I also mentioned my Roth IRA, which is invested in several stock mutual funds. Even if this money wasn't in an IRA (Individual Retirement Account) that would subject me to absolutely ruinous penalties for accessing early, I would be in very serious trouble if I needed to access that money right now, or tomorrow, or next month, or even within the next couple of years. The stock market has been in a decline for months now, and I mentioned that these are stock mutual funds. Every dollar which I invest in these accounts immediately loses value, continues to lose value, and wil keep doing so for months, maybe a couple of years, to come. "So, you dummy, why the heck are you doing this?" you ask. Simple... over the long-term (measured in years and decades), history tells me that I will make much more than in any standard savings accounts. Long-term investments allow you to leverage the power of compounding interst to accumulate surprisingly large amounts of money. And this is necessary because I'd like to stop working one day, and enjoy my "golden years" in a warm place with nice meals and an occasional cruise. This used to be seen to with a pension, but those days are gone, my friend... some unions, many government workers, and railroad employees can still reasonably count on a pension, but the rest of us, even if our employer still has a pension plan (most don't... pensions have been largely replaced with 401(k) plans, or "defined contribution" as opposed to "defined benefit" - with the first, you invest a set amount each paycheck, and later you reap whatever the plan pays, versus defined benefit where you retire with a set amount). Several industrys still have pension programs, such as airlines. However, more and more often they turn those plans over to the PBGC, a GSE that basically collects all of the money in those plans and then pays it out to retirees as best it can, which isn't very well at all. Retirees are lucky to see $.50 on the dollar of what they were promised.

"How is this fair???", you ask. Well, it isn't... but then, neither is life. Pesnion plans were set up in the days when few people lived past 65 or 70. Today, people live far longer, which means that the number of retirees as compared to the number of working people has exploded. There simply isn't enough money to make good on the promises, and the company would fold if forced to come up with the billions needed. So, they enter bankruptcy, the government handles the pensions as best they can, and people who counted on their pensions get screwed. "What about Social Security?" First, SS was never intended to be a retirement plan... it was supposed to be a supplement to retirement. And then we started giving coverage to the disabled, and people who had never worked, and dependents, and spouses, and people "disabled" by addiction to drugs, and illegal aliens. In 2017, Social Security will begin paying out more than it collects. Roughly 35 years after that, the Social Security Trust Fund will be exhausted, and without government action, will collapse in upon itself. An excellent book about this is Laurence Kotlikoff's The Coming Generational Storm. For a shorter read, take a look at Storms On The Horizon, the text of a speech given by Richard Fisher, President of the Federal Reserve Bank of Dallas. Also, watch David Walker on 60 minutes. I mention it, because I could go on for hours on this topic. If you're an economic conservative, you'd be nodding your head at my sage wisdom. If you're a liberal, you'd be screaming in rage and composing an angry email denouncing me for my idiocy, my lack of compassion, etc. I mention this not as part of an exercise in political dogma, but as a simple fact... we all must prepare for our own retirements. We cannot count on Big Business nor Big Government to be there for us. They will shrug their shoulders and throw up their hands, and tell us, "Sorry... there's no money." We can scream about how we're owed, how unfair it is, how wrong it is. And we'd be right, but our being right wouldn't keep a roof over our heads, or food in our stomachs, or get us to the doctor.

At the end of the day, we must have savings sufficient to retire to a decent standard of living. Who knows, maybe pensions will return, and Social Security will be saved, and that money will come rolling in for us! In that case, we'll retire rich, with far more money than we need. Our biggest problem will be how to spend it all, and whom/what to leave it to ater we pass on. But, if I'm right, our savings will be all that we have. In order to provide for our own reasonable retirement, we have to start saving and plannig yesterday. Since we missed that boat, the next best thing is to start right now. Open a if you're eligible. Start to contribute to a 401(k) plan if you have one available. Do both if you can. If you don't... you must start saving 20% of your income, minimum. You're missing out on the tax benefits of the IRA and 401(k) programs, and so you need to allocate that much more.

6. Don't look for the quick road to riches - The culture in America used to be to value and respect hard work and thrift. We used to admire people for the effort that they put into building successful businesses. Sadly, the Industrial Revolution created a lot of neat toys, and those neat toys became the symbols of wealth... huge, gaudy motorcars of the '20s are a good example. We started to look at the fruits of wealth and coveted the fruit, rather than the wealth. Over time, most people have come to view the collection of toys as wealth in and of itself. This led to a society where "the quick buck" became the goal. Gambling and too-good-to-be-true "investments" sucked millions and millions of people in. While I firmly believe that gambling (and other "victimless" or mala prohibita crimes) should be legal, I also see how widespread gambling has helped to undermine our society (very quickly, the apparent dichotomy is explained in that I believe in true individual liberty and free will. See The Philosophy of Liberty to learn more about where I'm coming from). The state sponsored lottery encourages many people, usually those least able to afford it, to throw far too much money after an elusive dream of sudden, staggering wealth (even though it wouldn't do them a bit of good in most cases... the infusion of money doesn't change who you are, and a saying that I believe I've coined is, "Poverty has nothing to do with the contents of your wallet" - an awful lot of lottery winners soon wind up bankrupt)

It is one thing to occasionally indulge in gambling when it's strictly for fun. I like to go to Las Vegas once or twice per year. I take how much I'm willing (and able to afford) to lose, and when I get down to my last $200 or so, I knock off with the video poker and craps. I do not "invest" my next mortgage payment on a "hot" machine or table. Similarly, I'll buy a lottery ticket once in a while, when the jackpot gets to some ridiculous figure. Why not? For $1 I have a minute shot at The Big One, and can have some fun daydreaming a little bit about what color Ferrari I'd buy. Or, sometimes a group of people at work will form a lottery pool. Same thing... for a couple of dollars you can join this happy group and joke around about what might happen. But, the instant that it ceases to be fun, or you find yourself "depending" on a win... it is long past time to stop. You aren't going to win huge. In my life, I've hit three royal flushes on quarter video poker machines... twice for $1000, once for a little over $1300 It was very exciting, and a wonderful feeling to have the guy come over and count hundred dollar bills into your hand. But it's a fluke. The odds of a royal flush are something like one in 40,000 I couldn't begin to guess how many hands I've actually played. The odds of winning the big lottery jackpot are something like one in 175,000,000 You're more likely to get struck by lightning three times in a row. It... isn't... going... to... happen Or, if it is, it's going to happen when and how it'll happen, not as part of some "system" of pouring money into the machines, or patterns of "lucky numbers". Don't forget... the house always makes money, and that's because they collect it from the players.

An awful lot of "investments" fall into this category as well. If it's hawked on TV... it isn't an investment. If you heard about it from your brother-in-law or coworker (who's always behind on his bills and just hit you up for a loan last month)... it isn't an investment. If it's being "sold" to you, it almost certainly isn't an investment. If you didn't find the "investment" through hard work, research, etc. you have to ask yourself... "Why is this person presenting me with this wonderful, once-in-a-lifetime deal? What do I bring to the table, other than my money?" If you can't answer that question, walk away. Sure, you might be making the wrong decision... just like maybe you should have stopped in at every liquor store on your way to work and bought all the lottery tickets, because the winning one might have been there.

Do this... every time you're tempted to throw money into something like this, put it in your bank account instead. I guarantee you, in X number of years you'll have more than if you'd made every single one of those "investments".

7. Live well - I mention this because we cannot lose sight of why we're trying to get our financial house in order. If you knew for a fact when you were going to die, all this would be easy... you'd know exactly how much you needed to save. And if you knew how, you'd be able to prepare accordingly. But the vast majority of us are not cursed with that knowledge. We hope to live until we're 95, and to be spry and active the whole time. We want to live. We have things we love to do. We must balance our sacrifices for tomorrow with our lives today... why should we deny ourselves any pleasure now for the apparent promise of a pleasurable retirement when we might not make it? We could get hit by a bus tomorrow. We could also suffer a stroke that leaves us paralyzed. All the savings in the world wouldn't matter to us in the first case. They'd come in mighty handy in the second. But would we want to be lying in a hospital bed, realizing we'd done nothing but work our entire lives, putting off all pleasure for a tomorrow that is never going to come now?

Part of living well is taking care of our bodies today so as to maximize our chances of enjoying our retirement tomorrow. What good would it be to be able to stop working, but to be saddled with unnecessary pains and ailments? Wouldn't it be tough to enjoy your retirement, even if you had plenty of money, if you were morbidly obese, unable to walk, depending on oxygen because you smoked, etc? I do not smoke, I try to eat healthy, balanced meals, I drink in moderation, and I exercise. I want to keep my body in the best shape possible so as to have the best chance of a happy retirement, and to avoid medical expenses today which would drain years off of my happy retirement tomorrow.

I do not live a life of deprivation and extreme self-sacrifice. Part of my budget includes allowances for things that I enjoy... an occasional dinner out at a nice restaurant, trips, etc. I do deny myself toys that won't actually improve my life. Some peope always have a new car, and are never done taking the depreciation hit or through with their payments. Some people always have the latest technological gadget when it first comes out, and paying a huge premium for that. If something like that is really important to you, and you can actually afford it, as opposed to being able to make the payments... then go for it. But ask yourself... what do you really get out of a new $40,000 car that you wouldn't get out of a $20,000 car, or a $5000 used one? Take a long look at stuff like this. Sure, I'd love to get a new Mercedes and tool around in German engineered comfort. But my paid for eight-year-old Acura gets me to and from my job, and for much less gas, mainteneance, and insurance than the Mercedes would. I would be paying thousands of dollars more per year for the Mercedes, and what would I get in return? I'd have to give up other things.

So, the moral of the story is... hope for the best, pan for the worst. Strike a balance between today and tomorrow. There is always a way. Living happily does not have to mean spending a lot of money, but lack of money is very likely to lead to a miserable existence tomorrow. At the beginning of this little essay, I mentioned my qualification to write this as "being on the path to wealth". I'm saving roughly a third of my take-home salary. This means I live well within my means, but I am not in any way, shape, or form "living poorly". I have disciplined myself to save first, and, honestly, I do not "miss" the extra spending. For example, the several books I've mentioned are available at the library... why buy them when you can read them for free? This isn't to say that I never buy books... I buy books (and DVDs) that I know I will continue to enjoy and learn from. Having shelves full of books wouldn't make me any smarter. Adding up all of the little things like this lets me live quite happily and lacking for nothing. Wanting, sure... but channeling your wants helps you to succeed at saving and investing. Fulfilling them does not.

This is a work in progress. It's the result of many of the books I've read on many topics that have shaped my political, ethical, moral, and economic outlook on the world. As things come to me, I'll add more. If you'd like to share your feedback, email me!