10 Keys to Personal Wealth 1. Spend less than you make: It sounds simple, but the secret to building wealth is the same as business success. “It’s not what you make, but what you keep.” Yes, profit. Is your life profitable? If not, begin today with income and a budget. You may work to increase your income, but keep your expenses low. You can live modestly and still live well. 2. Save on purpose: “The hardest day to save is today.” Figure out what you need to save in order to retire when and how you choose. Adopt a current savings rate and stick to it. The magic lies in making it automatic. You’ll be surprised that you don’t miss the money. As your life unfolds, you may be able to increase your savings rate. No doubt you will make adjustments along the way, but the more you can save the more choices you will have to create happiness and fulfillment for yourself and those you love.3. Live affordably: Rent or buy a house that fits your cash flow. Drive a car you can afford without sacrificing style or comfort. Millionaires live surprisingly frugal lives. That’s the way they stay millionaires!4. Contribute to a Qualified Retirement Plan: 401k, 403b, IRA, 457- whatever the name, you need to grow money in a tax-deferred vehicle. Get the free match from your employer. This is basic, but it does not eliminate the need to save money outside your qualified retirement plan. If you only have qualified savings, you are undermining your personal wealth. Build your personal capital with regular contributions to both qualified and non-qualified savings plans.5. Invest your savings: Experts recommend retirement principal 10 times your salary. That means if you make $60,000 you will need $600,000 saved by the time your reach 65. If you are 35 years old and simply put the money in your mattress, you must save $20,000 a year for 30 years to meet your goal! –Truly a mission impossible for almost anyone. But, if you invest your savings at a modest 5% rate of return, you only need to save $8,500 or about 14% of your income to reach your goal of $600,000.6. Avoid fear and greed: Emotion can sabotage your investments more than you think. Too much fear can cause you to invest too conservatively, or jump out of good investments when the markets are rocky. Conversely, don’t expect to get rich quick, or listen to those who tempt you to jump into their attractive schemes. Too much risk can leave you with a fraction of your assets. Instead, find a trustworthy investment advisor or wealth manager to help grow your portfolio. Steady progress toward your goal is worth far more than the small fees you might pay. Mistakes are expensive and hopefully you won’t have to learn money lessons the hard way. With good advice, you may never know the pitfalls you avoided by investing wisely.7. Resist the temptation to tap your retirement funds early: Sometimes money in a 401k or IRA seems available for anything. The money is there and we certainly have desirable things that we want. But the penalties that come with early distributions plus the tax, make early withdrawals very expensive—to the tune of 40%-50% of the withdrawal. But that is only part of the picture. Even loans from your 401k are very expensive. Paying back the lost principal is extremely difficult. Saving to payback a loan is money that you could have added to your previous principal. And most importantly, the earnings on that withdrawn principal are lost forever. So, don’t do it, unless it truly is a real emergency and you have no other options.8. Transfer life and disability risk while you can: We easily take our health for granted. One day you may wake up and be unable to qualify for life or disability insurance. When you are young and struggling to save, buy term life insurance for a while. But as soon as you can, convert or purchase a permanent policy with a benefit that you will live to collect. Term insurance is cheap because most people outlive their ability to pay the premiums. At age 60, 70 or 80 term insurance is very expensive. Before age 55 your chances of collecting on a term insurance policy are less than 1%. So, buy permanent life insurance early and overfund it to build cash value. Also, get a policy with living benefits than you can use in case of terminal illness or long-term care needs. And, don’t forget to protect your future earning power. What would you do if you were unable to work? A disability plan will protect you and your family if you become unable to work. Long Term Care, Longevity Plans and other risk transfer opportunities may make sense as well. Work with an insurance consultant whom you can trust, not an agent who may talk you into a plan that is better for the agent than for you.9. Create a Living Trust with Wills, Powers of Attorney, and Health Care Directives: Why bother with these legal documents? Well, a regular will is a ticket to probate—the court process for settling your estate. It is public, long, expensive, and ties up your assets until it’s over—perhaps 2 years or more! If you don’t have a Will, the State has one for you. Although it may not be the one you want for your spouse, children or things. It will send you to probate court just as fast as a regular will you might write. Instead, make a Living Trust, put your wishes in that private document. Select a successor trustee who can carry out your wishes within days of your passing. Put all your titled assets in your Trust. Make a pour-over Will for you and one for your spouse that says, “Whatever I own and forgot to put in the Trust should go into the Trust.” If you are unable or unwilling to manage your affairs, Powers of Attorney will let someone you have chosen act on your behalf. If you are sick, a Health Care Directive will tell medical professionals what your wishes are and who may make medical decisions if you are unable to do so. All of these documents should be prepared by an attorney, or at least reviewed by a qualified attorney for accuracy and appropriateness to your situation. Of course you can find documents and attempt to execute them on your own or with the help of a non-lawyer. But, all of that is the unauthorized practice of law and is a recipe for disaster. Take heed of the saying, “A person acting as his or her own lawyer has an idiot for a client!”10. Finally and most importantly, structure your money to support your dreams: Your life is unique. Spend some time choosing your goals. What do you want? What satisfies your soul? Use your money like the tool that it is to live the life you choose. Gather the assets you need to enjoy life, find fulfillment and give back to your community in meaningful ways. Leave a legacy of your choosing with a life well-lived. For more information about wealth and the 10 keys above, contact Harris & Associates, a Registered Investment Advisor. We will be happy to schedule a discovery meeting to explore where you are, what you want and suggest ways you can navigate a path to get there. We don’t try to be all things to all people. Instead, we seek to help select successful individuals achieve their dreams, by bringing together a team of professionals who can offer trusted advice at a reasonable price. Start your plan today with a free discovery meeting. Your journey to wealth and happiness begins with the first step.