Making $1 Million Dollars: How Did They Do It?

Need dollarsEveryone wants to make his or her first $1 million by 30, or so it seems. These days, making $1 million on your own accord, that is, without an inheritance or winning lottery ticket, can seem like a dream too good to be true.

However, this goal is certainly not impossible. With a combination of careful saving, audacious investing, and a large dose of patience, many have succeeded in making their first $1 million and a couple million after that too. Here we meet five people and hear their advice on how you can do the same.

The boring way

Jason, aged 45, explains that he made his first million ‘by saving and investing, then waiting a few decades’, or, as he rationalises, ‘the boring way’. Steadily working for various companies since the age of 22, Jason started earning 20K a year and today earns somewhere in the vicinity of 100K. Jason saved the majority of this, only splurging on a car and Mac laptop. Couple that with some smart investments in early purchases of Microsoft and Starbucks stocks, and you can see that earning $1 million is a task of much patience and sacrifice.

Enjoying the game

Terry, aged 30, recently hit $3 million in liquid net worth and explains that making money is like a game. ‘[I]f you enjoy playing it, then it becomes easier and easier with time’. Terry became saving as a high school graduate and college student, investing graduation monies into selling and reselling items online. After graduation, Terry started an eCommerce website alongside a job that paid 100K a year. His advice: ‘verse yourself on lots of different businesses [and p]lay for the long-term’.

Read up on it

Nathaniel, aged 32, hit the $1 million mark at aged 30, a big achievement coming from a farming family that struggled with their finances. As a teenager, Nathaniel saved money during the holidays by working for local businesses. He also started reading books on investing and money management, for example, by Robert Kiyosak. Buying his first home at 25, Nathaniel rented out two rooms, making a healthy profit and using the equity to invest in additional properties. As he notes sagely, ‘everything that I am doing is very long term’.

Buy and sell smart

Jodie, aged 38, has $3 million in net worth and exclaims that ‘it can be done’. Beginning at the age of 19, her simple philosophy is to buy and smell smart. At 19, she bought and sold clothes and cologne, making 3K. At 24, she did the same with Domain names, creating 100K. In recent times, she has invested in property and financial/auto stocks during the collapse, making upwards of $2 million. Her advice: ‘[y]ou just have to believe and keep parlaying to the next thing’.

Matching expenses with income

Elaine, aged 35, accumulated $1 million in net worth at the age of 30. She began saving as an investment bank analyst in a foreign country, working long hours and capitalising on a low local tax rate. Back in the US, she joined a private equity firm and began investing her liquid assets carefully in stocks. With a first child on the way, Elaine began to adjust her spending in line with increases in her wage income. She attributes her financial success to this mixture of careful spending and personal investment.

Note: some names have been changed.

Amy Hopkins is a university student and freelance writer who is interested in business. She has recently been reading up on managed funds.

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How Creditors Decide Whether To Grant You A Loan

Whether To Grant You A LoanLooks like everything is going to be fine, after nine awkward months of unemployment, you finally land a job. It is more than twenty miles away but it’s a job, and it pays a living wage. After more than a year you feel that both you and your partner can breathe, start to live, and start to pay back the loans that helped to start your new found family life, but before the future beckons  let’s look back.

Before It Came Crashing Down

It may not have been a whirlwind romance, but more of a steady, progressive and eventual marriage, where you both wanted it, and it just happened.  The wedding might have took place in 2006 just one year before the financial crash, where mortgage loans were cheap and plentiful and taking out a 130% mortgage (full cost of the flat, plus 30% for the wedding and holiday), was all the rage.

Both you and your partner may have decided on a brand spanking new flat and furniture. Those two months of choosing and buying might well have been some of the most blissful times you ever had. Not fully understanding the intricate and confusing world of loans it would have been easy to buy and buy more. You were both working you and could afford it. What first started out as an anxious application for a loan application, with the fear of rejection, soon becomes your right to have more credit and loans.

Creditors make this first and most dangerous mistake. When any loan becomes a right, the granting of finance becomes more important than the object you need and your long-term financial situation. Here is how the banks (used to and now) decide to grant you an application.

Banks, Finance Companies and Your Loans

Some members of society still hold a very old fashion view of banks, finance companies and loans in general. Many people have a picture in their mind of the loans clerk reading and sorting out loan applications that come in by post, the clerk deciding the simple ones and passing the more difficult to senior staff. Well a long time ago this is what happened, but not now. In the computer age, when you or your partner applies for loans, it is very rare for any human interaction to occur in the bank’s decision to grant one.

Deciding to Grant You a Loan

The financial companies have all developed computer models. The computer models, not people decide who is approved and for how much. One of their most important tools are the credit reference agencies, they keep a record of all the loans and utilities that the public apply for and how they use those loans, they then share this information with the lender. Since the credit crisis, their searches (as referred to) can have frightening outcomes. If information is wrong, it can say you have defaulted on a loan, when you have not, then it becomes very difficult to obtain credit. To understand how this can affect people, check out the book by Frank Kafka “The Trial” (when the authorities hold all the power). However, the opposite happens when the computers say yes to your loan application, you suddenly have a good credit standing and everyone wants to give you loans. For most of us, as long as we keep in employment and our circumstances do not radically change, it can be fine to take out a loan, as you will more likely be able to pay it back. However, if you have the bad luck to lose your job, the time until a new one arrives can be very harsh. In this case, loans can help dramatically in the short term, though like anything they are best to adopt with moderation.

Wendy Derbyshire is freelance finance writer and guru. She has a deep understanding of the credit market and believes when used sparingly, loans can help propel people to financial stability.

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Pennies Today, Dollars Tomorrow: How Compound Interest Grows Your Debt

Are-You-Managing-Your-Debt-Or-Is-Your-Debt-Managing-YouHow much will you pay in interest this year?  Few borrowers realise the implications of compound interest on their debt when they sign on the dotted line.  While a few percentage points may seem like a trivial technicality, the interest on your loan is compounding every day– and so is your debt.

Simple versus Compound Interest Calculations

Simple interest accrues only on your principal, which is the actual amount that you have borrowed from a lender, be it via a credit card or a home loan.  In simple interest calculations, your interest rate is percentage of the principal on your debt.  An APR, or Annual Interest Rate, of 15% on a principal of $100 would accrue $15 of interest charges over the life of the loan in a simple interest calculation.

Compound interest involves a continual recalculation of the amount that you owe the lender.  For the $100 that you charged on a credit card with an APR of 15%, your daily interest rate will be approximately 0.041%.  This is because the amount of interest will compound, or be recalculated, based on your balance each day.  On Day 1, you will accrue $0.41 in interest charges, bringing your new balance to $100.41.  On Day 2, your interest will be calculated based on a balance of $100.41 and you will accrue an additional 42 cents of debt, bringing your new amount owed to $100.83.  This will continue each day until the balance is paid in full.

While most credit card companies and similar lenders offer a grace period in which the borrower may pay the balance in full to avoid any interest charges, making only the minimum required payment means that the remaining balance will begin to accrue interest immediately.

The Exponential Growth of Your Debt

Almost all lenders use compound interest calculations when you borrow money.  This has profound implications on your debt.  While the initial 41 cents of interest on your $100 charge seems innocuous enough, over the course of a year your debt will grow exponentially.  If you make a minimum payment of $10 each month, it will take you 11 months to pay down your debt, costing a total of $107.50.  Now consider if you miss a payment and have late penalties applied to your account, causing you to take months longer to pay the balance in full.  It isn’t hard to see why several thousand dollars or more of debt would quickly become an insurmountable burden.

In November 2012, the average credit card debt per borrower in the US was almost $5,000.  Student loan debt for undergraduates was a staggering $27,000 after leaving college, with professional students owing over $79,000.  Compound interest rates will cause the debts to soar even higher, with many borrowers ultimately paying tens of thousands of dollars more than their principal.

Stop the Climb!  Solutions to Help You Get Out of Debt

The key to limiting the growth of your debt is controlling the interest compounding on your debt. Debt consolidation loans offer a means to do just that.  By consolidating all of your debt into one loan, you will pay interest on only one loan.  More of your monthly payment will pay off the principal, allowing you to pay down your debt more quickly.

A debt consolidation loan is not a magic bullet.  A realistic budget and the discipline to stick to it are crucial parts of any debt elimination plan.  But they do offer a way to slow the exponential growth caused by compound interest, allowing you to regain control of your finances.  Getting out of debt is a difficult undertaking; debt consolidation can simplify the process.

Katie Latchford is a freelance writer who has a keen interest in financial matters such as how to ease your financial situation by applying for a debt consolidation loan to help you to manage your debt more effectively.

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5 Amazing Tips To Help You Cut Your Expenses

jonnynomoneyDuring an economic recession, everyone realizes the importance of cutting back on expenses. However, many people think that cutting expenses is a lot easier said than done. Cutting back your expenses is never easy, but it is not an impossible task either. Here are 5 amazingly helpful and practical tips on how to reduce personal expenses.

Carpool to work

What is the one thing whose price just keeps going further up and will continue to do so beyond the foreseeable future? That would be gas prices. Simply by cutting down on how much gas you pump in your car you can end up saving a huge chuck of your monthly expense. The best way to do so is to start carpooling. In tough economic times, there will be others in your workplace looking to carpool and save gas money.

Don’t eat out as much

It is amazing how much money we end up spending while eating out. It may not seem like much, especially at the fast food joints. But it all adds up at the end of the month. Try to cut back on dining out. Packing a lunch for office everyday can save a lot of money in itself. Cook more frequently and stop depending on the take-out menus. Besides saving money, knowing how to cook is an essential skill that everyone must know. Save the dining out for special occasions only.

Create a budget and stick to it

We have all tried to do a bit of financial planning in our heads when stuck in traffic. However, once the vehicle starts moving, all our bright financial plans get blow out the window. Sit down and make a proper budget for your household expenses. List all you monthly and annual expenses, including financial obligations. Create a budget so that you can meet the essential expenses without having to stretch your budget. Of course, there is no point creating a budget if you don’t stick to it. Use cash for all your expenses instead of using credit cards; it’ll help you stay on budget.

Reduce household energy consumption

One of the biggest expenses for everyone is the monthly energy bills. Reducing the amount of energy used in a household can have a massive effect on how much the homeowner can save. Ideally, you would want you entire house to be powered by solar or wind energy, but that is not a financially feasible option for most of us. Simple practical solutions, such as using energy-efficient light bulbs and ensuring the house is properly insulated, can help you save bundles of cash every month.

Get your insurance premiums lowered

Along with energy bills, another major monthly expense is the premiums for car, home, and medical insurance. You jolly well cannot stop making monthly payments and let your insurance lapse. What you can do, is shop around for insurance quotes. When your coverage period comes to an end, look for insurance quotes that offer you the same level of coverage, but for lower premiums. There are websites that allow you to compare and shop for home and auto insurance online, so being lazy is not an excuse.

The 5 helpful tips mentioned here are very practical, even in times of recession, and nobody should have any trouble following them.

This post is contributed by Andrew Hopes. He helps provide useful financial tips and strategies and has found great use of payday loans for a quick relief from all the financial problems.

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The Best Places To Keep Your Money Safe And Keep It Growing

11947055-gold-globe-with-many-gold-coinsWhen you want to grow your money or just keep it safe, probably your first impulse is to look for a bank account that offers good interest rates and put it in there. This is how most of us will keep our money safe and amass a little interest over time, but are you really making the most of your cash when you put it away like that and forget about it? Could you be doing more with your cash or enjoying more benefits? Here we will look at how to get more from your money and how to choose the right account or service for you and your money.

Understanding Bank Accounts

Before you put your money into any account, you should make sure that you understand precisely what a bank account is and what it does. What you might not be aware of for instance, is that when you put your money into an account that money gets invested into properties, projects and businesses as though you were playing the stock market with it. The interest you accumulate is the customers’ cut of the profit the bank makes by making those investments.

Now generally this interest is pretty low in a current account, but you can make more interest by putting it into a range of savings accounts which generally make accessing your money more difficult. Because you take your money out of a savings account less frequently, the banks can make more profit from investing it and thus they can offer you higher APR (annual percentage rate). If you pay into an ISA that doesn’t allow regular access, then this will provide you with even higher interest.

Choosing the right bank account then should mean choosing the bank that you most trust, choosing the deal with the highest APR (make sure it’s cumulative interest) and choosing the one that offers the easiest access. In general you should also make sure that you have multiple bank accounts with different organizations. This will keep your money safer because it won’t all be in one ‘pot’ should anything happen to that bank, and it will also help you to keep track of your own money and to budget more wisely.

Other Options

The problem is though that with any bank account you will still only be taking a cut of the profit they get from investing your money – and a very small cut at that. There are ways you can increase this amount further though, which include investing yourself in stocks and shares (or bonds) or alternatively using something like a self-managed super fund which means essentially teaming up with some other people to invest your cash jointly and choose which investments you want to make.

There are also other ways you can keep your money safe which provide other benefits or which are more suitable for particular groups. For instance if you run a large business and are worried about potential bankruptcy you might be interested in asset protection in which case you may be interest in a Swiss Annuity which pays you back your own money with interest over a set duration. If you need to take out life insurance to protect your family meanwhile, then life assurance policies can help you to invest your cash while at the same time protecting your family and could be a great way to protect your family.

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