Eight
Ways To Financial Success In The New Millennium
If achieving
financial success is at the top of your New Year’s resolutions for the new
millennium, consider the following advice. It may not make you a millionaire in the short-term, but it will help you
to develop millionaire-type tactics so you can boost your savings.
Fine Tune Your Investment Strategy
Take a look
at your investments and evaluate their performance in light of your goals and
expectations. For example, if you’re saving for your children’s education,
which is more than a decade away, are you socking away money in high-growth
funds? If you’re planning for retirement, are your assets allocated properly
among stocks, bonds, and other vehicles so you have a comfortable level of risk
while still getting the return necessary to meet your goals?
Hire A Financial Planner
Like it or
not, you may not be the best person to manage your own personal finances. Hire a
personal financial planner, who provides objective fee-only financial advice and
can help you to define your financial goals and adopt the best strategy to meet
them.
Start A Business
While not
all entrepreneurs strike it rich, starting your own business does offer numerous
wealth-building opportunities. You may want to start out with a sideline
business, while working or studying full-time elsewhere. The key is to develop a
comprehensive business plan that describes your product or service, potential
market, sales goals, and how you intend to reach those goals. Get help from
other successful entrepreneurs and small business groups in your area.
Buy A Franchise
More than
half a million franchising opportunities exist in the United States. While the
costs of participating in a franchise can be high, there are benefits for
would-be entrepreneurs. The first is that, generally, a franchise operation has
a lower risk of failure than an independent business. Secondly, most franchises
offer established products or services, so there is already some market
recognition. Typically you can also obtain management and start-up assistance.
Just be sure that you are prepared for such an undertaking and that the
franchise has a proven system of operation and a successful track record.
Think Of Your Children
If you are building your wealth, another key consideration is how you will pass that wealth on to your heirs. For example, if your estate is worth over $650,000, you may be hit with substantial estate taxes. To avoid this, you may want to give your children some of your assets in the form of cash gifts of up to $10,000 a year ($20,000 if married and making a joint gift). Such gifts are free from the gift tax and allow you to reduce the amount you would otherwise have in your estate.
Get Paid In Equity
Whether you
are an employee or independent consultant, consider asking your employers and
clients to provide a part of your compensation in the form of company stock, if
they are not already doing so. For the past two decades stocks have typically
outperformed all other investment vehicles, so you’re likely to reap a bigger
payout if you get paid in stock that you can afford to hold onto for a while
before cashing out.
Maximize 401(k)
Contributions
Many companies today offer 401(k) plans, which allow you to contribute pre-tax dollars to the plan. Employers often match the amount you contribute up to certain maximums, and the interest earned by your contributions and those of your employer grow tax deferred until withdrawn. If your company offers such a plan, make it a priority to start contributing the maximum in the new millennium.
Time Recognition Of Capital Gains
Don’t be
enticed by stories of day traders who have racked up millions by buying and
selling stocks in a matter of days, and sometimes hours. The smartest way to
invest is for the long-term. That’s because capital gains realized from the
sale of a stock or other asset will be taxed at the lower rate of 20 percent if
you’ve held onto it for longer than one year. Otherwise, it may be taxed at a
rate as high as 39.6 percent.
Finally,
the key to long-term wealth is saving more and spending less. This was
true for the 20th century and will surely hold true for the 21st.