This Is The Best Money Advice We’ve Ever Overheard
We hope you’ve been listening, ’cause we have.
To Build A Nest Egg, Take The First Slice
Stuart Hanson grew up in the North West and spent his summers on his grandparents’ farm. He put himself through medical school with loans and weekend jobs. At lunch one day, he heard some doctors talking about “paying themselves first”. “I had no idea what that meant,” he says now, 79, a retired pulmonary and critical-care physician. “I was a young father with a 98% home loan.” But he couldn’t shake the idea, so he signed up for an investment seminar with the intention of making some extra money. “There I learned about having a portion of your salary automatically routed from each payslip into savings,” he says. Aha! Before even paying your mortgage and other bills, you pay yourself. Dr Hanson started with what he could afford at the time (just 2% of his gross), but as his income grew, he increased what he was paying himself. Forty-four years later, he and his wife are using that money to live a comfortable retirement. Don’t believe us? Last year they took a cruise around the world.
Your Play: Automate Your Savings – Tally your monthly income, subtract your monthly expenses and take a look at what’s left over, says Donna Nadler, a senior partner with Capital Management Group in New York. Could you part with a third of that? What about half? The more you funnel into your long-term investment fund, the greater your odds of taking that round-the-world cruise someday. Already maxed out your monthly contribution? Good! Now set up a diversified long-term growth account with a financial advisor and have money sent there every month, says Nadler.
Toast Every Client, Boost Your Business
Robert Hales was nursing a martini at a party when he overheard a doctor say, “A professional is someone who always puts the client’s needs first.” Hales was 34 and earning a comfortable living in insurance. But because he didn’t have a degree in estate and business tax law, he was losing clients to attorneys who did. “I used to think being a professional meant being a lawyer or doctor,” he says. “But that remark made me realise that my real frustration with attorneys wasn’t that they cut me out but that I wasn’t able to help the client as well as they could.” For the first time in years, Hales decided to invest in himself. He and his wife were raising three kids, but he enrolled in a part-time law course anyway. He kept selling insurance while he studied, and four years later he qualified and stopped losing clients to attorneys. “Overhearing that changed my life,” says Hales, 81. “It’s not about how much money you make. If you put the client first, the money comes anyway.”
Your Play: Find Your Purpose – “It’s the men who are on missions of service – not the ones focused on making money – who become the most successful,” says Lauren Zander of the Handel Group, an executive coaching company. To shift your mindset, form a mental picture of yourself in three to five years. Consider not just the job but also how you’re helping people (remember that “professional” part?). “Then make a list of all the actions you have to take to reach your goal,” says Zander. The more clearly you can define your path, the easier it will be for you to follow.
3 Questions Rich Men Ask:
- Their Doctors – Could you refer me to the most costeffective facility? Prices for routine procedures (think X-rays, MRIs and blood tests) can reach into the thousands, says Jeff Rice, a doctor. Your doc could send you to a facility that charges a lot more, so push back and say you want the best price around. You could save up to 50%, Dr Rice says.
- Their Prospective Employers – Will you match my retirement contributions? That match can make you wealthy. Example: Company A offers you R400k with no match. Company B offers R20 000 less but will match up to 6% of your salary. After 30 years and with a 7% return, you’ll have R2.4m with Company A, or R4.7m with B.
- Their Financial Advisers – What fees are you charging me? Pay a professional no more than 1% in annual advisory fees to manage your portfolio, and give a discount broker 0.25% per transaction. Be cautious of fullservice accounts, though. You may be charged up to 10 times what you’d pay a discount broker. – Moira Lawler