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Color of Money Live With Michelle Singletary
What It Takes to Become a Millionaire
Tuesday, March 28, 2000 at 2 p.m.

Michelle Singletary
Michelle Singletary

Let's get personal about personal finance books. So many consumers are in search of the secret formula to wealth that they are buying a boatload of books that pass along the same information. The latest example of this comes from millionaire expert, Thomas J. Stanley. Stanley is striking it rich again by repackaging his best seller "The Millionaire Next Door." The sequel to this successful book was released last month and is called the "Millionaire Mind."

When I compared the two books I found little difference in the bottom line conclusions. In "The Millionaire Next Door," Stanley and his co-author report that the average millionaire is an average Joe, who lives below his means, invests about 20 percent of his annual income, clips coupons, wears inexpensive suits, and drives an American-made car.

Four years later, Stanley is back. This time he returns with a $26.95 chance for us to look into the millionaire's mind. So Join me Tuesday at 2 p.m. and let's talk about what it takes to become a millionaire.

Mt. Rainier MD: If 'everybody' is a millionaire, then nobody is, millionaire being a certain measure of wealth that the average joe does not have. It is fantasy to imagine that any large number of people can become rich without simply raising the bar of how we define rich. In fact, in 1890 terms, the great majority of people in the U. S. ARE rich - have things that only wealthy people could afford, have leisure that only wealthy people had. But we don't see ourselves as rich because most Americans have these things. These how-to-become-rich writers are making themselves well-to-do off our skewed perceptions.

Michelle Singletary: Welcome to another discussion about money. And man mention the word millionaire and everybody's got an opinion. Frankly, I wonder who much does it take to make one happy? Personally, I agree with Mt. Rainier that many of us have to begin to ask when is enough enough. I'm not talking about those folks that are barely making ends meat but the lucky ones among us who if we saved a bit more and spent a lot less could being living a worry-free life.

Fairfax: I am 31. I make 64k a year. I have a law degree. But I am not happy. How do I convince myself that I should be happy with what I have and that I don't need to be like my friend in San Jose, who at 33 is retired from the tech industry and gets to travel and volunteer for a "living."

Michelle Singletary: You start being happy with what you got by stop comparing your lot with others. Last year I went to a woman's religious retreat and one of the speakers commented how unhappy many of us are because we continue to compare our weaknesses to others strenghts. The same is true when it comes to money. Unless you are Bill Gates, there will always be someone who has more money, a bigger house, better car, etc. I could say just think of the people who have so much less than you do and that could make you feel better but it might not. But just think about this at 31 with an income of 64k you are making more than the typical American family of 4. You are blessed.

New York City, N.Y.: So, Michelle, apart from going from the Baltimore Sun to the Washington Post, how can a journalist become a millionare?

Michelle Singletary: Break another scandal and bring down another president(and I'm not taking about some filegate).

Mt. Vernon Square, WDC: Mrs. Singletary, I understand the need-desire for financial freedom but isn't this a little overboard? Who wants to be a millionaire? I won't be skinnier, smarter or healthier than I am now - I'll simply have more money. Is it ridiculous for someone to admit that they have enough already? That would be me. While I look forward to increased compensation based on my skill level, etc., the excess money I have now is either being placed into my 401-k- or being spent on unhealthy habits. Is it unAmerican to be happy - at peace even - with the status quo? You're going to say the status quo may change - right - so could you lose the same million that you've earned - so could you die before it's spent. I wish for this world that everyone have enough - no more, no less. Thank you for this opportunity.

Michelle Singletary: Enough is good enough for me too. And I think it's wonderful you already feel like you have arrived. It's a lesson for us all.

Oxon Hill: I am an African American, and I have some money I want to invest. But I'm not sure how I can get started. What steps should I take to craft a financial plan? Are there any financial advisers in the area who cater to minorities? And are there any investment clubs or organizations in the area devoted to the needs of African Americans? And are there any books that can help me get started on the road to investing?

Michelle Singletary: What steps can you take? Start by saving. You have to have money to invest. I hope you already "pay yourself first." I have to tell you a funny story about that. I've been telling my nephew that for years. He's in his early 20s and just doesn't see the point. Well the other day I was fussing at him again to "pay yourself first." He said he did. He gets his paycheck and spends it. "I thought that's what you meant," he said. What I mean is set aside a regular amount of money every paycheck and don't spend it on everyday expenses. This is the beginning of your nest egg, your rainy day money, your pile cash that later you will begin to invest.
Crafting a financial plan? No plan fits all. You begin your plan by asking yourself what you are planning for-retirement, college fund for kids, downpayment for a house. Then you go about fulfulling that plan and deciding how much you need to save to reach those goals.
Investment clubs? This is one of the fastest growing ways for regular folk to learn about the stock market. You can join an existing club or start one yourself. Check out the National Association of Investors Association. It's a group that helps people join, start and run investment clubs.
Books? There are a boatload of books for beginner investors. I would recommend you take a trip to the book store and just pick one out. Most of them contain the same information. Specifically, I like "Wealth Happens One Day At A Time" by Brooke Stephens.

landover, MD: Every year around this time I clean out my filing cabinets and get my papers sorted for income tax returns. Some papers date back 10 to 15 years. I am so afraid of throwing away something I should keep. How long should I keep papers for IRS or other purposes?

Michelle Singletary: Well as far as IRS you should keep records for at least 3 years. If you have take what you might think are questionable deductions you should keep your records for 7 years. Personally, we keep bank statements and pay stubs for a year (I should say my husband because I'm a pack rat too and my office is overflowing with papers. But my hubby is trying to change that). Sales receipts you should keep as long as the warranty on whatever you purchased is still good. But this is a good question and a reminder to us all to review all the stuff we have in our files.

South Carolina: I want to become a millionaire. I'm 23, on active duty in the greatest navy in the world. I save $400 a month: $150 in mutual funds, $200 in a savings account and $50 to an investment product that is also a $100,000 life insurance policy. I take home about $2,000 a month and have only $800 in bills -I
use the rest to take care of my mom-. Still, I feel I'm not doing enough. What can I do to make my money work harder for me?

Michelle Singletary: You can start by adopting me. You are doing fine I would say. I would only recommend you have someone (a fee-only) financial planner take a look at the insurance policy. Generally, at your age I would only use insurance for that purpose only. You may want to just get a term policy and put the rest of the money in your mutual funds, stocks or a pure investment not tied to an insurance policy. Other than that I would say you are on the right track. By they way at 23 make sure your mutual funds are aggressive. You have so much time you can afford to be riskier.

Dupont: My annual salary is close to $48,000, but my debt is close to $50,000. I lived excessively for a number of years, and now it's overtaking me. I've cut back using my credit cards, although sometimes they're used to make ends meet. In my retirement savings plan from a prior job, I have about $35,000. If I cash out, I think I may end up with around $16,000 after taxes. Should I do it and take the $16,000 and pay some of my debt down? I borrowed from the plan about six years ago and paid off some of the cards, but I obviously didn't get the message. I am 49 years old and single. Any advice?

Michelle Singletary: Big problem. I would suggest you contact Debt Counselors of America or www.getoutofdebt.org. You can also call them at 1 800 680-3328. You are getting rather close to retirement so i would be reluctant to raid my retirement fund especially with all the penalities and taxes you would have to pay. What you need is a debt management plan. DCA can help with that. They can help you negotiate with your creditors and perhaps get you back on track to get rid of that debt. But first you have to cut back on expenses. It's hard but you can do it.

Washington, DC: I went to a bookstore the other day, and I was amazed by the number of personal finance books geared to women. I haven't read or bought any of these books. Yet I am curious. How can women and men have different financial goals? Aren't we all going for higher salaries, greater wealth and secure retirements? Or are there some financial circumstances that only women face or face more often than men?

Michelle Singletary: I agree with you. Basically, it's just a marketing gimmick for the authors and publiishing companies. Men may be from Mars and women from Venus but we our money is the same color. There are some differences in how men and women invest (women more conservatively than men) but basically the same rules apply when it comes to investing and saving. The stock market doesn't discriminate. It doesn't care if you wear a bra or a jock strap. So, I say just find a book that dispenses good, solid advice. Personally, I don't like the ones that treat women and blacks like we are children anyway. It's as if they think we are some strange animals who need special hand holding different from the rest of the white male world. Please.

Wash DC: I graduated from college in May. Now that I have a job, I'd like to get started on planning for my future. Yet I have no experience in handling money, and no aptitude for the job. Are there any books out there that can help me learn what I need to know about personal finance? And do you have any books in particular that you'd like to recommend?

Michelle Singletary: For you I might try "The Truth About Money" by Ric Edelman. It's a good, solid book with loads of information and Edelman's opinions (many of which I agree with). But as I've said in a previous answer. You start by "paying yourself first." That will help set the tone for you to become a regular saver and investor. And you have so much time on your side that you too can become a millionaire.

NW: Do you know of any home loans that allow you to specify that an extra payment is paid against the principal, NOT the interest?

Michelle Singletary: Most home loans will allow you to make extra payments. The exception might be a loan that has a penalty for prepayment (but that's another matter). I know with my own loan there is a place on the bill that allows me to write in an amount each month that I can pay toward the principal. It indicates that right on the bill. If yours doesn't just call the company and ask how you can do it. Keep in mind even one extra mortgage payment a year can save you thousands of dollars over the life of the loan.

Reston, VA: I have to confess, I don't understand the desire to see a financial planner who caters to minorities, or an investment group that is for African-Americans. What would a financial planner tell a minority that they wouldn't need to tell a Euro-American?

Michelle Singletary: Probably not much. It's about comfort. Some people just feel more comfortable talking to someone with a similar background. Many investment clubs have special ties (unions, women's choir, a baseball team, youth program). It doesn't bother me that someone wants to hire a black, white or green financial planner. Whatever makes them happy and helps them become financially savvy. It's a personal choice.

Washington, DC: Could you please let me know if there is a stock brokerage that offers a mutual fund made up of companies such as McDonald's and Toys `R' Us?

Michelle Singletary: There are thousands of mutual funds, all with different missions. You might want to check out Charles Schwab's web site. The investment company has a supermarket of no-load mutual funds and you can let them know you are particularly looking for funds with those stocks in its portfolio. But you don't have to just check out Schwab. Any number of mutual fund companies can point you in the right direction. Speaking of financial books you might want to check out "But Which Mutual Funds?: How to Pick The Right Ones To Achive Your Financial Dreams" It's by Steven T. Goldberg, an editor at Kiplinger's Personal Finance Magazine. Also go to the web site for the Investment Company Institute ( the trade group for mutual fund companies).

Dc: Hi Michelle, I read you religiously! Keep up your excellent work.

This morning as I was driving to my 9-5 job, where I make about 50k a year, I was listening to an NPR story about Seattle millionaires MY AGE -late 20s, early 30s- who are retired from Microsoft and who spend lots of time trying to "play down" their wealth. They frown upon BMWs and Prada bags and wear flannel shirts to their volunteer jobs at nonprofits.

I don't know about you, but right about now I am resenting my parents for teaching me that having a 9-5 and making 60k is the American dream.

Am I a brat? Or is there really something to my discontent?

Michelle Singletary: Loving it that you love me. And yes you are a brat (sorry). In fact,many regular folk with old regular paying jobs can become wealthy. Remember the story of the washwomen who saved all her life and left thousands of dollars to help kids go to college? I think many of us (including me sometimes) suffer from this "I just don't have enough." But when you look around your house you have plenty. Just look at the millionaires who have rotten lives and rotten kids. It's corny but it's so true - money can't buy happiness. Making 50k is big dough from where I come from. I'm not saying money isn't needed to buy you security but you do have to stop and ask yourself what is it that really counts.

Chevy Chase: My daughter, who is 17, has just started a part-time job on weekends. I am encouraging her to invest $50 per month in a mutual fund. Are there any fund families that will let her start with $50 per month if the money is automatically withdrawn from her checking account?

Michelle Singletary: Sounds like your kid is pretty lucky to have you. You got them started ont he right track. yes there are a growing number of mutual funds geared toward kids. Check out Stein Roe Young Investor. Last time I checked you could invest in this plan with a $50 a month automatic payment. Also there is USAA First Start Growth. You may also want to check out Kiplinger's "Dollars & Sense for Kids." There is a ton of information aimed at helping your kid learn about saving and investing.

Rockville, MD: I turn 49 this year and plan to "retire" from full time work by the time I'm 55. I will be able to do this because I made a conscious decision when I turned 35 to save as much money as I could. Being a single mother, this wasn't always easy. But, I always put away a little.

Even today, I live a very modest lifestyle, live in a townhouse, buy my clothes at thrift shops-yard sales, drive a compact car and attempt to be as self-sufficient as I can. -And I think I do a pretty good job of it, too!- My kids all went to college -on part scholarships-.

My friends and co-workers are in awe of me. How did I manage to accumulate so much "wealth?" Ha! I laugh and look at them with their dual incomes, high credit card debt, Caddies and BMWs that are always in the shop, buying the latest and greatest toys, etc.

They simply don't get it, do they?

By the way, I come from a blue collar family and have been on my own since I was orphaned at 13. While I don't wish my early "life experiences" on anyone, they have made me a stronger, more fiscally responsible person.

For those just starting to build a nest egg, 15 years from now you, too, will look back in awe at what consistent investing can do.

Michelle Singletary: I thought this comment was a nice one to end today's online discussion. All of us should be asking ourselves is it our mission to be millionaires or live a life that makes the world better for our familes, friends and neighbors. That may sound corny but goodness knows many of us would have a lot less stress if we just strived to earn and save just enough to live comfortable lives. I mean how many cars can you drive at one time? How many homes can you live in at one time? I look forward to hearing from you real soon.

© Copyright 2000 The Washington Post Company

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