10 Rules for Building Wealth

How to build a wealth in slow economy?
People tend to be optimistic about the future when times are good. They think they can save money and build wealth at any time they want. Unfortunately, it’s harder than everyone thinks. Many people are ended up with more material stuff as they get older but their finances are not better off in terms of wealth now than 10 years ago. A good news is it is not too late to start no matter where you are.

Unemployment rate has went up to 5.5% according to the government unemployment claim. Economic crisis seems closer to us when we see our friends are losing their jobs and your own investment money. Some of them have lost about 20%-30% from their investments particularly in the mortgage related funds since last November 2007 and their funds are continued shrinking away. Recently, we see many homes are in foreclosures and people are losing confidence in economy. Everyone seems nervous about investing money.

Many of us try to read or find information about building wealth with what we have, hoping to find ways to get our money to work for us. Fortunately, there’s always ways to build our wealth. Here are 10 rules for building wealth according to Jia Lynn Yang, Fortune reporter.

1. Start early
More than any one stock or mutual fund pick, the age you start investing will determine how much wealth you build. To illustrate: Employee A starts putting away $100 a month when she's 22. Her money grows at 8 percent a year, and after ten years she stops contributing - and lets her stake grow. Employee B waits until he's 32 to set aside $100 a month, also growing at 8 percent a year, and he keeps it up until he hits 64. When they both retire at 64, she will have $234,600, and he'll have only $177,400. Need we say more?

2. Use your 401 (k)
If you're not already enrolled in your company's plan, stop reading now and sign up. Since you're putting in pretax dollars, a 401(k) is an unrivaled savings vehicle, and passing up an employer match is - literally - giving up free money. Confused about how to manage all the choices in your 401(k) plan? New pension legislation is encouraging companies to offer third-party investment advisory services, so call HR to find out if yours offers any on-the-house guidance.

3. Keep it simple
If you have a full-time job and it's not picking stocks, acknowledge that. Choosing three or four index funds - say, an S&P 500 fund, an EAFE fund, and a small-cap stock fund - will give you broad exposure. ETFs (low-cost mutual funds that trade like stocks) are also an easy way to invest in more exotic asset classes, like commodities. If you're close to retirement, consider life-cycle funds from Vanguard or T. Rowe Price, which will automatically rebalance your account according to your goals.

4. Don’t try to beat the market
Even the best fund managers have trouble beating the S&P 500, so give up the chase. The most straightforward way to avoid this trap is to diversify your assets and then rebalance your portfolio at least once a year. Check your asset breakdown with Morningstar's free Instant X-Ray tool (www.morningstar.com). Essentially, rebalancing means selling some winners that are taking up too big a share of your portfolio and redeploying that cash to bulk up in areas that have lagged. (Buy low, sell high - get it?)

5. Don’t chase trends
You want to grow your money for the long haul, so you can't switch your strategy every time you read the headlines. If you see an asset class that's catching fire - like real estate investment trusts (REITs) in the late '90s or commodities this year - ask yourself some basic questions: Can I describe how it works in plain English? If not, start your research at Investopedia.com. Why is it so popular right now? If the answer is "Paris Hilton bought some," best to stay away.

6. Make saving automatic
No one wants to think about saving - so don't. Already more companies are making 401(k) enrollment automatic (34 percent of big companies, vs. virtually none ten years ago). If you're already maxing out your 401(k), see whether your company can transfer money directly from your paycheck into your Roth IRA or a taxable account. Or ask if your bank can transfer a set amount (even $100 a month) from your checking account into a high-interest-bearing online savings account (check out HSBC's and ING's offerings).

7. Go heavy on stocks
The more time you have, the more risk you should take. If you're just starting out, 80 percent to 100 percent of your assets ought to be in stocks. The simplest trick? Subtract your age from 120: That's the percentage you should have in stocks; the rest should be in bonds. "If you have, say, 30 or 40 years, what happens over the next three months or even three years doesn't matter. If you need the money in two years and it drops 40 percent in one year, that's a problem," says Stuart Ritter, a certified financial planner with T. Rowe Price.

8. Hold down fees
Be wary of any mutual fund charging a management fee higher than 1 percent (a few stellar managers may be worth it; most are not). A manager with a high buying and selling rate (called "turnover") should also set off warning bells. If you aren't interested in watching your fund manager like a hawk, stick with an index fund, like one from Vanguard, where expenses are typically around 0.2 percent. And if you're trading stocks, don't be fooled by low commissions: They add up.

9. Ditch credit card debt
All debt is not created equal, so rank yours by interest rate and pay off the bad stuff first. That usually means credit cards, which can carry interest rates as high as 30 percent. (Compare your card's APR with others at Bankrate.com.) On the other end of the scale are student loans. Those rates are generally between 3 and 6 percent, so consider making the minimum payment and investing in your 401(k) instead. Hey, even Supreme Court Justice Clarence Thomas was still paying off his school loans when he joined the bench.

10. Defer taxes
Eager to lock in your gains on a hot investment? Before you click on sell, consider the tax implications. In a taxable account, you'll pay 15 percent in capital gains taxes every time you sell a winner you've owned for more than a year (the longer you can defer paying taxes, the more time you're giving your money to grow). Come tax time, however, it can be a good move to sell losers in your portfolio to take advantage of the annual $3,000 capital-loss deduction limit and offset any capital gains on your winning picks.

Article from CNNmoney.com

Arming with right attitude for prosperity.

We attract what we think about.
We are bombarded with bad economic news right now; record-breaking foreclosures, people are losing jobs, food and gas prices are going up, and food shortages in some countries. We tend to concentrate on negative things more than positive things and people don't see the prosperity midst of worries and fears of future.

However, successful people find opportunities in most inopportune times and still build a wealth. They see things in different perspective unlike many people. Their thoughts and attitude are different from average Joes, not because they are better and smarter.

I read Joel Osteen's book 'Become a Better You' and I found one section that he explains about our attitude that can change our lives.

According to Joel in his book, Roger was down and discouraged so he went to see his minister for some advice. Roger always thinks nothing is going right in his life and he thinks there is nothing to be excited about in his life.

The minister thought for a moment and then said, "All right, let's do a simple exercise." He took out a legal pad and drew a line right down the center. He asks Roger to list all of the good things in his life on the left side and to list all of his problems that are bothering him on the right side.

Roger laughed and skeptically and said, "Okay, but I'm not going to have anything to put on the asset side." The minister insists Roger to go through the exercise anyway and start saying, "I'm sorry to hear that your wife passed away." At that, Roger snapped to attention to his minister. He asked, "What are you talking about?" "My wife didn't passed away. She's alive and healthy."

"Oh, really?" The minister wrote on the asset side: "Has a wife, alive and healthy." Then he said, "I'm so sorry to hear that your house burned down."

"What?" Roger cried and replies, "My house didn't burn down. I have a beautiful house."

"Oh, really?" the minister said and wrote on the asset side of the ledger: "Has a beautiful house." Then he said, "I'm really sad to hear that you lost your job. You got laid off."

"Where are you getting all this nonsense?" Roger asked incredulously. "I've got a great job."

"Oh, really?" the minister said, as he raised his eyebrows and wrote down, "Has a great job."

About that time, Roger caught on and said, "Give me that list." The minister passed the yellow legal pad to Roger, who proceeded to list several dozen more good things in his life. By the time he was finished, he left the minister's office with a different attitude. His circumstances hadn't changed, but his perspective was completely different.

What is the lesson from all this?
We often focus on things that are wrong and don't see things that are right in our lives. Once we change the perspective with good attitude, things can turn around. We take for granted for what we have and ignore the things that are right.

The difference between rich and successful people and average Joes is their perspectives on circumstance. Successful people tend to look for opportunities midst of difficult times and they think the future ahead of them rather than current situation controls their lives.

Being rich doesn't make people happy but it makes one's life whole alot easier. Stay rich is dependent upon one's ability to use money wisely whether it's in investment or in business. Enjoy being rich is a lot to do with one's attitude and perspective.

The bottomline is arming with right attitude will get you there smoother whether it's for prosperity or building a wealth.