Does retiring in fifty years sound good? How about ten years? If you, like most Americans, are following traditional financial advice that’s been repeated for generations, then your hair will most likely be gray before the word “retirement” becomes a present reality and no longer describes your future.
Financial gurus such as David Bach and Suze Orman have made fortunes giving advice to the middle class that is reminiscent of what your parents have told you for years: go to college, get a good job, buy a house and retire after age sixty-five. Since this path takes many years and luck (it is not guaranteed that your house value will go up or that your 401 (k) will appreciate), I will call that path the slow track to wealth. Is it safe? Of course. Will it make you wealthy? Of course not.
What will make you wealthy (with the exception of lottery winnings) is following the footsteps of Donald Trump or Bill Gates onto the fast track of accumulating wealth. Spearheaded by personalities such as Robert.Kiyosaki and Loral Langemeier, their empire is founded on the principle of people investing in their financial education and being pro-active so that you can retire quicker and gain financial confidence in the process.
So how do you know which track you are on? Let’s compare the two different approaches to money.
The Slow Track to Wealth
Motto: “Learn, Earn and Retire at 65”
- Get an academic education and become an employee
- Buy things at a discount (food, cars etc.)
- Spend less when buying items
- 401 (k) or IRAs are primary retirement/investment vehicles
- Pay off credit cards and use them sparingly since debt is bad
- Use cash whenever possible to buy things
- CDs, money-markets, and mutual funds are sound investments
- Home ownership is an asset and includes tax benefits
The Fast Track to Wealth
Motto: “Make your money work hard for you, don’t work hard for money”
- Get a financial education and become an employer
- Buy assets at a discount (houses, businesses, etc.)
- Spend OPM- other people’s money when buying assets
- 401 (k) or IRAs are additional retirement vehicles to other investments
- Debt can be good, if leveraged correctly
- Use your asset’s positive cash flow to buy things
- Businesses, real estate and paper assets (such as stocks and bonds) are sound investments
- Home ownership is a liability since it takes money out of your bank account
Kiyosaki’s definition of cash flow is something that puts money into or out of your bank account. Overall, the fast track’s theme is to acquire enough assets (anything that will give you a positive cash flow every month) so that it covers your monthly expenses. Once you have this passive income coming in, you will become financially free. While the slow track believes that starting a business or investing in stocks is risky, people that follow the fast track believe that depending on your government or employer to make you wealthy is far riskier.
The following is a financial checklist that can help you no matter which track you are on.
- Prepare a will
- Keep an eye on your credit card debt and FICO score
- Buy life insurance (especially if you have dependants) and disability insurance
- Have a retirement plan
- Have at least 3 months of living expenses in case of emergencies
- Investigate the background of your financial advisor, tax official or anyone else that handles your money
Which track is better? No one can answer that except you. Regardless of whether you are creeping along on the slow track or racing by on the fast one, at the very least be pro-active about your financial future and start to plan now. Ultimately, the only person that’s responsible for your retiring wealthy, or in the poorhouse, is reflected in your computer’s screen right now.