Four Keys to Building Wealth

Dave Ramsey, Real Estate
on October 29, 2006

Americans are hit with so much financial advice that it’s impossible to understand and keep up with it all. Like many others, you probably just want to know the bottom line—what are the most important financial steps I need to take? To cut through the clutter, we asked four top personal finance experts to offer their single best piece of advice. Here’s what they had to say:

Riches in real estate
I’m often asked what’s the secret to being rich. If I could only give a person one piece of advice when it comes to money it would be this—buy a home. You simply cannot get rich renting. According to the Federal Reserve, the average renter in America today is basically broke (worth less then $5,000). On the other hand, the average homeowner is worth more than $171,000. That’s 34 times more than a renter. The simple truth about building wealth in America is this: “Nothing you will ever do in your lifetime will realistically build you as much wealth as buying a home.” Don’t believe me? Go ask your parents and grandparents right now if their home was their best investment. The answer is almost always a resounding “yes.” My grandmother bought her home for $10,000 and, when she went to sell it a few years ago, she sold it for more than $400,000. I remember as she was packing up the house she turned to me and said, “If only we’d bought a few more houses and rented them,” we would have really been rich. If you’re renting right now, start saving to buy a home. It’s the smartest investment you’ll ever make.
—David Bach is the author of Start Late, Finish Rich and The Automatic Millionaire.

Control your finances
The key to getting your money to behave is to bother. Caller after caller to my radio show have gotten themselves into financial messes because they were going through life like Gomer Pyle on Valium and not paying attention to what their money was doing. But people do smart things if they just bother! Get on a plan and stick to it. I learned through my own financial mistakes that the key to financial success was making the guy I shave with behave. Winning at money is 80 percent behavior and 20 percent head knowledge. It’s not about sophisticated financial theories; it’s about taking control. I won with money and you can too. Like Nike says: “Just do it!”
—Dave Ramsey is a personal money management expert, radio talk show host and author of The Total Money Makeover, Financial Peace and More Than Enough.

Keep it simple
All of the best investments are the simple ones. If you’re shown a gee-whiz financial product with a lot of bells and whistles, you can be sure of two things: You don’t need it and it’s overpriced. You can get better results with something plainer and lower cost. What’s simple? Term life insurance. Automatic savings plans, like company 401(k)s. The mutual funds called lifestyle funds. A college savings plan bought directly from your state. Do I use these ideas myself? You bet!
—Jane Bryant Quinn is the author of Smart and Simple Strategies for Busy People.

Question conventional wisdom
The single best piece of advice I can give is this: Be careful what financial advice you listen to. Most financial advice—such as “save money,” “get out of debt,” “invest for the long term” and “diversify”—is fine for the middle class or the poor. It’s not good advice if you want to be rich because it is obsolete advice. For example, in 1971 the U.S. went off the gold standard and the U.S. dollar became a currency and . . . currencies are designed to lose money. That’s why today, “save money” is bad advice. Remember, your mind is your greatest asset, so be careful what you put into it.
—Robert Kiyosaki, author of Rich Dad Poor Dad and Before You Quit Your Job, is an investor, entrepreneur and educator.

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