On Wealth in the US
Read the opening essay The US Problem
On Wealth
Wealth is defined as an abundance of valuable possessions, so not just money. Wealth tends to last generations, not just for the individual, and with planning will only grow over time. However, Rich is an entirely different beast and can come and go and seldom continues to grow over time, let alone generations. Rich is an excellent place to start; planning will develop that into wealth.
And to be sure, those who began with wealth need only continue it and have a comfortable place to start. Unfortunately, many Americans do not have the luxury of beginning with wealth, or do we? That will depend on your definition of valuable possessions. It can be argued that there are no poor if they have the skill, drive, and support of a cherished few.
A Plan
Some planning and a little discipline will help to grow your wealth. As many before me have said, always pay yourself first. Put whatever you can into a savings account, separate from your checking, and continue to do this with every paycheck you get. A friend of mine recently put me onto Yotto, a lovely different FDIC insured account with the bonus of picking some lucky numbers and getting a payout when they hit. If you sign up and put in a re-occurring amount, you get 100 tickets.
My initial investment brought me $10.50 for the first $25 in winnings, get some friends to sign up, and they will get 100 tickets as well. The real point here is that it is money you don’t think about in your daily life. Whatever you do to collect savings, save about three months’ worth of emergency funds; these are only to be used if you lose a job, have unforeseen expenses, and the like.
Do not include this money for standard bills, but extra you are stashing away. Once you hit your three-month goal, then collect another month. Now with the extra months’ worth of saving, you can look at investments. Investing, thankfully has gotten easier, most brokerage firms are offering no-cost trades, and some are allowing you to buy stocks in “slices.” These Slices let you buy into things you never thought you could afford because now, instead of x number of shares, you can say $100.00 of this stock and $350.00 of that stock. It not only makes investing a bit easier but wide open.
As this grows, your options will expand. Please note that you will incur taxable income with every move you make with these stacks, even if you re-invest it, so I recommend holding stocks for the long term.
Retirement Funds
Planning for retirement is much the same as your initial savings. If your company offers any matching, then buy at least that amount. If you can afford it, max out your 401k as it will also reduce your taxes. If your company does not off any sort of retirement plan, it is now up to you. There are two individual options, a traditional Individual Retirement Account (IRA) or a Roth IRA.
The first reduces your current taxes but is taxed at your income rate and forces you to pull out some percentage from this fund depending on your age. The second is after taxes, but you will never pay taxes when you withdraw, and you can leave it to whomever you chose with no penalty, but I think you must be at least 59–1/2 to touch the money without penalty.
As you leave one company for another, my suggestion is that you roll your 401k into an IRA as you have much better investment control. On the side, when you have built up your savings and regular investments for a year, I would consider opening a Roth IRA.
The other advantage of either retirement account is that you can trade, sell stocks, and buy others with no penalty or tax implications. For myself, I had a couple of 401Ks while I worked for a company, then opened up a Roth when I went into business for myself.
The Uphill Battle
Many, if not most Americans do not come from established money. This lack of a wealthy heritage is most severe in minorities, including women and the LGBT community. In addition to this opening, scarcity is the place in society these groups have found themselves.
If you did not come from a white and well-educated background, you were likely fed the lie that you are in your correct place and should be happy. For everyone else, it can be done, but it is an uphill climb. Before dismissing the women as a minority, not only could they not vote until the early 20th century, they also could not set their financial plans in motion until the 60s and 70s, before which they could not open a bank account, own a house, or even get a credit card.
Go back further to the other minorities. You just need to look at the fact that you had no vote unless you were white and a land-owner, followed quickly by voting restrictions, such as “Jim Crow” laws. These factors further limited options because there was nobody making laws that could benefit you.
Then there is the pay disparity and lack of work options for all minorities, reducing the opportunity to build wealth. Finally, there is some hope, but it does take a re-training on how money works and how it grows. Thus the distinction between rich and wealthy.
As for those who chose or did not have a family to leave money to, this can be changed. Leave it to a charity to help educate or to trusted friends or students. No law says you must be of blood relation to passing on what you have learned or earned. You cannot keep it, so let it do some good for someone or a group.
