How to get rich or richer?

When giving my tax-planning, wealth-building seminars, I like to ask the audience, "Raise your hand if you know the Rule of 72 and how it works." Typically, about one-third of the audience raises their hands.

I'll explain this rule to be sure that we all understand it. Write the number 72 on a piece of paper. Assume you are getting a 10 percent rate of return on your investment. Divide 10 into 72 and you get 7.3, or the number of years it will take your principal sum to double at that rate. For example, $10,000 compounding for a 36-year period will double five times and eventually become $320,000.

What if that 10 percent return was subject to a 40 percent income tax at the state and federal level? Then you would only have a 6 percent return because 6 into 72 results in 12-12 years to double your money. This means that $10,000 will only double three times over a 36-year period.

When you compare $80,000 to $320,000 when tax deferred, it can make a huge difference.

Two factors that are measurably important to creating wealth are rate of return and tax deferment.

If you have money in a qualified plan such as a 401(k), profit sharing or any of the many IRAs and other qualified plans, then you are on the road to tax deferment. If you are the owner of a Roth IRA or the new Roth 401(k), then wave your tax-free flag high.

Now we come to the hardpart--the rate of return. How would you like to average a16 percent rate of return (or greater) per year? With a senior settlement (SS), you can.

An SS is simply the purchase of an existing insurance policy from a senior citizen (who is 65 years old or older) by an investor. The selling senior, who no longer wants to pay premiums, gets a much larger price for the policy than the cash surrender value from the insurance company. The investor wins by making a large profit without risk (because the senior is sure to die).

How do you become such an investor? There is a public company, trading on the NASDAQ, that makes it easy. The average rate of return on SS investments is 16.36 percent per year and has been greater than 16 percent throughout the company's 14-year operating history.

You can become an SS investor in one of three ways: taxable, tax-deferred or tax-free. Let's examine these possibilities:

Taxable--This category includes your own funds or funds you control (such as corporation or other business entities, family limited partnerships or any non-charitable trust).

Tax-Deferred--Almost everyone can participate via their qualified plans (IRAs--traditional or roll-over, 401(k)s, profit-sharing and other qualified plans). The trustees of pension plans or other plans that are not self-directed can join the profitable fun by investing the plan funds in SS for the benefit of all participants.

Tax-Free--A Roth IRA or Roth 401(k) can fatten your tax-free accumulations. Charitable entities--charitable remainder and lead trusts and family foundations--are a perfect fit.

Because SS plans are probably new to many of you, here's a suggestion: Show this article to your professional advisors--CPA, lawyer, banker, financial planner and others. Discuss SS from at least two aspects concerning your investments (taxable and otherwise): 1) determine how an investment in SS compares to other possible investment choices, and 2) compare existing investments to your long-term and short-term goals.

Do you want more information about how you can earn an average 16.36 percent per year, without risk? Fax me your name, address, phone numbers for business, home, and cell, and include your estimated time to invest. Please note that the minimum investment amount is $50,000 for accredited investors

Four easy steps to pay yourself first

1. Create an account that is separate from all your other accounts. This account should be only for a specified goal, usually saving or investing. If possible, choose an account with a higher interest rate--usually these types of accounts limit how often you can withdraw money, which is a good thing because you're not going to be pulling money out of it, anyway.

2. Determine how much you want to put into the account and at what interval. For example, you can decide to put in $300 per month, or $150 per paycheck. This will depend on what you intend to do with the money. For example, if you want to put a $20,000 down payment on a home in 36 months (three years), you’ll need to save about $550 per month every month.

3. Put that money into the account as soon as it is available. If you have direct deposit, have a portion of each paycheck automatically deposited into the separate account. You can also set up an automatic monthly or weekly transfer from your main, active account to your separate account, if you can keep track of your balance enough to avoid overdraft fees. The point is to do this before you spend money on anything else, including bills and rent.

4. Leave the money alone. Don't touch it. Don't pull money out of it. You should have a separate emergency fund for just that--emergencies. Typically that fund should be enough to cover your for three to six months. Do not confuse an emergency fund with a saving or investing fund. If you find that you don't have enough money to pay your bills, look for other ways to make money or cut expenses. Don't charge them on your credit card (see Warnings below).

9 easy steps to get rich and survive this hard times

It seems that everyone wants to get rich. There are books out on that subject, classes that are headed by someone who can show you an easy way to get rich, rich people willing to drop advice on how to get rich, and many other schemes that guarantee you will get rich fast. Getting rich is one of the main goals of most people, and while it is never easy, there are some sensible techniques that will increase your chances of getting rich.

1. Define "rich". It's one of those subjective words that everyone uses but no one defines. What are your standards for being rich? In other words, what do you envision when you think about being rich? This can be different for everyone. Usually it whittles down to a few common goals:

2. Prestige. For many people, the idea of getting rich is tied to getting respect. It's not so much about how much money you have, but about maintaining a luxurious standard of living--exotic vacations, nice cars, swimming pools, etc.

Retirement. Some people want to get rich so that they never have to work another day in their lives. In this case, the standard of life one wishes to maintain once retired is critical to understanding how much money is needed to get rich.

Keep your eyes and ears open. All the time interesting people and chances appear and disappear. Get a feeling when to step forward and when to wait.

Delay gratification. If you're looking for information on how to get rich, then you're probably not rich right now, and there's a reason for that. Are you spending money on things that won't get you rich? Are you sticking with a job that doesn't make that much money to begin with? In order to get rich, you're going to have to give up some of the things you enjoy doing now, so that you can enjoy those things without restriction later. For example, you might like having free time, so you give yourself a few hours a day to do nothing. But if you were to invest those few hours into getting rich, you could work towards having 20 years of free time (24 hours a day!) with early retirement. What can you give up now in exchange for being rich later?

3. Cut expenses

4. Get a job that pays more or get a promotion

5. Downgrade or give up your car

6. Downgrade your apartment or house

7. Reallocate your spare time

8. Save money. You've heard the phrase "It takes money to make money." So start socking away the extra money you're making now that you've delayed gratification as outlined previously. After all, what's the point in giving up the stuff you like if you have a hole in your pocket? Start building a "get rich fund" at the bank. Always pay yourself first. This means before you go and blow your pay check on a new pair of shoes or a golf club you don't need, put money aside in to an account that you don't touch. Do this every time you get paid and watch your account grow.

Invest. Once you've stockpiled your savings, start thinking of ways to invest it. This is where your definition of "rich" really comes in handy. If you're looking for prestige, for example, a good investment would be education. Save up enough money to attend an Ivy League school and obtain a degree in something that will make decent money but, more importantly, earn great respect (doctor, lawyer, dentist, any kind of professional). If your goal is to retire early, on the other hand, invest that money in stocks, bonds, or other vehicles of investment that will give you an annual return on investment (ROI) that's enough to maintain you in your retirement. For instance, if you have one million dollars invested and you get a reliable 7% ROI, that's $70,000 per year! Invest in relatively stable assets - rental properties or potential development land in steadily growing areas is a good example. Put your money not in luxuries that will be worth nothing in a couple of years (a fancy car, for example), but in things that will increase in value over time, and that will earn you supplementary income in the interim.

9. Stay rich. It's hard to get rich, but it's even harder to stay rich. Your wealth is always going to be affected by the market, and the market has its ups and downs. If you get too comfortable when times are good, you'll quickly drop back to square one when the market hits a slump. If you get a promotion or a raise, or if your ROI goes up a percentage point, don't spend the extra--save it for when business is slow and your ROI goes down two percentage points.

Network with the Rich It's always an excellent idea to surround yourself with other rich people; whether you have already become very rich or whether you are just starting out and clueless. Understand how the rich think and the way they manage their money. Fly first class or business class once in a while, spend a weekend at a luxury golf course; if you can't afford to do too much traveling and spending, then use the internet instead.