To live like a millionaire, it helps to be one. That applies equally when you want to retire like a millionaire, but Doctor X, as we’ll call him, discovered he wasn’t yet there during a meeting with Keith Gredys.
Gredys is chairman and CEO at Ask Kidder–Fuerza Financial Inc. benefits consultants and plan builders in West Des Moines. Gredys quickly saw that the doctor was pretty much spending whatever his top-tier salary brought. He had some habits–like $100 a day for an aquarium of exotic fish, for starters–that were keeping his eye off the money ball.
The doctor wanted to retire. But with just six weeks’ worth of his salary in a retirement account, Gredys advised that his golden years might have to wait a (long) while.
To channel some of his pay into investments, the doctor needed a budget. Bill Gates may not need to worry about the utility bill, but the rest of us don’t get off that easily.
It isn't difficult for Gredys to come up with a budget; the tough part is sticking to it. We all know what our income will be and we can usually predict profits of businesses we own. Bonuses, or big litigation wins, may sway the bar, but those don’t happen overnight and can be factored in. We all should know what it costs to educate our kids, maintain our cars, maintain our homes, go out to dinner, and take a vacation. Investment set-asides play an obvious role. Put the pluses on a spreadsheet, pour in the minuses, and divide by 12 to reach that magic monthly budget.
The key is to live below your means. Warren Buffett still lives in the house in Omaha that he bought in 1958 for $31,000. I was at a convention in Los Angeles in 1998 when Michael Eisner, then-CEO of the Walt Disney Co., drove over to meet us in his late model Buick. This was soon after he had cashed in Disney options valued at $570 million.
No, we need not all drive Buicks. And we can buy a new house more than once in a half century. Even fish are OK. Just do so with a plan in mind.
Writing about the book "The Millionaire Next Door," financial writer and podcast host Paula Pant observed that its authors lobbied the wealthy to make a spending plan. "Operating a household without a budget," they said, "is akin to operating a business without a plan, without goals and without direction."
