# Set Goals, Don’t Just Have a Velleity

Velleity is defined as a desire with no effort put forth; a wish.  For most people, growing wealthy is a velleity.  They may talk about how nice it would be to have money, but they never put forth any effort to actually become wealthy.

There is no secret to becoming wealthy.  It is simple math.  Make as much as you can.  Live on less than you make.  Invest what you save.  Eventually – in 20 years or so – you will become a millionaire.  Wait another seven or eight years, and you will have a couple million dollars.  By the time you are 60, you will probably have a net worth of about 15 million dollars or more.

Most people though will talk about how nice it would be to be wealthy, but then continue to do the things that keep them poor.  And poor people come at all income levels.  They continue to run up credit card balances and pay horrendous amounts of interest each month.  They continue to buy new cars every few years and make big car payments each month.  They continue to take vacations they can’t afford.  To eat out every meal.  To buy all sorts of new clothes all the time.

If you want to lose weight, you need to eat less than you burn each day.  You need to cut down on the calories you consume and you need to increase the amount of exercise you do to burn more.  If you want to become wealthy, you need to increase the income you make and decrease the amount you spend.  The more you have free to save and invest each month, the more rapidly you’ll become wealthy.

It all begins by sitting down and writing down all of the sources of income for the year at the top of a sheet of paper, and then writing down all of your critical monthly expenses at the bottom.  Critical expenses include food, shelter, clothing, utilities, taxes, and insurance.  Sum these expenses and multiply by twelve.  Subtract this sum from your income – this is how much discretionary income you have.

Next, sum all of the recurring expenses you have – your credit card bills, your cable TV subscription, your phone bill, etc….  Again, multiply this number by twelve and subtract from your discretionary income.  If the answer is positive – good, you are able to save.  If the number is negative, you have work to do.

In order to become wealthy, you need to have at least \$300-\$500 in cash left over each month to save and invest.  If you don’t have this much left over, start looking at things you can cut.  Pay off your car or sell it and buy a car you can afford for cash.  Use the money you are saving on payments to pay off credit cards.  Get rid of all of the interest you are paying and you’ll have a lot more money free.  Cut back on some luxuries – particularly eating out – and use the money to pay down debt or save.

Once you have about \$10,000 in the bank for emergencies – this will take a couple of years at \$500 per month –  start putting the extra money you have into a car fund.  Once the car fund reaches about \$5000, start putting additional money into an investment fund.    Each time you have a few thousand dollars saved up, invest in a stock or buy shares of a mutual fund.  Be sure also to put money into your company’s 401k plan – at least up to the company match.  If you have additional money left over, put it into an individual IRA or Roth IRA.

Don’t forget that the kids will want to go to college some day – don’t act surprised when they are seniors.  Put \$2000 each year into educational IRAs for each child.  Get a 15 year fixed mortgage on your house and pay it off when your kids are still in high school.  Put the additional into your personal investments to prepare for college expenses.  If you don’t want to see your kids move home after graduation, consider setting up emergency funds for them to help get them started after college.  You and your wife can gift them up to \$13,000 each without paying gift tax.

Anyone can become wealthy.  It just needs to be more than a velleity – you need a plan.