More Americans are dropping a few rungs on the wealth accumulation ladder, but at the same time wealthy Americans can expect to grow even richer: A May 2011 study from the Deloitte Center for Financial Services says that total wealth among U.S. millionaires will likely more than double by 2020. Total wealth accumulation among U.S. households will climb from $39 trillion in 2011 to $87 trillion by 2020. And the fastest growth accumulation rates on a state-to-state basis favor the East Coast, particularly Florida, New York and New Jersey.
So what do millionaires know that the rest of us don't? Gerald Grant, a financial advisor and author of Bold Moves to Creating Financial Wealth, has some ideas. At the top of his list is knowledge, something that the rich have plenty more of, Grant says.
“Knowledge, particularly in today’s tough economic times, is more important than ever before,” says Grant, a financial planner at Miami-based Financial Planning for AXA Advisors, LLC. “Whether you’re managing your own money or have someone managing it for you, knowledge of how money works is more important than ever before.”
It’s not that obtaining that knowledge is especially difficult, Grant says. It’s not. But what it takes is a sense of mission and discipline that starts with going “back to school.”
“For the most part, people today do not have a handle on their expenses,” says Grant. “When I first meet with clients, I have them complete an expense worksheet that identifies all of their expenses including dining, entertainment, mortgage and car payments. A large number of people are surprised by how much they spend. Increasing awareness of how you are spending money is the first step in managing your finances. Once you have that knowledge, you have a basis from which to work. You can become more disciplined in your savings and investment strategies.”
Most Americans short themselves by paying their bills first and adding to their savings account later. Grant says that wealthier Americans have turned that notion on its head by making sure they put aside savings for themselves first, and then pay the mortgage lender, utilities and phone providers. That’s a refreshing concept—imagine making yourself a financial priority over your billion dollar credit card company.
“Typically, people pay their bills and whatever is left over – if anything – is what they save,” he adds. “What you should do is determine what you want to save and pay yourself first. Then you can budget your remaining expenses. It may mean cutting back on eating out as often as you like, but you will be able to save – and invest – for the future.”
It’s a concept Grant has practiced since he was a teenager in Kingston, Jamaica, earning $2 an hour as a dishwasher. His parents and teachers convinced him that knowledge was indeed power, and now he wants the less affluent to start practicing what he’s preaching.
Following his advice might be America’s best hope for closing the financial gap once and for all.
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