Taking financial responsibility

There should have been a class. Or maybe our parents should have had that "talk" with us when we were little. No, not the birds and the bees. We seem to have that part down, lol. The other talk. How to live life responsibly; able to take care of ourselves and our loved ones and dependents.

For the rest of us, there is a book by Thomas J. Stanley, written 12 years ago, called The Millionaire Next Door. It is a classic.

How can you join the ranks of America's wealthy (defined as people whose net worth is over one million dollars)? It's easy, say doctors Stanley and Danko, who have spent the last 20 years interviewing members of this elite club: you just have to follow seven simple rules. The first rule is, always live well below your means. The last rule is, choose your occupation wisely. You'll have to buy the book to find out the other five. It's only fair. The authors' conclusions are commonsensical. But, as they point out, their prescription often flies in the face of what we think wealthy people should do. There are no pop stars or athletes in this book, but plenty of wall-board manufacturers--particularly ones who take cheap, infrequent vacations! Stanley and Danko mercilessly show how wealth takes sacrifice, discipline, and hard work, qualities that are positively discouraged by our high-consumption society. "You aren't what you drive," admonish the authors. Somewhere, Benjamin Franklin is smiling.

The steps are simple.

1. Get a paying job.

2. Live beneath your means.

3. Save 10% of each paycheck (or a minimum of 5% if you are really strapped) into a savings account. Do this first, before deciding to buy that new TV, ATV, motor home, digital cable, DVD player or other (un)necessary sundries.

4. Place the entire 10% each month into your new "emergency fund" savings account. This fund should stay liquid, meaning something you can take money out of when you need it, not a CD (certificate of deposit). Continue to contribute money to this account until it equals 6 months of your monthly cash-flow needs. Now you can rest easy that if something goes wrong with your job, car, house or health, that you have 6 months in which to figure out how to handle it.

5. When this account is fully funded, take the 10% and put it into investments. Remember not to invest all of it in one place. Try to do different things with it. This is called diversification. That makes your money less at risk.

6. If you have debt problems, you need to lower your standard of living. Get a cheaper place. Drive a cheaper car. Live frugally. Perhaps take 5% for savings and 5% toward debt repayment until you get it paid off. And stop using your credit cards as if they are your emergency fund. This is no way to prepare for retirement.

For those who refuse to listen, refuse to save money in a bank account, refuse to live beneath your means, please remember. Actions have consequences.