10 of the Richest Cheapskates of All Time

Including two beloved movie stars, a pair of British royals, a couple of oil barons, and one very rich U.S. president.

Warren Buffett, the billionaire investor, is known for his frugality, living in the same unostentatious Omaha home he bought in the 1950s and driving himself around in an ordinary American car (albeit a Cadillac).

Sam Walton, the late billionaire co-founder of Wal-Mart, also lived comfortably, but without all the showy toys he could easily have afforded. “Why do I drive a pickup truck?” he asked in his autobiography. “What am I supposed to haul my dogs around in, a Rolls-Royce?”
But there’s frugal, and then there’s cheap.

Here are 10 famous figures who seem to have crossed the line between admirably frugal and abominably stingy. Some hoarded their money and denied themselves and their families even the most common of comforts. Others lived lavishly, sparing nothing on their own pleasures—while sticking other people with the bill whenever possible.

Charlie Chaplin

New York Daily News Archive—Getty Images Charlie Chaplin returns from Europe, October 18, 1921.

(1889 – 1977)
The great silent movie comic was never quieter than when the time came to buy another round or the waiter appeared with the check. This despite the fact that he was reportedly earning $10,000 a week by 1916, the equivalent of $219,000 a week today. “Even after he had millions in the bank,” biographer Kenneth S. Lynn observed, “Chaplin never seemed to have any money on him, and when dining out with friends he always allowed someone else to pick up the tab.“

Actor Marlon Brando called him “an egotistical tyrant and a penny-pincher,” while Orson Welles upped the ante to “cheapest man who ever lived.” According to Hollywood lore, Chaplin borrowed movie-set carpenters to build his home in Beverly Hills in order to save money, resulting in a structure so flimsy and prone to falling apart that it was soon nicknamed Breakaway House.

How to Max Out Your Earnings at Any Age

Whether you're just starting out or further along in your career, here's how to manage your biggest asset—your earning power.

You know that financial security hinges on good habits, like saving regularly, keeping your spending in check, and not doing anything stupid with your investment portfolio. Still, it’s equally important to manage your career. Decisions you make at work can, arguably, have the biggest impact of all on your future comfort.
Here’s advice to help you max out your earnings whether you’re just starting out or hitting your peak.

Earlier in your career

Be socially savvy. You probably know that a strong profile on social media sites goes a long way in helping your career, now that the majority of employers use Linkedln, Facebook, and Twitter to find talent. Make it easy for hiring managers to find you and be impressed by your accomplishments. LinkedIn has found that a complete profile greatly increases the likelihood you’ll be contacted about a job; a photo in professional context helps too.


Play the numbers. Professionals who don’t negotiate their salaries early in their career can lose more than $500,000 in income by age 60, according to Linda Babcock and Sara Laschever, authors of Women Don’t Ask: Negotiation and the Gender Divide. Start by putting a number on the table to sway the final offer. Find out what’s reasonable by talking to peers in your field—including, ideally, someone who works at your target company—and check salary data sites like Glassdoor.com and PayScale.com.

Stay in the game. Taking time off to care for kids can be a big blow to lifetime earnings because of lost wages and career momentum. In one Harvard study, female MBAs who took 18 months off earned 41% less over their careers than male colleagues. Before you quit outright, see if you can negotiate flextime, work part-time, or freelance.

Don’t lose touch. If you quit your job, do “strategic volunteering”—something that dovetails with your career and can be added to your résumé. And keep up with co-workers. “When you’re not working is exactly when you need to keep those connections strong,” says Carol Fishman Cohen, co-author of Back on the Career Track.

Dazzle the higher-ups. People with senior–level mentors earn $7,000 more a year, according to workplace researcher Catalyst. So create situations where you’ll stand out: Seek assignments that allow you to interact with top brass and join industry groups favored by movers and shakers.

Get moving. People who exercise at least three times a week earn 6% to 9% more than those who do not, according to research by Cleveland State University professor Vasilios Kosteas. He cites growing evidence that fit employees are more productive and manage work-related stress better, which can lead to faster career advancement.

Later in your career…

Give your résumé a facelift. You’re 40% more likely to land a new job with a professionally crafted résumé than a DIY one, found job site The Ladders. Via an industry association, find a résumé writer who knows what works in your field. Been working for while? Lop off everything but the last 10 years. Decades of experience are nice, but employers care more about what you’ve done lately.

Hit up your contacts. Half of job openings aren’t advertised, says Duncan Mathison, author of Unlock the Hidden Job Market. Tap connections to ask about opportunities where they work.

Go where you’re wanted. Getting up there in your career? Some companies seek experienced workers. Find leads at AARP’s site Life Reimagined and CareerBuilder’s Prime CB.

Be tech savvy. “Bust the myth that older workers don’t have the most up-to-date skills,” says HR expert Martha Finney. Have a strong social media presence and be able to discuss how the latest technological trends affect your industry.

Build your brand. At Yola.com you can create a professional website free; for $10 a month you get hosting, Facebook, and mobile-publishing support. Showcase your work, posting articles, presentations, speeches, and client testimonials, and add new examples regularly. A blog can bolster your rep too. Says CareerXRoads CEO Mark Mehler: “The blogs with the most readers are the ones with the most frequent updates.”

Protect your paycheck. High earners are vulnerable in a cutback and slower to rebound. A vice president over 50 takes 20% longer to get rehired than a 41- to 45-year-old, recruiter ExecuNet found. So add skills constantly, even if they’re not a perfect fit with your current job. “Companies often seek out hires who can bring new thinking,” says author and restructuring adviser Duncan Mathison.

Adopt a colleague. Managers with protégés earned an average of $25,075 more a year than their non-mentoring peers, workplace researchers Catalyst found. “The ability to develop talent is highly valued,” says Catalyst’s Anna Beninger.

How Being a Boring Investor Can Make You Rich

Think like a millionaire and learn how to boost your returns without resorting to exotic—or risky—investment strategies.

Most millionaires don’t rely on complicated strategies to attain wealth. More than three-quarters of a typical millionaire’s portfolio is held in a basic mix of stocks, bonds, and cash—with some real estate and annuities mixed in, according to Phoenix Marketing. As for exotic fare such as private equity or art, only 5% to 7% of the average affluent person’s wealth is tied up in those investments. And just one in eight high-net-worth households even owns a hedge fund, according to a survey by U.S. Trust.

That sure sounds a lot like the strategies regular investors use. So why do millionaires do so much better? Well, for one, they actually stick with their plain-vanilla strategy and don’t let market swings or hot performance sway them. And they pay greater attention to the small stuff that can nick returns over time.

That will be particularly important going forward. “Given today’s stock valuations and low interest rates, it would be safer to assume returns that are 1.5 to four percentage points lower than historical averages,” says Hal Ratner, head of research for Morningstar Investment Management. For a balanced 60% stock/40% bond portfolio, you’re looking at returns closer to 5% rather than the historic 8.6%. Here are ways to boost that result:

Your Millionaire Moves
• Embrace your passive side. Nearly a third of those with ultra-high net worth—folks with $5 million or more—are interested in investing in low-cost ETFs this year, Spectrem found. Among those worth less than $1 million, it’s just 14%.

What do the wealthy know? That passively managed index funds and ETFs outpace actively managed funds over the long term, thanks to their lower costs. In the 10 years ending in December 2014, the S&P 500 returned an annualized 7.7%, while the typical actively managed blue-chip fund gained 6.6%. A $100,000 investment will hit $1 million in 37 years at 6.6% rate. But at 7.7%, you’ll get there five years sooner.
The Oracle of Omaha gets this. In his will, Buffett left instructions for the trustee managing his wife’s estate to go with index funds, preferably Vanguard’s. “I believe the trust’s long-term results from this policy will be superior to those attained by most investors—whether pension funds, institutions, or individuals—who employ high-fee managers,” he wrote.

• Fend off Uncle Sam. Four in five millionaires say taxes are a major factor in their investment decisions, according to Spectrem. For good reason. Research by Vanguard and T. Rowe Price shows you can lose as much as two percentage points annually to taxes. Yet there are plenty of ways to make some of that up.
How? Here again, index funds help. Over the past 15 years stock index funds have lost 0.8 percentage point less a year to taxes than actively managed portfolios.

Next, be mindful of where you keep your investments. Buy-and-hold equity index funds, because of their inherent tax efficiency, can be held in taxable accounts. But funds that throw off short-term capital gains or interest income, such as actively managed growth funds or bond funds, should be stashed in tax-advantaged plans like 401(k)s and individual retirement accounts.

Yet an analysis of Vanguard IRA customers found that only two in five are keeping their active equity funds in IRAs and only 18% own their bond funds there. That’s a costly mistake. Vanguard found proper “asset location” can boost the value of a balanced portfolio by up to 11% over a decade.
If you must hold stock funds in a brokerage account, go with a tax-managed option. T. Rowe Price Tax-Efficient Equity (PREFX) minimizes taxes through various means, including selling losing shares to offset gains. That has helped it beat the S&P 500 by an average of nearly one point a year for the past decade.
• Curb your enthusiasm. It’s hard to resist the temptation to chase a highflier. But ultra-high-net-worth investors, Spectrem found, consider past performance far less than risk, diversification, taxes, and reputation when it comes to picking an asset or security.

That approach helps preserve gains. Morning-star found that investors lost 2.5 points a year on average over the past decade by chasing what’s hot and getting in too late, rather than buying and holding.
Focus instead on strategies that can help you manage your own behavior. A study last year at Goethe University Frankfurt found that households that successfully built wealth had better self-control as measured by their ability to set goals, monitor their portfolio, and commit to their objectives.

To improve your self-control, automate your investing as much as possible, says Ben Carlson, a money manager and author of A Wealth of Common Sense. For instance, 60% of 401(k)s offer auto-rebalancing. Set it up and you won’t balk at making the tough decision to buy low and sell high.
• Don’t swing for the fences. Millionaires are actually quite risk-conscious. U.S. Trust found that only a third of high-net-worth investors are willing to take more risk to earn higher returns. That explains why about two-thirds of the group stash 10% or more of their portfolios in cash.

This isn’t entirely about fear. Millionaires worry about valuations. And the price/earnings ratio for stocks—based on 10 years of averaged profits—is at a level not seen since the financial crisis and dotcom bubble. Like them, you shouldn’t feel compelled to use every last dime to buy stocks if you fear prices are too high

7 Ways to Improve Your Credit

You probably know that your credit is a big factor in getting a loan, but you may not realize just how much of an impact it can have on all aspects of your financial life. Your credit can influence everything from interest rates and insurance premiums to apartment rentals and even job eligibility.
The good news: You don’t have to earn a high income or be flush with cash to have great credit.
“The most important thing you can do is make your payments on time and don’t take on too much credit card debt,” says John Ulzheimer, the credit expert for CreditSesame.com.

Meanwhile, it doesn’t take drastic measures to improve your credit scores over time. Here’s what you need to know.

First, understand how it works
Simply put, your credit history reflects your track record for paying back loans, as well as your current debt levels and access to credit. Three different credit agencies — Equifax, Experian and TransUnion — collect information pertinent to your credit record and keep it in a credit report. With your permission, lenders, landlords, insurers and employers can access these reports.

These reports are also the basis for your credit score, which is a numerical snapshot of your creditworthiness. The most widely-used credit score is the FICO score, which ranges from 300 to 850. You have three different scores, one associated with each of the three credit agency reports. Borrowers with scores above 750 are generally considered excellent, while scores below 650 are considered poor.

Check your credit reports
With so much riding on your credit history, it behooves you to check all three reports annually. You can do so for free once a year at AnnualCreditReport.com. At the same time, you’ll want to make sure the details in the report are correct and legitimately reflect your borrowing activity; suspicious activity may be a sign of identity theft.

If you find an error in any of the reports, you’ll want to go through the necessary steps to remove it or update it. You should start by contacting the lender or creditor that reported the inaccurate information and asking them to update your account. Depending on the nature and severity of the error, you may also want to contact the credit bureaus directly.
Sure, it’s a hassle but, considering what’s at stake, also time well spent. “You can improve your credit score considerably just by correcting negative information,” said Ulzheimer.

Keep track of your score
Unlike your credit reports, you’ll need to pay to see your FICO or other credit scores unless you get it from a lender or other service that pulls your score in the regular course of business.
Given how much is riding on this number, it’s worth paying for once a year. You can access one score — plus an explanation of your score — for $19.95 at MyFICO.com. Assuming that the information in all three of your credit reports is correct and consistent, one number is sufficient.

Fair Isaac, the company that calculates FICO scores, uses a complex formula for coming up with this tally. In a nutshell, however, the numbers are based on whether you pay your bills on time, how much of your available credit is outstanding, the types of loans you have and how long you’ve had them.

Pay your bills on time
The single biggest influence on your credit score is whether you’ve made your loan payments and done so on time, says Anthony Sprauve, FICO’s senior consumer credit specialist. “Your payment history is 35% of your score,” he says. “It’s the biggest slice of the pie.”
In fact, according to FICO, 96% of people with excellent credit (scores over 800) pay their bills on time.
Keep in mind that this number only reflects payments as they relate to your credit report, says Ulzheimer. If you consistently pay your utility bills, for example, that won’t influence your score.
Your best defense: Set up automatic payments for the minimum amounts to make sure you’re never tardy.

Keep balances in check
The second biggest factor in your score is credit utilization, which is the percentage of your available revolving credit (i.e. credit cards) that is being used. This accounts for 30% of your score. Consumers with the best credit scores use just 7% of their revolving credit lines, according to FICO, but anything below 30% is generally considered acceptable, says Sprauve.

If your score is low because of high balances, paying these down is one of the fastest ways to improve your score. “You could see improvement in as little as 30 days,” says Ulzheimer.

Keep in mind that even if you pay your balance in full every month, your ratio of debt to credit will vary depending on when creditors report to the bureaus. “People assume it’s the same as the due date, but that’s not necessarily the case,” says Sprauve, who recommends making a payment every two weeks if you tend to charge a lot. “Your report will show a smaller balance no matter when the creditor reports,” he adds.

Apply for new credit judiciously
There are few reasons for why you don’t want to apply for too many loans — credit cards in particular — at one time. First of all, the average age of your credit lines counts for 15% of your credit score. The higher your average, the better your score. The average account for consumers with the best credit is 11 years old, versus just six months for consumers with poor credit.

Likewise, new credit inquiries, which account for 10% of your score, can temporarily lower your score. The types of loans you have also influence your score, to the tune of 10% of your score.
Because older loans and higher credit limits can potentially help your score, many experts recommend keeping accounts open even if you don’t use them. This strategy makes sense to a point but shouldn’t dictate your decision to close an account or keep it open, says Ulzheimer. Many accounts are factored into your average account age for years after they’re closed.

Stay away from credit repair scams
If your credit is marred by a short sale, foreclosure or default, solicitations from outfits promising to clean up your credit may sound tempting. After all, these events will stay on your credit report — and drag down your score — for at least seven years.
The bad news: There are no legitimate “easy” fixes for wiping the slate clean. There’s nothing a so-called credit repair clinic can do that you can’t do on your own for free.
The good news: As long as you keep revolving debt in check and pay your bills on time, you’ll make steady progress toward improving your score. “You’ll be surprised by how much improvement you can see after just 24 months,” says Ulzheimer

To Improve Your Cash Flow, Think Like a CEO

Borrow these tactics from corporate America to improve your household balance sheet.

The Great Recession whacked American companies, well run and not, fairly indiscriminately. You can learn a lot from how execs at the best ones responded and returned their businesses to record profitability in what now seems like the blink of an eye.

In 2008, for instance, Wal-Mart leaders knew they had to continue cutting prices to keep financially strapped customers coming in the door. To do so without hurting the bottom line, top brass suspended a stock buyback program and reduced spending on new supercenters, focusing instead on remodeling existing stores. The payoff: Wal-Mart revenue kept growing during the financial crisis, and its market share has increased in basic goods, such as groceries.


You may not have the financial muscle that Wal-Mart does. But like any sound business, you should know what your spending priorities are and where you have room to cut. Here’s how you can apply these principles to your personal finances—and prosper.

Control your outflow
Just as company executives contract and expand outlays to fit the company’s business cycle, so should you.
Take your savings rate. Conventional wisdom suggests you should save a steady 10% or so a year for retirement throughout your career. Instead, says Maspeth, N.Y., financial planner Michael Terry, you’re better off adjusting that rate to fit your financial situation—pulling back to, maybe, 5%, when your kids are in college and the budget is tight, then ramping up to 10% to 15% after they graduate. Once your mortgage is paid off, Terry says, boost your rate again, say, to 25%.

Odds are good that you’ll come out ahead with less pain. Take a typical 50-year-old who earns $70,000 a year, saves at a steady 10% clip, and has $350,000 socked away in his 401(k)—the target for that age. Assuming standard 2% raises and average annual returns of 5%, he’ll amass $916,500 by 65. If instead he lowers his savings rate to 5% until his kids are out of college, bumps up to 15% at 55, and to 25% at 60, he’ll have $980,000 by the time he retires.

Don’t be shortsighted
When the going gets tough, CEOs who want to sound tough often impose across-the-board cuts. Yet be careful when trying to impose this tactic at home. If you’re looking to boost your cash flow through higher wages, for instance, cutting as much from your career development spending as from your vacation fund is counterproductive. Things like “continuing education and networking are worth the money,” says financial planner David Blaylock.

Lower your operating costs
Another way corporate America improves its cash flow was by reducing its borrowing costs. While it’s likely you’ve missed rock bottom on interest rates, they’re still low by historical standards. “If your debt is three years or older, take a hard look at refinancing before the window of opportunity closes,” advises LearnVest financial planner Tonya Oliver-Boston.

The savings can be substantial, particularly if you shorten the term of your loan. Say you refinance a 30-year $250,000 mortgage that you took out in 2007 when rates were about 6.35%, and roll the remaining debt into a 15-year loan at 3.25%. You’d have roughly the same monthly nut, but you’d save nearly $160,000 in interest and retire the debt nine years sooner. That would free more cash for savings in the years before retirement.

You can apply the same strategy to other higher-rate debt. Say you’re currently shelling out $500 a month to pay down $10,000 in credit card balances at an average 15% rate and $25,000 in college PLUS loans for parents at 7.9%. Refinance that debt with a home-equity line of credit, recently around 5%, and your payments will drop to about $275 a month. True, the rate on a HELOC is variable, but lifetime caps on increases should keep it well below PLUS loans and plastic.

Price yourself right
A business knows how to price what it sells competitively. In your household, your salary is the equivalent of your price, and nabbing a higher one is a sure path to greater profitability.
Developing a rep as a top performer is critical: Make a strong case for yourself in your annual review by quantifying what you’ve done to boost revenue or cut costs, such as bringing in new clients or switching to lower-cost suppliers. “Adding more value is about bottom-line impact,” says New York City career coach Caroline Ceniza-Levine.

Coming to your boss with a counteroffer from a competitor can also lead to a bump in pay, but it’s risky. A less threatening route, says Ceniza-Levine, is to reach out to recruiters to see what salary you could command. Then you can say to your boss, “Recruiters are coming to me with offers that are 20% above where I am, but I like it here. Is there anything we can do?” Framing the situation as a shared problem reinforces that you’re still loyal.

Then again, if your efforts are unsuccessful, it may be time to look elsewhere. Even a small bump in pay can have a big impact on your bank account over time.

Tools to Make Your Money Grow

• 1. Protect Your Portfolio Like Buffett

  Build a moat
  In the constantly changing world of business, the key to investing success isn’t identifying companies that are growing the absolute fastest. Rather, it’s “determining the competitive advantage of any given company and, above all, the durability of that advantage,” Warren Buffett famously wrote.
  He coined the term “wide moat” to describe firms with products, services, or business models that can stand the test of time.
  You can own attractive wide-moat companies through Buffett’s Berkshire Hathaway, which Morningstar says is roughly 15% cheaper than the average stock in the S&P 500, based on its price/earnings ratio.
  For a diversified approach, buy Market Vectors Wide Moat ETF It tracks the Morningstar Wide Moat Focus Index, which over the past 10 years has beaten the S&P 500 by five percentage points annually.
  Or pick some wide-moat shares. Among MOAT’s holdings are Buffett-like stocks that dominate global markets, such as IBM, Coca-Cola, and General Electric.
  
• 2. Get Better Advice

  Invest in a team, not a star
  Even if you’re smart or lucky enough to find that rare stock picker who can consistently beat the market over time, there’s a good chance he will be gone before the long run comes around. The average number of years that an active manager stays with a stock fund is just 5.7.
  One simple solution: Stick with stellar funds run by disciplined committees, not a single manager.
  The nine-member group at Dodge & Cox Stock and the four-person team at Tweedy Browne Global Value have whipped the broad markets over the past three, five, 10, and 15 years.
  Put your adviser under a “BrightScope”
  When selecting planners, you want to know more than just their fees and disciplinary record. You also want to know their areas of expertise, typical customer, average account balance, and pay structure.
  Screen advisers in your area using all of these variables at Brightscope.com’s financial adviser directory.
  Pay next to nothing for basic help
  Asset-allocation advice has become a cheap commodity, so don’t overpay.
  New Internet-based advisers such as Wealthfront and Betterment charge annual fees of 0.15% to 0.35% in general.
  Vanguard’s new Personal Advisor Services will offer portfolio management and a financial plan for 0.30%.
  
• 3. Make Smarter Choices

  Get more by doing less
  By trying to outsmart the market, overly active investors usually dig themselves into a hole.
  In the past 20 years, the average stock fund investor earned just 4.3% annually while the S&P 500 gained 8.2%. Instead, just create a long-term plan and stick to it.
  Do something by “doing nothing”
  Here’s a mental trick that can help you stay the course. When trying to make decisions — for instance, Which gym should I join? or Where should I open an IRA? — toss in an option called “do nothing.”
  Research from Wharton professor Rom Schrift and Georgia State’s Jeffrey Parker suggests that this small addition to your set of choices will subtly remind you of your goal (be it exercising or saving for retirement) and help you stay disciplined.
  Buck up before you buy
  You’ve probably heard the old saw about investing with your head, not your heart. At the very least, don’t make any financial decisions with a forlorn heart.
  When feeling lonely or socially isolated, you’re more apt to take bigger risks with your money, according to a new study in the Journal of Consumer Research.
  So “delay important financial decisions following a breakup or a falling-out with friends, colleagues, or family,” the study’s authors say.
  Be a precise negotiator
  A new Columbia Business School study finds that asking for an exact dollar amount — such as a $102,500 salary or a $5,375 raise — vs. a rounded figure gives you the upper hand when bargaining.
  Using a specific number signals you are informed and “you’ve done your homework,” says professor Malia Mason.
  
• 4. Follow the Trend

  Here are two demographic developments likely to move the markets for decades:
  America’s echo boom
  As the ratio of a country’s middle-aged (35- to 49-year-olds) to young (20 to 34) rises, so do stocks, says Ned Davis economist Alejandra Grindal.
  Why? As folks age, they start to save more for retirement, which is good for the markets. The U.S. M/Y ratio surged in the ’80s, sank in the 2000s, but is expected to turn around next year, thanks to the aging of the millennials.
  SPDR S&P Capital Markets ETF, with exposure to asset managers such as T. Rowe Price, should benefit.
  China’s baby boom
  Beijing is easing its one-child policy, starting off by allowing parents who are only children themselves to have a second kid.
  “Think about what that means for demand for infant formula, food, education, and housing,” says David Winters, manager of the Wintergreen Fund.
  A solid play on China’s rising consumer power: Matthews China Fund.
  
• 5. Start a Business

  Steal a page from the wealthy
  The Spectrem Group found business owners account for 6% of seven-figure households — triple that of doctors and lawyers.
  Don’t expect to get rich quick; the payoff comes when you sell. The median price for a web-design firm last year was $687,500, according to BizBuySell. Construction firms fetched $2.1 million.
  Be impatient for profits
  Business owners all too often focus on future growth, not on immediate profits. Don’t make this mistake.
  Long-term expansion is enticing, but grow too fast and your capital requirements and chances of failing increase, say Clayton Christensen and Michael Raynor, authors of The Innovator’s Solution.
  
• 6. Rethink Your Long-Term Investments

  Grab the early-bird advantage
  Investors have from Jan. 1 through the April tax-filing deadline the following year to fund an IRA. Yet the bulk of this money gets contributed in the last several weeks, forgoing more than a year’s worth of tax-free compounding. Here’s what you could gain by saving early:
  Inflation-adjusted IRA balance in 30 years:
  Early bird: $158,967
  Procrastinator:$143,467
  Note: Based in today’s dollars. Early-bird contributes Jan. 1 each year; procrastinators contribute April 1 the following year. Assumes $5,500 annual contributions gaining 4% after inflation. Source: Vanguard
  Learn the ABCs of 529s
  The trifecta of benefits for saving for college using a 529 account:
  1. Your money grows tax-free.
  2. Withdrawals for qualified educational expenses are tax-free.
  3. And many states offer upfront deductions or credits if you choose your in-state plan.
  After 18 years, $5,000 in annual savings will grow to $178,000 in a 529 savings plan while it will grow to $151,000 in a taxable account. (That’s assuming you’re in the 25% tax bracket and the accounts earn 6% a year).
  
• 7. Build a Better Portfolio

  Say yes to rules of thumb
  Planners warn against using mental shortcuts, since there’s nothing cookie cutter about your finances. Research from MIT begs to differ.
  In one study, some entrepreneurs were given simple heuristics (e.g., keep your business accounts separate from personal ones) while others were schooled in accounting arcana. Those given rules of thumb were more successful and more likely to practice good accounting.
  Rule of thumb: Your stock stake should be 110 minus your age
  Pay zero taxes
  0% — That’s the capital gains rate for selling a long-term investment if your ordinary income is below $73,800 for couples or $36,900 for singles.
  
  As part of the fiscal-cliff compromise, Congress permanently extended the 0% long-term capital gains rate for those in lower income-tax brackets. Yet “many people aren’t aware how high the income threshold is for the zero rate,” says Tim Steffen, director of financial planning for Baird’s Private Wealth Management.
  Build in safeguards, Part 1
  The last thing that you think of when stocks are rocking is rolling back your exposure to the winners. But if the past two bear markets taught you anything, it’s to rebalance your portfolio and book profits along the way.
  Start with areas that have far outpaced the S&P 500 since the bull began in 2009 — retailing stocks (up 313%) and real estate investment trusts (up 302%). Both are trading at valuations above their historical averages.
  Build in safeguards, Part 2
  Want an investment that will keep you safe in times of trouble? Seek out funds that over the past decade have lost less than the broad market in months when stocks have tumbled, while still outperforming over the past 10 years.
  According to Morningstar, this list includes Mairs & Power Growth andVanguard Dividend Growth. Both have beaten more than 90% of their peers since 2004.
  Think worst-case scenarios
  After a five-year bull run, risk taking is back. This is precisely the time not to get too exuberant.
  Gain some perspective by using this calculator: ativa.com/diversification-and-bear-markets. Check out how your current stock/bond allocation would have fared in each of the past eight recessions.
  
• 8. Make Credit Cards Work for You

  Leverage cash-back offers
  Don’t think of cash-back credit cards as unsecured borrowing but as a way to boost income in a low-rate world (provided you pay your balances off), says MyBankTracker.com’s Alex Matjanec.
  Here’s what these no-annual-fee cards pay for routine spending:
  For simplicity
  The Capital One Quicksilver card is as uncomplicated as it gets. It rewards you 1.5% on all purchases, with no limit. It also comes with a $100 bonus if you spend $500 within three months of getting the card. Spend $2,000 a month and you’ll get $460 back by the end of the first year, for a 2% return.
  For bigger reward
  With Fidelity American Express you earn 2% on all purchases with no annual fee.
  The downside: The money must go into a Fidelity-run account. If you choose a brokerage or cash management account, though, you can tap it in short order.
  For even bigger payback
  U.S. Bank Cash Plus offers higher rewards but makes you jump through some hoops.
  You choose which categories of spending (ranging from cellphone bills to gym memberships) will pay you 5% back, and which common items (such as gas or groceries) will earn 2%. Everything else pays 1%.
  
• 9. Lock in Low Mortgage Rates

  Three ways to remodel your mortgage
  Based on recent comments by chair Janet Yellen, the Federal Reserve Board could raise short-term interest rates as soon as a year from now. Consider this a last call for grabbing cheap home financing:
  30-year loans
  This spring’s 4.4% rate on a 30-year fixed mortgage pales by comparison to 2012’s 3.3% low, but it’s still a good deal by historical standards.
  Refinance a $300,000 loan you took out in 2008 at 6%, and you’ll save about $16,000 in total costs over the life of the loan.
  15-year loans
  Typically the difference between 15-year and 30-year rates is in the 0.5 to 0.75 percentage-point range. In the spring, 15-year fixed-rate mortgages were charging a full point less.
  Your monthly nut would rise, but if you can swing it you’d save about $150,000 over the life of a $300,000 loan.
  Home equity
  With rates rising, fixed home-equity loans are a safer bet over variable-rate home-equity lines of credit. Credit unions offer lower rates (5.7%) than banks (6.1%).
  Join the Pentagon Federal Credit Union with a one-time donation to a nonprofit; a 5- to 10-year PenFed HEL has a fixed rate of 3.99%.
  Home sellers: Make your move now
  If your strategy is to wait longer to sell, be careful. The pool of potential buyers may not be as robust as you think.
  With home prices up 21% over the past two years, more buyers are feeling an affordability squeeze that will only get worse when loan rates rise.
  And nearly two in five homebuyers say they’d “reconsider” purchasing a home if the 30-year rate climbs to 5% or higher.
  Home buyers: Buy the smallest house in the best neighborhood you can afford.
  
• 10. Protect Against Inflation

  Fight tomorrow’s war today
  No one seems worried about inflation these days, notes financial planner Douglas Goldstein, but it’s bound to stage a comeback. Shield yourself now, before inflation hedges get too expensive:
  Safeguard your cash with I bonds
  These inflation-protected bonds, sold by the government at TreasuryDirect.gov, come with two interest rates. One is set when you buy the bond; the other is adjusted for inflation semi-annually.
  New I bonds were recently paying a combined rate of 1.38%, vs. 0.12% for a one-year T-bill.
  Defend your bonds with TIPS
  Treasury Inflation-Protected Securities, or TIPS, have gotten a lot of bad press lately because of their so-called negative yields. The Vanguard Inflation-Protected Securities fund, for instance, yields — 0.2%.
  That means if consumer prices grow 2% annually, you’ll earn around 1.8%, as the principal value and interest payments are adjusted to keep up with consumer prices. If inflation rises more than that, your payout will be even higher.
  Take the fight abroad
  Inflation may not be detectable in the U.S. just yet, but in India prices are already rising at an 8% annual clip, and in Russia it’s closer to 7%.
  That’s eating away at the real returns of your foreign bonds. Buy SPDR DB International Government Inflation-Protected Bond ETF to fight this effect. The fund owns inflation-protected fixed income in both the developed and emerging markets.
  Forget the usual hedges
  Investors have traditionally turned to hard assets such as real estate and commodities to guard against inflation. Yet history shows these tools are barely as effective as cash.
  
11. Diversify

Go global
You’ve heard of the 4% rule, which limits how much you tap from your nest egg each year. A new study found this strategy works 66% of the time for retirees with a 50% stock/50% bond domestic portfolio.
Diversify globally and the success rate jumps to 78%.
When not to diversify, Part 1
There’s a 17% chance a portfolio of actively managed funds — one for U.S. stocks, one for foreign equities, and one for domestic bonds — beats an all-index approach. Boost that to three funds per asset class and your chances fall to 9%.
When not to diversify, Part 2
To save more, trim the number of banks you use.
A University of Kansas study found households with a single account saved more than those with multiple ones. You may use one account simply to hunt for top rates. If so, cap your total at two

How to Be Rich at a Very Young Age

Part 1

Earning A Large Amount of Money

1.  
    
   1. Set your goals and discover your motivations. 
   Before you do anything else, realize that the road to riches is not easy. You're going to have to find motivation that will drive you through the tough times and keep you on track when everything tries to pull you off it. Part of this may be simply imagining your goals or, in other words, where you want to be in ten or twenty years or at age 40.

   • While it's perfectly acceptable to get rich for yourself, you may also be motivated by what you could do for others. Imagine the better life you could give your future children or spouse.
   • Don't be afraid to dream big. If you're working towards earning $1 million in net worth for example, you may be limiting yourself. Don't be afraid to aim for $20 million, or $100 million.
   • Consider, too, what wealth means to you. Do you want $1 million (or more) in annual earnings, $1 million in assets, or $1 million in net worth? Each of these are different and can be reached by different means.
2.  
    
   2. Split your goals into short-term goals. 
   It's important to always keep your overarching motivation, but in order to actually get things done, you'll need to organize your life around actionable, short-term goals. You'll never get to $1 million if you don't get to $100,000 first. You'll never get there if you don't start earning more money and saving the money that you do earn. Always be checking off short-term goals and considering your next move to maintain a sense of accomplishment.

   • A good way to make short-term goals more actionable is to attach a number to them. For example, imagine you have a job in sales. "Sell more products" is not a clear short-term goal. Instead, try "sell 20% more products this month than last month." This will allow you to track your progress and be confident that you are actually achieving your goals.
3.  
    
   3. Study the lives of successful people. 
   People who have achieved great things have done so for a reason. Studying the lives of these people, or meeting them, can provide you with the inspiration you need to pursue your own goals. You'll want to research people like Mark Zuckerberg, founder of Facebook, or Mark Cuban, a very successful investor, to get an idea how these people achieved so much.

   • Additionally, you should seek the advice of a successful person that you know personally. Maybe you have a family member or know a community member who has done well in business. Generally, those people who've made it are open about how they got there and willing to share their experiences and advice with others. Question them extensively and try to replicate their actions.
4.  
    
   4. Work towards getting a great job. 
   If you don't have a job with a future, get one. The most essential part of getting rich is having a steady and increasing income stream. To do this, you'll have to get a job, even if that job is working for yourself. Obviously the right job will vary from person to person and depend on your individual talents and educational background. In any case, though, be sure that you're passionate about what you do, you'll never be successful otherwise.

   • Try looking for a job with a large company that offers plenty of room for advancement. You don't want the sort of job that doesn't reward your hard work with increased pay and promotions.
   • For more information about finding your dream job, see How to Find Your Dream Career.
5.  
    
   5. Use your talents. 
   Tailor your search for your main job and any other income streams you plan to earn to your individual talents. People who are extraordinarily successful combine their natural and learned abilities to the highest advantage. That is, you don't want to stay in a job that doesn't challenge you or allow you to show off your abilities. For example, if what you're really good at is writing, you're better off quitting your sales job and focusing on writing full-time.

   • One of the biggest advantages of being young is youth itself. Even though older people in the business will question you because of your lack of experience, you are able to work longer hours and can bring a fresh mindset or point of view to the problems of the world. Your adaptability and connection with the present is one of your biggest assets as a young entrepreneur.
   • If you don't have any marketable skills, learn one. For example, one of the most desirable and useful skills in today's job market is knowing how to write computer code. This is a skill that anyone can learn that could dramatically increase your potential and also earn you a good income. Try searching for free coding classes available online.
6.  
    
   6. Network with anyone and everyone. 
   Big ideas and successful companies usually don't just spring up from one person. Rather, they're the result of a group of like-minded people coming together and discussing the future. Take advantage of every opportunity to meet and establish relationships with both young people with similar goals and older, successful people. When great opportunities for jobs or entrepreneurial projects come along, you'll have the right support network to take action.

   • Keep in mind that you should use both in-person and social networking interactions to support and nurture your professional relationships. Be sure to also stay in touch with classmates from high school or college that are successful or on their way to being successful.
7.  
    
   7. Increase your income streams. 
   In addition to increasing your primary income stream (by moving up the ladder your current job or by finding a new one), you'll want to multiply your earnings by seeking additional sources of income. These can be investments, part-time jobs, or any sort of informal selling or consulting that you have time to do. Overall, see where and how you can increase your income and then repeat that process over and over again.For example, if you own an online store and have success, open another one, and then another one.

   • The internet is a goldmine of earning potential. There is a multitude of work you can find or create online to earn a stream of income on the side. Everything from writing and selling an ebook to writing a blog can earn you additional income each month. For more information, see how to make money online.
8. 
   8
   Work really hard. 
   With all of your working, networking, and side-income projects, you'll be overwhelmed at times. In order to reach your goals though, you'll have to work harder and later than everyone else around you. You'll have to follow through with any potential opportunities to advance, even if they don't end up working out. Success comes from constantly working towards your goals and persevering through the hard times.
    

   Part 2Choosing a High-Paying Job

1.  
    
   1. Be an entrepreneur. 
   This is the dream, the holy grail, for all young, aspiring millionaires and billionaires. Owning and then subsequently growing and selling a successful business is without a doubt the fastest way to earn spectacular wealth at a young age. This is how almost all the world's wealthiest young people made their money (excluding inherited wealth). However, actually becoming an entrepreneur requires balancing your massive earning potential with a huge amount of risk, lots of hard work, and the chance that even if you do it all right, you might still fail.

   • Some of the pros of becoming an entrepreneur at a young age include unlimited earning potential, being your own boss, and, quite literally, the ability to change the world (think about how Zuckerberg's founding Facebook has changed your world). Also, as a young person, you bring new ways of thinking and tremendous energy that can give you an edge over older professionals.
   • On the flip side, when becoming an entrepreneur you have to realize that 9 out of 10 businesses fail within five years. You're also likely too young to have any knowledge of the "little things" involved in running a business, like bookkeeping and taxation, leaving you to learn them quickly or sink trying. And, more than any other path, starting your own company will be incredibly hard work, combining a lack of direction with long hours and doubtful paychecks.
   • For more, see how to become an entrepreneur.
2.  
    
   2. Become an investment banker. 
   If you have a college degree in economics, finance, business, math, or a related field, or you will soon, and want to make as much money possible right now, work to become an investment banker. Investment banking salaries typically start at around $80,000 to $120,000 per year, with the average worker earning $112,000 right out of college. Investment banking jobs consistently top the rankings of highest-paying jobs for young people.

   • One of the biggest pros of becoming an investment banker, in addition to the huge salary, is the massive amount of opportunities for advancement. Investment bankers can double or triple their salaries quickly by advancing within the company or outside to private equity and venture capital firms.
   • Investment banking also comes with high competition among coworkers and very long hours. Don't jump into this career if you're not ready to work all night and weekends and fight for advancement every day.
   • For more, see how to become an investment banker.
3.  
    
   3. Become a software developer. 
   If working with computers if more your thing, software developer jobs also boast a high starting salary. Like with investment banking, you'll need a college degree to get into this career, specifically in computer science, engineering, or math. As an entry-level developer, though, you stand to make $84,000 per year, on average, designing anything from business software to video games.

   • Being a software developer will require a knack for coding and math, and may also require long hours and high expectations. You'll also have to stay up to date on the newest computer systems and coding languages. However, if you're good enough, earning potential just goes up and up at higher-end companies like Google and Facebook.
   • For more, see how to become a software engineer and how to get a software development job.
4.  
    
   4. Become an engineer. 
   Engineering in this case is a blanket term that covers all sorts of engineering, from chemicals to aerospace. However, on average, an engineer with a relevant college degree can expect a salary of $72,000. Specifically, petroleum engineers can expect to make the most, with an average salary of $88,700.

   • While engineering can be a great and well-paying career, it is very difficult to pass the rigorous training received in undergraduate and graduate school. This career is only for those with strong math and science abilities.
   • For more, see how to become an engineer

Part 3

Saving and Investing What You Earn

1.  
    
   1. Don't spend all of your money. 
   If you are not saving at least 25% of what you earn, start today. Take your income and expenses and find out where you can start to cut back, sell something, downsize or make a crack in your expenses. If you make at least $50,000 a year, you should be saving $12,500 a year. If you are spending a lot of money on an automobile, sell it. Some high-earning people end up essentially poor because they still manage to live beyond their means.

   • The younger generations of today have been born into a very commercialized world that constantly pushes the newest gadgets and clothes on us. In order to save and build wealth, you'll have to ignore the urge to indulge in these trinkets, even when you start making good money. Keep this in mind: poor people buy things from rich people and rich people buy investments to make themselves richer. Which side do you want to be on?
   • For more ways to cut expenses, see how to save money.
2.  
    
   2. Take your saved income and allocate it for investing. 
   Set up an automatic draft (payment) from your household account to your investment account. One of the biggest parts of becoming rich is making your money work for you. Therefore, try to allocate as much money as possible to an account that you can use to invest in the stock market. You can either set up an account with a local money manager or through one of the online trading websites to get started.
3.  
    
   3. Read up on investing strategies and techniques. 
   There are three books everyone should read before you put a dollar into any investment. Read "Become Your Own Banker," "Rich Dad, Poor Dad" and "LEAP" - in that order. If you don't have the motivation to read and educate yourself then you are not motivated to be rich. These books are the cornerstone of becoming rich, wealthy and in control of your own destiny.
4.  
    
    4. Invest in the stock market.  You can go about this one of two ways: either have an advisor do it for you or try to do it yourself. Because of the complicated nature of the financial markets, it is generally a good idea to leave investing, especially risky investing, to professionals. However, if you have the time and aptitude, you can avoid paying fees to an investment manager by doing it yourself. This will require a deep understanding of financial markets and the time required to follow them, however.
   • A good place to start is with "small-cap" stocks (shares of small companies) and shares of companies in foreign markets. These markets come with a large amount of risk and therefore also carry the potential for large returns. Always remember that large potential returns also come with the chance of massive losses. Mutual Funds can help reduce the risk involved.
   • For more information on investing in stocks, see how to invest in the stock market.
5.  
    
   5. Invest in more valuable assets. Once you've saved enough money in your stock-market account, you can invest in larger, income-producing assets like properties and small businesses. While risky, these investments may allow you earn a steady income that eventually will pay back your original investment and provide additional income streams. Eventually, these income streams may replace your primary income and allow you to either switch to a less-demanding job or retire young.

   • Decide where you want to focus your energy. Rental property investing, for example, is a slow process but with safe returns on your money. Your principal is paid by the renters over a number of years and eventually becomes entirely profit. Learn from other people's mistakes and consider the risks extensively before you make any investments.