Plan to Stick Around for a While

First, regardless of your situation, you should be planning on remaining in your new home for at least five years.  If you’re considering buying a home that you may or may not stay in very long, you may want to look for a different house or simply wait out the economic downturn; you won’t get any value out of your purchase, and you’re likely to lose money when reselling so soon.

Better Bargaining With Sellers

Beyond that, you can find quite a few bargains right now.  It has been difficult for many sellers, leaving them more open to price negotiation.  While some may try their hardest to stay close to their desired price, others may be more desperate to simply get rid of the house at the best price possible, especially if their house has been listed for a frustratingly long time.

Foreclosed Homes

And then you’ll also encounter foreclosed homes, where the homeowner has been unable to make their own payments; it’s a sad situation for them, but it does leave a good deal on the table for you.  You just need to learn the right time for you to jump at it—that’s going to mean a little homework for you, an important step in order to avoid extra financial surprises.

First-Time Homebuyer Tax Credit

If you’re looking to buy your very first home, you get an extra benefit if you act before December 1, 2009.  You could qualify for a tax credit of up to $8000.  Of course, there’s some fine print to read ahead of time (you can start with www.irs.gov for all the information), but you also do not have to pay it back in any form.  This could help put the house you’re hoping for more within your reach.

Good Credit Rating

Finally, mortgage rates are exceptionally low in many areas, which means you’ll pay less interest on your loan than you would if the economy were doing well.  However, no matter what kind of deal you find, you still need a high credit score.  As prices and interest rates have loosened, credit restrictions have tightened.  You want to make sure your score is a minimum of 720, higher if you can manage it.  Your deal might be canceled out by a lower score.

Home prices may rise again at any point along with interest rates, so now is a great time to look for a new home.  As always, though, make sure your credit score is excellent and that your job is steady right now, and don’t forget about your tax credit!

So how do we make sure we become wealthy? The only sure way to become rich is to do it the hard way. That is, to create our own luck by following the basic rules of making money.

I think of money and wealth as a sport. Just like professional athletes who still spend countless hours practicing free throw shots or their golf drive, money is the same way. Creating wealth is just a matter of understanding and applying the fundamentals and always striving get better at mastering the basics.

Here are the basic rules of money that will guarantee you to become rich, as I see it:

Control Your Outcome:

• Keep control on spending and expenses
• Understand how credit and debt works and keep debt to a minimum

Produce More Income:

• Get educated: people with advanced degrees earn more money
• Make yourself valuable
• Negotiate a higher salary and receive promotions
• Obtain higher paying jobs
• Produce other additional income streams by creating your own business

Save and Automate:

• Adjust to live within your means
• When you earn more income, save more
• Automate your savings so it is effortless and does not require any decision making

Invest and Diversify:

• Put your money to work for you by regularly investing your savings
• Take full advantage of tax-sheltered retirement accounts, employee matches to your 401k contribution and the tax advantages and leverage that real estate offers
• Diversify in order to maximize your long-term returns
• Understand the Power of Compound Interest

Protect Your Money:

• Limit your losses as much as possible by taking calculated risks
• Keep your portfolio balanced, and adjust as you near retirement
• Seek ways to lower your taxable income so you can keep more of your money working for you

Build Relationships: with the best professional advisers and mentors

This is the surest way to become rich. It is not complicated. Building wealth just takes patience and discipline. If you can reduce your debt, save more than you spend, and invest your savings regularly, you will become wealthy.

Teach yourself the fundamental rules of money and practice them over and over. If you can master the basics of money, you will become rich.

People that are smart enough (or lucky) enough to see opportunity to get in front of a boom before they actually occurs can literally change their life. And with the way thing are now in the economy, there are seemingly too many opportunities to make money if you’re willing to take risk and close your eyes for a while.

Just think…

The Gold Rush in the 1850s
The auto boom in the 1920s
The oil boom in the 1970s
The tech boom in the 1990s

And most recently the bull run in the stock market and real estate boom in places like Miami, Vegas and Phoenix

Imagine if you were at the front of these opportunities before the rest of the world realized it.

What if you could look into the future and start getting involved with the next boom now? What if you bought barrels of oil long before it hit $150 a barrel? What if you bought shares of Google when it was near $100 a share and sold it when it topped $700 a share?

Many wealth people have the incredible skill of being able to spot trends before they happen. Whether its a trend in the market they specialize in or something unique they discover – they can quickly go from dead broke to incredibly wealthy in a matter of days.

Only if it were that easy, right?

Well, there are some strategies that people that are able to consistently spot trends actually use to get in front of opportunities early. As you become an “expert trend spotter” you give yourself a big edge that can make you big bucks.

Here are some of those strategies, many of which you may already do but can be more conscious about when looking for the next opportunity:

1. Read multiple trade magazines and blogs to identify patterns
2. Become a better listener to hear what everyone is talking about
3. Keep a pulse on the advertising and marketing trends
4. Get involved in industry projects and community service to see how things are evolving and what the future holds

What do you think the next economic boom will be? At this point it seems like it could be just about anything!

In short, it would be foolish to not take his advice.

One of his most notable philosophies is to do exactly the opposite of what everyone else does. “Be fearful when others are greedy and greedy when others are fearful.” This, he has said during interviews, is the strategy that has made him rich.

It’s during these times, when everyone else was scared, that he invested in the market as a whole or in a particular company that offered opportunity. While others may have thought Buffett was being foolish and taking too big a risk, he saw at as absolutely no risk at all. Companies that were highly valuable were selling at rock bottom prices. During these volatile times, like we are experiencing now, are exactly the circumstances that allowed him to make the most wealth.

So as you look at your 401k statements and compulsively check your Ameritrade balances, remember your ultimate goal. Keep a level head and trust that Buffett knows exactly what he’s talking about.

If I had only listened to him when stocks hit an all time high last summer . . .

Millionaire Money Habit: Remember that it is a good thing that markets are volatile. It provides you with an opportunity to make money, but it also tests your ability to keep a level head. The only time you actually are guaranteed to be a loser with your investments is when you sell at a loss.

It’s important to look at your current situation and examine your goals, timeline and risk tolerance, and outline a plan to reach those goals. Then you can evaluate your necessary investment strategy and game plan. One strategy is to distinguish between a period of capital growth or capital preservation.

According to www.investopedia.com, capital preservation is, “An investment strategy whose primary goal is to prevent the loss of an investment’s total value.” It is a highly conservative investment strategy, characterized to avoid risk but still acquire moderate appreciation on your money. Capital preservation usually means investing the bulk of a portfolio in fixed-income investments that guarantee returns, but offer lower annual returns in exchange for their low-risk association. High quality bonds, money markets and certificates of deposit (CDs) are some examples.

Capital growth, according to www.investopedia.com is, “An asset allocation strategy that seeks to maximize capital appreciation, or the increase in value of a portfolio or asset over the long term.” This would include a portfolio that mostly contains equities, or stocks, in the hopes that the value of the stock will increase over time. Investing for capital appreciation brings on more risk, but the potential for returns can be much greater.

How to determine your investment strategy will depend on your goals, your timeline and your risk tolerance – or how much you can comfortably afford to loose in a worst case scenario. Typically, a person nearing retirement will shift their investment strategy over time towards a capital preservation approach since they do not have the benefit of taking risks and holding through market corrections. Younger investors generally focus more on capital growth, as they have an entire life to rebound from downturns and learn from mistakes.

Current market conditions can also determine an investor’s strategy in the short-term. As discussed in The Best Time Ever to Buy Stocks, the market regularly goes through cycles. There are periods that stocks tend to trend up and times that it trends down. During down cycles it may be best to focus more on capital preservation and prepare to distribute your capital into the stock market as opportunities arise and the market turns around. This, of course, assumes you know how to time the market efficiently, which is a complicated thing to do.

Millionaire Money Habit: Analyze your current situation, investment goals, risk tolerance (link to measuring risk tolerance article), and your timeline to help develop your investment strategy. If you are nearing retirement, put more weight on low-risk, fixed-income investments. If you have a 10 year or longer investment horizon, concentrate more on a diversified stock portfolio for greater returns over time.