December Commander's Corner Published Nov. 28, 2016 By Lt. Col. John Wilcox 169th Operations Support Flight MCENTIRE JOINT NATIONAL GUARD BASE, S.C. -- Having embarked on a new career in the financial industry, I often get questions such as what investments should one buy now? What stocks are poised to soar? When is the next big market crash coming? In essence, what does one have to buy to get rich? The real secret of building wealth in America, spend less than your income. Save and invest the difference. If you do this you will become wealthy. While the concept is simple, it is anything but simple to achieve. The good news is that this secret will work no matter your income level. How much you earn matters less than how much you invest in building wealth. While a high income facilitates obtaining the outward appearance of wealth, it does not make the task of spending less than you earn any easier. Building wealth is a sport where no amount of offense can overcome a poor defense. You need to play strong financial defense against the threats to accumulating wealth. The biggest threat to wealth creation is an untimely death. None of us know when, but death is coming for us all and you should prepare. Get a will...yesterday. Establish beneficiaries or Transfer/Pass on Death (T/POD) arrangements for all accounts. If married, title assets in joint name. This avoids subjecting your most of you estate to the slow and costly probate process, which is an absolute nightmare for a grieving spouse. If you have a spouse and/or children that depend on you, obtain life insurance in a sufficient amount to replace your income for as long as that support is needed. The total amount depends on your situation, but if you have children, SGLI is most certainly not enough. Marriage has a significant impact on your ability to build and maintain wealth. As a legal contract, marriage results in lasting financial obligations to one another. Carefully pick your spouse. Try to assess your financial compatibility as a couple beforehand. If you are frugal and your mate a spend thrift, this could be a serious marital challenge when the honeymoon ends. Disclose significant debts or assets upfront. Some serious thought should be given to how you will resolve financial differences before saying, "I do." Avoid divorce if at all possible. Even an amicable separation can be costly. At best, you will walk away with a 50% loss to your pre-divorce assets. Using reasonable rates of return, this will take 10-15 years to recoup. A 100% gain is required to recover from a 50% loss. If you are the primary source of family income, give your spouse legal grounds for the separation, and/or children are involved; you'll face the impossible task of trying to double your money while receiving half your income just to return to even. Finally, avoid debt, in all forms. Live beneath your means. Buy a used car. If you are in debt, get out of it. Tackle debts in order of highest to lowest interest rate. Ignore the real estate agents, mortgage brokers, car dealers, and financial advisors who advise you how much you "qualify" to borrow, extoll the benefits of the income tax write off, or claim that house debt is "good debt". A wise man once told me, "If you ever have too much time or money, buy a house. It will solve both problems." All debt is bad and acts as speed brake on your net worth. Don't excuse your mortgage, the word literally means "dead pledge." Pay it off faster using bi-weekly payments and apply bonuses or extra income to the principal. When you are finally free of debt, your net worth will skyrocket. This message is a simple one that involves work and sacrifice. Work hard, economize, spend less than you earn, save to invest and the dividends and interest will compound your savings into wealth.